Final judgment has been entered in the litigation concerning the 2024 final retirement security rule, formally invalidating the rule and bringing the litigation to a close. The rule, which would have revised the definition of an “investment advice fiduciary” under the Employee Retirement Income Security Act (ERISA), had been stayed nationwide since July 2024 and never took effect. The final judgment follows the U.S. Department of Labor’s (DOL) earlier decision to voluntarily dismiss its
consolidated appeals.

Final Rule Background

The final rule and related amendments to prohibited transaction exemptions (PTEs), issued on April 23, 2024, faced immediate legal challenges. Among other things, the final rule and related PTE amendments sought to clarify when advice providers were acting in a fiduciary capacity under ERISA and the conditions they had to follow to protect retirement investors. The rule also would have closed a loophole for advice provided on a “one-time” basis by establishing that a financial services provider would be a fiduciary with respect to a recommendation to roll over assets from a workplace retirement plan to an individual retirement account (IRA) if all elements of the fiduciary definition were satisfied.

Legal Challenges

Implementation of the final rule and related amendments, originally scheduled for Sept. 23, 2024, was delayed after two federal District Courts in Texas issued orders in July 2024 suspending the effective date until further court order. The cases were subsequently consolidated, and the DOL initially appealed the rulings under the Biden administration. However, following the
change in administration, the Trump administration held the appeals in abeyance while determining its next steps and ultimately withdrew them.

According to the DOL under the Biden administration, the rule and amended PTEs were designed to enhance retirement investor protections by requiring advice providers to follow ERISA’s high standards of care and loyalty when making investment recommendations.

Impact of Latest Development

With the entry of final judgment, the rule is now formally invalidated, and the litigation will conclude. This outcome provides additional regulatory clarity as the DOL considers future fiduciary rulemaking, including the rulemaking currently scheduled for May 2026 in the agency’s regulatory agenda.

Even with the rule invalidated, plan administrators and service providers should continue reviewing existing fiduciary compliance policies to ensure adherence to existing standards and prepare for potential future rulemaking.

This post is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

• Category: News
• Tag: Compliance