Supreme Court’s Loper Bright decision impact — FAQs 

September 16, 2024

The US Supreme Court overturned a 40-year-old principle of administrative law known as the Chevron deference doctrine (Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al.). That doctrine required courts to defer to administrative agencies’ reasonable interpretation of a federal law that is silent or ambiguous. Now, federal courts must exercise independent judgment when determining the best interpretation of a statute and cannot simply defer to agency interpretations, even when they are reasonable. This will likely increase courts’ scrutiny of federal agency regulations that are subject to legal challenges. These FAQs provide high-level information about the case and its potential impact on employee benefit plans and their sponsors. Also, this Mercer US Health News 15-minute video highlights the practical implications of this opinion on employer-sponsored health plans.

The Chevron deference doctrine — named for the 1984 Supreme Court decision Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. — required courts to defer to an administrative agency’s reasonable interpretation of a silent or ambiguous federal statute on a particular challenged issue. Federal agencies are in the executive branch and have responsibility to enforce laws enacted by Congress. One way the agencies go about their work is by issuing regulations through a public notice-and-comment process. Generally, courts applied Chevron deference only to final agency regulations (but not other types of subregulatory guidance).

Specifically, the Chevron doctrine required a court to defer to a federal agency’s regulatory interpretation of its governing statute:

• When a statute was silent or ambiguous (i.e., Congress’ intent couldn’t be clearly determined), and
• A federal agency had, through public notice-and-comment rulemaking, made a reasonable interpretation of that statute, even if the court’s interpretation might be different.

Since 1984, thousands of court decisions have cited Chevron in addressing challenges to agency regulations. While Chevron deference tended to tip the scales in favor of federal agencies in these challenges, courts have in some cases invalidated federal agency regulations as unreasonable.

In Loper Bright (which was combined with another case called Relentless, Inc. v. Dept. of Commerce), the Supreme Court overruled the Chevron deference doctrine. Federal courts must now exercise independent judgment when determining the best interpretation of a statute and cannot simply defer to agency interpretations, even when the statute is silent or ambiguous and the agency interpretation is reasonable. Courts may still view agency interpretations as persuasive, particularly with respect to their expertise on technical issues. Loper Bright indicates that this is more likely when the agency’s interpretation was adopted soon after a law’s enactment and has remained consistent over time, suggesting that courts may apply greater scrutiny when agencies change their longstanding views.

A different standard of review applies when Congress expressly delegates authority to a federal agency to promulgate regulations.

Sometimes the provisions of a federal law expressly authorize the relevant administrative agency to define particular statutory terms or provide discretion for the agency to fill in the details of a statutory scheme through regulations. Courts must apply a narrower scope of review to agency regulations promulgated pursuant to these types of express congressional delegations. In these instances, courts will limit their review to the following factors:

• Assessing the delegation’s constitutionality
• Confirming the agency acted within the scope of the delegation
• Determining whether the agency followed a reasoned process when issuing the regulations

This narrower scope of review suggests that legal challenges to these types of regulations may be less likely to succeed.

Neither Chevron nor Loper Bright involved regulations applicable to employee benefit plans. But the Loper Bright decision governs how courts must now evaluate legal challenges to all federal regulations and so could have major implications for ongoing and future lawsuits relating to employee benefit plans.

Retirement and health and welfare plans are heavily regulated. Employee benefit plans are governed by statutes such as ERISA, the Internal Revenue Code, and the Public Health Service Act, and subsequent legislation (for example, the Affordable Care Act, SECURE 1.0 and 2.0, and the No Surprises Act). Federal agencies — primarily the departments of Labor (DOL), Treasury, and Health and Human Services — issue regulations interpreting their governing statutes. Lawsuits challenging employee benefit plan regulations were commonplace even before Loper Bright. Recent examples include challenges to the following:

• DOL’s fiduciary investment advice and Environmental, Social & Governance (ESG) investing rules
• Tri-agency surprise billing rules
• ACA’s section 1557 nondiscrimination rule

After Loper Bright, challenges will likely have an easier time succeeding. Courts can no longer defer to an agency’s reasonable interpretation of the law, but instead must use independent judgement in determining the best interpretation of a law.

