A coalition of trade groups for life insurance and annuity issuers told a federal court in Texas on Friday that the Labor Department's new fiduciary rule should be halted because DOL exibited "outright defiance" of the court's decision to vacate the 2016 rule in crafting the new one.
"DOL's lead argument — that ERISA's text is broad and authorizes DOL to go beyond the common law — all but ignores" the court's 2018 decision, the insurance groups said, in "relying on the same authorities the Fifth Circuit considered in holding precisely the opposite when invalidating the 2016 rule."
The trade groups filed suit against Labor on May 24. Their latest filing is a response to Labor's answer, filed June 28.
With the briefs filed, the next step is the court decision on the injunction. The court could decide to hold a hearing on the matter or make a decision based on the briefs.
At times, the insurance groups state, Labor's rule "constitutes outright defiance" of the Fifth Circuit's decision, referring to the March 15, 2018, ruling in Chamber of Commerce v. U.S. Department of Labor.
Ultimately, the groups told the court, "two straightforward points are sufficient to decide the merits" of their case against the rule.
First, the Fifth Circuit established in Chamber that ERISA "codified the touchstone of common law fiduciary status — the parties' underlying relationship of trust and confidence."
However, like the 2016 rule, Labor's new rule "seeks to transform virtually all insurance agents and brokers who recommend retirement products in compliance with existing state and federal laws into fiduciaries without regard to whether those relationships actually are or would be 'fiduciary' at common law," the filing states.
Second, the Fifth Circuit held in Chamber "that the statutory standard does not permit DOL to 'dispense' with the well-established 'distinction between investment advisers,' who render advice for a fee and have long been deemed fiduciaries, 'and stockbrokers and insurance agents, who generally assumed no such status in selling products to their clients.'"
Like the 2016 rule, Labor's new rule "does precisely what Chamber forbids: it ignores the core distinction between investment advice paid for by a client and sales speech engaged in by insurance agents, brokers, and others incidental to the sale of retirement products," the insurance groups' filing states.
"In these ways and others, the Rule overrides the common law and exceeds DOL's statutory authority, just as the 2016 rule did," the insurance groups maintain.
Annuity Access
In a joint statement when filing their original lawsuit against the rule, the insurance groups argued that Labor's "latest regulation will block retirement savers from accessing information about annuities at a time when the lifetime income these products provide is needed more than ever before" as the rule reduces "consumer access to professional financial guidance and critical protected lifetime income solutions."
