A Florida federal district court judge partially granted a securities industry group’s motion for summary judgment, in which it sought to invalidate certain ERISA guidance from the U.S. Department of Labor (DOL). The case is American Securities Association v. U.S. Department of Labor et al., case number 8:22-cv-00330, U.S. District Court for the Middle District of Florida.
In her ruling, the judge found that FAQ 7 of the April 2021 guidance, issued by the DOL’s Employee Benefits Security Administration (EBSA), conflicted with federal benefits and administrative procedures laws. The DOL guidance concerns when retirement plan rollover recommendations constitute investment advice. The judge further found that the policy was an arbitrary and capricious interpretation of current law. As a result, the judge vacated and remanded that portion of the guidance to EBSA for further proceedings.
The American Securities Association (ASA), which represents the interests of regional financial services firms, filed suit to challenge the DOL guidance in February 2022. The ASA claimed that the guidance caused firms to restrict investment advisors from recommending rollovers from employee benefits plans and created new obligations for those firms with no legal basis. In its complaint, the ASA alleged that the guidance violated the Administrative Procedure Act by failing to follow the notice and comment periods required for interpretative rulemaking. The ASA claimed that the guidance violated ERISA by creating a new inquiry to determine whether an individual was a fiduciary and subject to ERISA.
Although the judge agreed with ASA as to FAQ 7, it rejected ASA’s same arguments concerning FAQ 15. In granting partial summary judgment to the DOL, the judge found that FAQ was a procedurally proper interpretative rule that clarified requirements provided in a previous final rule. That 2020 rule is known as Prohibited Transaction Exemption 2020-02.
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