The Labor Department is closing the book on the Biden administration’s iteration of the fiduciary rule and dropping its defense of the regulation in court.
According to a motion filed to the Fifth Circuit Court of Appeals signed by appellate attorneys with the Department of Labor, the “government respectfully moves to dismiss” its appeal of an earlier district court ruling pausing the Biden-era regulation finalized in 2024.
The rule’s end in the courts mirrors the first Trump administration; in 2018, the Texas-based Fifth Circuit vacated another fiduciary rule passed in the final year of the Obama administration.
The Biden administration’s Labor Department unveiled its iteration of a fiduciary rule in October 2023, with President Joe Biden framing the rule as a way to curb so-called “junk fees” in the form of high (and potentially unsuitable) commissions in retirement advice. The final rule was released in April 2024 and was slated to take effect in September 2024.
However, opponents of the rule quickly pounced; in May 2024, the Federation of Americans for Consumer Choice, an Austin, Texas-based lobbying group for independent insurance professionals, filed a suit in Texas to quash the rule (followed by a second Texas suit from critics including the American Council of Life Insurers, the Insured Retirement Institute and Finseca).
That summer, the two Texas district courts temporarily stayed the rule, arguing it “suffers from many of the same problems” as the Obama-era rule previously vacated by the Fifth Circuit. Days before the rule was to take effect, the government appealed both decisions.
Donald Trump’s victory in the 2024 presidential election upended the rule’s future, and in February, the Labor Department under Secretary Lori Chavez-DeRemer asked the court to pause the case while the DOL determined its course of action.
Although the DOL has ended its defense of the Biden-era rule, it has scheduled an “Investment Advice Fiduciary Under ERISA” rule on the Office of Management and Budget’s regulatory review page, with a tentative date of May 2026. No other details are offered, besides that it will “ensure that the regulation is based on the best reading of the statute.”
The post suggests the Trump administration may take a second bite at the apple, after passing its own iteration of a fiduciary rule in the waning days of Trump’s first term in 2020; the rule was dead on arrival with the Biden White House. It would mark the fourth attempt to pass a fiduciary rule by three different presidential administrations within 10 years.
Two of those rules (during the Biden and Obama administrations) ran into the buzzsaw of a federal appellate court with a reputation for being unfriendly to regulatory efforts, wielding the power to issue a nationwide injunction.
However, whether efforts to strike down future fiduciary rules in a similar fashion will be possible remains to be seen after the Supreme Court’s 6-3 decision earlier this year limiting federal judges’ ability to issue nationwide prohibitions on particular laws or policies (though class action suits can still proceed, which could continue to have a national impact).
According to Ben Edwards, a professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, industry lawsuits pursuing national injunctions typically feature brokerage or trade associations or groups as plaintiffs to represent the interests of the industry, but they may not be adequate representatives in a class action to stand in for the industry as a whole.
Edwards suggested that if industry members need to be parties, they could face criticism that they’re pursuing their own interests at the expense of clients, and it may change their willingness to litigate.
“It’s another thing if your firm has to be the face of the challenge,” he said.