No, Loper Bright doesn’t invalidate or eliminate any existing regulations, including those applicable to employee benefit plans. The ruling also specifically preserves earlier court decisions upholding agency regulations based on the application of Chevron deference, at least for now.

However, another Supreme Court decision issued a few days after Loper Bright may make it easier for affected persons to bring legal challenges to longstanding regulations. In Corner Post, Inc. v. Board of Governors of the Federal Reserve System, the court determined that the Administrative Procedure Act’s six-year statute of limitations for challenging a regulation doesn’t start when a regulation is published, but instead when the person or entity bringing the legal challenge was first affected by the regulation. In Corner Post, the court found that a new business’s challenge to an existing regulation wasn’t time-barred since the business had become newly subject to that rule. Whether this ruling will invite new legal challenges to longstanding employee benefits regulations remains to be seen.

Since Loper Bright didn’t eliminate any employee benefit regulations, plan sponsors and plans should continue to comply with existing agency final regulations. But the potential for increased legal challenges to new (and even old — see the previous FAQ) regulations means plan sponsors should make sure that they are monitoring employee benefits litigation that may change their compliance obligations.

Since Loper Bright, there has been some speculation about whether complying with regulatory safe harbors will continue to provide the protection it has in the past. For example, many plan sponsors choose to satisfy safe harbors that reduce their risk or compliance obligations (e.g., retirement plans that follow the DOL’s regulations implementing 404(c) and QDIA fiduciary relief, or welfare plans that satisfy the ERISA exemption for voluntary plans). Sponsors with concerns or questions about the ruling’s implications for specific employee benefits regulations or guidance should consult with legal counsel. 

No, plan sponsors don’t need to take any immediate action. It’s business as usual for day-to-day plan administration and operation. Plan sponsors should continue to closely monitor and analyze new agency guidance affecting their benefit plans. This may include discussing with legal counsel and industry trade groups whether to submit comments on proposed regulations. Sponsors should also monitor litigation challenging new (or existing) employee benefits regulations.

In the short term, Loper Bright is likely to affect a slew of recent and soon-to-be issued regulations impacting group health plans. These include:

• Final ACA section 1557 nondiscrimination in health programs and activities regulation, which is currently being challenged with multiple district courts temporarily staying (invalidating) certain parts of the rule citing the Loper Bright decision
• Final Mental Health Parity and Addiction Equity Act’s nonquantitative treatment limitations regulation
• Regulation addressing covered prescription drugs as essential health benefits for self-funded and large insured group health plans
• Regulation clarifying how/when to accumulate prescription drug manufacturer financial assistance towards participant cost-sharing limits (see Drug copay accumulator programs: A many-sided argument (Oct. 26, 2023))

In the short term, Loper Bright is likely to influence several ongoing lawsuits challenging two recent DOL regulations primarily affecting retirement plans.

The first lawsuit challenges DOL’s 2022 regulation addressing ERISA fiduciaries’ ability to consider ESG factors in investment selection and proxy voting (see On second thought, DOL has softer touch with ESG investing rule (Dec. 13, 2022)). In September 2023, a federal district court judge upheld the ESG regulation by applying Chevron deference. On appeal, the 5th U.S Circuit Court of Appeals recently returned the lawsuit to the lower court for reconsideration as a result of Loper Bright.

There are also two lawsuits seeking to invalidate DOL’s regulation expanding the scope of fiduciary investment advice under ERISA — and amendments to seven related prohibited transaction exemptions — originally scheduled to take effect Sept. 23 (see What plan sponsors should know about DOL’s final fiduciary rule (June 20, 2024)). On July 25, a federal district court judge issued an order temporarily blocking the rule from taking effect nationwide, citing the Loper Bright ruling. A second federal district court issued a similar order the following day, also citing Loper Bright. Because these rulings are preliminary, however, the courts could ultimately come to different conclusions after further consideration.

