A Texas federal judge has issued a nationwide preliminary injunction blocking the U.S. Department of Labor's (DOL) new fiduciary rule, which classifies more retirement advisors as fiduciaries under the Employee Retirement Income Security Act (ERISA). The DOL's rule was set to go into effect on September 23, 2024, until the Court issued its order in Federation of Americans for Consumer Choice, et al. v. Department of Labor, et al., which stayed the rule until further order of the Court.
The Federation for Consumer Choice (FACC) is a trade organization comprising independent marketing associations, insurance agents, and agencies marketing fixed annuities. FACC sued the DOL after it unveiled its new fiduciary rule in May 2024. The Court ruled in favor of FACC on its request for a preliminary injunction, finding that the organization was likely to succeed in its claim, as the new DOL rule directly conflicts with ERISA's definition of "investment advice fiduciary."
FACC claims that DOL's expansion of "investment advice fiduciary" to include many retirement advisors is equivalent to its 2016 fiduciary rule, which the U.S. Court of Appeals for the Fifth Circuit struck down in 2018. In particular, FACC—and the judge in issuing the preliminary injunction—focuses on how the new rules treat financial advisors who give one-time advice to clients about rolling over assets from ERISA plans to IRAs as fiduciaries.
In response, the DOL contends that its new fiduciary rule is substantially different from the 2016 rule and addresses the issues the Fifth Circuit pointed out in its decision to vacate it. Rather than assuming that every financial advisor in every transaction is a fiduciary, the new fiduciary rule focuses on the relationship between the advisor and the investor and how the advisor presents itself.
Meanwhile, other insurance industry organizations have opposed the retirement security rule. In May, these organizations filed suit, seeking to overturn the fiduciary rule on the basis that it "undermines state authorities who are responsible for overseeing annuities."
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