What Is Participant Investment Advice in a 401(k)?

Participant investment advice sits between education and discretionary management. Education can explain diversification, risk, asset allocation and plan investments without necessarily creating ERISA investment-advice fiduciary status. Advice makes an individualized recommendation. A managed account goes further and can implement decisions. Those distinctions determine who controls the account, which fiduciary rules apply and whether a compensation conflict needs a prohibited-transaction exemption.^[1][2][3]

The legal framework became easier to describe in 2026 for an unusual reason:

the 2024 fiduciary rule was vacated, and the 1975 five-part test was restored to the Code of Federal Regulations.^[1][8]

That does not make the law simple.

It makes the starting point clear.

Education Is Not Automatically Advice

A 401(k) provider can give participants useful investment information without necessarily becoming an investment-advice fiduciary.

Interpretive Bulletin 96-1 identifies four broad categories of participant education.^[2]

Plan information

Examples:

• how the plan works
• plan investment options
• contribution mechanics
• benefits of participating
• impact of withdrawals
• employer match.

General financial and investment information

Examples:

• risk and return
• diversification
• compounding
• dollar-cost averaging
• inflation
• retirement-income needs
• investment time horizon
• risk tolerance.^[2]

Asset-allocation models

Generic models can illustrate how different asset classes might be combined when the conditions in the bulletin are satisfied.

Interactive investment materials

Tools can let a participant enter information and explore retirement or asset-allocation scenarios without necessarily becoming fiduciary advice.^[2]

The line is not:

computer = education

or:

human = advice.

The content and relationship matter.

Example: Education

A plan website says:

> Investors with longer time horizons may be able to tolerate more short-term equity volatility than investors who expect to use their money soon.

That is a general investment concept.

It does not tell one participant:

Buy Fund X.

Example: The Communication Becomes More Advice-Like

Participant enters:

• age 57
• retirement age 62
• current allocation
• risk tolerance.

Provider responds:

> Move $80,000 from the bond fund into the plan's U.S. equity fund and target-date 2035 fund.

Now the communication is:

• individualized
• tied to specific plan investments
• action-oriented.

That requires a different analysis.

Calling the page:

Education Center

does not decide the legal result.

The Current 2026 Fiduciary Test Is the Five-Part Test

The 2024 Retirement Security Rule attempted to replace the old regulatory framework.

Federal courts vacated that rule and the related exemption amendments.

On:

March 20, 2026

DOL republished the earlier regulatory text in the CFR and restored the 1975 investment-advice rule.^[1][8]

The current regulation therefore again uses the familiar five-part structure.

What Does the Five-Part Test Require?

Under 29 CFR 2510.3-21(c), a person generally must provide advice about:

• value of securities or other property
• advisability of investing in, purchasing or selling securities or other property

and satisfy the relationship conditions in the regulation.^[1]

The classic advisory relationship requires advice that is:

1. provided on a regular basis
2. pursuant to a mutual agreement, arrangement or understanding
3. intended to serve as a primary basis for investment decisions
4. individualized to the plan's particular needs
5. provided for fee or other compensation, directly or indirectly.^[1][3]

The exact regulation should be applied to the actual relationship.

A checklist without facts is not enough.

One Recommendation Can Fail the Regular-Basis Prong

Suppose an employee attends one retirement seminar.

Afterward, a representative makes one investment recommendation.

No continuing relationship exists.

That recommendation can raise:

• securities-law
• contract
• suitability/best-interest
• employer-policy

questions.

But under ERISA's current five-part test, a genuinely isolated recommendation can fail the:

regular basis

element.^[1]

That is one reason current fiduciary status can differ from ordinary-language use of the word:

advice.

Regular Basis Does Not Mean Every Week

There is no rule that advice must occur:

• monthly
• quarterly
• at a specific numerical frequency.

The issue is the actual advisory relationship.

A recurring relationship involving periodic recommendations can satisfy the concept even when the participant does not speak to the adviser constantly.

The facts matter more than the calendar label.

