Nine insurance trade associations filed a lawsuit today against the U.S. Department of Labor (DOL) to overturn a regulation limiting consumers' choice of financial professional and their access to retirement products that deliver protected lifetime income.
The American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, NAIFA-POET, Finseca, Insured Retirement Institute (IRI), and National Association for Fixed Annuities (NAFA) issued the following comments on their challenge to the DOL's harmful intervention in the retirement savings marketplace and its one-size-fits-all fiduciary standard obligation on effectively every financial professional who sells retirement products:
“The legal action we are taking today comes after careful deliberation on what is in the best interest of the retirement savers we serve.
“Our filing makes a convincing case that 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. Moreover, it ignores recently enhanced federal and state standards for financial professionals who work with retirement savers.
“However, the DOL’s biggest failing is its inability to learn from past mistakes. Despite sound evidence of its harmful effects, strong objections from Members of Congress and opposition voiced in thousands of consumer comments, the DOL chose to advance a repackaged version of its ill-advised 2016 regulation. Before it was struck down by the Fifth Circuit, the 2016 regulation resulted in more than 10 million American workers’ accounts with $900 billion in savings losing access to professional financial guidance.
“The DOL’s latest regulation will block retirement savers from accessing information about annuities at a time when the lifetime income these products provide is needed more than ever before. More than 4 million Americans will turn 65 each year through 2027. Most will not have access to a traditional pension and will be relying on their personal savings to last throughout retirement. By reducing consumer access to professional financial guidance and critical protected lifetime income solutions, DOL’s regulation will jeopardize the retirement financial security of millions of workers and retirees.
“The DOL also failed to recognize the actions taken by state policymakers to protect consumers in annuity transactions. Since 2020, 45 states have strengthened safeguards for retirement savers by adopting the revised National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation. The revised model, which imposes a best interest standard, aligns with the SEC’s Regulation Best Interest. Together, these rules greatly enhance the state and federal standards financial professionals must follow when recommending annuities. The DOL’s fiduciary regulation upends this progress and undermines the expertise of state authorities who are responsible for overseeing annuities.
“In the face of these failures by the DOL, we are compelled by our commitment to present and future retirees to take legal action to stop this harmful regulation from taking effect.”
The associations filed the lawsuit in the United States District Court for the Northern District of Texas, which is within the jurisdiction of the Fifth Circuit Court of Appeals.
The full filing can be read here.
