A US judge blocks the latest version of the Labor Department rule by Reuters
Written by Tom Hals
WILMINGTON, Delaware (Reuters) – A U.S. judge has blocked a Labor Department rule from taking effect that would have expanded the types of retired advisers considered respected, finding the rule unreasonable and inconsistent with the law governing retirement plans.
The law, unveiled in April as the “Retirement Security Act,” was challenged by insurance groups that argued it conflicted with ERISA, or the Employee Retirement Income Security Act.
Judge Jeremy Kernodle in Tyler, Texas, on Thursday said the Federation of Americans for Consumer Choice Inc and other insurance groups may win their arguments. He blocked the national law from taking effect on September 23 during the trial.
Insurance groups opposed the rule as being unfairly handled by administrators offering one-time recommendations to retirees, such as switching investments from an ERISA plan to an individual retirement account, or IRA.
A spokesperson for the Department of Labor did not immediately respond to a request for comment.
The Department of Labor said the law would protect retiree savings by requiring investment advisers to put the interests of retirees ahead of their own and requiring financial institutions to manage their advisers' conflicts of interest.
The rule was intended to fill a void in the fiduciary rating that did not apply to the purchase recommendations of non-securities such as fixed index annuities, which are typically sold by insurance companies, according to the White House.
Investments in such annuities are attractive to risk-averse investors and grow quickly but also come with high costs. The White House estimated that the fiduciary rule could save retirees $5 billion a year in such investments.
Businesses have been using the courts to overturn regulatory powers and won a major Supreme Court victory in June in a case known as Loper Bright, which said judges should not stop interpreting an ambiguous statute.
Kernodle said because of Loper Bright, he does not owe it to the Department of Labor's interpretation of ERISA.
The Department of Labor attempted to expand the fiduciary rule in 2016, under the administration of Democratic President Barack Obama. That effort was blocked by the 5th U.S. Circuit Court of Appeals in 2018 and Kernodle said the latest version of the fiduciary rule failed for many of the same reasons.