The Mutual Understanding Matters

Suppose a provider says:

> These ideas are general information and are not intended to be a primary basis for your investment decisions.

The participant nevertheless treats the material as important.

That does not automatically create the mutual understanding required by the current five-part test.

Reverse the facts:

• provider markets itself as the participant's retirement investment adviser
• recommendations are individualized
• participant is expected to rely on them
• meetings recur.

The relationship looks materially different.

Discretion Is a Separate Fiduciary Route

The five-part advice test is not the only way a person can become an ERISA fiduciary.

ERISA Section 3(21) also reaches specified discretionary authority or control.^[3]

That matters for INV-140.

A managed-account provider that can:

• rebalance
• buy
• sell
• change allocations

without asking the participant to approve each transaction can have fiduciary status because of discretionary authority.

That is different from a nondiscretionary adviser who says:

"Here is the recommended allocation; you decide whether to implement it."

Advice and Management Are Different Products

The participant can delegate thinking without delegating execution.

The law treats those differently.

Fiduciary Status Is Only the First Question

Assume the provider is an ERISA fiduciary adviser.

Next question:

Does the provider or an affiliate receive compensation that creates a prohibited transaction?

ERISA Section 406 restricts specified fiduciary self-dealing and conflicted transactions.

An adviser cannot solve that problem merely by saying:

"The participant chose the investment."

If the recommendation generates compensation for the fiduciary or related parties, an exemption may be needed.

Section 408(g) Is Conflict Relief, Not the Fiduciary Definition

ERISA Sections:

408(b)(14)

and:

408(g)

provide a statutory exemption for certain transactions connected with participant investment advice.^[4][5]

This framework does not decide whether the adviser is a fiduciary.

It starts with a:

fiduciary adviser.^[4][5]

That distinction is fundamental.

Question 1

Is this person an investment-advice fiduciary?

Question 2

If yes, does a compensation or transaction conflict require prohibited-transaction relief?

Question 3

If yes, does Section 408(g), PTE 2020-02 or another exemption fit?

Different questions.

A Plan Is Not Required to Offer Advice

The participant-advice regulation says directly that nothing in the provision requires a plan fiduciary to:

• offer
• provide
• make available

investment advice to participants.^[5]

A plan can provide:

• education
• diversified menu
• target-date QDIA

without providing individualized advice.

Offering advice is a plan-design and fiduciary decision.

What Is an Eligible Investment Advice Arrangement?

Section 408(g) generally provides two principal routes:^[4][5]

1. fee leveling
2. computer model

An arrangement can use:

• one
• the other
• both.

The routes solve the compensation-conflict problem differently.

Route 1: Fee Leveling

The core idea is simple:

the adviser cannot get paid more merely because one investment option is selected instead of another.^[5]

The regulation reaches compensation such as:

• commissions
• salary
• bonus
• awards
• promotions
• other things of value.^[5]

The compensation cannot vary based on the investment option ultimately selected.

That removes a direct incentive to steer account assets toward whichever option pays the adviser more.

Fee Leveling Is Not the Same as "No Affiliate Earns Money"

Suppose the plan menu includes:

• Provider A index fund
• Provider A target-date fund
• unrelated bond fund.

The advice representative earns the same compensation regardless of which option is selected.

Provider A's asset-management affiliate can still earn fund-management revenue when participants use Provider A funds.

That does not automatically destroy the fee-leveling route.

But:

• affiliations
• compensation
• conflicts

must be analyzed and disclosed under the applicable rules.^[5]

The individual adviser compensation test is narrower than:

every entity earns identical revenue.

Fee-Level Advice Must Consider Investment Costs

The regulation requires qualifying advice to take into account:

• investment-management fees
• other expenses

connected with recommended investments.^[5]

A model cannot properly recommend:

Fund A at 1.00%

over:

similar Fund B at 0.05%

while ignoring the fee difference.

The adviser can still conclude the higher-cost investment is appropriate.

The cost has to enter the analysis.

Participant Information Also Matters

To the extent furnished, the fee-leveling arrangement takes into account information such as:^[5]

• age
• life expectancy
• retirement age
• risk tolerance
• current investments
• other assets
• other sources of income
• investment preferences.

