Two stays in two days. The two different challenges filed in Federal District Courts in Texas have now resulted in two different stays of the effective date of the U.S. Department of Labor’s Retirement Security Rule—with the second stay issued last Friday night being even more comprehensive than the first one that was issued last Thursday.
“The stay of the effective date provides consumers with a needed reprieve from these devastating consequences as the court considers the substantial legal issues we have raised regarding this ill-advised rule.”
Coalition statement
The second stay, issued by the Federal District Court for the Northern District of Texas, means that the regulations will not take effect until the court rules on the merits of the case brought by trade associations in American Council of Life Insurers, et. al. v. U.S. Department of Labor, et. al.
The American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, NAIFA-POET, Finseca, Insured Retirement Institute (IRI), and National Association for Fixed Annuities (NAFA) issued a statement following the Friday night ruling granting the Plaintiffs’ motion for a stay of the rule’s effective date.
“We are grateful to the court for its decision to issue a stay halting the September 23, 2024, effective date of the U.S. Department of Labor’s (DOL) fiduciary-only regulation, the DOL’s latest attempt to vastly expand its statutory authority by imposing fiduciary status on almost every financial professional who sells retirement products,” the statement begins.
“If allowed to take effect, this rule would deprive millions of consumers access to much needed retirement financial guidance and protected lifetime income products, replicating the considerable harm suffered under a similar 2016 DOL regulation vacated by a federal court in 2018.
“The stay of the effective date provides consumers with a needed reprieve from these devastating consequences as the court considers the substantial legal issues we have raised regarding this ill-advised rule,” the statement concludes.
Highlights of ruling
The joint statement release also included several key highlights from the 17-page ruling:
• “As a whole, Defendants arguments are nothing more than an attempt to relitigate the Chamber decision. Because the Fifth Circuit’s Chamber decision unambiguously forecloses all of Defendant’s arguments, the Court need not repeat why those arguments fail here. Instead, such arguments are appropriately raised to the en banc Fifth Circuit or the Supreme Court not in a district court bound by Fifth Circuit precedent. For the reasons, and those stated in FACC, the Court concludes that Plaintiffs have carried their burden at this stage to show a likelihood of success on the merits. Therefore, Plaintiffs have satisfied ‘arguably the most important’ of the four factors,” page 9 of the ruling states.
• “Not only is the Rule likely unlawful, it also likely to cause irreparable harm to Plaintiffs.” (p. 10)
• “Without immediate relief, Plaintiffs will likely suffer concrete and irreparable injury. In fact, DOL does not even dispute that Plaintiffs have demonstrated irreparable injury.” (p. 11)
• “The final factors the Court must weigh are the balance of the equities and the public interest, which ‘merge’ when government is a party.” (p. 12)
• “The DOL does not sufficiently identify any countervailing hardship from a stay that would simply preserve the status quo.” (p. 14)
• “For these reasons, the Court holds that the balance of equities weighs in favor of Plaintiffs and that the public interest is not disserved by affording such relief.” (p. 14)
• RULING: “For the reasons stated above, the Court GRANTS in part and DENIES in part Motion for Preliminary Injunction and Stay of Effective Date (ECF No. 11). Specifically, the Court STAYS, as of the date of this decision, the effective date of the Rule during the pendency of this suit and any appeal. However, the Court DENIES the request for a preliminary injunction at this time after determining that a stay of the effective date will provide Plaintiffs will complete relief. SO ORDERED on this 26th day of July, 2024.” (p. 17)
Read the court order here.
Second stay in two days
The second stay ruling of the DOL’s controversial fiduciary rule came just one day after the ruling in a separate case in another federal district court in Texas, filed by the Federation of Americans for Consumer Choice (FACC) along with several independent insurance agents.
In that case, U.S. District Judge Jeremy Kernodle, of the U.S. District Court for the Eastern District of Texas, issued a preliminary injunction to freeze the DOL’s Retirement Security Rule, which had been scheduled to take effect on Sept. 23.
But that ruling left parts of the DOL’s fiduciary rule intact, as the suit sought to vacate the rule and amendment to PTE 84-24 under the Administrative Procedures Act. While granting the preliminary injunction and stay in that case did put a hold on the rule and PTE 84-24, it did not impact the PTE 2020-02 amendments that were scheduled to go into effect on September 23. The new ruling on Friday does put a hold on the Retirement Security Rule in its entirety.
While the DOL is almost certain to appeal, it is now clear that the fiduciary rule will not be taking effect in September, while the two challenges play out in the courts.
SEE ALSO:
• Texas Judge Puts DOL Fiduciary Rule on Ice
• DOL Fiduciary Rule Hit with First Lawsuit
• FACC Files Second Lawsuit Against DOL Fiduciary Rule
• Republican Congressmen Rail Against Biden Administration’s Fiduciary Rule
• FSI, SIFMA Join Lawsuit Against Fiduciary Rule; CFP Board Backs It in Separate Suit