The Department of Labor sent its clearest signal yet this week that it plans to eliminate the hated class-action lawsuit provision of the Obama-era fiduciary rule.
In a court brief filed in District of Minnesota federal court, government attorneys said the lawsuit angle “will likely be mooted in the near future.”
The lawsuit right is included in the Best Interest Contract Exemption, which agents will need to comply with in order to sell variable and fixed indexed annuities. It is slated to take effect Jan. 1.
However, the DOL is proposing an 18-month delay that is expected to be published in the Federal Register soon. During that time, the department will study and revise some portions of the rule.
The lawsuit provision is one of the most despised aspects of the fiduciary rule. Several lawsuits were filed challenging the government’s right to create a private right of action, including one in Minnesota court filed by Thrivent Financial.
Filed in September 2016, Thrivent ’s 29-page lawsuit claimed the DOL rule will render its dispute resolution mechanism obsolete. Thrivent’s mechanism prohibits class actions.
“Nothing in ERISA gives DOL authority to preclude financial institutions and their clients from entering into and enforcing arbitration agreements that include class action waivers,” Thrivent's complaint reads.
The two sides are trading briefs in the case, but the government made it clear this week that Thrivent should not worry about class action remaining a part of the rule.
Phase one of the DOL rule took effect June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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