The provider must request the specified information.

The participant is not forced to provide it.

Advice can only be as individualized as the available facts permit.

Example: Missing Outside Assets

Participant does not disclose:

$900,000 IRA invested entirely in technology stocks.

The 401(k) adviser recommends a diversified equity-heavy allocation based on:

• age
• plan balance
• stated risk tolerance.

The advice may satisfy the regulatory information process if the adviser requested relevant information and the participant did not provide it.^[5]

But the economic recommendation could still differ from what a full household picture would produce.

Disclosure quality and data quality are separate issues.

Route 2: Certified Computer Model

The second Section 408(g) route permits advice generated through a qualifying computer model.^[4][5]

The model must do more than produce a colorful risk score.

It has substantive design requirements.

The Model Must Use Accepted Investment Theory

A qualifying model applies generally accepted investment theories considering:

• historic risks
• historic returns
• asset classes

over defined periods.^[5]

It can use additional considerations.

It cannot be a black box with no defensible investment methodology.

The Model Must Include Fees

Like the fee-leveling route, the model must account for:

• investment-management expense
• other costs

attached to the recommended options.^[5]

This matters because robo systems can otherwise optimize:

• expected return
• volatility
• diversification

while ignoring a high-cost implementation.

A legally compliant model cannot treat expense as invisible.

The Model Must Use Participant Data

The program must request and, when furnished, use information such as:^[5]

• age
• time horizon
• risk tolerance
• current plan investments
• other assets/income
• preferences.

This does not make the computer infallible.

It prevents the program from pretending to be individualized while ignoring the participant.

All Designated Plan Options Generally Enter the Model

The model generally must take into account:

all designated investment options

available under the plan without inappropriate weighting.^[5]

The regulation has limited exceptions, including specified treatment for certain annuity options and participant-requested exclusions.^[5]

That requirement is aimed directly at biased architecture.

A provider should not quietly remove a low-cost competitor from the recommendation set because its affiliate earns more elsewhere.

The Model Cannot Inappropriately Favor Proprietary Investments

The regulation expressly addresses two conflict patterns.^[5]

The model cannot inappropriately favor:

1. investments offered by the fiduciary adviser or a materially affiliated/contractually related person
2. investments that generate greater income for the fiduciary adviser or a related person.

That rule is more important than the phrase:

algorithmic advice.

Algorithms can encode economic incentives.

Example: Biased Model

Plan offers:

Affiliated target-date fund

Expense:

0.65%

Unaffiliated target-date fund

Expense:

0.08%

Model recommends the affiliated fund for nearly every participant.

Internal design documents show the program was calibrated to favor products generating more affiliate revenue.

That is exactly the kind of bias the computer-model requirements are designed to prevent.^[5]

Participant execution does not cure a defective recommendation engine.

The Provider Cannot Certify Its Own Model

Before use, the advice provider must obtain written certification from an:

eligible investment expert.^[5]

That expert must have:

• appropriate technical training or experience
• proficiency to analyze the model.

The expert cannot have the prohibited material affiliations or contractual relationships specified by the regulation.^[5]

The developer of the model cannot serve as the independent certifier.

Material Model Changes Can Trigger Recertification

Suppose the provider changes:

• capital-market assumptions
• optimization method
• treatment of proprietary funds
• risk scoring
• participant-input weighting.

If the modification may affect compliance with the model requirements, a new certification is required before the modified model is used.^[5]

A certification is not permanent approval of every future software version.

The Certification Must Explain the Work

The written certification is not supposed to say only:

"Model approved."

The regulation requires content addressing:

• methodology used to test compliance
• how the methodology showed compliance
• limitations imposed on the expert
• qualifications of the people applying the methodology
• certification conclusion.^[5]

That makes the expert's work auditable.

Selecting the Expert Is a Fiduciary Act

The regulation expressly says selection of the eligible investment expert is a fiduciary act governed by ERISA Section 404(a)(1).^[5]

That has practical consequences.

