DOL fiduciary duty rule administrative history
I. BACKGROUND: What Is the Fiduciary Duty Rule?
Under ERISA, a fiduciary must act in the best interest of retirement investors, avoiding conflicts of interest and self-dealing. The definition of fiduciary was originally narrow, stemming from the 1975 regulation that required advice to be:
Provided on a regular basis,
Pursuant to a mutual understanding,
The advice serves as the primary basis for investment decisions, and
Individualized to the plan or participant.
This five-part test made it difficult to classify many advisors as fiduciaries, particularly broker-dealers who provided one-time advice or recommendations.
II. 2016 DOL FIDUCIARY RULE: The Expansion
In 2016, under the Obama administration, the DOL finalized a new Fiduciary Rule that significantly expanded the definition. Under the new rule, anyone receiving compensation for investment advice to retirement plans or IRA owners was considered a fiduciary, even if the advice was one-time or not under a formal agreement.
It also introduced the Best Interest Contract Exemption (BICE) allowing advisors to continue receiving variable compensation (e.g., commissions) if they contractually agreed to act in the investor’s best interest and disclosed conflicts.
III. LEGAL CHALLENGES & KEY CASE LAW
Here are five major court cases that have shaped the fiduciary rule's administrative and legal history:
1. Chamber of Commerce v. U.S. Department of Labor (2018)
Court: U.S. Court of Appeals for the Fifth Circuit
Citation: 885 F.3d 360 (5th Cir. 2018)
Facts:
The Chamber of Commerce and financial industry groups challenged the 2016 Fiduciary Rule, arguing that the DOL exceeded its authority under ERISA and the Administrative Procedure Act (APA).
Holding:
The Fifth Circuit vacated the rule in its entirety, stating that the DOL had overreached its authority. The court said the rule "impermissibly transforms sales pitches into fiduciary advice."
Impact:
This was the turning point—the Fiduciary Rule never took full effect. The DOL did not appeal the decision, and the rule was effectively struck down.
2. Market Synergy Group v. DOL (2016–2017)
Court: U.S. District Court for the District of Kansas
Citation: 2017 WL 661592 (D. Kan. Feb. 17, 2017)
Facts:
Plaintiff was a marketing organization claiming the rule harmed their business and that the DOL failed to follow proper administrative procedures when excluding certain insurance products from exemptions.
Holding:
The court upheld the rule, rejecting the claims that the DOL violated the APA or acted arbitrarily.
Impact:
Though the plaintiff lost, the case highlighted the complexity of applying the rule to different financial products like fixed indexed annuities, an issue later raised again in other litigation.
3. National Association for Fixed Annuities v. Perez (2016)
Court: U.S. District Court for the District of Columbia
Citation: 217 F. Supp. 3d 1 (D.D.C. 2016)
Facts:
The NAFA challenged the Fiduciary Rule, particularly its application to fixed indexed annuities, arguing that it would harm their business and that the DOL exceeded its statutory authority.
Holding:
The court upheld the rule, finding that the DOL acted within its authority and followed appropriate administrative procedures.
Appeal:
The D.C. Circuit appeal was later dismissed as moot after the Fifth Circuit vacated the rule.
4. Thrivent Financial for Lutherans v. Acosta (2017–2018)
Court: U.S. District Court for the District of Minnesota
Facts:
Thrivent challenged the Best Interest Contract Exemption (BICE) on the grounds that it conflicted with class action waiver provisions in its contracts and interfered with its business model.
Holding:
The court issued a preliminary injunction against enforcement of the class-action provision, but the rest of the rule was not enjoined.
Impact:
Reinforced concerns among financial service providers that the BICE provisions could conflict with existing legal rights and arbitration agreements.
5. American Securities Association v. DOL (2023)
Court: U.S. District Court for the Middle District of Florida
Citation: No. 8:22-cv-330-VMC-CPT
Facts:
This case challenged DOL’s 2021 reinterpretation of fiduciary advice under ERISA—part of the Biden administration's renewed attempt to regulate retirement advice.
Holding:
The court ruled that the DOL's attempt to expand fiduciary status through sub-regulatory guidance (Field Assistance Bulletin and FAQs) violated the APA.
Impact:
A significant blow to the DOL’s post-2018 efforts to implement a fiduciary standard via guidance rather than formal rulemaking.
IV. POST-2018: The Biden Administration's Approach
After the 2018 Fifth Circuit decision, the DOL under the Trump administration issued a new rule in 2020 (the “Improving Investment Advice for Workers & Retirees” exemption) that reinstated the 1975 five-part test but allowed fiduciaries to qualify for an exemption if they met certain conditions, including acting in the investor's best interest.
The Biden administration retained this rule but began reinterpreting it more expansively, leading to legal resistance, such as in the 2023 ASA case above.
As of 2025, the DOL has been working on another comprehensive fiduciary rule proposal that may reintroduce many aspects of the 2016 rule in a more legally defensible form.
V. SUMMARY TIMELINE
| Year | Event |
|---|---|
| 1975 | Original five-part fiduciary test issued |
| 2010 | First attempt to redefine "fiduciary" (withdrawn in 2011) |
| 2016 | Final Fiduciary Rule issued by Obama DOL |
| 2018 | Rule vacated by Fifth Circuit (Chamber of Commerce case) |
| 2020 | Trump-era DOL issues revised exemption and reinstates 1975 test |
| 2021–2023 | Biden DOL reinterprets fiduciary rule via guidance; courts push back |
| 2025 | New rule expected from Biden DOL (pending) |
VI. KEY TAKEAWAYS
The Fiduciary Duty Rule reflects an ongoing tension between consumer protection and financial industry interests.
Courts have generally been skeptical of broad reinterpretations of fiduciary standards without formal rulemaking.
The DOL must carefully balance its regulatory authority under ERISA with the requirements of the Administrative Procedure Act (APA).
Future rules are likely to be shaped by lessons learned from the judicial invalidation of the 2016 rule.
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