Texas Court Puts the Brakes on Implementation of DOL Fiduciary Rule
A federal judge from Texas put the Department of Labor’s final “Retirement Security Rule: Definition of an Investment Advice Fiduciary,” or fiduciary rule, on hold.
Judge Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas in the city of Tyler issued a stay on the rule, which was finalized back in April. Kernodle’s decision came in response to a lawsuit filed by a group of plaintiffs led by the Federation of Americans for Consumer Choice, which advocates for insurance distributors.
The final fiduciary rule, set to take effect on Sept. 23, expands the types of advice that must meet a fiduciary standard, updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code.
The updated definition of an investment advice fiduciary applies when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners, and plan officials responsible for administering plans and managing assets.
The latest ruling out of Texas reads as follows:
“The Court grants Plaintiffs’ motion. As explained below, Plaintiffs are likely to succeed on the merits of their claim because the 2024 Fiduciary Rule conflicts with ERISA in several ways, including by treating as fiduciaries those who engage in one-time recommendations to roll over assets from an ERISA plan to an IRA. DOL’s related amendments to Prohibited Transaction Exemption 84-24 are also unreasonable and arbitrary and capricious.
Earlier this month, the House Appropriations Committee approved by a 31-25 vote a resolution to overturn the fiduciary rule.
As previously reported by AltsWire, advocates for fiduciary investment advice like the Institute for the Fiduciary Standard and the CFP Board came out in favor of the rule since it was proposed in 2023.
However, advocacy groups such as the Insured Retirement Institute and the Financial Services Institute long expressed concern about the consequences of the rule and the hastened regulatory process that transpired for DOL’s final rule.
The resolution provides for disapproval of the fiduciary rule under the Congressional Review Act, which allows Congress to potentially override federal agencies. Since the Committee passed the bill, it is eligible for consideration by the full House of Representatives.
In order to take effect and vacate the fiduciary rule, the resolution would have to pass the House and Senate before being signed by the president.
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