Key Takeaways
- The lawsuits against the DOL’s new regulation on fiduciary advice and the related exemptions—and the likely appeals—will probably last for years.
- Two key issues in the lawsuits and appeals are whether the DOL has the authority to amend its existing regulation—the 5-part test—to cover one-time recommendations and whether the DOL has the authority to issue prohibited transaction exemptions that require a standard of care (e.g., prudence and loyalty) where the law does not otherwise.
- The DOL will argue that circumstances have change since 1975, for example, the enactment of Code section 401(k) and the post-ERISA growth in the importance of those plans. As a part of that, the DOL asserts that rollover recommendations should be fiduciary advice and that the compensation from the rollover IRA (account or annuity) would be a prohibited transaction.
- My last post, Fiduciary Rule 51, discussed the impact of the Supreme Court’s Loper Bright decision on the new fiduciary regulation. This post discusses the impact of Loper Bright on the validity of the amended PTEs, 84-24 and 2020-02.
As I explained in my last post, Fiduciary Rule 51, I have been asked whether the Supreme Court’s decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al. could affect the outcome of the litigation about the validity of the DOL’s fiduciary regulation and related exemptions. The answer is “yes,” but perhaps not in the way you might think. This article discusses the Loper Bright decision in the context of a review of the DOL’s Prohibited Transaction Exemptions (PTEs) 84-24 and 2020-02.
To be fair, I am not an expert on constitutional law and I don’t want to create the impression that this is an authoritative article. Instead, my goal is to highlight the issues for consideration by the courts.
