The Department of Labor has issued technical corrections to the fiduciary rule, specifically clarifying whether insurance companies can use the best interest contract exemption as well as principal transaction exemption clarifications.
Meanwhile, the first hearing has been set in the string of lawsuits that have been filed to kill the rule, and the House Appropriations Committee’s fiscal 2017 funding bill seeks to torpedo it.
Micah Hauptman, financial services counsel with the Consumer Federation of America, told ThinkAdvisor on Friday that the technical corrections DOL issued are “fixing typos and making other minor clarifications for the avoidance of any doubt about the rule.”
The technical correction DOL issued to BICE deals with the actuarial review of insurance companies, Hauptman explains. “States typically require insurance companies to receive annual an actuarial review but not all states require that review to be conducted by an ‘independent firm.’ The rule inadvertently included the words ‘independent firm’ to the actuarial review requirement, so the DOL has deleted those words to avoid any doubt that all insurance firms that comply with state requirements can gain exemptive relief under the BIC [or BICE], which is what everyone already understood to be the case.”
Phyllis Borzi, assistant secretary of Labor for DOL’s Employee Benefits Security Administration, said in a recent interview that DOL has been getting feedback on areas in the rule that need tweaking. “People have given us, and we are meeting with people, who have identified areas [where] they want some clarification,” she said. “Some of it is more substantive than others; in some cases it’s tweak a few words.”
House Spending Bill
The House Appropriations fiscal 2017 Labor, Health and Human Services funding bill, released Wednesday, states that no DOL fiduciary or conflict of interest rule “shall have an effective date or have any legal effect.”
CFA’s Hauptman told ThinkAdvisor in a previous interview that the next attempts to kill DOL’s rule would be inserting a policy rider on a spending or budget bill to defund the rule as well as attempts “to delay implementation” of the rule.
Hauptman argued that DOL’s fiduciary rule “could be the next Obamacare where every few months, members reiterate how strongly they oppose this rule.”
Other “backstops,” Hauptman said, could be a court granting a preliminary injunction, as well as a string of bills offering “technical” fixes to the rule, “like what we’ve seen in the Dodd-Frank context … to chip away and open a loophole in the rule.”
Court Date Set
Of the five lawsuits filed against DOL, a Topeka, Kansas court will hold the first hearing on Aug. 24 in the case brought by insurer Market Synergy.
The Market Synergy complaint, filed in the U.S. District Court for the District of Kansas, challenges the department’s conduct in adopting the revisions to Prohibited Transaction Exemption 84-24, which pertains to what the DOL calls “fixed-rate annuities.”
Meanwhile, the U.S. District Court for the District of Columbia has set Aug. 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 go into effect in April 2017.
DOL filed a request on June 20 that the three lawsuits pending in the U.S. District Court for the Northern District of Texas be consolidated; the plaintiffs agreed to consolidation but insisted that each of the cases be allowed to “retain their separate identities” and move forward “expeditiously.”
Both sides in the Texas cases proposed on June 24 that oral arguments be heard in mid- to late- October. The judge has not ruled on that proposal.
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