As discussed in our prior Advisories (see hereand here), the US Department of Labor (DOL), in connection with promulgating Prohibited Transaction Class Exemption 2020-02, reversed its longstanding position on how the five-part fiduciary status test applies to rollover transactions from a retirement plan or IRA. Under DOL's revised position (which came into effect in 2021), many rollover transactions implicate "fiduciary" status for financial institutions whereas, historically, most rollover transactions did not. This major change in the law caused most financial institutions to materially modify their business practices and procedures for rollover transactions. However, on February 13, 2023, in response to a legal challenge brought by the American Securities Association, the Federal District Court for the Middle District of Florida ruled that DOL's revised position on rollovers is "arbitrary and capricious" and vacated the position. (See American Securities Association v. United States Department of Labor, 2023 WL 1967573 (M. D. Fl. Feb. 13, 2023)). Financial institutions should carefully track DOL's response to the District Court ruling, which may include an appeal and/or the proposal of new fiduciary regulations that clearly apply fiduciary standards to rollover transactions.
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