Judge to Hear National Association for Fixed Annuities Suit Against DOL Rule
August 22, 2016 by Frank Klimko
WASHINGTON – A federal judge on Aug. 25 will consider a request urging him to immediately stop implementation of the U.S. Department of Labor’s new fiduciary rule, which critics claim could initiate a cavalcade of arbitrary mandates, upending the retirement advice industry.
“If the rule is allowed to go into effect, jobs will be lost, careers will be altered, firms will close and vast resources will be invested in what will likely prove to be an unnecessary effort to comply with a rule that should not be allowed to stand,” according to the most recent filing of the National Association for Fixed Annuities.
NAFA filed a lawsuit in June, seeking a preliminary injunction from Judge Randolph D. Moss, of the U.S. District Court for the District of Columbia. If granted, it would immediately put a hold on the rule — preserving the status quo over the regulation of retirement advice — while both sides argue the overarching merits of the case (Best’s News Service, June 7, 2016).
“There is a high likelihood that the rule will not survive judicial scrutiny,” wrote Philip Bartz, NAFA attorney. “The department has no authority to expand the scope of ERISA (Employee Retirement Income Security Act) fiduciary duties in this manner.”
In response to the NAFA complaint, DOL attorneys said the department did not overstep its authority in updating the fiduciary rule. The NAFA lawsuit should be tossed out because NAFA rejects the substance, not the legality, of the rule, DOL attorneys said.
“A decision to regulate to further the public interest consistent with that grant of authority,” the DOL said in the document, “cannot be legitimately challenged on the basis of inapposite legal claims and disagreement with the policy choices made.”
Conflicted advice will cost investors in individual retirement accounts (in one segment of the market alone) between $95 billion and $189 billion over the next 10 years, the DOL said. The rule’s initial implementation deadline is April 10.
The NAFA litigation is the first of five lawsuits that are moving forward, attempting to challenge the rule. Most allege the rulemaking was arbitrary and capricious.
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