Do not choose:

• an obviously conflicted consultant
• an unqualified reviewer
• the cheapest available name

without a prudent process.

The independence mechanism is only as strong as the person selected.

The Advice Program Needs Independent Authorization

A Section 408(g) arrangement generally must be expressly authorized by a plan fiduciary other than specified conflicted parties.^[5]

The regulation prevents the advice provider from effectively:

approving itself.

The authorizing fiduciary should understand:

• provider
• compensation
• model
• conflicts
• participant experience
• audit structure.

Authorization is a fiduciary decision.

Participant Disclosure Comes Before Initial Advice

Before the first recommendation involving an investment option, specified written information must be furnished without charge.^[5]

Required subjects include:

• material affiliations
• role of related parties in developing the advice program
• role of related parties in selecting plan investments
• past performance/historical returns if not otherwise supplied
• all relevant adviser/affiliate compensation
• material relationships in recommended investments
• how participant information will be used or disclosed
• services being provided
• statement that the adviser is acting as an ERISA fiduciary
• ability to obtain advice from another adviser without the same affiliations or compensation connections.^[5]

That is not generic boilerplate.

It is conflict disclosure.

The Rollover Compensation Disclosure Is Especially Important

The regulation's participant disclosure reaches compensation related to:

• rollover
• distribution
• investment of distributed assets

when connected with the advice arrangement.^[5]

Example:

Provider advises participant to:

roll $600,000 from the 401(k) to an affiliated IRA advisory program.

The provider will then earn:

0.85% annually.

That economic consequence belongs in the disclosure analysis.

A retirement-plan recommendation can change the provider's future revenue dramatically.

Privacy Is Part of Advice Disclosure

A personalized program can collect:

• age
• salary
• savings rate
• other assets
• risk tolerance
• spouse information
• retirement goal.

The regulation requires disclosure of how participant information will be:

• used
• disclosed.^[5]

For a modern digital advice program, privacy and cybersecurity are not secondary operational questions.

They are part of the service architecture.

An Annual Independent Audit Is Required

For this regulatory relief, the advice provider must engage an independent auditor:

at least annually.^[5]

The auditor tests compliance with the regulation.

This is not the plan's ordinary Form 5500 financial statement audit.

It is an advice-program compliance audit.

What Does the Audit Report Cover?

The auditor's written report identifies matters such as:^[5]

• fiduciary adviser
• arrangement type: fee leveling, computer model or both
• most recent model certification when relevant
• eligible investment expert
• specific compliance findings.

For a plan arrangement, the auditor generally provides the report to:

• fiduciary adviser
• each fiduciary that authorized the arrangement

within:

60 days after audit completion.^[5]

That report should be reviewed.

Not filed unread.

Selecting the Auditor Is Also a Fiduciary Act

The auditor must satisfy independence requirements.

The regulation says selection of the auditor is itself governed by fiduciary standards.^[5]

That creates two distinct independent controls:

Model route

Independent eligible investment expert.

Every Section 408(g) arrangement

Independent annual auditor.

They perform different jobs.

Certification Is Not the Audit

A common mistake is to treat the computer-model certification as sufficient ongoing oversight.

It is not.

Certification asks:

Does the model satisfy the design requirements before use or after material modification?

Annual audit asks:

Did the actual advice arrangement comply with the regulation during the period?

Design review and operating review are different controls.

Participant Direction Still Matters

Under the statutory/regulatory exemption, the relevant sale, acquisition or holding transaction occurs solely at the direction of the advice recipient.^[4][5]

That is why Section 408(g) is naturally aligned with:

nondiscretionary advice.

The provider recommends.

The participant chooses.

If the provider has discretionary authority to trade, move to the managed-account analysis in INV-140.

Reasonable Compensation Still Applies

The exemption does not authorize unlimited fees.

Compensation received in connection with the relevant transaction must be:

reasonable.^[5]

And the terms must be at least as favorable to the plan as an:

arm's-length transaction.^[5]

Disclosure does not make excessive compensation reasonable.

