Labor Department Drops 401(k) Plan Fiduciary Guidance Appeal

The US Labor Department has abandoned its appeal of a Florida federal district court ruling that struck down sub-regulatory guidance expanding the definition of a retirement plan fiduciary, according to the American Securities Association.

The ASA, which filed the original suit against the department, said Monday that the DOL and US Justice Department had dismissed the appeal voluntarily at the US Court of Appeals for the 11th Circuit, after previously starting the process.

A US District Court for the Middle District of Florida judge in February vacated a portion of the department’s frequently asked questions guidance, ruling that it illegally widened regulatory goalposts and failed to comply with the agency’s own regulations.

The Labor Department has been trying to extend strict fiduciary standards of conduct to cover the kinds of products workplace pension plan participants roll their savings into at retirement. Guidance the Florida court struck down in February reinterpreted a 1975 five-part test defining investment advice fiduciaries to include first-time advice that was intended to form an ongoing relationship.

“The district court correctly held the DOL’s guidance was arbitrary and capricious and had no basis in the law,” said ASA President and CEO Chris Iacovella in an emailed statement.

The Labor Department referred questions regarding the appeal to the Justice Department, which declined to comment Monday morning.

Regulators are still working on a rewrite of the fiduciary rule. By abandoning the Eleventh Circuit appeal, the department could be signaling that the rule is nearing its release, although a similar challenge to the department’s fiduciary rule guidance is still awaiting a ruling in Texas.