In a groundbreaking decision, the U.S. Supreme Court overturned the long-standing Chevron doctrine in the case of Loper Bright Enterprises v. Raimondo. This ruling has significant implications for regulatory agencies, including the Department of Labor and its enforcement of the new fiduciary rule, which aims to impose a higher standard of care on investment advisors for retirement plan participants and IRA owners.
The Chevron doctrine, established in 1984, granted federal regulatory agencies deference in interpreting ambiguous statutory language within their authority, allowing them to shape the implementation of laws through regulations. However, the Supreme Court’s 6-3 decision in Loper Bright Enterprises v. Raimondo put an end to this deference by ruling that it is the role of the courts, not agencies, to resolve statutory ambiguities.
This shift in power from regulatory agencies to the judiciary will require courts to independently interpret statutes and review agency actions. The recent ruling has already impacted the enforcement and viability of the DOL’s fiduciary rule, prompting a United States District Judge to put a hold on its effective date citing the Loper Bright decision.
With the Chevron doctrine no longer in play, the DOL could face challenges in enforcing certain aspects of the fiduciary rule such as defining who qualifies as a fiduciary, determining best interest standards, and scrutinizing disclosure requirements. This change may lead to more legal challenges and inconsistent interpretations across different jurisdictions.
Plan sponsors must be cautious in working with fiduciaries who act in the best interests of their company and participants. Ensuring transparent fee structures, a focus on long-term investment strategies, and independent accreditation like CEFEX certification can provide further assurance of adherence to industry standards.
While the Loper Bright decision doesn’t invalidate existing regulations, it opens the door for legal challenges to agency interpretations previously upheld under Chevron deference. Plan sponsors must adapt to the changing regulatory landscape, stay informed about legal developments, and prioritize acting in the best interests of plan participants in light of this landmark decision.
