DOL Drops Rollover Appeal


The Department of Labor on Monday dismissed its appeal of a ruling in favor of the American Securities Association against Labor’s guidance that declared rollover advice fiduciary advice.

A federal court in Tampa, Florida, struck down in mid-February the Labor Department’s guidance. The court ruled that Labor’s interpretation of the five-part test setting out who qualifies as a fiduciary under the Employee Retirement Income Security Act was “arbitrary and capricious.”

The case was brought in February 2022 by the American Securities Association in the Middle District of Florida challenging what ASA said was “Labor’s attempt to change existing retirement rules without going through a notice-and-comment rulemaking as is required under the Administrative Procedure Act.”

Labor’s guidance stated that a financial advisor’s one-time recommendation to roll over retirement assets may be subject to ERISA fiduciary duties. The District Court declared this action “arbitrary and capricious” and vacated it, ASA said.

“We are pleased the DOL dropped its appeal of the district court’s decision to strike down its attempt to change existing rules about retirement advice without a formal rulemaking,” said Chris Iacovella, president & CEO of ASA on Monday in a statement.

ERISA attorney Fred Reish, however, told in an email that Labor dropping the appeal does not necessarily signal that the department is “abandoning its position that a rollover recommendation is fiduciary advice.”

Reading the tea leaves, “the most logical explanation would be that the DOL is on the cusp of sending a new proposed [fiduciary] regulation to the White House’s Office of Management and Budget — the OMB.”

Lisa Gomez, assistant secretary of Labor for the Employee Benefits Security Administration, said Thursday that issuing a new fiduciary rule was a “huge priority” for the Labor Department.

“I believe that there is a proposal that is largely complete and that will say that a rollover recommendation is a fiduciary recommendation,” Reish said.