The Labor Department in 2020 under the Trump administration reinstated the five-part test and in the preamble to an investment-advice exemption that took effect in February 2021 said the five-part test applies to rollover recommendations.
The lawsuit said the plaintiffs will be negatively impacted by the preamble language — referred to in the lawsuit as the "new interpretation" — and advice exemption, which the Labor Department began enforcing Tuesday.
"The agent plaintiffs oftentimes make rollover recommendations for purchase of annuities to IRA owners and participants in employer-sponsored 401(k) and similar benefit plans, for which they receive commissions or other compensation from annuity issuers," the lawsuit said. "The agent plaintiffs will thus be directly and adversely affected by the DOL's new interpretation suddenly categorizing their status as investment advice fiduciaries under ERISA or the (Internal Revenue) Code, as applicable."
The lawsuit added, "This new interpretation carries forward the core problem the Fifth Circuit identified in vacating the fiduciary rule the first time: DOL's impermissible effort to rewrite and expand the definition of a fiduciary under ERISA and the Code."
A Labor Department spokesman directed comment requests to the Department of Justice; the Justice Department did not immediately respond.
The Labor Department's Employee Benefits Security Administration is currently working on a rule-making initiative that will likely broaden who's considered a fiduciary under ERISA by amending the regulatory definition of the term fiduciary.
In its fall regulatory agenda, released in December, EBSA said the rule-making "would amend the regulatory definition of the term fiduciary … to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries." Moreover, it would "take into account practices of investment advisers, and the expectations of plan officials and participants, and (individual retirement account) owners who receive investment advice." EBSA will also evaluate available prohibited transaction class exemptions and propose amendments or new exemptions to ensure consistent protection of employee benefit plan and IRA investors, the agency said.