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On April 14, the U.S. Department of Labor (DOL) filed a notice of appeal to the 11th Circuit Court of Appeals on a Florida District Court ruling (American Securities Association v. United States Department of Labor) that struck down parts of the agency’s sub-regulatory guidance on the applicability of the fiduciary standard to advice on rolling over ERISA plan retirement funds into IRAs.

The U.S. District Court for the Middle District of Florida ruled in February that DOL had “exceeded its regulatory authority when it applied strict fiduciary standards of conduct to financial advisers recommending IRAs.” At issue was whether combining a recommendation to take a rollover from a retirement plan with post-rollover advice meant that advice is being provided on a “regular basis” under DOL’s five-part regulatory test for fiduciary investment advice status. Per the Florida court opinion, recommendations to employee benefit plans must be analyzed separately from recommendations to IRAs to determine whether the regular basis prong of the five-part test has been met.  In this situation, DOL’s ability to regulate advisors’ standards of conduct ends when the money leaves the plan established under ERISA.

Prospects: It is unlikely that DOL will give up on its effort to impose stricter standards of conduct in retirement fund rollover and other situations—at least for as long as there is a Democrat in the White House. If the agency loses in the 11th Circuit, it is possible DOL will push the issue all the way up to the Supreme Court. In addition, DOL has included a new fiduciary rulemaking project in its most recent regulatory agenda. Hence, resolution of this issue is still some time away. 

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.