A federal judge has granted the Department of Labor’s motion to pause two cases involving its 2024 fiduciary rule, according to Financial Advisor.
The rule, approved under the Biden Administration, would expand the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) to cover financial professionals making one-time recommendations about issues such as rolling over a 401(k) plan and purchasing annuities.
Two district courts stayed the rule last year following lawsuits filed by a coalition of financial industry groups whose products would have been affected. The government appealed both district court decisions at the time.
But the Department of Labor recently filed a motion in the U.S. 5th Circuit Court of Appeals to hold its appeals in the cases, saying the matter will need further analysis by the Trump Administration.
Judge Catharina Haynes has now given the DOL an additional 60 days to decide whether it will appeal the stays of the rule. Haynes ruled that the “unopposed motion to stay further proceedings in this court to allow new Department of Labor officials sufficient time to become familiar with the issues in these cases and determine how they wish to proceed is granted for 60 days.”
In its motion, the DOL pointed out that the department is under new leadership and officials “are still in the process of onboarding and familiarizing themselves with all of the issues presented by pending litigation.”
To allow new DOL officials “sufficient time to become familiar with the issues in these 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,” the filing states.
One of last year’s lawsuits against the new fiduciary rule was filed by a coalition of groups that includes the Federation of Americans for Consumer Choice. The FACC, which represents independent insurance professionals, asserted that the DOL exceeded its authority granted by Congress in approving the rule and goes against precedent set by the courts.
The second lawsuit, filed by nine insurance trade organizations, also claimed the department exceeded its authority, and acted without analyzing impact data in an adequate way to quantify the benefits.
The updated fiduciary rule was intended to apply when financial services providers give investment advice for a fee to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets. These fiduciaries would have to adhere to high standards of care and loyalty when they recommend investments and avoid recommendations that favor the investment advice providers’ interests at the retirement savers’ expense.
The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Should your firm be in need of experienced counsel in these areas, please contact us at (888) 655 6002 or through our online contact form.