Loper Bright appears unlikely to meaningfully delay SECURE 2.0 implementation. Many SECURE 2.0 provisions direct or expressly authorize the agencies to issue implementing regulations or guidance (see the FAQ above regarding express delegation). DOL and IRS have already released a significant volume of proposed regulations and subregulatory guidance for key SECURE 2.0 provisions (see User’s guide to SECURE 2.0). So far, none of this guidance has garnered legal challenges from affected persons.

How the ruling will affect agencies’ future rulemaking efforts remains uncertain. House Republicans quickly called on DOL and all other department and agency heads to detail how ending the Chevron deference doctrine could affect their interpretations of statutes and litigation during the Biden administration. In testimony before a House committee, however, Acting Labor Secretary Julie Su expressed confidence that DOL's regulations are on solid legal ground and said the department will forge ahead with its rulemaking agenda.

While Loper Bright brings a lot of uncertainty, we will likely see even more litigation challenging new (and possibly long-standing) final regulations, now that the thumb on the scale in favor of agency interpretation has been removed. Even in a Chevron world, litigation challenging regulations (particularly perceived partisan ones) was somewhat commonplace; however, Loper Bright may serve to embolden plaintiffs to find a favorable court and challenge any regulation they find objectionable.

Because the Loper Bright decision limits the deference courts may give to agencies’ interpretation of silence and ambiguities in the law, Congress may respond by writing more detailed legislation in an attempt to leave fewer gaps, and strengthening its oversight of the executive branch rulemaking process. Lawmakers are exploring their options for how to do that, considering proposals such as mandating congressional approval of major agency regulations, increasing congressional staff to help draft legislation or creating a new regulatory agency to help Congress more clearly prescribe how laws should be implemented. Other policymakers want Congress to resurrect the Chevron deference standard legislatively.

Even with more resources, however, some policy experts question whether Congress could (or wants to) write and amend statutes with enough specificity and flexibility to preclude future legal ambiguities and resulting lawsuits. Lawmakers also sometimes deliberately punt the finer details of divisive or complex issues to the executive branch agencies to come to a consensus to pass final legislation.

Any new congressional approach to drafting legislation will be controversial and may take years to evolve. In the short term, the Loper Bright decision could spur more active dialogue between Congress and the executive branch about the intent, interpretation, and implementation of new and existing law.

Agencies frequently issue guidance in forms other than regulations, such as revenue rulings, notices, FAQs, bulletins, technical releases, fact sheets, administrative manuals, government form filing instructions, and self-compliance tools — none of which are subject to a formal public notice-and-comment process. Such guidance rarely received Chevron deference, so the Loper Bright decision should have little direct impact on how courts handle challenges to subregulatory guidance.

Some commentators have speculated that we may see fewer formal regulations and even more subregulatory guidance after Loper Bright. Federal agencies may decide the extra effort and prolonged timeframe involved in public notice-and-comment rulemaking isn’t justified if courts no longer defer to the agencies’ reasonable interpretations. 

• American Council of Life Insurers v. DOL, No. 4:24-cv-00482-O (ND TX July 26, 2024)
• Federation of Americans for Consumer Choice v. DOL, No. 6:24-cv-163-JDK (ED TX July 25, 2024)
• State of Utah v. Su, No. 23-11097 (5th Cir. July 18, 2024)
• Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008, 603 US __ (July 1, 2024)
• Loper Bright Enterprises et. al. v. Raimondo, Secretary of Commerce, et al., No. 22-451, 603 US __ (June 28, 2024)
• Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)

• What plan sponsors should know about DOL’s final fiduciary rule (June 20, 2024)
• On second thought, DOL has softer touch with ESG investing rule (Dec. 13, 2022)
• User’s guide to SECURE 2.0 (updated periodically)

• SCOTUS weakens agency power: Implications for employer health plans (July 26, 2024) (video)
• Drug copay accumulator programs: A many-sided argument (Oct. 26, 2023)