MEMBER ALERT

Court Grants Nationwide Stay of DOL Fiduciary Rule

Late on Friday, July 26, 2024, the judge in our case granted a stay of the effective date of the DOL’s entire fiduciary regulation. Judge O’Connor found that the “Plaintiffs are virtually certain to succeed on [the merits] of their claims that the Rule exceeds DOL’s statutory authority.” The Court agreed with and incorporated the analysis of the July 25 decision in the FACC case filed in the Eastern District of Texas, where the Court stayed the effective date of the DOL’s base rule (defining who is an Investment Advice Fiduciary) and the amendment to PTE 84-24.

Relying on the Fifth Circuit’s decision in Chamber that vacated the DOL’s 2016 fiduciary rule, the Court rejected the DOL’s 2024 rulemaking efforts to expand ERISA fiduciary status to insurance agents and brokers serving retirement savers, concluding that the DOL defense of the Rule is “nothing more than an attempt to relitigate the Chamber decision” and that the 2024 Rule, like the 2016 Rule, overrode the important distinction between insurance agents and brokers, who are compensated only for completed sales, and investment advisers, who are “paid fees because they ‘render advice’.” In failing to maintain this distinction, the 2024 Rule exceeds the DOL’s authority by departing from both the common law and ERISA’s statutory language.

Because the FACC only challenged those two aspects of the Rule, the decision by the Court in our case also stays the effective date of the amendment to PTE 2020-02, as well as the other ancillary PTEs that were amended under the DOL Rule. As with the FACC ruling, the stay is not restricted to the parties before the Court; Judge O’Connor determined that the Rule “is almost certainly unlawful for a broad class of investment professionals in the industry – not just Plaintiffs” and granted relief on a nationwide basis. To limit relief to the parties “would only ‘prove unwieldy’ and ’cause more confusion’.”

In determining the remedy, Judge O’Connor stated that a stay, which is a temporary form of vacatur, provided “complete relief” to the Plaintiffs and thus declined to enter a preliminary injunction at this time. Importantly, the Rule will not take effect during the pendency of the lawsuit, including any appeal.

Along with our co-plaintiffs, ACLI, Finseca, IRI, and NAIFA, NAFA issued this joint statement regarding the complete preliminary victory that this decision represents.

NAFA continues to work with our outside litigation team at WilmerHale and our coalition partners in further analyzing the ruling and determining next steps. We look forward to sharing those details and will provide you with any updates to the litigation as developments unfold. The full opinion is attached.

Read the Court Opinion

NAFA, the National Association for Fixed Annuities, is the premier trade association exclusively dedicated to fixed annuities. Our mission is to promote the awareness and understanding of fixed annuities. We educate annuity salespeople, regulators, legislators, journalists, and industry personnel about the value of fixed annuities and their benefits to consumers. NAFA’s membership represents every aspect of the fixed annuity marketplace covering fixed annuities sold by independent agents, advisors and brokers. NAFA was founded in 1998. For more information, visit www.nafa.com.