Fifth Circuit Court Vacates Fiduciary Rule
On March 15, 2018, in a 2-to-1 decision, the U.S. Court of Appeals for the Fifth Circuit reversed a lower court decision in Texas and issued a ruling vacating the Labor Department’s fiduciary rule. The decision creates a circuit split as the 10th Circuit Court of Appeals had previously issued a unanimous decision upholding the fiduciary rule.
What Happens Now?
What happens now is uncertain. If the Department of Labor (“DOL”) continues to defend the rule or if consumer advocates step in to defend the rule, the Supreme Court could review it. However, the DOL could also scrap the current rule and start over, while the Securities and Exchange Commission has also indicated it may step in and create its own fiduciary rule. There are also some states in the process of establishing fiduciary standards.
As a result of this uncertainty, it is anticipated that those in the industry such as recordkeepers and investment professionals will take a wait and see approach before making any changes in their current course. Plan sponsors and fiduciaries will need to stay tuned to see what develops and any impact it may have to their plans.