DOL Fiduciary Rulemaking in Jeopardy Amidst Recent Court Rulings

May 10, 2023
Hall Benefits Law, LLC

Two recent federal court decisions, one in Florida and one in New York, have cast significant doubt on the ability of the U.S. Department of Labor (DOL) to issue and enforce formal regulations defining who qualifies as a fiduciary under federal benefits law. In its latest regulatory agenda, the DOL’s Employee Benefits Security Administration (EBSA) indicated that it intended to issue a new proposed rule explaining when an individual advising employee benefit plans and IRAs on investments in exchange for a fee is a fiduciary under ERISA.

The recent Florida federal court decision invalidated portions of EBSA’s guidance on retirement plan rollovers. In addition, the New York federal court decision from late 2022 dismissed an ERISA class action challenging a retirement manager’s rollover advice. These two decisions, along with a 2018 decision of the U.S. Court of Appeals for the Fifth Circuit invalidating the DOL’s earlier version of the fiduciary rule, may make it challenging for the DOL to issue a legally valid final rule on the subject.

In the Florida decision, the judge found that EBSA’s FAQ document from April 2021 was an arbitrary and capricious interpretation of current law in violation of the Administrative Procedure Act. The judge stated that EBSA had overreached its authority in trying to capture rollover transactions outside the scope of ERISA.

Given these decisions, financial institutions have no clear regulatory guidance on ensuring rollovers comply with ERISA and DOL’s fiduciary conduct standards. This situation creates great uncertainty for these institutions as they await further guidance, whether through additional DOL rulemaking or appeals of the recent court decisions.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.