9 trade groups file a second lawsuit to stop the DOL fiduciary rule

Nine insurance trade associations filed a second lawsuit Friday against the Department of Labor to overturn its controversial Retirement Security Rule.

The rule would rope most annuity transactions into a fiduciary duty, increasing liability exposure. The RSR takes partial effect Sept. 23 and requires "major changes" by producers, one analyst says.

The American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, NAIFA-POET, Finseca, Insured Retirement Institute (IRI), and National Association for Fixed Annuities (NAFA) filed suit in the U.S. District Court for the Northern District of Texas, which is within the jurisdiction of the Fifth Circuit Court of Appeals.

The Fifth Circuit overturned the Obama administration's fiduciary rule in 2018.

The lawsuit is the second one attempting to stop the DOL rule from becoming law. The Federation of Americans for Consumer Choice filed a lawsuit in Eastern District of Texas earlier this month. Both lawsuits claim that the DOL is overstepping its authority to regulate individual retirement plans.

The trade groups issued the following comments on their challenge to the DOL rule:

“The legal action we are taking today comes after careful deliberation on what is in the best interest of the retirement savers we serve.

“Our filing makes a convincing case that the DOL’s fiduciary-only regulation suffers from the same legal defects as the DOL’s failed 2016 rule. It exceeds the DOL’s authority under federal law, is arbitrary and capricious, and is unconstitutional. Moreover, it ignores recently enhanced federal and state standards for financial professionals who work with retirement savers.

“However, the DOL’s biggest failing is its inability to learn from past mistakes. 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. 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 DOL’s latest regulation will block retirement savers from accessing information about annuities at a time when the lifetime income these products provide is needed more than ever before. More than 4 million Americans will turn 65 each year through 2027. Most will not have access to a traditional pension and will be relying on their personal savings to last throughout retirement. By reducing consumer access to professional financial guidance and critical protected lifetime income solutions, DOL’s regulation will jeopardize the retirement financial security of millions of workers and retirees.

“The DOL also failed to recognize the actions taken by state policymakers to protect consumers in annuity transactions. Since 2020, 45 states have strengthened safeguards for retirement savers by adopting 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. Together, these rules greatly enhance the state and federal standards financial professionals must follow when recommending annuities. The DOL’s fiduciary regulation upends this progress and undermines the expertise of state authorities who are responsible for overseeing annuities.

“In the face of these failures by the DOL, we are compelled by our commitment to present and future retirees to take legal action to stop this harmful regulation from taking effect.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.