Compliance

Latest DOL Fiduciary Rule Lawsuit Spotlights Insurance Industry Concerns

Two national insurance advocacy groups have “reluctantly” joined the growing list of plaintiffs asking the federal courts to declare the DOL’s new fiduciary rule arbitrary and capricious. 

By John Manganaro editors@strategic-i.com | June 10, 2016
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The latest legal challenge to the Department of Labor’s (DOL) new fiduciary rule comes from two national life insurance industry advocacy groups, who say they are reluctantly, but necessarily, attempting to halt the rulemaking.

Previous suits have been filed by the fixed-annuities industry and a wider coalition of financial services providers and other interests, including U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable. Similar to those challengers, the American Council of Life Insurers (ACLI) and the National Association of Insurance and Financial Advisors (NAIFA) say their “commitment to present and future retirees requires them to challenge the U.S. Department of Labor's fiduciary regulation in court.”

“ACLI and NAIFA do so reluctantly,” suggests ACLI President & CEO Dirk Kempthorne and NAIFA CEO Kevin Mayeux. “But it has become clear that the rule will harm the very people it is meant to help. It will harm retirement savers who now, more than ever, need access to the guaranteed lifetime income products—personal pensions—offered by ACLI and NAIFA members.”

The complaint was filed U.S. District Court for the Northern District of Texas—the same venue as the suit filed by the U.S. Chamber, FSI, and company. The text of the complaint suggests the DOL regulation “will impact Americans' access to accurate and valuable information from financial professionals about their 401(k)s, individual retirement accounts (IRAs) and other retirement plans, including information about guaranteed lifetime income products such as annuities.”

Those who have followed the rulemaking in recent years will see some familiar arguments in the text of the complaint. According to ACLI and NAIFA members, annuities are the only products in the private marketplace that guarantee lifetime income, and thus the DOL should be cautious before enshrining a rule that could potentially make it harder to access said products.

“After a regulator in the United Kingdom tried a similar approach in 2012, the UK Treasury Department and Financial Conduct Authority in March 2016 issued a report …  that said a gap exists for people on lower incomes or with lower levels of assets who cannot afford to pay the fee for advice or find it harder to access,” the suit argues. “In addition to affecting retirement planning products and the importance of saving for the long-term, the regulation will impact the availability of lifetime income products in the marketplace.”

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