Six Years of Records

Records necessary to determine compliance must be retained for at least:

six years

after the advice is provided.^[4][5]

That should include, as applicable:

• participant disclosures
• model certifications
• audit reports
• compensation records
• advice records
• participant direction
• methodology/version information.

A digital advice program that cannot reconstruct what model version produced a recommendation has a governance problem.

Noncompliance Can Be Transaction-Specific

If the conditions are not satisfied for advice to a particular participant, the prohibited-transaction relief does not apply to the connected transaction.^[5]

The regulation goes further for:

pattern or practice

noncompliance.

Relief can fail across the period of the pattern or practice.^[5]

That makes recurring model or disclosure defects materially more serious than one clerical error.

Example: Annual Audit Finds Late Disclosures

Auditor samples 300 participant files.

Finds:

• 4 late initial disclosures
• otherwise complete advice records
• no compensation bias.

The legal and remediation analysis will differ from:

the provider systematically gave advice before disclosure to every participant for eight months.

Scale, recurrence and pattern matter.

The Statutory Advice Exemption and PTE 2020-02 Are Different Tools

The DOL class exemption commonly known as PTE 2020-02 is another prohibited-transaction route for investment-advice fiduciaries.

It can permit specified:

• conflicted compensation
• riskless principal transactions
• certain covered principal transactions

when its conditions are satisfied.^[7][8]

It is not a replacement name for Section 408(g).

The 2024 PTE Amendments Were Vacated

The 2024 Retirement Security Rule amended that class exemption.

Those amendments were vacated with the fiduciary rule.

In March 2026, DOL republished the operative:

original 2020 version

of the class exemption.^[7][8]

That is the version current analysis should start with.

Do not use a 2024 amendment summary as though it remains operative.

The Class Exemption Has a Different Structure

The operative exemption focuses on financial institutions and investment professionals providing fiduciary investment advice.

Its conditions include concepts such as:

• Impartial Conduct Standards
• fiduciary acknowledgment
• conflict disclosures
• policies and procedures
• retrospective review

under the exemption's terms.^[7][8]

It is especially relevant when advice fiduciaries receive compensation that would otherwise violate prohibited-transaction rules.

Robo Advice Exposes the Difference Between the Exemptions

The operative 2020 class exemption excludes transactions resulting from investment advice generated solely by an:

interactive website

using computer models or applications without personal interaction with an investment professional.^[8]

That is a major distinction.

Section 408(g), by contrast, expressly contains a:

computer-model route.^[4][5]

So for a pure 401(k) robo-advice program:

The class exemption is not automatically the obvious route.

The structure may fit Section 408(g) more naturally if all conditions can be met.

Example: Pure Robo Program

Participant logs into plan.

No human adviser interacts.

Software:

• collects age/risk/horizon
• analyzes all designated plan options
• considers fees
• generates allocation recommendation.

Participant implements the trades.

That arrangement can be analyzed under the statutory computer-model framework.^[5]

The operative class-exemption text has a separate exclusion for advice generated solely through the interactive-website structure.^[8]

One exemption may fit.

The other may not.

Example: Human Adviser Recommends a Rollover

Participant calls adviser.

Adviser recommends:

move plan assets to an IRA managed by the adviser's firm.

The firm expects continuing asset-based compensation.

First ask whether the current five-part fiduciary test is satisfied.^[1]

If the adviser is an investment-advice fiduciary and the compensation creates a prohibited transaction, the class exemption may become relevant.^[7][8]

That is a different fact pattern from an in-plan computer model.

Section 408(g) Does Not Make Every Recommendation Good

An eligible advice arrangement can satisfy conflict-exemption rules and still produce a bad recommendation.

ERISA fiduciary duties remain.

The adviser still must act consistently with applicable:

• prudence
• loyalty
• fiduciary obligations.

An exemption solves a prohibited-transaction problem.

It does not bless investment judgment.

A Plan Fiduciary Still Has to Select the Provider Prudently

The plan sponsor cannot say:

"The advice company is the fiduciary, so the committee is done."

