The American Securities Association (ASA) is ready to battle the U.S. Department of Labor (DOL) over the agency’s attempt to change existing retirement rules around advice without going through a notice-and-comment. ASA filed its lawsuit in the Middle District of Florida, home of the Tampa-based trade organization.
In its lawsuit, ASA claims that the regulatory agency used the guidance issued via a series of frequently asked questions (FAQs) to impose new obligations on retirement accounts that did not previously exist. They also say the DOL is violating the Administrative Procedure Act of 1946 (APA), which governs the process that federal agencies develop and issue regulations, by not providing a rulemaking period to solicit public input.
Calling it “bureaucracy at its worst,” ASA, which represents wealth management and capital markets interests of regional financial services firms, is pulling no punches.
The ASA lawsuit takes issue with the FAQs saying that they “impose new obligations that have no basis in the agency’s underlying rules” with two being particularly “egregious”:
- That the agency rewrote its regulations concerning when a financial professional serves as a “fiduciary” under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. According to the DOL, a financial professional’s first instance of advice to rollover assets from one retirement plan to another can be the act of a “fiduciary,” even though the DOL regulations state that a person is not a fiduciary unless he provides advice “on a regular basis to the plan.”
- Secondly, that the DOL is imposing a “host of burdensome documentation and investigation requirements on financial institutions when making rollover recommendations, despite the fact that the exemption the Department promulgated contains no such requirements.
While the DOL has a history of asking for public input, more recently issuing a Request for Information seeking comment on how climate change could impact retirement savings, they seemed to be taking a different tact by using the FAQs to provide guidance on its current retirement rules.
ASA attempted a more diplomatic approach when it sent a letter to DOL head Martin Walsh last September outlining its issues. The trade group argued they were “deeply concerned” about the DOL’s attempt to change the fiduciary definition without public input, saying it caused “confusion and uncertainty,” and that it was crossways with the APA’s procedural requirements. Claiming that guidance, such as the FAQs, can be “thrown online in a matter of minutes and immediately change behavior,” ASA is now ready to challenge the agency in court.
“This lawsuit is necessary to protect America’s retirement savers from an ever-expanding administrative state that continues to push policies the American people, Congress, and the courts routinely reject. The DOL’s failure to seek public comment before changing rules about retirement advice is a violation of the Administrative Procedure Act,” said ASA CEO Chris Iacovella.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
