Nine Insurance Trade Groups File Suit Against DOL Fiduciary Rule

Nine insurance trade groups filed a lawsuit against the Department of Labor with the goal of overturning the agency’s Retirement Security Rule, more commonly known as the DOL’s fiduciary rule. The lawsuit was filed in the United States District Court for the Northern District of Texas, within the jurisdiction of the Fifth Circuit Court of Appeals.

The nine organizations include the National Association for Fixed Annuities (NAFA), the American Council of Life Insurers (ACLI), Insured Retirement Institute (IRI), Finseca, the National Association of Insurance and Financial Advisors (NAIFA), NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, and NAIFA-Piney Woods of East Texas (NAIFA-POET).

The long-debated, controversial rule, released on April 23, 2024, updates the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code and is set to take effect Sept. 23, 2024.

According to the insurance groups, “the DOL’s fiduciary-only regulation suffers from the same legal defects as the DOL’s failed 2016 rule. It exceeds the DOL’s authority under federal law, is arbitrary and capricious, and is unconstitutional.” The groups also contend that imposing additional fiduciary duties on them is redundant, given that annuity sales are already subject to state-level regulations and investment advice generally adheres to the SEC’s Regulation Best Interest. Furthermore, these firms argue that such obligations would be financially burdensome, overly restrictive, and ultimately disadvantage individuals with limited assets who lack the means to hire long-term financial advisors.

The Fifth Circuit is the same court that struck down the 2016 rule.

The DOL’s fiduciary rule has been hotly contested since its introduction on Halloween 2023. Many industry trade groups have argued that the comment period was rushed, while earlier this month, Congressional Review Act resolutions were introduced in the House and Senate in an effort to disapprove the rule.

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