9 Groups File New Suit Challenging DOL Fiduciary Rule Regs

Nine insurance trade groups joined Friday to file a suit attacking the U.S. Labor Department's new fiduciary rule regulations in the U.S. District Court for the Northern District of Texas.

The groups have accused the department of rushing to adopt the new retirement investment advice fiduciary definition regulations without meeting federal Administrative Procedure Act requirements, and without analyzing impact data in an adequate way while conducting a cost-benefit analysis.

The plaintiffs are the American Council of Life Insurers, the Insured Retirement Institute, the National Association for Fixed Annuities, Finseca, the National Association of Insurance and Financial Advisors, and the NAIFA chapters of Texas, Dallas, Fort Worth and Pineywoods of East Texas (known as NAIFA-POET).

Labor Department representatives did not immediately respond to an email seeking comment.

The background: The Labor Department has been working to impose a fiduciary rule on sellers of non-variable indexed annuities for years.

A fiduciary standard requires the people and companies subject to it to put the interests of clients first, rather than simply offer the clients products and services that appear to suit their needs.

In April, the department completed work on a regulation establishing the retirement investment advice fiduciary definition, using the definition to impose a fiduciary standard on people and companies that help savers roll assets from 401(k) plans and individual retirement accounts into other arrangements, and created limited exemptions from the new fiduciary definition for insurance agents and brokers who sell retirement savers life insurance and annuity products with an investment component.

In practice, because the U.S. Securities and Exchange Commission already imposes federal oversight over issuers and sellers of variable annuities, the new regulations would have the biggest effect on issuers and sellers of non-variable indexed annuities and indexed universal life policies.

The Federation of Americans for Consumer Choice and several insurance agents sued the Labor Department over the regulations May 2 in the U.S. District Court for the Eastern District of Texas. FACC asked that court for a preliminary injunction against the department Wednesday to stop the rule from going into effect while its case was pending.

The Texas federal courts are under the jurisdiction of the 5th U.S. Circuit Court of Appeals, which blocked implementation of a previous Labor Department fiduciary rule standards effort.

The united trades suit: The nine trade groups assert in their suit that the Labor Department used an arbitrary and capricious process to impose burdensome, one-size-fits-all requirements that will limit retirement savers' ability to learn about annuities.

"The Department estimated only partial costs, cherry-picked data to ignore unfavorable findings, and inconsistently or improperly applied discount rates to inflate benefits and conceal costs," according to the complaint. "In the proposed rule, the Department did not even attempt to quantify the benefits, leaving commenters unable to meaningfully scrutinize the Department's conclusory claims that the benefits to retirees would outweigh the corresponding extensive costs."

The department acknowledged that it did not even have data on the assets invested in annuities in pension accounts, or a breakdown of how many assets are in fixed and variable annuities in individual retirement accounts, the groups say.

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