The first of potentially many lawsuits against the Department of Labor’s (DOL) fiduciary rule has been filed.
The Federation of Americans for Consumer Choice (FACC), along with several independent insurance agents, filed a lawsuit on Thursday in the U.S. District Court for the Eastern District of Texas located in the city of Tyler, Texas.
The FACC, an advocacy group for independent insurance agents, is represented by law firm Figari and Davenport, which also represents the FACC in its existing lawsuit against the DOL challenging the agency’s 2020 guidance on who is considered a fiduciary. As part of the current lawsuit, FACC says it will “seek a preliminary injunction asking the court to stop the new rule from taking effect during the pendency of the case.”
In a statement, the FACC says that by implementing a new Retirement Security Rule, the DOL has violated the Fifth Circuit’s 2018 rule that had vacated the department’s previous 2016 fiduciary legislation. “FACC is disappointed that the DOL has chosen to go down this same tired path with yet another proposal that blatantly violates the 2018 ruling by the Fifth Circuit and arrogantly ignores limitations of its authority under ERISA,” the FACC said. “The DOL’s new rules are yet another assault on the financial services industry – especially insurance agents – that only serve to create more cost and confusion for American consumers.”
The new lawsuit comes as the Department of Labor says its prepared to take on legal challenges against its latest fiduciary rule, which was only released just last week. Department of Labor Acting Secretary Julie Su has previously stated that the department expects to tackle legal hurdles on the new rule.
The specifics
In the lawsuit, the FACC states the DOL “promulgated a new rule that purports to redefine and significantly broaden who is considered an ‘investment advice fiduciary’” under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC).
“The DOL’s new rules are yet another assault on the financial services industry – especially insurance agents – that only serve to create more cost and confusion for American consumers.”
The Federation of Americans for Consumer Choice
The FACC adds that the DOL had amended several prohibited transaction exemptions, including PTE-84-24, which “relates to the compensation that insurance agents may receive if they are deemed to be fiduciaries under the new 2024 Fiduciary Rule.”
“As described below, the 2024 Fiduciary Rule and PTE amendments are just the latest salvos by the DOL in its almost 15-year quest to re-define what it means to be an ERISA fiduciary in contravention of the will of Congress,” plaintiffs contend in the suit. “Moreover, it blatantly defies the prior ruling of the United States Court of Appeals for the Fifth Circuit striking down a rule package that was effectively indistinguishable from the 2024 Fiduciary Rule.”
Moreover, the suit accuses the DOL of pushing through its latest rule “at extraordinary speed and without any substantial consideration of the consequences or the effect it will have on the insurance industry in particular.”
Critics of the rule have accused the Biden Administration in the past months of accelerating the reviewal process in order to advance the final rule prior to the November presidential election. Opposers especially condemned regulators for an “unreasonably short” 60-day comment period, which crossed over several federal holidays.
“The 2024 Fiduciary Rule is inconsistent with the intent of Congress as expressed in ERISA, and the DOL has exceeded its authority and acted arbitrarily and capriciously in promulgating both the 2024 Fiduciary Rule and amended PTE 84-24,” the complaint concludes. “Plaintiffs have therefore brought this action requesting that the Court vacate the 2024 Fiduciary Rule and amended PTE 84-24 in their entirety, and to preliminarily and permanently enjoin the DOL from enforcing either of them.”
Pending any other legal challenges, the DOL’s final rule will become effective starting September 23, 2024.
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