5th Circuit Grants DOL 60 More Days on Fiduciary Rule Lawsuit

U.S. Circuit Judge Catharina Haynes, of the U.S. 5th Circuit Court of Appeals, granted the Department of Labor’s request for another 60 days to consider its next steps in two court cases challenging the department’s 2024 Retirement Security Rule.

On Tuesday, Haynes granted the DOL’s unopposed motion to extend the existing abeyance for an additional 60 days to June 16, 2025.

The DOL sought an additional delay, in a motion filed on Monday, due to the change in presidential administration and the time required for new DOL leadership to become familiar with issues presented by the litigation.

The DOL had previously requested a stay in February, which was set to expire on Tuesday. At that time, Secretary of Labor Lori Chavez-DeRemer’s nomination was still under consideration; she has since been confirmed.

The Retirement Security Rule, or the “fiduciary rule,” proposed in April 2024 under former President Joe Biden, sought to amend the test for determining when an individual falls within the statutory definition of a “fiduciary” to an Employee Retirement Income Security Act plan based on “rendering of investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan.”

The rule was scheduled to take effect on September 23, 2024, but hit legal roadblocks in the form of complaints filed by industry firms and member organizations.

The U.S. District Court for the Northern District of Texas put a national stay on the rule in a July 26, 2024, opinion in American Council of Life Insurers v. DOL. One day prior to that ruling, the U.S. District Court for the Eastern District of Texas had also granted a stay in a separate case, Federation of Americans for Consumer Choice Inc. et al. v. DOL et al. 

Both lawsuits sought to block the rule, which required “trusted investment advice providers” and financial institutions working with them to operate as fiduciaries in most cases when advising on retirement plan design, annuity sales and individual retirement account rollovers.

Plaintiffs have argued in both cases that the DOL’s rule exceeded its authority under federal law, is “arbitrary and capricious” and has the “same legal defects” as the 2016 version of the rule that was eventually struck down by the 5th Circuit.

The extension granted this week gives the DOL more time to consider how to reply to appeals in the two cases, which have been consolidated.