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Regulation and Compliance > Federal Regulation

Thrivent Fights DOL Fiduciary Rule’s Anti-Arb Clause

By Melanie Waddell

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Thrivent Financial for Lutherans, the insurer suing the Department of Labor over its fiduciary rule, said Monday that it plans to file a preliminary injunction soon to halt the anti-arbitration clause set out in the rule’s best-interest contract exemption.

In a Monday letter to Judge Susan Richard Nelson in the U.S. District Court for the District of Minnesota, the lead attorney for Thrivent, Andrew Kay, said that due to Labor’s refusal to address Thrivent’s concerns about “the anti-arbitration condition that remains part of the [best-interest contract exemption]” to the fiduciary rule, Thrivent intends to “file soon” a motion for preliminary injunction.

Thrivent became the sixth plaintiff to lob a complaint against Labor’s fiduciary rule when the insurer filed a suit last September challenging the class-action waiver requirement under the rule’s best-interest contract exemption, or BICE.

Compliance with BICE is set to kick in on Jan. 1, 2018, but Labor Secretary Alexander Acosta told the same court on Aug. 9 that Labor had filed with the Office of Management and Budget to have the January compliance date extended by 18 months.

Thrivent’s case against Labor’s rule has been focused specifically on the arbitration portion of the BICE, so any preliminary injunction motion would necessarily focus on that specifically as well.

Thrivent, Kay said in the letter, took issue with Labor’s position to only address issuing a “public statement that it does not intend to enforce the anti-arbitration condition of the BIC Exemption.”

Such a public statement, Kay said, would not address Thrivent’s concerns for several reasons:

First, he said, “a statement of non-enforcement would not change the fact that the regulation remains on the books, making it impossible for Thrivent to make required certifications of its regulatory compliance, including required certifications to state regulators that Thrivent complies with all federal laws.”

Second, the fiduciary rule and related exemptions are to be enforced in part through excise taxes collected by the Treasury Department, Kay wrote.

“DOL does not have any enforcement authority. Unlike eliminating the rule or enjoining its enforcement, DOL’s statement of nonenforcement provides no guarantee that the Department of Treasury (a separate federal agency) would refrain from enforcing the rule once in effect.”

Third, Kay argued, under the existing structure, “it is private litigants — not federal agencies — who would primarily enforce the fiduciary rule. DOL’s proposed statement of non-enforcement would not guarantee that private litigants would refrain from pursuing putative class actions and citing existing provisions of the BIC Exemption, which were duly promulgated under the Administrative Procedures Act, in support of that effort.”

Thrivent, Kay continued, “would be willing to have its motion for a preliminary injunction considered based on the papers and without a hearing, and Thrivent would request a briefing schedule that would allow briefing to be completed by the third week in September.”

If the court wishes to hold a hearing, Thrivent would request to be heard on its motion sometime during late September or early October, Kay stated.

In the filing with the court in the case being brought against Labor by Thrivent Financial for Lutherans, Acosta told the court that Labor submitted to OMB proposed amendments to three exemptions:

  • The best-interest contract exemption, which opponents of the rule argued is the contract that would spark a slew of class-action lawsuits;
  • Class exemption for principal transactions in certain assets between investment advice fiduciaries and employee benefit plans and IRAs; and
  • Prohibited Transaction Exemption 84-24 for certain transactions involving insurance agents and brokers, pension consultants, insurance companies, and investment company principal underwriters.

OMB has 90 days to review Labor’s request to extend the compliance deadline. Once approved, Labor’s proposal will be published in the Federal Register and public comments will be taken, likely for 15 days.

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