Aliya Wong
Former Executive Director, Retirement Policy


March 22, 2018


For almost a decade the Chamber has been warning the Department of Labor (DOL) of the dire consequences that would result from its rule to expand the definition of a fiduciary under ERISA. While the Chamber believes in an appropriate fiduciary standard, we have continually expressed our concern that the DOL had overstepped its legal authority. And the 5th Circuit Court of Appeals agrees.

In a decision issued on March 15, the 5th Circuit vacated the fiduciary rule. In the 46-page opinion, the Court states “that DOL’s interpretation of an ‘investment advice fiduciary’ relies too narrowly on a purely semantic construction of one isolated provision and wrongly presupposes that the provision is inherently ambiguous.” Moreover, the Court recognizes that “[a] perceived ‘need’ does not empower DOL to craft de factostatutory amendments or to act beyond its expressly defined authority.” With respect to the Best Interest Contract Exemption, the Court agreed with the Chamber’s concern about incorrectly using its exemptive authority in stating that BICE “exploits DOL’s narrow exemptive power in order to ‘cure’ the Rule’s overbroad interpretation of the ‘investment advice fiduciary’ provision.” Furthermore, the Court notes that “DOL’s assumption of non-existent authority to create private rights of action was unreasonable and arbitrary and capricious.” In other words, the Court agreed with the Chamber that the DOL had gone too far.

The decision is a victory for the entire private retirement system and is a particular victory for plan sponsors. In 2015, the Chamber warned of the negative impact on Small Business plan sponsors. More complex regulations mean more hurdles and compliance costs, and a greater likelihood of lawsuits. We advised that the rule would force advisors to review how they do business, and likely would decrease services, increase costs, or both. The result would be that small businesses that depend on these advisors for affordable assistance would be likely to disproportionately bear the costs of excessive regulation—their small scale means they are more expensive to serve. Therefore, the regulation would hurt the very small businesses and workers it was intended to protect.

Small business owners also testified before Congress and provided testimonials as to their concerns with the rule and how it would hamper retirement savings for them and their employees. Many stated that the increased costs and inability to provide financial education would discourage retirement savings. These impacts were felt when the rule was partially implemented last year. Fortunately, the 5th Circuit has now stopped further damage from being done.

However, the 5th Circuit decision is not the end of the story. The Chamber remains committed to working with the Securities and Exchange Commission, the DOL, and Congress to ensure that the fiduciary rule protects retirement savers and allows employers to continue to offer retirement plans without undue hardship or being subjected to unreasonable liabilities.

About the authors

Aliya Wong

Aliya Wong was the Executive Director of Retirement Policy at the United States Chamber of Commerce.