In a victory for the Department of Labor, a federal judge on Nov. 4 rejected an attempt by an insurance trade group to strike down its new fiduciary rule for retirement advice.
In the first court decision involving a legal challenge to the DOL rule, U.S. district judge Randolph Moss in Washington turned back the challenge brought by the National Association for Fixed Annuities.
In addition to seeking a preliminary injunction to delay the implementation date, NAFA also was asking the court to vacate and set aside the fiduciary rule and its associated exemptions.
“The court will deny NAFA's motions for a preliminary injunction and for summary judgment and will grant the [Labor] Department's cross-motion for summary judgment,” wrote the judge in a memorandum opinion.
Secretary of Labor Thomas Perez, named in the suit, called the ruling "a win for working Americans who simply want a secure retirement."
"The conflicts of interest rule was developed after substantial input from a variety of stakeholders, including the industry, and it will make sure that retirement savers receive advice that puts their interests first," he said in a statement Nov. 5. "I'm pleased that the court recognized the comprehensive and thoughtful process we used in crafting this rule."
NAFA had challenged the new rules “on numerous grounds,” according to the memorandum, including the new definition of fiduciary and a claim that the DOL had acted beyond its authority.
NAFA further contended that “the new rules will have catastrophic consequences for the fixed indexed annuities industry.”
Meeting the April 2017 deadline for initial implementation of the rule is "almost an impossibility for the industry," Chip Anderson, NAFA's executive director, told InvestmentNews when the lawsuit was filed in June.
NAFA's operation manager, Bailey Sorensen, did not return a call to comment.
Steve Hall, the legal director for Better Markets, a consumer group, called the court decision a “huge victory for all Americans saving for a safe and secure retirement.”
The DOL and Mr. Perez still face five lawsuits from firms and industry trade groups seeking to stop the new fiduciary rule.
Mr. Perez has publicly been very positive about the law standing up to court challenges.
“I'm very confident,” he told an audience in June at a National Press Club luncheon in Washington.
Mr. Perez said two factors weigh in favor of the regulation. First, as he reiterated in the statement Nov. 5, the DOL conducted an “inclusive and deliberate [regulatory] process” in which it sought extensive comments and modified the rule in response to criticisms.
Second, the regulation can stand on its merits, he said.