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Fifth Circuit Finalizes Judgment Vacating DOL’s Fiduciary Rule



Chamber of Commerce v. U.S. Dep’t of Labor, 2018 WL 1325019 (5th Cir. 2018) (judgment issued as mandate on June 21, 2018)

On June 21, 2018, the Fifth Circuit Court of Appeals finalized its judgment vacating DOL regulations regarding ERISA’s fiduciary definition and related prohibited transaction exemptions (collectively, the “Fiduciary Rule”). As background, ERISA’s definition of “fiduciary” includes, in part, any person who provides investment advice for a fee with respect to plan assets. In 1975, the DOL issued regulations that limited fiduciary status based on rendering investment advice for a fee to persons who, “on a regular basis,” rendered individualized advice that was the “primary basis” for investment decisions. Then in 2016 the DOL issued regulations eliminating the regular basis and primary basis criteria, expanding that part of the fiduciary definition and making it more likely to apply to individual retirement accounts (IRAs) and health savings accounts (HSAs) through the Code’s prohibited transaction rules. Exemptions under the Fiduciary Rule also imposed “impartial conduct standards” and other requirements previously inapplicable to those accounts. Aspects of the Fiduciary Rule became applicable on June 9, 2017, but the DOL provided temporary enforcement guidance and transition relief (see our Checkpoint article).

In March 2018, the majority of a Fifth Circuit panel held that ERISA’s definition of fiduciary requires a special relationship of trust and confidence, and that the Fiduciary Rule conflicted with ERISA both by eliminating the regular basis and primary basis criteria, and by making the investment-advice portion of the Fiduciary Rule inconsistent with the rest of ERISA’s fiduciary definition (see our Checkpoint article). Concluding that these flaws were not severable from the rest of the Fiduciary Rule, the court issued a judgment vacating the entire Rule. Under the applicable procedural rules, however, that judgment was not immediately effective. After the March decision, several parties sought to join the litigation, but those attempts all failed. The DOL also declined to seek U.S. Supreme Court review of the decision, so on June 21, 2018, the Fifth Circuit’s court clerk certified the March judgment and issued it (without change) as the court’s mandate.

EBIA Comment: The Fifth Circuit’s mandate is the final, formal step that effectuates the court’s invalidation of the Fiduciary Rule. While some commentators initially questioned whether the decision would be effective outside the Fifth Circuit, others have insisted that it is, and the DOL’s subsequent enforcement relief in Field Assistance Bulletin (FAB) 2018-02 (see our Checkpoint article) seems to implicitly concede that point. Thus, issuance of the mandate appears to be the end of the line for the Fiduciary Rule, although the Rule’s influence may live on in the practices of entities that implemented changes based on the Rule and choose not to immediately unwind those changes, in reliance on FAB 2018-02. That FAB indicates that the DOL is considering additional relief for entities that relied on the Fiduciary Rule so there may be more guidance to come. For more information, see EBIA’s 401(k) Plans manual at Section XXIV.D (“Investment Advice Fiduciaries”) and EBIA’s Consumer-Driven Health Care manual at Section XVI.E.2 (“Who Is a ‘Fiduciary’ With Respect to an HSA?”).

Contributing Editors: Thanks to attorney Stuart C. Harris for his contributions to this article, with final editing by EBIA staff. Mr. Harris is a partner in the Portland office of Davis Wright Tremaine LLP,, and is a contributing author of EBIA’s 401(k) Plans manual.

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