Fiduciary Rule update – Fifth Circuit, at DOL’s request, dismisses appeal of stay, and what’s next

On November 28, 2025, the Fifth Circuit Court of Appeals dismissed, at the Department of Labor’s request, DOL’s appeal of the 2024 decision by United States District Court for the Eastern District of Texas, in Federation of Americans for Consumer Choice v. United States Department of Labor (FACC v. DOL), to stay of the effective date of DOL’s advice fiduciary rule and its related amendment to Prohibited Transaction Exemption 84-24.

In what follows, we review the status of this case and of current law (after the dismissal of DOL’s appeal) and consider what DOL may do next.

Background

In describing DOL’s 2024 amendment to its 1975 fiduciary advice rule, the district court in FACC v. DOL identified as significant “two major regulatory changes”:

First, the 2024 Fiduciary Rule again seeks to redefine investment advice fiduciary and shed the 1975 Definition. … Under the new rule, a person qualifies as an investment advice fiduciary in one of two ways: (1) he ‘represents or acknowledges that [he] is acting as a fiduciary’ under ERISA; or (2) he

either directly or indirectly (e.g. through or together with any affiliate) makes professional investment recommendations on a regular basis as part of [his] business and the recommendation is made under circumstances that would indicate to a reasonable investor in like circumstances that the recommendation: is based on review of the retirement investor’s particular needs or individual circumstances, reflects the application of professional or expert judgment to the retirement investor’s particular needs or individual circumstances, and may be relied upon by the retirement investor as intended to advance the retirement investor’s best interest.

Second, DOL again amends PTE 84-24 [the related insurance agent/broker PTE]. … To qualify for the amended PTE 84-24, an insurance agent must: (1) adhere to “Impartial Conduct Standards” similar to those imposed by the 2016 Fiduciary Rule, including the duties of care and loyalty; (2) make certain disclosures, including of any material conflicts; and (3) operate under a supervisory program established by the insurance company that created the annuity.

A critical objective of this amendment was to convert one-time recommendations about rollovers to terminating/retiring participants into “fiduciary advice,” subject to the rigorous “best interest” rules described above.

The District Court’s stay

On July 25, 2024, the Texas District Court granted plaintiffs a stay of the effective date of the rule and related PTE, finding that plaintiffs were likely succeed on the merits of their challenge to it. In doing so, the court held that, “[w]ith these changes [described above], the 2024 Fiduciary Rule – like the 2016 Rule – will capture transactions that do not satisfy the established ‘relationship[s] of trust and confidence’ contemplated by ERISA.”

With the Fifth Circuit’s dismissal of DOL’s appeal of this ruling, for fiduciaries did not elect to comply with either 2024 or 2016 amendments to the 1975 regulation, the status quo ante, the now-famous “five-part test” is (for the moment at least) fully restored. The case will go back to the District Court, where it is possible (even likely) that DOL will propose simply withdrawing the regulation, or (as the court indicated) plaintiffs will prevail on the merits.

The five-part test and why DOL wanted to change it …

In this context it’s probably useful to review the five-part test. It provides that:

[A] person is a fiduciary only if they: (1) render advice as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property (2) on a regular basis (3) pursuant to a mutual agreement, arrangement, or understanding with the plan or a plan fiduciary that (4) the advice will serve as a primary basis for investment decisions with respect to plan assets, and that (5) the advice will be individualized based on the particular needs of the plan.

DOL has expressed particular concern about three elements of the five-part test: the “regular basis” requirement (which would exempt from coverage “one-time” rollover advice) and the requirements of “a mutual agreement, arrangement, or understanding” that the investment advice will serve as “a primary basis for investment decisions.” According to DOL, these elements “too often work to defeat legitimate retirement investor expectations of impartial advice and allow some advice relationships to occur where there is no best interest standard.”

But what about PTE 2020-02, which “reinterpreted” the five-part test?

The Fifth Circuit’s dismissal of DOL’s appeal does not, however, make all the problems created by DOL’s decades long attempt to change the 1975 rule go away. There remains a set of issues under Prohibited Transaction Exemption 2020-02 Improving Investment Advice for Workers & Retirees, issued in 2020 and subject to litigation in at least two separate district courts.

That PTE did two things. It provided an exemption that was necessary for providers that had “adapted” to the 2016 Fiduciary Rule by explicitly committing to fiduciary status and relied on its related PTE for an exemption from resulting prohibited transaction treatment. When the Fiduciary Rule and the PTE were vacated (in 2018) by the Fifth Circuit, these providers were left with a prohibited transaction problem.

And, second, the PTE included in its preamble a comprehensive reinterpretation of the five-part test to (for the most part) eliminate all the problems DOL had with it (noted above). It’s not an exaggeration to say that PTE 2020-02 represented the adoption of a new fiduciary advice rule via a PTE preamble.

The status of PTE 2020-02 is much less clear than the status of the now (effectively) permanently stayed fiduciary advice regulation.

On July 9, 2025, the United States District Court Northern District of Texas issued an order in a challenge to PTE 2020-02 (and its preamble), vacating that portion of the PTE 2020-02’s preamble to the extent that it applied to one-time advice with respect to a rollover transaction, but otherwise affirming DOL’s reinterpretion of the “five-part test.”

There is another challenge to this PTE in a Florida district court.

The status of this litigation is unclear.

What will DOL do?

Daniel Aronowitz has now taken over as head of the Employee Benefit Security Administration (EBSA) at DOL and is likely to have much less positive view of DOL’s entire advice fiduciary project than have prior occupants of that position. It is possible that, under his leadership, DOL will withdraw everything to do with the fiduciary rule project. How soon that might happen, however, is unclear – revision of ESG rules and litigation reform may be given a higher priority.

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We will continue to follow this issue.