On Sept. 20, the Department of Labor (DOL) appealed to the Fifth Circuit Court for a reversal of the ruling by the U.S. District Court for Eastern Texas that temporarily suspended the implementation of the 2024 Retirement Security Rule, also known as the fiduciary rule. The move came three days before the rule’s original effective date.
The rule’s Sept. 23 implementation was put on hold in late July as the result of a lawsuit filed by the insurance industry-backed Federation of Americans for Consumer Choice (FACC), as well as James Holloway, James Johnson, TX Titan Group, ProVision Brokerage, and V. Eric Couch. It named the DOL and Acting Secretary Julie Su as defendants.
In ordering the stay, U.S. District Judge Jeremy D. Kernodle explained that “the 2024 Fiduciary Rule suffers from many of the same problems” found in the version vacated by the Fifth Circuit in 2018.
“In July, plaintiffs argued that the new rule violated the Fifth Circuit’s 2018 decision and that it’s too broad,” American Retirement Association Chief Legal Officer Allison Wielobob explained, referring to the case’s various moving parts as “legal jujitsu.” “The DOL replied to the complaint, refuting the Federation, and many of us presumed the court would deal with the substance of the case sometime down the road. But the plaintiffs then filed a separate motion that asked the court to freeze the effective date of September 23 - Monday. The judge issued a lengthy opinion, saying they met the legal standard for doing that. The DOL is now appealing that ruling on the freeze to the Fifth Circuit.”
Despite the curious timing, Wagner Law Group Partner and COO Tom Clark isn’t reading much into it. There was a prescribed 60-day period to appeal, and the deadline was approaching.
“It’s put up or shut up on whether they’re going to appeal this order,” Clark said. “That’s my take on it. I don’t think there’s too much to read into what their next move is at this point. They want to appeal to preserve their rights, but they haven’t given the community any real insight as to their thoughts about how to move forward.”
All the DOL’s options “are still on the table,” and they might be waiting for the election to decide their next move.
“A notice of appeal is three lines long,” he added. “The real work begins when the docket entry gets created by the Fifth Circuit, the case management memo gets opened, and the court issues a set of deadlines. That’s when the real work starts.”
Clark claimed there are hints that the two sides are talking to each other but won’t say what about, making it hard for observers to read the “tea leaves.”
“If I’m an advisor working with plan sponsors, the story is, ‘Okay, the DOL is not giving up.’ They filed their notice of appeal as a placeholder. We really still don’t know what their thoughts are other than preserving their rights. What that tells me is I need to keep paying attention in the future, but this thing could go on for another year and a half. I need to pay attention, but it’s on my back burner, not front burner attention.”
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