WASHINGTON — The American Council of Life Insurers (ACLI) took a strong step this week toward challenging in court the Department of Labor’s new fiduciary standard, saying its board has approved a resolution “exploring the details of a legal challenge” to the new regulation.
However, some industry lawyers privately believe the ACLI statement was aimed at determining which financial industries and companies would join them in such a lawsuit ahead of the first deadline, which is June 7. That is the date the rule goes into effect.
These lawyers believe the ACLI will make its final decision as to whether to sue based on how much support it has from other interested parties. They see a steep climb to challenging it, both in court and in Congress.
One key trade group, the National Association of Insurance and Financial Advisers (NAIFA), has stated that its focus is to leverage all three branches of government to help bring about good policy and enable members to serve consumers.
What Your Peers Are Reading
“NAIFA will continue to explore all options. Our greatest strength is our grassroots advocacy, and that is primarily where we will continue to engage on the issue,” said Jules Gaudreau, NAIFA president. “NAIFA participates in several industry coalitions. Others in the industry are exploring litigation options.”
Those challenging it would have until then to seek an injunction preventing its implementation, although compliance will not start being phased in until April 2017. That is when financial advisors and agents must start to reflect the new rule, instead of the current “suitability” standard, when selling customers into 401(k), individual retirement accounts and similar investment vehicles.
The huge number of financial firms that are affected by the DOL ruling have until April 2017 to start complying with it. But the rule does go into effect on June 7. Total compliance is required by April 2018.
The rule will require agents, advisors, brokers, mutual fund managers and others in finance to act in the best interest of their clients when selling investment products into retirement accounts. It is regarded as the first comprehensive change in the rules of the road regarding sale of investment products into retirement accounts since the implementing statute, the Employee Retirement Income Security Act of 1974 (ERISA) was enacted in 1974.
A primary concern for insurers is how it will affect annuities sales. Under the rule, fixed annuities of various types will come under federal oversight for the first time. Consumer protections on these products have been the sole province of the states before the new rule was published.