DOL Plans Appeal to Revive Retirement Security Rule

The Department of Labor will appeal two federal court stays on its fiduciary rule, which was originally slated to go into effect Monday. 

Notices of appeal were filed by the DOL on Friday in the U.S. District Court for the Northern District of Texas and the U.S. District Court for the Eastern District of Texas, Tyler Division, with the full appeal pending with the U.S. 5th Circuit Court of Appeals. 

The fiduciary rule, formerly called the Retirement Security Rule, was the DOL’s second attempt in the past decade to bring retirement investment advice, including individual retirement account rollovers and small employer-plan advisement under fiduciary obligation. The rule had been finalized with a September 23 start date but hit legal roadblocks from complaints filed by industry firms and member organizations. 

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

On Friday, the DOL signaled it will appeal to get the fiduciary rule reinstated, but it has yet to provide its full argument.  

In 2018, the 5th Circuit, which hears appeals from federal courts in Louisiana, Mississippi and Texas, invalidated a DOL fiduciary rule in Chamber of Commerce v. U.S. Department of Labor. The DOL has argued that the rule currently being challenged is different, in part because it more clearly addresses when retirement plan rollover advice and annuity sales fall under fiduciary guidance. 

U.S. District Judge Reed C. O’Connor, however, presiding in the Northern District, wrote in granting the stay that Chamber played a role in his decision. 

“As a whole, Defendants’ arguments [against the lawsuit] are nothing more than an attempt to relitigate the Chamber decision,” O’Connor wrote. “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 Fifth Circuit will now docket the appeal and then review it to make sure they have jurisdiction, says Allie Itami, a partner with Lathrop GPM LLP. Furthermore, if the court questions “jurisdiction because of the interlocutory nature, they might ask the parties to brief whether the appeal is timely.” 

If the appeal does go ahead, the court will “instruct the parties to file a notice of appearance and eventually issue a briefing notice saying when the briefs will be due.”