DOL’s new fiduciary rule faces lawsuit filed by 9 insurance trade groups
The American Council of Life Insurers and others are seeking to overturn the fiduciary rule finalized last month because it “undermines the expertise of state authorities who are responsible for overseeing annuities.”
Plaintiffs include The American Council on Life Insurers, the National Association of Insurance and Financial Advisors, the Insured Retirement Institute and the National Association for Fixed Annuities. In a group statement, the associations said the legal action came after careful deliberation on what is in the best interest of retirement savers. The 2024 version of the fiduciary rule suffers the same legal defects as the department’s 2016 fiduciary rule because it exceeds the department’s authority, is arbitrary and capricious, and is unconstitutional, they said.
“The DOL’s biggest failing is its inability to learn from past mistakes,” the statement said. “Despite sound evidence of its harmful effects, strong objections from Members of Congress and opposition voiced in thousands of consumer comments, the DOL chose to advance a repackaged version of its ill-advised 2016 regulation,” the statement said. “Before it was struck down by the Fifth Circuit, the 2016 regulation resulted in more than 10 million American workers’ accounts with $900 billion in savings losing access to professional financial guidance.”
The lawsuit also points to policies implemented in 45 states since 2020 that strengthen safeguards for retirement savers based on the revised National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation. The revised model, which imposes a best interest standard, aligns with the SEC’s Regulation Best Interest (Reg BI), the associations said.
“Together, these rules greatly enhance the state and federal standards financial professionals must follow when recommending annuities,” plaintiffs said. “The DOL’s fiduciary regulation upends this progress and undermines the expertise of state authorities who are responsible for overseeing annuities.”
The associations filed the lawsuit in the United States District Court for the Northern District of Texas, which is within the jurisdiction of the Fifth Circuit Court of Appeals.
Related: DOL’s new fiduciary rule: Already under fire from life insurance & annuity industry groups
The rule’s first challenge came within days of the rule’s finalization last month. That lawsuit, filed in the U.S. District Court for the Eastern District of Texas, said the department exceeded its authority in crafting the rule and asked the court to vacate the rule under the Administrative Procedures Act on the grounds it is contrary to law as well as arbitrary and capricious. The lawsuit called the rule an “assault on insurance agents selling annuities,” and said it reflects deep-rooted misunderstandings and bias on the part of the DOL against annuities and the insurance sales channel through which they are sold.
The rule is set to go into effect Sept. 23.