9 Insurance Groups File 2nd Lawsuit Opposing DOL’s Fiduciary Rule

Nine insurance trade associations filed a second lawsuit last Friday against the Department of Labor (DOL), seeking to overturn the controversial Retirement Security Rule.

The lawsuit was filed 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 insurance industry has campaigned hard against the Retirement Security Rule, which would include recommendations for retirement income annuities under the regulatory framework of the Employee Retirement Income Security Act.

The most recent rule, a final version of which was announced in April, includes individual retirement investment rollover guidance and retirement plan advice for small plan sponsors under the fiduciary framework.

The organizations have claimed that the additional fiduciary requirements are unnecessary because annuity sales are already regulated by many states and investment advice is generally governed by the Securities and Exchange Commission’s (SEC) Regulation Best Interest rules.

The new rule “exceeds the DOL’s authority under federal law, is arbitrary and capricious, and is unconstitutional,” according to a joint statement from the groups that filed the lawsuit, which includes The American Council of Life Insurers, National Association of Insurance and Financial Advisors, Naifa-Texas, Naifa-Dallas, Naifa-Fort Worth, Naifa-POET, Finseca, Insured Retirement Institute and National Association for Fixed Annuities.

“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 groups said.

The groups also argue that the DOL’s move “upends” the progress made thanks to the adoption by 45 states of the revised National Association of Insurance Commissioners Suitability in Annuity Transactions Model Regulation, which in turn aligns with the SEC’s Regulation Best Interest, and “undermines the expertise of state authorities.”

The lobbying group The Federation of Americans for Consumer Choice, along with several other plaintiffs, including insurance industry firms ProVision Brokerage and TX Titan Group, filed a lawsuit earlier this month also claiming that the DOL “has exceeded its authority and acted arbitrarily and capriciously.”