Two Conflicting Court Decisions on the DOL Fiduciary Rule

This past Tuesday (3/13/2018), the 10^th Circuit Court of Appeals upheld a Kansas district court decision in favor of the Department of Labor, rejecting the plaintiff’s argument that the DOL fiduciary rule treated fixed index annuities arbitrarily by placing them under the best-interest contract exemption. The plaintiff also unsuccessfully argued that the DOL violated rulemaking procedures and failed to do a proper economic analysis in formulating the rule.

This ruling was the first by an appeals court. The second one came only two days later when the 5^th Circuit Court of Appeals completely struck down the rule in a 2-1 decision asserting that the DOL acted outside the purview of its authority in regulating all retirement accounts. The author of the decision, Judge Edith Jones, wrote, “DOL has made no secret of its intent to transform the trillion-dollar market for IRA investments, annuities and insurance products, and to regulate in a new way the thousands of people and organizations working in that market.”

The ruling also referenced President Trump’s directive to the DOL “to re-examine the Fiduciary Rule and prepare an updated economic and legal analysis” of its provisions, some of which would not have become effective until 7/1/2019.

Anyway, it appears that the next stop for the DOL fiduciary rule is the Supreme Court, unless the DOL decides to accept the ruling and start over. For the sake of millions of retirement investors, we hope that the DOL will appeal and that the Supreme Court will see it the same way as the 10^th rather than the 5^th Circuit Court of Appeals.