The National Association for Fixed Annuities (NAFA) filed a federal lawsuit against the Department of Labor Thursday challenging the fiduciary rule it released in April. NAFA’s lawsuit was filed in the D.C. District Court and seeks a preliminary injunction to stay the rule, which is scheduled to be enforced starting in April 2017.
“NAFA believes this action is necessary, not only to defend the interests of our members, but to protect consumers against excessive government regulation that will only hurt average working Americans trying to save for retirement,” said Chip Anderson, executive director of NAFA, in a press release announcing the lawsuit.
The lawsuit alleges the rule is invalid on grounds the DOL exceeded its authority to regulate IRAs and improperly categorizes insurance agents as fiduciaries. The lawsuit was the second the DOL was hit with in the same day, after a multiparty lawsuit filed earlier Thursday claimed the DOL overstepped its authority in crafting the rule.
NAFA’s lawsuit further alleges that the rule “creates a private right of action, which only Congress can do,” and that the “DOL’s decision to include fixed indexed annuities (FIAs) under the Best Interest Contract Exemption (BICE) in the final rule — rather than under the less onerous PTE 84-24 as originally proposed — with no opportunity for meaningful comment and without adequate justification was arbitrary and capricious.”
NAFA asserts that because fixed insurance products are not securities, FIAs and those who create, distribute and sell them will be harmed by the rule. The brief filed with the lawsuit contends the rules are unworkable for insurance companies, independent marketing organizations and individual agents because the DOL rule and exemptions are designed for the securities industry.
“The inherent problems with this rule are vast and far-reaching,” said Anderson. “This rule is administratively unworkable, especially for the fixed annuity industry, and that means quality products and advice currently available to middle-income Americans will be harder to access and more expensive.
“Our organization strongly supports consumer protection, but this rule exceeds the DOL’s rulemaking authority and will result in lost jobs in our industry, less choice for consumers, and more lawsuits to line the pockets of class action lawyers,” Anderson said. “We will do whatever we can to help policymakers create real solutions, but this rule will do more harm than good, and we will challenge it in the courts.”