Labor Department to Appeal 401(k) Fiduciary Rollover Ruling

The US Labor Department signaled that it will appeal to the Eleventh Circuit a lower court opinion striking down its recent guidance on retirement plan rollovers.

Regulators on Friday filed a notice of appeal to the US District Court for the Middle District of Florida on the opinion and all other adverse rulings in the case.

Judge Virginia M. Hernandez Covington‘s Feb. 13 opinion said the department had exceeded its regulatory authority by applying strict fiduciary standards of conduct to financial advisers recommending individual retirement account or annuity transfers.

Once pension assets leave an account established under the Employee Retirement Income Security Act (Pub. L. No. 93-406), the department’s ability to set standards of conduct or protocol ends, the opinion stated.

The American Securities Association sued the department’s employee benefits agency more than a year ago for issuing subregulatory guidance that partially modified the 1975 five-part test defining a financial advice fiduciary.

The department is in the process of drafting a regulation to redefine fiduciary advice again, a project stakeholders fear will exert more DOL influence into the securities and insurance markets.

The case is Am. Sec. Ass’n v. U.S. Dep’t of Lab., M.D. Fla., No. 8:22-cv-00330, notice filed 4/14/23.