Selecting and retaining the service provider remains a fiduciary function.^[5][10]

The committee should review:

• qualifications
• fiduciary status
• methodology
• fees
• conflicts
• cybersecurity
• participant complaints
• audit results.

Delegation changes who performs the advice.

It does not erase the selection decision.

What Should the Committee Compare Before Hiring a Provider?

Fiduciary model

• education only?
• advice fiduciary?
• Section 3(38) discretion?
• which exemption is relied on?

Compensation

• plan-paid
• participant-paid
• asset-based
• commissions
• affiliate revenue
• rollover revenue.

Methodology

• human
• computer
• hybrid
• all designated investments considered?
• fees considered?
• participant data used?

Conflicts

• proprietary funds
• affiliated managers
• recordkeeper revenue
• IRA rollover economics.

Governance

• model certification
• annual audit
• disclosures
• record retention
• error correction.

Operations

• participant authentication
• trade handoff
• data feed
• complaint handling
• cybersecurity.

The advice methodology and the business model belong in the same diligence file.

Advice Provider vs. Plan Fiduciary

Parallel responsibilities are normal.

Education vs. Advice vs. Management

Do not call all three:

financial wellness.

The legal authority changes as the service gets more directive.

Fee Leveling vs. Computer Model

The two routes attack conflict differently.

Five-Part Test vs. Section 408(g)

Confusing these columns is one of the easiest ways to misstate the law.

Section 408(g) vs. the 2020 Class Exemption

Use the exemption that matches the transaction.

Not the one with the most familiar name.

Example: Provider Calls Advice "Education"

Provider gives every participant:

> Based on your age, salary and risk tolerance, move the entire balance from Fund A into the provider's affiliated Fund B.

Provider repeats this review annually.

Participants are encouraged to rely on the recommendations.

Calling the service:

Retirement Education

does not make the facts disappear.

The current fiduciary test should be applied to the actual relationship.^[1][2]

Example: Asset-Allocation Model Remains Education

Plan brochure shows three hypothetical portfolios:

• conservative
• moderate
• growth.

It explains:

• assumptions
• asset classes
• historic risk/return concepts

and satisfies the IB 96-1 conditions.

It does not tell the participant which specific plan funds must be bought.

That can remain investment education.^[2]

The model educates.

It does not select.

Example: Adviser Pay Is Level but Affiliate Revenue Differs

Human adviser earns:

$85,000 salary

regardless of participant investment selections.

Advice program recommends among:

• affiliated target-date fund
• unrelated target-date fund
• index funds.

Affiliate earns more if the affiliated fund is selected.

Fee-leveling analysis must examine the regulation carefully.

The adviser-level compensation can satisfy the direct leveling concept while:

• affiliate economics
• disclosure
• overall fiduciary loyalty

still require scrutiny.

"Level fee" does not mean:

no conflict anywhere in the organization.

Example: Computer Model Ignores a Low-Cost Option

Plan adds a new:

0.03% index fund.

Advice model's data feed is not updated for six months.

Participants continue receiving allocations across higher-cost options.

A computer model route generally requires the model to account for designated options and fees under the regulatory framework.^[5]

This is not merely an IT inconvenience.

It can become an exemption-compliance problem.

Example: Annual Audit Finds Model Drift

Original model certification assumes:

• strategic asset allocation
• neutral fund ranking
• fee-aware optimization.

Later release adds a proprietary-product score that increases affiliated-fund recommendations.

No recertification occurs.

Annual auditor discovers the change.

The issue is not:

"Did average returns look good?"

The issue is:

Did the modified model continue satisfying the exemption's design requirements, and was recertification required before use?^[5]

Participant Fees Still Need Ordinary Plan Disclosure

If the advice service charges an individual participant fee directly against the account, 404a-5 can require applicable:

• annual individual-expense disclosure
• quarterly actual dollar reporting.^[6]

Example:

Investment advice service — $75

charged to participant account.

Section 408(g) conflict disclosure does not replace the plan's ordinary participant fee-disclosure obligations.

