If your eyes have been glazing over trying to keep up with the torrid pace of recent efforts to torpedo the Labor Department's new fiduciary rule, known officially as the retirement security rule, you're not alone.
Here's a rundown of where things stand now, what might happen next. The biggest takeaway for advisors: Be prepared to comply by Sept. 23, when the rule's initial requirements take effect.
Since Labor released the final rule on April 23, two lawsuits were filed against the rule in May and House lawmakers have introduced legislation to halt the rule. Acting Labor Secretary Julie Su told House lawmakers on May 1 that Labor's new fiduciary rule can withstand legal challenges.
While the two bills introduced to torpedo the rule passed out of their respective committees on Wednesday, industry watchers view the bills' chances of becoming law as slim.
"Given the history" of the fiduciary rule fight, any chances to overturn the rule are in the hands of the courts, as legislative moves are less likely to succeed, Micah Hauptman, director of investor protection for the Consumer Federation of America, told me in a recent email.
Lawmaker Moves and Lawsuits
The latest chapter of the legal battle over fiduciary advice goes back to Feb. 2, 2022, when the Federation of Americans for Consumer Choice, a group representing independent insurance agents who sell annuities and other income planning products, sued to block Prohibited Transaction Exemption 2020-02, a regulation on rollover advice that was finalized during the Trump administration.
On May 2, FACC and several independent insurance agents sued Labor in U.S. District Court for the Eastern District of Texas over the new retirement security rule, seeking a preliminary injunction "to stop the new rule from taking effect" during FACC's case against PTE 2020-02.
In a second filing 20 days later, the plaintiffs argued that the retirement security rule would cause too much damage if it went into effect and that the court must delay its implementation until FACC's pending PTE case was resolved.
Nine insurance trade groups filed a lawsuit on May 24 in the U.S. District Court for the Northern District of Texas to overturn the rule. The Securities Industry and Financial Markets Association and the Financial Services Institute joined the insurance groups' suit on June 29 via a plaintiff-intervenors' complaint.
On July 10, the House Education and Workforce Committee passed by a 23-18 vote a Congressional Review Act resolution to stop Labor's new fiduciary rule from taking effect.
The same day, the House Appropriations Committee approved by a 31-25 vote the fiscal year 2025 Labor, Health and Human Services, Education, and Related Agencies bill, which would prevent Labor from using any funds to administer, implement or enforce the fiduciary rule and related prohibited transaction exemptions.
In mid-June, Labor filed a reply brief in the case filed by FACC.
"I thought that the reply brief was very solid," Fred Reish, partner at Faegre Drinker, said on a Broadridge webcast in early July. "The DOL did a great job of explaining why this [new rule] is not like the Obama-era rule. And certainly, if the court were a neutral court, without any particular philosophical approach to interpreting the law, they [DOL] would probably have muddied the water enough that it would be difficult for a stay to be granted."
However, the two judges in the two federal district courts in Texas "are very conservative judges" and have both made rulings that "might be viewed as anti-regulatory," Reish said. "So I think the outcome is really uncertain."
