The National Association for Fixed Annuities filed a second federal lawsuit Thursday in the D.C. District Court challenging the Department of Labor’s new “fiduciary” rule.
The lawsuit seeks a preliminary injunction to stay the rule, which is scheduled to take effect in April 2017. NAFA is represented by Phillip D. Bartz and Jacob A. Kramer, antitrust lawyers with Bryan Cave, a legal firm based in St. Louis.
The U.S. Chamber of Commerce spearheaded a lawsuit with eight other plaintiffs filed in a Texas district court.
“NAFA believes this action is necessary, not only to defend the interests of our members, but to protect consumers against excessive government regulation that will only hurt average working Americans trying to save for retirement,” said Chip Anderson, executive director of NAFA.
The lawsuit alleges the DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and that it improperly categorizes insurance agents as fiduciaries.
The lawsuit further alleges that the rule creates a private right of action, which only Congress can do.
The suit further alleges that DOL’s decision to include fixed indexed annuities (FIAs) under the Best Interest Contract Exemption (BICE) in the final rule – rather than under the less onerous PTE 84-24 as originally proposed – with no opportunity for meaningful comment and without adequate justification was arbitrary and capricious.
NAFA members were "blindsided" by the final treatment of FIAs, the lawsuit says.
"The impact will be highliy detrimental to the FIA industry and its clientele. Insurance carriers will need to restructure their distribution models, because they will not be able to guarantee in a BIC that independent agents selling insurance products from different carriers have acted in the best interest of purchasers," the lawsuit reads.
As fixed insurance products and not securities, FIAs and those who create, distribute and sell them stand to be uniquely harmed by this rule.
“The inherent problems with this rule are vast and far-reaching,” Anderson said. “This rule is administratively unworkable, especially for the fixed annuity industry, and that means quality products and advice currently available to middle-income Americans will be harder to access and more expensive. The brief filed with the lawsuit contends the new rules are unworkable for insurance companies, independent marketing organizations, and individual agents, largely because the DOL rule and exemptions are designed for the securities industry.
“Our organization strongly supports consumer protection but this rule exceeds DOL’s rulemaking authority and will result in lost jobs in our industry, less choice for consumers, and more lawsuits to line the pockets of class action lawyers. We will do whatever we can to help policymakers create real solutions, but this rule will do more harm than good, and we will challenge it in the courts,” Anderson said.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
© Entire contents copyright 2016 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.