Different rules can require overlapping information for different purposes.

408(b)(2) Can Add Provider-Level Transparency

Covered service-provider disclosures under 408(b)(2) can separately require information for the responsible plan fiduciary concerning:

• services
• compensation
• fiduciary/RIA status
• indirect compensation
• related arrangements.^[9]

Participant disclosure and plan-fiduciary disclosure therefore operate at two levels.

Participant asks:

What is this adviser paid and what conflicts affect the recommendation?

Committee asks:

What is the provider paid across the plan relationship, including affiliates and indirect compensation?

Both matter.

A Strong Monitoring File Uses the Audit, Not Just the Sales Deck

Initial selection

• provider credentials
• fiduciary status
• compensation
• exemption relied on
• methodology
• affiliated investments
• cybersecurity.

Section 408(g) structure

• authorizing fiduciary
• model certification
• eligible expert independence
• disclosure form
• audit engagement
• recordkeeping controls.

Annual review

• auditor report
• model changes
• recertification
• participant complaints
• compensation changes
• affiliated-investment usage
• rollover activity
• data-security events.

Participant outcomes

• usage
• opt-out
• recommendation dispersion
• fee impact
• implementation errors.

An advice program should be monitored as:

fiduciary service + algorithm/process + compensation system.

Frequently Asked Questions

Does a 401(k) have to provide investment advice?

No.

The regulation expressly says it does not impose such an obligation.^[5]

Can the plan provide investment education instead?

Yes.

Interpretive Bulletin 96-1 identifies categories of information and materials that can be provided without, by themselves, constituting investment advice.^[2]

What is the current ERISA investment-advice fiduciary test in 2026?

After the 2024 rule was vacated, DOL restored the 1975 regulatory text in March 2026. The current advice regulation again uses the five-part framework in 29 CFR 2510.3-21.^[1][8]

Does one recommendation always create fiduciary status?

No.

The current five-part test includes a regular-basis element for the advisory relationship described in the regulation.^[1]

Is a managed account the same as investment advice?

No.

A managed account can give the provider discretionary implementation authority. Participant advice generally leaves the participant with the decision whether to act.

What is Section 408(g)?

It is a statutory prohibited-transaction exemption for certain participant investment advice arrangements involving fiduciary advisers.^[4][5]

Does 408(g) decide who is a fiduciary?

No.

Fiduciary status is analyzed separately. Section 408(g) provides transaction relief when its conditions are satisfied.

What are the two main 408(g) routes?

Fee leveling and certified computer-model advice.^[4][5]

What does fee leveling mean?

For the regulatory route, the fiduciary adviser providing advice cannot receive compensation that varies based on which investment option the participant selects.^[5]

Can affiliated funds still exist in a fee-level arrangement?

Yes, depending on the facts. Affiliate compensation and conflicts remain important and must be analyzed under the full regulation and fiduciary duties.

Can a computer model recommend proprietary funds?

Potentially, but the model cannot inappropriately favor affiliated options or investments that generate greater related-party income, and it must satisfy the other model conditions.^[5]

Who certifies the computer model?

An eligible investment expert meeting the independence and qualification requirements in the regulation.^[5]

Can the provider certify its own model?

Not under the independent expert requirements.

Is one certification enough forever?

No.

A material modification affecting compliance can require a new certification before the modified model is used.^[5]

Is there an annual audit?

Yes.

The fiduciary adviser must engage an independent auditor at least annually for the participant-advice exemption arrangement.^[5]

How long must records be kept?

At least six years for records necessary to determine compliance.^[4][5]

Does the participant receive conflict disclosure?

Yes.

The regulation requires specified written disclosure before initial advice, including compensation, affiliations, services, data use and fiduciary status.^[5]

Can the adviser execute the recommended trade automatically under Section 408(g)?

The exemption's transaction structure requires the purchase, sale or holding transaction to occur solely at the direction of the participant or beneficiary.^[4][5] Discretionary implementation belongs in a different analysis.

Is the 2020 class exemption the same as Section 408(g)?

No.

