Compliance

DOL Responds to Fiduciary Rule Lawsuit

The agency defends its authority to issue a new rule and to extend provisions of the rule to IRAs.

By Rebecca Moore editors@strategic-i.com | July 19, 2016
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In a reply to complaints brought against it by the National Association for Fixed Annuities (NAFA), the Department of Labor says it is entitled to summary judgment on all claims, and the court should deny NAFA’s motion for summary judgment and a preliminary injunction.

Among its many arguments, the DOL says that, in enacting the Employee Retirement Income Security Act (ERISA), Congress gave the agency broad administrative and interpretive power to “prescribe such regulations as ... necessary or appropriate to carry out the [relevant] provisions,” including to “define accounting, technical and trade terms used in” the Act.

In exercising that authority, the DOL says it promulgated a reasonable interpretation of “investment advice” in light of the text, legislative history, and purposes of ERISA. Where Congress did not specifically define “investment advice,” but entrusted DOL with broad discretion to interpret that language in light of its expertise and competing policy concerns, the DOL says its reasonable interpretation is entitled to deference. To back this up, the agency quoted the case of Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., in which the opinion says, “When Congress has entrusted the Secretary with broad discretion, we are especially reluctant to substitute our views of wise policy for his.”

The court document notes that while NAFA does not contest that the Chevron framework applies to the DOL’s conflict-of-interest rule, NAFA contends that the agency’s interpretation of “investment advice” fails at Chevron step one because “Congress intended ERISA fiduciary duties to apply only to those who participate in ongoing management of a plan or its assets.” The DOL contends NAFA’s interpretation runs afoul of the statutory text and case law regarding ERISA fiduciaries.

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