Lawsuits against the Department of Labor’s rule amending the definition of fiduciary on retirement advice are mounting.
The fourth and fifth legal challenges to the rule were filed Thursday by the Indexed Annuity Leadership Council as well as Market Synergy Group in Kansas.
IALC, comprised of life insurers, filed its lawsuit against DOL in the U.S. District Court for the Northern District of Texas, the same venue where lawsuits were filed Wednesday by the American Council of Life Insurers and the National Association of Insurance and Financial Advisors and on June 2 by nine plaintiffs.
Jim Poolman, IALC’s executive director, stated that while the group’s litigation is “not disputing that retirement advisors should act in the best interests of their clients,” DOL’s rule “will harm millions of hard-working Americans who need the principal protection and lifetime guaranteed income that fixed indexed annuities offer.”
The final DOL regulation “unfairly targets certain types of fixed annuity products, making it harder for Americans to purchase fixed indexed annuities when it is in their best interest to do so,” he said, adding that “this legal challenge is necessary because the rule creates an unworkable standard for independent agents and insurance companies and goes far beyond DOL’s authority.”
Market Synergy’s complaint, filed in the U.S. District Court for the District of Kansas, challenges only the Department’s conduct in adopting the revisions to PTE 84-24, “which contradicted the revisions announced in the Department’s notice of proposed rulemaking.”
The complaint states that in promulgating the final revisions to PTE 84-24, which make the exemption available to “fixed rate annuities,” as defined by DOL, but not to one class of fixed annuities – specifically, “fixed indexed annuities” – the Department “acted without providing adequate notice and an opportunity for comment, reflecting arbitrary and capricious conduct in excess of its statutory authority and in clear violation of its obligations to make necessary findings under applicable law.”
In doing so, the complaint continues, DOL’s “actions have endangered the livelihood of tens of thousands of hard-working individuals and thousands of small businesses in an important segment of the insurance industry.”
The U.S. District Court for the District of Columbia has set August 25 as the date to hear the recent suit against DOL brought by the National Association for Fixed Annuities. The lawsuit seeks a preliminary injunction to stay the rule, which is currently scheduled to become operational in April 2017.
NAFA’s lawsuit alleges the DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and that it improperly categorizes insurance agents as fiduciaries.
President Barack Obama on Wednesday followed through with his promise to veto resolutions passed by the House and Senate to kill the DOL’s rule.
Industry advocates of DOL’s rule believe the lawsuits will have little impact.
“We believe the DOL rule is based on a sound legal foundation and their process set the standard for openness, thoroughness, and attention to comments submitted,” said Barbara Roper, director of investor protection for the Consumer Federation of America. “Contrary to the arguments being put forward, DOL has clear authority both to define fiduciary investment advice under ERISA and the tax code and to set the conditions for any exemptions from the prohibited transaction rules.”