Federal court vacates DOL’s interpretation of the five-part test as it applies to certain rollovers, but otherwise affirms DOL’s view

On July 9, 2025, the United States District Court Northern District of Texas issued an order in Federation of Americans for Consumer Choice v. United States Department of Labor, accepting “the Findings, Conclusions, and Recommendation of the United States Magistrate Judge.” Below we provide a brief note on the court’s rulings.

The good news …

The court vacated that portion of the Department of Labor’s 2020 (re)interpretation (in the preamble to Prohibited Transaction Exemption (PTE) 2020-02) of DOL’s (1975) “five-part test” as it applies to one-time advice with respect to a rollover transaction. DOL had sought (in the PTE) to satisfy the “regular basis” element of the five-part test with respect to such advice by taking into account subsequent advice provided, e.g., with respect to the rollover IRA. The Magistrate/court held that in these circumstances:

• The “regular basis” element of the regulation requires more than one advice event with respect to a Title I ERISA plan.

• For that purpose, (subsequent) advice with respect to a Title II “plan” (e.g., an IRA) does not count.

• And, therefore, this sort of one-time rollover advice does not trigger ERISA fiduciary status.

This holding in effect follows the holding by the US District Court for the Middle District of Florida, in American Securities Association v. United States Department of Labor.

That is the “good news.”

The bad news …

The court, in its decision, also adopted the Magistrate’s other findings, that:

• Unlike DOL’s regulation, ERISA itself does not require more than one incident of advice to trigger fiduciary status.

• Other problematic elements of DOL’s 2020 reinterpretation of the five-part test – including subjecting the “mutual agreement” and “primary basis” elements to a facts and circumstances analysis – do not conflict with either ERISA or the regulation. (We discuss these “problematic elements” at length in our article on the 2020 PTE.)

In this regard, perhaps most problematically, in accepting the Magistrate’s 2023 recommendation, the court did not even mention the Supreme Court’s subsequent (2024) decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al., overturning Chevron Doctrine deference to agency interpretations.

It is likely that that failure, in itself, would (if there is an appeal) be found to be a reversible error. And many believe that an appeal of the other elements of the court’s decision favorable to DOL’s 2020 reinterpretation of the five-part test would also succeed.

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We will continue to follow this issue.