Retirement saver trust rules meet a second death

A rule aimed at increasing investment advice protections for retirement savers has been struck down in court – effectively for the second time.

Some legal experts said the outcome could lead to unwary retirement investors receiving investment advice that is not in their best interest and could create confusion about the legal obligations brokers, insurance agents and other financial intermediaries have to individual investors.

Retirement law experts say the repeal of the so-called fiduciary rule issued by the Labor Department under President Joe Biden is a kind of deja vu, mirroring the outcome of a similar rule issued by President Barack Obama’s administration about a decade ago.

The Biden-Obama rule sought to crack down on conflicts of interest among brokers, advisors, insurance agents and others by creating higher legal hurdles for advising retirement investors.

However, after losing a legal battle with the financial companies, the Democrats’ provision was ultimately scrapped after President Donald Trump’s administration refused to continue defending the provision in their first and second terms, respectively.

“There are really familiar elements to what happened here,” said Andrew Olinger, partner and general counsel at Wagner Law Group, about the sequence of events.

Broadly speaking, a fiduciary is someone who has a legal obligation to act in a client’s best interests. For example, medical practitioners such as lawyers and doctors have a fiduciary responsibility to their clients and patients.

Before the Obama and Biden administration’s Labor Department regulations, most recommendations to roll over assets from workplace retirement plans such as 401(k)s to individual retirement accounts were not considered fiduciary investment advice, said Fred Reisch, a retirement law expert who consults with the Ferenczi Benefits Law Center.

On a practical level, Labor officials in the Obama and Biden administrations said they feared this would encourage some intermediaries to encourage retirement savers to roll their money into investments such as pensions and mutual funds, earning them higher commissions but not benefiting investors.

Such rollovers often occur around retirement age, when workers quit their jobs, and an investor’s entire nest egg, perhaps hundreds of thousands or millions of dollars, can be needed to live on for decades to come.

“The decision to rollover is one of the biggest financial decisions you will have to make in your life,” Reisch said. “It’s like buying a house.”

Rollovers are also becoming increasingly popular as baby boomers enter retirement age.

About 6 million people deposited nearly $700 billion in total into IRAs in 2022, according to the latest data from the Internal Revenue Service. These numbers are a significant increase from just five years ago. Approximately 4.7 million people deposited $478 billion into IRAs in 2017, according to IRS data.

A 1975 Department of Labor regulation established a five-step test to determine whether a person who advises and receives compensation for retirement savers is a fiduciary. Each part had to be fulfilled in order for financial intermediaries to be subject to higher legal regulation.

One of the five comments stated that advice should be regular, or ongoing.

But experts say brokers and insurance agents often make one-time rollover sales and do not have an ongoing advisory relationship with investors.

“Since most rollover recommendations are one-time recommendations, that typically means that they are not fiduciary advice under ERISA in almost all cases,” Reisch said, referring to the Employee Retirement Income Security Act, the federal law that sets minimum standards for workplace benefit plans.

Courtesy of ERISA, employers that sponsor 401(k) plans already have a fiduciary responsibility to the plan’s investors.

But experts say that until the Obama-era Department of Labor issued the fiduciary rule in 2016, brokers primarily had to meet only a lower legal hurdle, the “suitability” requirement, to receive rollover advice.

Fundamentally, investment recommendations must be appropriate, but not necessarily best, for an investor based on factors such as personal income, risk tolerance, and investment objectives.

That regulation, and the subsequent Biden administration in 2024, called for higher standards for rollovers and other financial advice for retirement savers.

The Biden and Obama trust provisions have a long and complicated legal history. Each was challenged by financial industry groups that opposed the regulations.

The U.S. Court of Appeals for the Fifth Circuit struck down the Obama-era rule in 2018. The Trump administration refused further defense, effectively nullifying the rule.

Something similar happened with Biden-era regulations.

The Biden-era rule never went into effect until 2024, after two federal courts in Texas decided to delay enforcement.

The Biden administration appealed this decision, but the Trump administration refused to appeal, and the appeals court dismissed the case in November 2025. A Texas district court later ruled in a separate order in March 2026 invalidating the regulations because no party defended them, experts said.

The plaintiffs in the lawsuit, insurance industry groups, hailed the outcome as a victory for consumers, calling the Biden-era rules “legally flawed” and “overstepping the department’s authority.”

“The regulations at issue were an unwarranted attempt to impose ERISA fiduciary status on securities brokers and insurance agents, when there is no fiduciary relationship,” Daniel Aronowitz, assistant secretary of labor for employee benefits and security, said in a statement.

“The Securities and Exchange Commission and state regulators regulate and will continue to regulate the activities of securities brokers and insurance agents,” Aronowitz said.

Following the conclusion of the legal battle, the Trump administration announced on March 18 that the previous five-step test for determining fiduciary status had been reinstated.

“We’re really back to the status quo,” said Mr. Olinger of Wagner Law Group.

He said the pendulum had “swung back” in favor of the financial industry through the end of the fiduciary rule. But it’s unclear how much, or how quickly, financial firms will roll back the enhanced processes they put in place for retirement investment advice, he said.

From a practical perspective, without fiduciary rules governing rollovers, it would be difficult for retail investors to know what quality of advice their brokers or agents are relying on, said Reisch of the Ferenczi Benefits Law Center.

That’s because each intermediary has a different regulatory regime regarding rollovers, he said, in the absence of a Labor Department fiduciary rule.

“(That) makes it virtually impossible for a typical (401(k)) participant to know what the criteria are,” he said.

Reisch said the legal standards for their advice are wide-ranging. For example, registered investment advisers generally have higher legal hurdles than insurance agents, he said.

Of course, this is not to say that all or even most financial intermediaries are inherently bad.

But the regulatory landscape puts an alarming burden on retirement savers even higher, he said.

“If you have good advisors, that’s good. They’ll take care of you,” Reisch said.

Intermediaries that don’t have your best interests at heart are likely to refuse to disclose their compensation and aren’t transparent about their services and how they receive compensation, Reisch said. In that case, investors should “just run without thinking,” he said.

“The overriding of the (Department of Labor) rule confirms an uncomfortable truth: Not all retirement recommendations are regulated equally,” Ben Rizzuto, a certified financial planner and wealth strategist at Janus Henderson Investors, said in a recent analysis.

“Depending on license, compensation, and relationship structure, two advisors may provide similar rollover guidance under very different legal standards,” he wrote. “The burden for investors is often not regulatory uniformity but trust, transparency and understanding.”

Ask your broker, advisor, or agent to explain their compensation to you, Reisch says, and ask them to explain how much they make, where that income comes from, and what services they will provide you in the future. Good advisors are fully transparent about these details, he said.

If possible, get those details in writing, he said. If you can’t do that, take notes of the conversation.

Be wary of people who try to claim that their financial products or advice are free, Reisch said. For example, an insurance agent might say that the insurance company, not the customer, pays the commission, which may be true from a literal standpoint, but it’s not actually true because the money ultimately comes from the investor’s assets, he said.

“If someone says it’s free, run, because nothing is free,” he said.