Fiduciary rule lawsuits continue, as insurers respond to the DOL’s latest rebuttal
The American Council on Life Insurers and eight other insurer groups are still seeking an injunction against the Department of Labor’s controversial new Retirement Security rule, set to go into effect September 23.
Nine insurance trade associations, including 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, filed a lawsuit, American Council of Life Insurers et al. v. U.S. Department of Labor, against the DOL seeking to overturn the fiduciary rule because it limits consumer choice of financial professionals and access to retirement products.
“The DOL’s biggest failing is its inability to learn from past mistakes,” the insurer’s initial group 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.”
On June 28, the DOL responded to the insurers’ lawsuit, arguing that, contrary to what the lawsuit claimed, the new fiduciary rule differed from the 2016 rule, stating that the DOL “has been careful to craft a definition that is consistent with both the statutory text and with the Fifth Circuit’s focus on relationships of trust and confidence.”
In a reply filed on July 12, the insurers argued that the differences were not enough to “save the rule’s sweeping redefinition of fiduciary status,” which names agents and brokers who sell annuities as fiduciaries, and asked the court to “stay [the rule’s] effective date.”
Related: DOL fiduciary rule lawsuit expands, as 2 financial trade groups want it halted too
The DOL, which finalized its new fiduciary rule on April 23 was swiftly hit with another lawsuit on May 2, filed by the Federation of Americans for Consumer Choice, a trade organization whose members are independent marketing organizations, insurance agents and agencies that market fixed annuities. This lawsuit argued that the new rule is an “assault on insurance agents selling annuities” and reflects deep-rooted misunderstandings and bias on the part of the DOL against annuities.
In addition, the lawsuit alleges the DOL’s new definition of investment advice fiduciary is virtually indistinguishable from its 2016 Fiduciary Rule, which was struck down in 2018, and therefore, “seeks to grant the motion to stay the Rule’s effective date and to issue a preliminary injunction,” according to the suit.
Two other financial groups, The Securities Industry and Financial Markets Association and the Financial Services Institute, joined the insurers’ suit on June 29.
There has been legislative action as well to stop the DOL’s new fiduciary rule. On July 10, the House Education and Workforce Committee passed a resolution to stop the DOL’s new rule from taking effect.