It is a separate DOL class exemption with different conditions and scope.^[7][8]

Which version of the class exemption is current in 2026?

The 2024 amendments were vacated. DOL republished the operative original 2020 exemption in March 2026.^[7][8]

Can pure robo advice use the 2020 class exemption?

The operative 2020 exemption generally excludes advice generated solely by an interactive website without personal interaction. The statutory computer-model exemption is a different route specifically designed to accommodate qualifying model-based participant advice.^[5][8]

The ROIStreet Participant-Advice Control Map

Identify what the participant actually receives → separate education from individualized recommendation → separate recommendation from discretionary implementation → apply the current 2026 five-part fiduciary-advice test → identify every source of adviser and affiliate compensation → determine whether any prohibited transaction exists → identify the exemption actually being relied on → if Section 408(g), choose fee-leveling, computer-model or combined structure → verify participant fees and relevant personal information enter the advice methodology → for computer models, confirm all designated options are appropriately considered and proprietary/revenue bias is controlled → obtain independent model certification before use → recertify material model changes when required → obtain independent plan-fiduciary authorization → furnish required conflict and compensation disclosure before initial advice → preserve participant control over implementation for the 408(g) transaction → test reasonable compensation and arm's-length terms → retain required records for six years → engage the independent auditor annually → review the audit report and remediate exceptions → keep ordinary 404a-5 and 408(b)(2) disclosures separate from the exemption disclosure → if the 2020 class exemption is used instead, apply the operative 2020 exemption rather than the vacated 2024 amendment → monitor the provider, algorithm, conflicts, compensation and participant experience over time

The most important distinction is procedural:

Fiduciary status asks who owes the duty. A prohibited-transaction exemption asks whether a conflicted transaction may proceed. Education guidance asks whether the relationship crossed into advice at all. Discretionary management asks who controls implementation.

Treating those as one question produces bad analysis.

Sources & References

1. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2510.3-21 — Definition of Fiduciary — https://www.law.cornell.edu/cfr/text/29/2510.3-21
2. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2509.96-1 — Interpretive Bulletin Relating to Participant Investment Education — https://www.law.cornell.edu/cfr/text/29/2509.96-1
3. Legal Information Institute / U.S. Code: 29 U.S.C. §1002(21) — ERISA Fiduciary Definition — https://www.law.cornell.edu/uscode/text/29/1002
4. Legal Information Institute / U.S. Code: 29 U.S.C. §1108(b)(14) and (g) — Participant Investment Advice Exemption — https://www.law.cornell.edu/uscode/text/29/1108
5. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.408g-1 — Investment Advice—Participants and Beneficiaries — https://www.law.cornell.edu/cfr/text/29/2550.408g-1
6. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.404a-5 — Participant-Directed Individual Account Plan Disclosures — https://www.law.cornell.edu/cfr/text/29/2550.404a-5
7. U.S. Department of Labor — Employee Benefits Security Administration: Class Exemptions — PTE 2020-02 — https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/exemptions/class
8. Federal Register / U.S. Department of Labor: Retirement Security Rule: Definition of an Investment Advice Fiduciary — Notice of Court Vacatur and Republication — https://www.govinfo.gov/content/pkg/FR-2026-03-20/pdf/FR-2026-03-20.pdf
9. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2550.408b-2 — Covered Service Provider Disclosure — https://www.law.cornell.edu/cfr/text/29/2550.408b-2
10. U.S. Department of Labor — Employee Benefits Security Administration: Meeting Your Fiduciary Responsibilities — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/meeting-your-fiduciary-responsibilities

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan investment education, participant advice, managed accounts, prohibited-transaction exemptions and ERISA fiduciary duties. This article is not legal, fiduciary, investment, securities, tax or plan-administration advice. Investment-advice fiduciary status depends on the actual facts and relationship. Exemption availability depends on compensation, transaction structure, participant direction, disclosures, model design, audit and other conditions. The 2024 Retirement Security Rule and related exemption amendments were vacated; current analysis should use the operative 2026 authorities rather than superseded 2024 summaries.

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