On Thursday, March 14, 2018 the United States 5^th Circuit Court of Appeals vacated the federal Department of Labor’s recent rule on fiduciary standards for investment advisors by a 2-1 vote.   The regulation, which was promulgated by the Obama Administration and then became partially effective last June under the Trump Administration, changed the test for investment advisors working with employers and employees and made it much easier for the advisor to acquire fiduciary responsibility for the employee’s investment products, including health savings accounts (HSAs).  The appeals court found that the Department of Labor exceeded its legal authority granted under the Employer Income Retirement Security Act (ERISA) when it created and implemented the regulation.  Many employer and financial service industry groups, including the U.S. Chamber of Commerce, the American Council of Life Insurers, the Securities Industry and Financial Markets Association and the Financial Services Institute, challenged the DOL’s stance on the regulation in federal court.

The halt of the fiduciary regulation should come as welcome news to health insurance agents and brokers who help employers design plan offerings that include qualified high deductible health plan options paired with HSAs. While almost all of the attention surrounding the fiduciary rule was focused on advisors who help employers and employees with Individual Retirement Account (IRA) options, the regulation also allowed for the establishment of fiduciary liability for brokers who sold HSA products under certain circumstances, even if they only interacted with an employee consumer on one occasion.  Since regulatory guidance was never developed to address activities that could trigger fiduciary liability with regard to HSAs specifically, it was hard for brokers working in the HSA market to know for sure if their services to educate and communicate with clients were appropriate.

The 5^th Circuit Court’s decision to overturn the fiduciary rule doesn’t necessarily mean its permanent demise.  The Department of Labor could decide to appeal to the United State Supreme Court, and the Department could also certainly promulgate new, more limited regulations that are within the bounds of ERISA.  However, neither of those options seems particularly likely and neither would be quick actions. For the foreseeable future, brokers can help their employer clients and individual employees with HSA recommendations worry-free!

By Jessica Waltman, Special Contributor

Jessica Waltman is a health reform strategist, with more than 20 years of experience in health insurance markets and health policy. She is the former Senior Vice President, Government Affairs, for the National Association of Health Underwriters.