Advice to US retirement investors - participants in employer plans and owners of individual retirement accounts - can bring a third standard into play alongside Reg BI and the investment adviser fiduciary duty. When that advice makes the firm a fiduciary under the Employee Retirement Income Security Act (ERISA) or the related tax code rules, and the firm relies on the Department of Labor's main exemption for conflicted compensation, it has to meet ERISA-style standards of prudence.
The rules defining when that happens have changed repeatedly over the past decade, and changed again in 2026. After federal courts vacated the 2024 Retirement Security Rule, the Department of Labor restored the long-standing 1975 test for fiduciary status, effective April 20, 2026. The exemption most firms rely on, Prohibited Transaction Exemption 2020-02, remains in effect in its original form.[1]
This paper sets out where the DOL fiduciary rule stands, and what it means for Know-Your-Product. Prudence under ERISA is judged largely by process - how an investment was investigated before it was recommended and monitored afterward. That makes it a product-knowledge standard as much as anything else. The paper covers the current status, the link between prudence and KYP, the conditions of PTE 2020-02, how one product review process can support all three US standards, and what firms and advisors need to do.
Its scope is the product. Client-specific requirements are outside it. This area has been subject to frequent change and litigation; readers should confirm the current position before relying on it.
Three attempts to redefine investment advice fiduciary status have been made since 2016. As of this paper's publication, the original 1975 definition is back in force.
| Date | Event |
|---|---|
| 1975 | DOL adopts the five-part test for when investment advice makes a person an ERISA fiduciary |
| 2016 - 2018 | DOL adopts a broader fiduciary rule; the US Court of Appeals for the Fifth Circuit vacates it in 2018 |
| December 18, 2020 | DOL publishes PTE 2020-02, an exemption allowing investment advice fiduciaries to receive conflicted compensation if they meet its conditions; effective February 16, 2021[3] |
| 2024 | DOL adopts the Retirement Security Rule, broadening fiduciary status, with amendments to PTE 2020-02 |
| July 25 and 26, 2024 | Two federal district courts in Texas stay the 2024 rule; the Northern District court also stays the PTE 2020-02 amendments[1] |
| July 9, 2025 | The Northern District of Texas vacates portions of the PTE 2020-02 preamble relating to the five-part test[1] |
| March 20, 2026 | DOL publishes notice removing the 2024 rule from the Code of Federal Regulations and reinstating the five-part test, effective April 20, 2026; it treats the entire PTE 2020-02 preamble as effectively vacated, while the exemption's operative conditions remain[1][2] |
DOL stated in March 2026 that it had no current plans for further notice-and-comment rulemaking on the subject, while leaving open additional guidance.[2]
Under the restored 1975 regulation, a person gives fiduciary investment advice to a plan or IRA when, for a fee, they give advice on the value of securities or other property or recommendations on investing in them, and all five elements are met:
Where a firm or advisor meets that test and receives compensation that would otherwise be a prohibited transaction - commissions, revenue sharing, or fees that vary with the recommendation - it typically relies on PTE 2020-02 and must satisfy its conditions.[3] Separately, plan sponsors and other plan fiduciaries remain subject to ERISA's prudence standard for the investments they select.[4]
Whatever the definition of fiduciary status, the standard a fiduciary must meet is prudence - and prudence is judged by how well the fiduciary understood and watched the investment.
ERISA's prudence standard requires a fiduciary to act:
The standard is "familiar with such matters" - an expert's understanding, not a layperson's. In practice, prudence is assessed by the quality of the process: whether the fiduciary investigated the investment before acting, considered its costs and risks, and kept watching it afterward. The Supreme Court confirmed the second half of that in 2015:
Investigate before, monitor after. That is Know-Your-Product under another name. A firm that can show a documented assessment of each investment and evidence of ongoing monitoring has most of what a prudence review asks for; a firm that can't will struggle to show prudence however good its intentions.
PTE 2020-02 covers SEC- and state-registered investment advisers, broker-dealers, banks and insurance companies, and their representatives, that are investment advice fiduciaries. Its conditions include three with direct product-knowledge consequences:[3]
The retrospective review is the condition most specific to the DOL framework. Neither Reg BI nor the Advisers Act requires a senior executive to certify a written review of the firm's compliance each year in the same way; the adviser compliance rule requires an annual review of policies but not this certification.[7]
A firm serving retirement investors may be subject to Reg BI for brokerage recommendations, the Advisers Act fiduciary duty for advisory accounts, and PTE 2020-02 when its advice is fiduciary advice to a plan or IRA. All three require the firm to understand what it recommends. A single product review process can support all three if it is built to the most demanding element of each.
| Element | Reg BI | Adviser Fiduciary Duty | ERISA / PTE 2020-02 |
|---|---|---|---|
| Product-level standard | Understand risks, rewards and costs[6] | Reasonable investigation into the investment[8] | Care, skill, prudence and diligence of a prudent expert |
| Ongoing monitoring | Implied by understanding at each recommendation | Within the scope of the relationship | Continuing duty to monitor for plan fiduciaries (Tibble) |
| Written procedures | Compliance Obligation | Rule 206(4)-7 | Policies prudently designed to ensure compliance |
| Annual review | Not specifically required | Annual review of policies (Rule 206(4)-7) | Annual written retrospective review, certified |
For the Reg BI side, see Reg BI and KYP; for a comparison with Canada, see Canada vs US: KYP Standards Compared.
For product knowledge, the DOL framework adds less a new process than a higher standard of evidence and an annual check that the process worked.
The example below shows how a firm might add retirement-specific requirements to its existing product review procedures. It is illustrative; each firm's procedures should reflect its business, the exemptions it relies on, and legal advice on the current rules.