U.S. Department of Labor Seeks Pause in Fiduciary Rule Appeals
Earlier this week under the Trump administration, the U.S. Department of Labor paused its appeals of court rulings that suspended DOL’s 2024 fiduciary rule, also called the Retirement Security Rule – which updated the definition of an investment advice fiduciary under the Employee Retirement Income Security Act, i.e., ERISA, and the Internal Revenue Code.
The filing in U.S. Court of Appeals for the Fifth Circuit states that, due to the recent change in administration on Jan. 20, “DOL is now under new leadership,” and that new agency officials “are still in the process of on boarding and familiarizing themselves with all of the issues presented by pending litigation.”
Last July, two federal courts granted stays of the rule while they considered industry challenges to overturn the rule which for the first time, would make one-time advice a fiduciary transaction.
According to previous reporting by AltsWire, the final rule and related amended prohibited transaction exemptions require investment advice providers to give “prudent, loyal, honest advice free from overcharges.” Fiduciaries must adhere to high standards when they recommend investments and avoid recommendations that favor the investment advice providers’ interests – financial or otherwise – at the retirement savers’ expense. Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines.
The updated definition of an investment advice fiduciary was supposed to take effect in September 2024, 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.
Advocates on both sides have provide emotionally charged responses to the rule ever since its fall 2023 proposal.
According to the previous administration, the updated rule is to “protect the millions of workers who are saving for retirement diligently and rely on advice from trusted professionals on how to invest their savings.”
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 new filing seeks to allow new DOL staff “sufficient time to become familiar with the issues in these [summer 2024] cases and determine how they wish to proceed, the government respectfully moves to place these consolidated appeals in abeyance, with status reports due at 60-day intervals.”
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