Season 4, Episode 10: The Demise of Deference

With far-reaching implications—likely including the Labor Department’s fiduciary rule—the nation’s highest court has set aside a long-standing judicial deference to federal regulators in interpreting the law.  In this episode Nevin (Adams) and Fred (Reish) consider the impact(s).

While the full implications will take time to emerge, it’s almost certainly going to produce more litigation, and in the process, less certainty for advisors, plan sponsors and recordkeepers trying to operate within those boundaries.

Why It Matters

Since 1984, courts have adopted a review framework for challenged regulations. First, to consider whether Congress has directly spoken to the precise question at issue—specifically how the regulation is to be administered/applied—and if so, the court "must give effect to the unambiguously expressed intent of Congress and reverse an agency's interpretation that fails to conform to the statutory text.” And then, if the statute is ambiguous, the court “may not disturb an agency rule unless it is, 'arbitrary or capricious in substance, or manifestly contrary to the statute.’”

Under the new Supreme Court decision, those administrative agency perspectives can, but do not have to, be considered in deciding the case. In sum, courts will no longer be required to defer to the judgement of the regulatory agencies in terms of applying/interpreting ambiguous laws.