It also exposes providers operating under the contract to private class-action claims from investors.

In promulgating its rule and the new exemptions, DOL exceeded is authority granted by Congress under the Employee Retirement Income Security Act, alleges NAFA.

In addition to being "arbitrary and capricious," the fiduciary rule, and specifically the exemptions impacting the distribution of FIAs, is "impermissibly vague, and otherwise promulgated in violation of federal law," according to language in the complaint.

The rule stands to threaten the very existence of underwriters and providers of FIAs, alleges the complaint, and will result in "unrecoverable" losses of market share.

Fixed rate, or immediate annuities and fixed indexed annuities both guarantee protection of investment principal and protection of an annuitized lifetime income stream.

FIAs set an interest rate on the return on principal based on an external market index, and offer investors the chance to earn a higher return and payout when markets do well, whereas a fixed, or immediate annuity guarantees a minimum interest rate that is not pegged directly to an outside securities index.

Before the DOL's rule, both forms of fixed annuities were regulated as insurance products, not investment products. Immediate and FIAs are regulated by state insurance laws, whereas variable annuities, which do not offer principal protection and are built on segregated investment portfolios, are regulated under federal securities law.

In 2010, Congress validated FIAs as insurance products and reasserted state insurance commissions as the proper regulatory channel for the products as a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act. NAFA's complaint against the DOL also notes the Securities and Exchange Commission's failed attempt to make FIAs accountable to federal securities law.

Prior to the DOL's rule, the sale of all annuities to 401(k) plans and IRAs fell under PTE-84, which imposed a set of "impartial conduct standards" that assured a recommendation for an annuity was suitable for investors.

In the DOL's final rule, FIAs and variable annuities were removed from PTE-84 and placed under the new BIC exemption.

The rule's proposed form, released in April 2015, only removed variable annuities from PTE-84, leaving advisors, agents and brokers that recommend FIAs subject to PTE-84.

The news that regulators had lumped FIAs with VAs under the new BIC exemption in the final rule was a "last-minute switch" that "blindsided" the FIA industry, according to NAFA's complaint.

Independent insurance agents account for about 60 percent of all FIA sales, says NAFA.

Under DOL's final rule, that channel of distribution will face an existential threat, NAFA argues. Insurance companies and independent brokers are "ill-equipped to suddenly be subjected to the onerous compliance obligations required by the BICE, which more closely resemble the types of requirements imposed on the securities industry," says the complaint.

Because underwriters of FIAs will not be able to guarantee that independent agents are complying with the BIC exemption, distribution channels for FIAs will have to be restructured. NAFA says an estimated 20,000 independent agents will leave the FIA market.

"The Department gave no visible thought and provided no analysis regarding its last-minute decision to subject FIAs to the BICE, particularly with respect to the impact on the fixed annuity industry," the complaint says.

In the end, fewer agents will mean fewer fixed annuity products will be available to middle income retirement savers, argues NAFA.

"An entire industry will be turned on its head," claims NAFA.

"The impact on the FIA industry will mean that many lower and middle-class Americans will not be able to obtain affordable advice and products with respect to their retirement savings. In short, the Rule will hurt the very people the Department is trying to help," the complaint alleges.

A copy of NAFA's complaint can be read here.