The BIC Exemption to the new DOL Fiduciary Rule offers some relief, but at a potentially prohibitive cost.

The US Department of Labor (the DOL) recently forced the most significant change to the investment community since the enactment of the Employee Retirement Income Security Act of 1974 (ERISA). The DOL has expanded the scope of ERISA’s fiduciary duties and protections in final regulations (the Final Rule), defining a “fiduciary” under ERISA and the Internal Revenue Code of 1986 (the Code) (see our prior Client Alert for an overview of the Final Rule). However, in adopting the Final Rule, the DOL did make some concessions to industry practices of recommending proprietary products and other investments that generate third-party payments, by also adopting the Best Interest Contract Exemption (the BIC Exemption) to the prohibited transactions provisions of ERISA and the Code. Without the BIC Exemption, these practices otherwise would be prohibited as fiduciaries generally cannot receive compensation that varies based on their investment advice.