The legal battle over the federal government’s revised fiduciary rule has now gone back to an appeals court, Financial Advisor reports.
The Department of Labor (DOL) has filed a motion with the Fifth Circuit Court of Appeals for a 60-day extension while it decides how to proceed in the matter, following two previous extensions. The DOL is continuing to weigh its options with regards to lawsuits that have been filed over the rule, which was approved under the Biden Administration in 2024.
The measure 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 in Texas 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 DOL subsequently asked 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. Attorneys for the DOL told the court that “additional time is needed to determine how to proceed in these appeals.”
If the latest extension request is approved, it would give the DOL until October 28 to make a decision. The motion was unopposed, with all parties consenting to the delay.
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 groups say the rule was approved without meeting federal Administrative Procedure Act requirements.
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.
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 DOL said the rule is aimed at protecting retirement investors from improper investment recommendations and harmful conflicts of interest. They said it would reassure investors that their investment advice provider is working in their best interest and helping to make unbiased decisions.
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