Insurance groups filed a lawsuit Wednesday against a Labor Department rule that would raise investment advice standards for retirement accounts, arguing that the regulation would stifle annuity sales.
The American Council of Life Insurers, the National Association of Insurance and Financial Advisors and six NAIFA chapters in Texas brought the claim in the U.S. District Court for the Northern District of Texas.
The 105-page suit is the third in the last week designed to kill the DOL regulation, which would require financial advisers to act in the best interests of their clients in 401(k)s, individual retirement accounts and other qualified accounts.
In a six-count claim, the insurance groups argue that the DOL does not have the authority to promulgate the rule, which it deemed “arbitrary, capricious … and unconstitutional.”
Similar language was used in the other two lawsuits.
And this suit is being filed in the same Texas court as the claim last week brought by several financial and business trade organizations, including the Securities Industry and Financial Markets Association and the Financial Services Institute. Both claims are trying to increase their chances of success by using a court that has ruled against other DOL regulations over the last year.
This suit argues that the measure would deprive savers of access to products, such as variable and fixed-indexed annuities, that give them an income stream in retirement.
“The rule will drive up the costs of those valuable guaranteed lifetime income products, artificially distort the marketplace for retirement products generally, interfere with the free flow of valuable commercial information about those products to American consumers, and thereby worsen, not help resolve, the profound challenges facing retirement investors,” the claim states.
It added: “The rule is arbitrary, capricious and contrary to law as applied to the annuity products issued, marketed or sold by plaintiffs' members, because the [Labor] Department failed reasonably to assess and evaluate the profound adverse effects and minimal real-world benefits of its approach.”
The plaintiffs are asking the court to vacate the rule and prevent the DOL from enforcing it.
A DOL spokesman was not immediately available for comment.
But in response to the suit filed last week by several financial and business groups, Labor Secretary Thomas Perez vowed to vigorously defend the rule, which he says protects workers and retirees from investment advice touting high-fee products that enrich the adviser to the detriment of clients' retirement savings.
A Washington, D.C., district court will hear in late August a separate suit against the rule filed by the National Association of Fixed Annuities.