FACC and DOL enter stipulation to dismiss 2020 guidance lawsuit

The Federation of Americans for Consumer Choice has dropped its lawsuit against the Department of Labor after the agency withdrew guidance at the center of the dispute, ending a four-year legal challenge over fiduciary standards.

The group, known as FACC, and the Labor Department filed a stipulation late last week to dismiss the case without prejudice in federal court in Texas. The move closes the case while preserving FACC’s ability to bring similar claims in the future. The dismissal does not require court approval.

The lawsuit had challenged the DOL’s 2020 guidance on who qualifies as an investment fiduciary. The agency withdrew that guidance several weeks ago, rendering the case moot.

The dismissal follows closely behind the resolution of two related lawsuits — including one brought by FACC — that resulted in a court order vacating the DOL’s 2024 fiduciary rule. In response, the department issued a notice of vacatur in the Federal Register restoring its longstanding five-part test for determining fiduciary status and formally withdrawing the 2020 guidance.

In a statement, FACC CEO Kim O’Brien called the development a “red-letter moment” for the industry.

“It may seem anti-climactic, but we really see this as a red-letter moment because the stipulation brings an end to a very long chapter of uncertainty for our industry,” O’Brien said. She added that while the department had already withdrawn the guidance, the stipulation “memorializes and cements the DOL’s position on these issues.”

'No longer at risk'

According to the four-page stipulation, the case is moot because the 2020 guidance -- referred to as the “New Interpretation” -- “is no longer operative.” It further states that plaintiffs are no longer at risk of being deemed investment fiduciaries under that interpretation and that the Labor Department “no longer intends to use” it in determining fiduciary status.

O’Brien said the stipulation also clarifies the department’s intent to reinstate the Deseret advisory opinion, which had been tied to the broader fiduciary debate. The opinion states that recommending a rollover from an employer-sponsored plan to an individual retirement account generally does not make a financial professional a fiduciary.

“The restoration of the Deseret opinion is a big deal,” O’Brien said.

FACC Chairperson Mary Ann Lacey Gray credited the Trump administration and current Labor Department leadership for reversing course.

“A lot of credit goes to the Trump administration and especially the new leaders at the Labor Department who recognized the flaws of prior administrations’ multiple attempts to expand fiduciary definitions,” Lacey Gray said. “It is wonderful that the DOL has now fully restored the status quo … so those of us on the front lines helping clients save for retirement can get back to that important work.”

O’Brien said the outcome benefits both industry and consumers.

“This is an historic moment not just for FACC but for average middle-income consumers,” she said, adding that independent agents had faced the risk of being unable to operate under stricter rules. “It’s a win-win-win for industry, consumers and regulators.”

This report compiled by InsuranceNewsNet staff.