Eight groups led by the American Council of Life Insurers and the National Association of Insurance and Financial Advisors filed suit on Wednesday to overturn the U.S. Department of Labor’s fiduciary rule.
ACLI and NAIFA, along with six separate NAIFA local associations based in Texas, named the DOL and Labor Secretary Thomas E. Perez in the complaint seeking to vacate the so-called Conflict of Interest rule.
The eight plaintiffs’ groups, filing in U.S. District Court for the Northern District of Texas, allege six separate counts:
- Count 1: The U.S. Department of Labor “unlawfully and arbitrarily imposed fiduciary duties on commercial sales relationships and communication that are not fiduciary in nature,” the plaintiffs allege.
- Count 2: The Best Interest Contract Exemption, or BICE, is “arbitrary contrary to law and arbitrary and capricious,” the plaintiffs also allege. The BICE creates the opportunity for class action lawsuits neither authorized by Congress nor “administratively feasible,” according to the lawsuit.
- Count 3: The Labor Department’s treatment of variable annuities and fixed indexed annuities is also “arbitrary and capricious and contrary to law,” the suit claims. The Conflict of Interest rule favors or disfavors a particular type of retirement product over another, and restricts access of middle- and small-balance retirement savers to certain products, the suit also claims.
- Count 4: Industry groups did not have adequate notice of and an opportunity to comment on moving fixed indexed annuities from prohibited transaction clauses known as PTE 84-24, where they were placed in the proposed rule last year, and into the BICE, where fixed indexed annuities appeared in the final rule published earlier year. Meeting the requirements of the BICE is considered more onerous than meeting the requirements of PTE 84-24.
- Count 5: The department also failed to provide notice and an opportunity to comment on moving the sale of group annuities from PTE 84-24, where they were placed in the proposed rule, to the BICE, where group annuities were placed in the final rule.
- Count 6: The Conflict of Interest rule “violates the First Amendment as applied to truthful, non-misleading commercial speech about retirement products by nonfiduciary salespersons,” the complaint alleges.
The plaintiffs seek to vacate the rule and to declare it unconstitutional.
Plaintiffs include the American Council of Life Insurers, the National Association of Insurance and Financial Advisors, the National Association of Insurance and Financial Advisors-Texas, the National Association of Insurance and Financial Advisors-Amarillo, the National Association of Insurance and Financial Advisors-Dallas, the National Association of Insurance and Financial Advisors-Fort Worth, the National Association of Insurance and Financial Advisors-Great Southwest and the National Association of Insurance and Financial Advisors-Wichita Falls.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.