On March 15, the U.S. Court of Appeals for the 5th Circuit vacated the entire U.S. Department of Labor (DOL) fiduciary rule. The Big “I” is pleased with the decision as the association opposes the rule. However, this decision may not be the final say.
Just two days before on March 13, the 10th Circuit Court of Appeals rejected a more limited challenge to the rule related to fixed-indexed annuities, setting up a potential circuit split. However, those involved in the 5th Circuit litigation contend that the decision applies nationwide and that the fiduciary rule will effectively be “erased from the books” as of May 7, when the decision takes effect.
Following the decision, the DOL is taking a position of non-enforcement on the rule as it reviews next steps. The DOL is currently working on changes to the rule and may also continue to pursue litigation in the 5th Circuit or the U.S. Supreme Court.
The fiduciary rule was finalized in 2016, but implementation was delayed until June 9, 2017, when the rule took partial effect. Prior to the court ruling, the rule was scheduled to take full effect on July 1, 2019. Now, it is unclear whether that will happen.
The fiduciary rule is a complex federal regulation that tightens conflict of interest rules under the Employee Retirement Income Security Act (ERISA) and requires insurance agents and brokers who give guidance about certain retirement investments—including some annuities and health savings accounts—to adhere to a fiduciary standard of care.
Meanwhile, the Securities and Exchange Commission is expected to continue work on its own best interest standard for broker-dealers, scheduled for release later this year.
Jennifer Webb is Big “I” federal government affairs counsel.
