June 4, 2024

U.S. Chamber: DOL fiduciary rule ‘more egregious’ than past efforts

The U.S. Chamber of Commerce is supporting plaintiffs asking a Texas judge for an injunction to halt a Department of Labor fiduciary rule from taking effect.

Chamber attorneys filed a 28-page amicus brief Friday in the Eastern District of Texas. The Federation of Americans for Consumer Choice filed the lawsuit May 2 against the DOL rule, formally asking for an injunction two weeks later.

The DOL Retirement Security Rule was published April 25 in the Federal Register. It extends a fiduciary standard of care to most annuity transactions, with the initial requirements taking effect Sept. 23.

“If DOL’s Rule goes into effect, harm to individual investors is not merely likely, but certain,” the Chamber brief states.

Costs of compliance and the threat of litigation will add significant expense to those agents and advisors providing financial advice to low-to-middle market Americans, the Chamber argues.

“Brokers and insurance agents will inevitably pass on these costs to customers—or, daunted by this prospect, will simply transition to a model of offering full-service investment advice in exchange for asset-based compensation,” the brief states. “That model is frequently too expensive for retail investors.”

FACC is joined by several independent insurance agents in the lawsuit. The Eastern District of Texas court is within the Court of Appeals for the Fifth Circuit, known for its conservative opinions, including a 2018 decision to vacate the previous fiduciary rule put forth by the Obama administration.

Chamber: no authority under ERISA

The Chamber brief echoes the prime legal strategy of opponents: that Congress never gave the DOL the right to regulate individual retirement accounts. The Employee Retirement Income Security Act of 1974 gives the DOL regulatory oversight of workplace retirement plans.

DOL officials often point out how much retirement savings plans have changed since ERISA and the followup 1975 “five-part test” for determining fiduciary status. Workplace 401(k) plans didn’t exist in 1975, noted Lisa Gomez, assistant secretary, Employee Benefits Security Administration.

However, that does not give the DOL the right to make unilateral changes in the law, the Chamber brief states.

“This may be a sound reason for Congress to engage in legislative factfinding and craft a legislative solution to the extent Congress has these same concerns,” Chamber attorneys write, “but it does not permit a federal agency to dramatically redefine a statutory term that had a ‘well-settled meaning’ when ERISA was enacted.”

Briefing schedule set

Meanwhile, a group of nine trade associations filed a second lawsuit May 24 in the U.S. District Court for the Northern District of Texas, which is also within the jurisdiction of the Fifth Circuit Court of Appeals. The Chamber filed its brief in that case Monday.

Judge Reed C. O’Connor, known for vacating the Affordable Care Act in a decision that was later reversed, set a briefing schedule Friday. The trade groups – led by the American Council of Life Insurers and the National Association of Insurance and Financial Advisors – are also asking for an injunction to freeze the rule in place until it is fully litigated.

O’Connor approved a schedule that includes defendents filing their response to the motion by June 28, and plaintiffs replying in support of their motion by July 12.

That sets up the judge to rule on the injunction sometime in late July or early August. Industry analysts say the injunction is crucial to allow smaller insurance producers time to comply with the initial standards.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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