Fixed-Annuities Group Drops Lawsuit Against DOL Rule
March 28, 2018 by Tracey Longo
The National Association for Fixed Annuities has withdrawn its lawsuit challenging the Department of Labor fiduciary rule.
NAFA’s decision comes on the heels of a March 15 Fifth Circuit Court of Appeals ruling that vacated the fiduciary rule in its entirety. The NAFA lawsuit was one of two lawsuits challenging the authority of the DOL to issue the rule.
The association’s membership reprsents about 85 percent of the fixed annuity marketplace, covering annuities sold by independent agents, advisors and brokers, according to NAFA.
“We are very pleased the Fifth Circuit understood the harms the fiduciary rule created for middle-American retirement savers,” NAFA Executive Director Chip Anderson said. “This ruling vindicates both NAFA’s and the Fifth Circuit plaintiffs’ chief concerns and, as a result, we see no reason to continue to pursue our litigation in another federal circuit court.”
NAFA began its legal challenge to the fiduciary rule nearly two years ago, while the the broker-dealer industry’s Financial Services Institute, SIFMA, the U.S. Chamber of Commerce and a number of other trade organizations brought a similar challenge in a separate lawsuit. The lower courts in both cases ruled in favor of the DOL rule, but the lawsuit by the multiple industry groups prevailed when the Fifth Circuit overruled a District Court in Dallas.
NAFA believes the Fifth Circuit decision renders its case moot.
“We still have a lot of work to do, but now we will focus our energies on promoting insurance regulations that properly recognize differences among financial products and the way those products are delivered,” said Anderson.
He indicated NAFA will continue to engage with the National Association of Insurance Commissioners and other state and federal policymakers, which are advancing “best-interest” standards that would apply to the sale of insurance products, including annuities.
“We are confident that fixed annuities will always play an important role in meeting the needs of retirement-oriented consumers and will continue our fight to promote fair-minded regulation that gives consumers real choice in a vibrant financial services marketplace,” he said.
Both NAFA and the DOL agreed to the voluntary dismissal of the lawsuit.
It’s unclear if the DOL will appeal the Fifth Circuit ruling. Some view an appeal as unlikely given the pro-business, anti-regulation climate being advocated by President Trump, who last year delayed implementation of the rule and ordered that it be reviewed by the DOL.
“it’s likely that the DOL will come out with a new proposed rule and exemptions in the second half of the year,” Drinker Biddle & Reath attorney Fred Reish said.
“If I had to guess, I would say that these revised rules will still say that a recommendation to take a distribution and roll over was still a fiduciary act. The interesting part would be what the new exemption will require,” Reish added.
The Fifth Circuit’s decision to vacate the DOL rule goes into effect May 7. However, if the DOL contests and the court decides to stay its decision as hearings and appeals take place, the decision to vacate the DOL’s fiduciary rule may not apply for a year or more or may be overturned, which would leave the fiduciary rule intact.
