According to O’Brien, the members of the federation find it nearly impossible to observe the rule because as independent agents they lack the assigned supervisor that the Department of Labor’s interpretation requires, although they are regulated and supervised by state insurance regulators.
“We think it is helpful to everyone, including the Labor Department, that a federal court review whether these new rules comport with the Fifth Circuit decision handed down a few years ago, because otherwise a cloud will hang over these rules until there is such a legal challenge,” said Andy Jubinsky, an attorney with the Figari & Davenport law firm, which is representing the trade federation.
In 2016, the DOL issued the now-vacated series of rules (and exemptions) that significantly reinterpreted and broadened who could be considered an “investment advice fiduciary,” FACC said in its lawsuit.
At the time, the agency said it wanted to “regulate, in an entirely new way, hundreds of thousands of financial service providers and insurance companies in the trillion dollar markets for ERISA plans and individual retirement accounts.”
But the DOL was sued by the U.S. Chamber of Commerce. The chamber prevailed, and the rule was overturned.
The court reasoned that, in using the term “fiduciary” in the language of ERISA and the tax code, Congress intended to incorporate the well-established meaning of that common-law term, which turns on the existence of a special relationship of trust and confidence.
“Undeterred by the Fifth Circuit’s rebuke in [the Chamber of Commerce suit], the DOL has now sought to resurrect and repackage the substance of its vacated fiduciary rule through adoption of a new Prohibited Transaction Exemption, No. 2020-02,” the federation said in the lawsuit.
“The new interpretation is inconsistent with the statutory provisions of ERISA and the code and [is] arbitrary and capricious. The court should therefore vacate the new interpretation in its entirety and enjoin the DOL from implementing or enforcing it in any manner,” the federation continued.