The National Association for Fixed Annuities (NAFA), along with eight other partners, filed a lawsuit against the Department of Labor (DOL) on Friday to overturn the agency’s fiduciary rule.
The lawsuit was filed in the United States District Court for the Northern District of Texas and is within the jurisdiction of the Fifth Circuit Court of Appeals.
Along with the American Council of Life Insurers (ACLI), Finseca, Insured Retirement Institute (IRI), and the National Association of Insurance and Financial Advisors (NAIFA), as well as partners NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, and NAIFA-POET, the filing accuses the ruling of being “contrary to law,” “arbitrary and capricious,” and “ultimately unconstitutional,” according to a joint statement addressing the suit.
In statements following the complaint, the groups go on to liken the Retirement Security Rule to the DOL’s 2016 fiduciary regulation, which was ultimately vacated in 2018. “Our filing makes a convincing case that the DOL’s fiduciary-only regulation suffers from the same legal defects as the DOL’s failed 2016 rule…Moreover, it ignores recently enhanced federal and state standards for financial professionals who work with retirement savers,” the letter reads.
The insurance trade groups also accuse the 2016 rule of stripping workers from financial advice—and specifically regarding annuities—and claim the new rule will take after the old one. Furthermore, it criticizes the agency of forming a new rule despite calls for extending its comment period at the beginning of 2024.
“…The DOL’s biggest failing is its inability to learn from past mistakes. Despite sound evidence of its harmful effects, strong objections from Members of Congress and opposition voiced in thousands of consumer comments, the DOL chose to advance a repackaged version of its ill-advised 2016 regulation,” the letter adds. “Before it was struck down by the Fifth Circuit, the 2016 regulation resulted in more than 10 million American workers’ accounts with $900 billion in savings losing access to professional financial guidance.”
“In the face of these failures by the DOL, we are compelled by our commitment to present and future retirees to take legal action to stop this harmful regulation from taking effect,” the letter concludes.
The lawsuit is the second in what could be a string of litigation in the coming months for the Department of Labor. Earlier this month, the Federation of Americans for Consumer Choice (FACC) filed a lawsuit seeking a preliminary injunction in stopping the new rule from taking effect.
Last Tuesday, the FACC filed its second suit against the agency in an effort to defer the Retirement Security Rule’s September implementation until their first suit is settled.
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