The Trump administration might have difficulty killing the Department of Labor fiduciary rule after a third federal judge upheld the rule Wednesday, one labor expert said.
Judge Barbara M.G. Lynn granted a summary judgment to the DOL in an 81-page ruling released just hours after the agency asked for a stay until March 10.
Plaintiffs in the case were led by the U.S. Chamber of Commerce, the American Council of Life Insurers and the Insured Retirement Institute.
President Donald J. Trump does not support the rule and nearly issued a order to shelve the regulation last week. White House lawyers scrapped the language just before the president signed the memorandum.
Instead, his memo ordered the DOL to review the rule and develop a counter regulation if needed. In order to do that, Acting Labor Secretary Edward Hugler asked for the stay. But he was too late. Judge Lynn issued a rejection of the stay request along with her decision.
Lynn's decision makes it "troublesome for the Trump Administration" to kill the rule, said Erin Sweeney, a Washington, D.C. lawyer with Miller & Chevalier.
"There are two district court decisions on summary judgment concluding that the new regulation is more consistent with the statute than the previous regulation," concluded Sweeney, who previously served as senior benefit law specialist for the Office of Regulations and Interpretations at the U.S. Department of Labor.
"In addition, Judge Lynn's opinion squarely addresses two of the three items that the White House directed the DOL to reconsider, and she concludes that the DOL upheld its burden," Sweeney added.
The two items are whether the rule would limit retirees' access to retirement savings products and whether the rule would create unreasonable costs for consumers.
In particular, opponents say the Best Interest Contract Exemption is arbitrary and capricious and will limit retirees' access due to hefty disclosures and recordkeeping requirements.
The judge disagreed, writing that the "BICE's affect on compensation models is not arbitrary or capricious. To the contrary, it is reasonable for the DOL to incentivize certain compensation models over others to protect plan participants and beneficiaries.”
Trump could direct the DOL to write new regulations that reverse the fiduciary rule. But to do so means following an arduous process of notification and public hearings and publication. And courts have ruled against similar efforts in the past.
Notably, a 1983 Supreme Court decision struck down an order by the National Highway Traffic Safety Administration rescinding regulations requiring either airbags or automatic seat belts in new cars.
Despite the court loss, plaintiffs encouraged the administration work to delay the rule, said ACLI Vice President and General Counsel Gary Hughes.
“This decision underscores the urgency for the administration to act immediately to delay this misguided regulation," Hughes said. "A delay will provide time for the administration to conduct a thoughtful review and to work with ACLI, NAIFA and other stakeholders toward public policies that help Americans achieve their financial and retirement security goals.”
Judges in Washington, D.C. and Kansas federal courts previously upheld the fiduciary rule, which established a best interest standard of care for anyone advising or selling financial products using retirement dollars. It is set to begin taking effect April 10.
In separate statements, neither ACLI or IRI expressed plans to appeal the ruling. Rather, both organizations indicated that the Trump administration might be a better route to defeat the rule.
“We continue to believe that the Department of Labor exceeded its authority, and we will pursue all of our available options to see that this rule is rescinded," plaintiffs said in a joint statement on behalf of the chamber, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association. "The President’s recent directive to the Department, reflecting well-founded, ongoing and significant concerns about the rule, is a welcome development."
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@example.com.
© Entire contents copyright 2017 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.