PLANSPONSOR - September/October 2024 - 4

RULES & REGULATIONS
Texas Courts Stay New Fiduciary Rule
T
wo federal courts in Texas have
put a hold on the Department of
Labor's Retirement Security Rule,
in advance of its September effective date.
An opinion issued in a case heard by
Federal Judge Reed C. O'Connor in the
Northern District of Texas Fort Worth
Division, July 26, sided in part with the
plaintiffs
in American Council of Life
Insurers v. DOL. The court ordered a stay
on the so-called fiduciary rule with the
argument that the rule needed no further
court review; however, the judge denied
a preliminary injunction, which would
have put a hold on the rule until the court
determined its merits.
The final rule, which was scheduled
to take effect September 23, requires
" trusted investment advice providers " and
financial institutions working with them
to operate as fiduciaries in most cases
when advising on qualified retirement
plan design, annuity sales and individual
retirement account rollovers.
The Northern District's stay was
based in part on its argument that the
new DOL rule resembled the one vacated
4 PLANSPONSOR.COM September - October 2024
by the 5th Circuit Court of Appeals in
2018 in Chamber of Commerce v. U.S.
Department of Labor.
" As a whole, Defendants' arguments
[against the suit] are nothing more than
an attempt to relitigate the Chamber
decision, "
the
court's
decision reads.
" Because the Fifth Circuit's Chamber
decision unambiguously forecloses all of
Defendant's arguments, the Court need
not repeat why those arguments fail here. "
The current suit, led by the American
Council of Life Insurers along with eight
other insurers, argued that the DOL's rule
exceeded its " authority under federal law,
is arbitrary and capricious " and had the
" same legal defects " as the rule attempted
in 2016 that the 5th Circuit eventually
struck down.
The Northern District suit followed
a similar lawsuit filed in the Eastern
District of Texas by the Federation of
Americans for Consumer Choice Inc., an
advocacy group for independent insurance
agents and some other independent
insurance agents. A judge granted the
plaintiffs' request for a stay in that case
Art by Alex Eben Meyer
the week prior to the O'Connor decision,
with U.S. District Judge Jeremy Kernodle
additionally writing that the plaintiffs are
" likely to succeed " in their action.
The plaintiffs
in Federation of
Americans for Consumer Choice Inc. et al.
v. U.S. Department of Labor et al. had also
cited the similarities to the 2016 fiduciary
rule. The DOL disputed that claim,
arguing that the new iteration took the
2018 ruling into account and was designed
to better clarify when retirement plan rollover
advice and annuity sales fall under
the fiduciary standards of the Employee
Retirement Income Security Act.
Kernodle sided with the plaintiffs
regarding that claim. He further noted
that the scope of relief is national and not
limited to " the parties before the court. "
" Plaintiffs are likely to succeed on
the merits of their claim because the
2024 fiduciary rule conflicts with ERISA
in several ways, including by treating as
fiduciaries those who engage in onetime
recommendations to roll over assets from
an ERISA plan to an IRA, " Kernodle wrote.
The judge also wrote that the
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