Judge Vacates Biden 401(k) Rule Trump DOL Plans to Rewrite (1)

A major Biden administration 401(k) rule is officially dead after the Trump administration stopped defending it in court.

Judge Jeremy D. Kernodle in the US District Court for the Eastern District of Texas approved a motion to vacate on Thursday after it was unopposed by both the Department of Labor and the Federation of Americans for Consumer Choice, one of the life insurer groups that sued over the regulation.

The Trump administration had previously stopped defending the regulation in the US Court of Appeals for the Fifth Circuit, stating its plan to re-write the Biden-era rule.

The district court’s move serves as a death blow to the Biden administration’s fiduciary rule finalized in April 2024, which was quickly hit with lawsuits claiming it exceeded the administration’s regulatory authority. Revamping the rule is now fully in the hands of an Employee Benefits Security Administration that has gravitated toward deregulation and reducing litigation under President Donald Trump.

The Biden rule expanded fiduciary duties to cover workers’ rollovers from 401(k) and 403(b) accounts into annuities and other investment vehicles, applying strict legal standards of care to a new set of Wall Street players.

The regulation faced opposition from major firms and insurers who argued increased liability and disclosure requirements would drive up risk and cost of these one-time transactions, ultimately hurting investors. But advocates said the rule would offer greater protections to retirement savers and guard plan sponsors from potential conflicts of interest.

The final version of the rule also made clear that human resources employees of plan sponsors who provided plan-related materials would not be considered fiduciaries.

Differing Enough

FACC argued in court that the Biden administration’s fiduciary rule too closely mirrored a version issued by the Obama administration. The Fifth Circuit in 2018 vacated the Obama-era version of the rule in its entirety, determining it violated the Administrative Procedure Act.

The DOL under Biden had argued its version of the rule differed enough from its predecessor to pass APA muster by narrowing focus to transactions where a relationship of “trust and confidence” under ERISA exists between adviser and investor.

But FACC’s attorneys argued the new standard went too far by entirely gutting a five-part test introduced in 1975 to define fiduciary status, and thus contradicting the Fifth Circuit’s 2018 decision.

Kernodle and a judge in a similar challenge in the Northern District of Texas both appeared to agree with this reasoning, and granted life insurers’ motions in July 2024 to stay the rule’s implementation.

An appeal of those decisions to stay was later dropped by the second Trump administration.

The other fiduciary rule lawsuit was brought by the American Council of Life Insurers. ACLI filed its own motion to vacate the rule on Monday that the DOL did not oppose.

Kim O’Brien, CEO of FACC, said in an emailed statement Thursday that the organization was grateful to the Trump administration for bringing “a fresh perspective to these longstanding issues over the proper jurisdictional reach of the Department of Labor.”

“We see this as an especially positive development for consumers who will benefit from the demise of a regulation that would have limited financial marketplace choices and driven up the cost of financial products,” O’Brien said.

The case is Fed’n of Americans for Consumer Choice Inc. v. Dep’t of Labor, E.D. Tex., No. 6:24-cv-00163, 3/11/26