The U.S. Department of Justice (DOJ) dropped its defense of a Biden-era regulation that would have imposed a fiduciary duty on financial advisers when they provide retirement investment advice.
The government on Nov. 24 formally stopped fighting a legal challenge to the Department of Labor’s (DOL’s) “retirement security rule” (RIN 1210-AC02) by withdrawing an appeal, one that the Biden-era DOJ had filed with the Fifth Circuit.
These events bring a close to the latest chapter in the DOL’s long-running effort to impose a fiduciary duty on financial advisers who provide retirement investment advice.
DOL’s previous version of the fiduciary regulation was struck down by the Fifth Circuit in 2018 (Chamber of Commerce v. U.S. Dep’t of Labor, 885 F.3d 360 (5th Cir. 2018)).
The retirement security rule would have widened the circumstances in which a financial services provider qualifies as an “investment advice fiduciary” under the Employee Retirement Income Security Act (ERISA) and thus owes duties of prudence and loyalty to retirement investors.
The legal challenge to the recent rule was led by insurance industry trade groups.
“As CPA financial planners, we already adhere to a strict ethical code that puts clients’ interests first,” said Dan Snyder, CPA/PFS, the AICPA’s director–Personal Financial Planning. “The current regulatory limbo is disappointing because a universal fiduciary standard for retirement advice is fundamentally about investor protection, and the ongoing uncertainty only creates confusion for both financial planning professionals and the public we serve.”
Challenge to the fiduciary regulation
Issued in April 2024, the retirement security rule was quickly challenged in court by various industry groups. The challengers argued, among other things, that DOL exceeded its rulemaking authority in adopting the regulation.
When two federal courts in Texas found the challengers’ arguments persuasive and paused the regulation from taking effect, the Biden-era DOJ appealed those stay orders to the Fifth Circuit, where the cases were consolidated. On Nov. 28, the appeals court granted DOJ’s motion to dismiss the government’s own appeal, consequently leaving the regulation stayed (Federation of Americans for Consumer Choice, Inc. v. U.S. Dept. of Labor, No. 24-40637 (5th Cir., granting motion to dismiss appeal Nov. 28, 2025)).
Loper Bright issue
In other words, because the government’s appeal has now been dismissed, the stay orders issued by the two federal courts in Texas, the Eastern District and the Northern District, will remain in effect. Those orders prevent the retirement security rule from taking effect. The courts issued the stays after finding that the industry trade groups were likely to prevail on the merits of their claims that the DOL lacked authority to issue the April 2024 regulation.
One weakness of the government’s case in the Fifth Circuit had it not withdrawn its appeal would have been the demise of the Chevron doctrine, which was established in the case of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). In June 2024, the U.S. Supreme Court nullified the long-standing judicial deference doctrine, which required courts to defer to administrative agencies’ reasonable interpretations of ambiguous statutes (see Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024)).
This broad doctrinal change, giving agencies less discretion in interpreting statutes (such as ERISA), happened just two months after the DOL finalized the retirement security rule.
Notably, the Eastern District of Texas’s ruling imposing a stay on the retirement security rule highlighted the Supreme Court’s overruling of the Chevron doctrine, stating, “A court should no longer defer to an agency’s interpretation of a statute but should decide for itself ‘whether the law means what the agency says’ [quoting Loper Bright].”
The DOL, in its regulatory agenda announced last spring, indicated that it plans to redraft the rule “and will ensure that the regulation is based on the best reading of the statute.”
— To comment on this article or to suggest an idea for another article, contact Dave Strausfeld at David.Strausfeld@aicpa-cima.com.
