A U.S. District Court issued a final judgment Tuesday vacating the Department of Labor’s fiduciary rule and related prohibited transaction exemptions that were finalized under the Biden administration.
The Texas District Court decision represents a win for several industry groups that originally filed the lawsuit seeking to throw the rule out, including the National Association of Insurance and Financial Advisors, the American Council of Life Insurers, the Insured Retirement Institute, Finseca and the National Association for Fixed Annuities.
“Retirement savers are best served by policies that protect consumers while preserving choice and access to financial professionals—not regulatory overreach that reduces their options,” according to a joint statement by NAIFA, ACLI and the other parties to the lawsuit. “Consumers already benefit from strong protections at both the state and federal levels, including enhanced annuity best interest standards adopted by most states and federal requirements governing investment advice. These frameworks protect consumers while preserving access to information and guidance about annuities—the only product available in the financial marketplace that acts like a pension by guaranteeing lifetime income.”
The Financial Services Institute and SIFMA, which were plaintiffs-intervenors in the lawsuit, also issued a joint statement:
“The order ensures that financial advisors can continue to provide the services best suited for each individual client. The 2024 rule was materially indistinguishable from a 2016 DOL rule that was struck down by the Fifth Circuit in 2018,” the groups said. “As we explained in our complaint, ‘[l]ike the 2016 Rule, the 2024 Rule is inconsistent with the common law, contravenes the statutory text and impermissibly attempts to regulate the provision of services to accounts over which the Labor Department has no regulatory authority. Indeed, the illegality of the 2024 Rule is even clearer today.’”
This follows a move in November by the DOL to dismiss its appeal of a Texas district court decision to pause the 2024 rule.
The Biden administration’s Labor Department unveiled its iteration of a fiduciary rule in October 2023, with President Joe Biden framing the rule as a way to curb so-called “junk fees” in the form of high (and potentially unsuitable) commissions in retirement advice. The final rule was released in April 2024 and was slated to take effect in September 2024.
However, opponents of the rule quickly pounced; in May 2024, the Federation of Americans for Consumer Choice, an Austin, Texas-based lobbying group for independent insurance professionals, filed a suit in Texas to quash the rule (followed by a second Texas suit from critics including the ACLI).
The rule’s end in the courts mirrors the first Trump administration; in 2018, the Texas-based Fifth Circuit vacated another fiduciary rule passed in the final year of the Obama administration.
