The Proposed Rule proves an important point, i.e., the DOL’s goal has remained unchanged over the past 15 years of rulemaking. While the DOL will likely insist that the Proposed Rule is different from the New Interpretation because the DOL is repealing the five-part test, that is an immaterial distinction. In fact, the Proposed
It is hard to state forcefully enough how the Department’s proposals reflect a complete lack of deference to the Chamber of Commerce opinion. The Department seems to believe it is unencumbered by the Fifth Circuit decision, which it tries to reduce to mere criticism of the Best Interest Contract (BIC) Exemption. In
FACC at the same time is strongly objecting to DOL’s new rule proposal as inherently incompatible with ERISA as spelled out by the Fifth Circuit decision. “FACC will have no choice but to ask the courts yet again to intervene if the DOL dares to move forward with this proposal
In this regard, by now proposing to overhaul PTE 84-24, the DOL sabotages the assurances in its briefing that the New Interpretation had preserved that exemption for insurance agents who would be swept into its far broader reading of the five-part test. Similarly, the DOL has argued that the major question doctrine should not apply because the expansion of fiduciary responsibility under ERISA did not have far-reaching economic impact or involve a matter of political significance. The contents of the new proposal, introduced with fanfare by the President himself, demonstrate otherwise.
…it is offensive that the DOL tries to characterize commissions and other financial components within annuities as “junk fees”. That is a term never before applied to annuities and amounts to a slanderous characterization of the compensation paid to hardworking insurance agents. To our knowledge, all annuity fees charged to clients are routinely and prominently disclosed as required by state insurance law. We hope industry will join FACC in pushing back hard against this cynical propaganda ploy in order to protect the reputation of our products and agents.
FACC has previously provided comments to the Department and commends its initiative in proposing regulations that align with the NAIC Model Regulation on Suitability in Annuity Transactions. We wish to express our continuing gratitude to you and others at the Department for moving forward with these regulations.
[T]he DOL continues to ignore or twist what the New Interpretation says and what the Fifth Circuit held in Chamber of Commerce. . . . Having convinced the Magistrate Judge to accept the premise that it hasn’t really reinterpreted the five-part test in any meaningful way, the DOL now hopes the Court will not look too closely under the hood but instead simply adopt the Magistrate Judge’s erroneous Recommendations. The Court cannot do so, however, without running afoul of the Fifth Circuit’s unequivocal holdings on the proper interpretation of ERISA and the five-part test.
The NAIC model and many other states permit insurance companies and producers to utilize producer disclosures that are “substantially similar to NAIC Appendices A, B, and C.” Many insurers and producers are already using those disclosure forms in other states and it would help insurance companies and producers if Utah conformed to the NAIC model language. Specifically, we ask that the Rule be modified to say “the producer shall prominently disclose to the consumer on a form substantially similar to the 2020 NAIC Model #275 Suitability in Annuity Transactions Appendix A”. Parallel wording could be used for the other appendices as well. As you can appreciate, this is important to enable insurance companies and producers to utilize the same forms across all jurisdictions that have adopted the NAIC model.
The NAIC model and many other states permit insurance companies and producers to utilize producer disclosures that are “substantially similar to” NAIC Appendices A, B, and C. Many insurers and producers are already using those disclosure forms in other states and it would help insurance companies and producers if New Hampshire conformed to the NAIC model language.
Importantly, vacatur of the scope recommended by the Magistrate Judge frustrates the DOL’s express purpose in adopting the New Interpretation, which set forth the DOL’s “final interpretation of when advice to roll over [Title I] Plan assets to an IRA will be considered fiduciary investment advice under Title I and the Code” (AR 1), and will significantly limit the effect of the New Interpretation. It does not, however, go far enough. Plaintiffs raised multiple other grounds on which the New Interpretation is fatally inconsistent with ERISA and the five-part test. Allowing the remainder of the New Interpretation to survive would leave in place significant and unjustified burdens on the Plaintiffs and similarly situated parties, who would still be at risk of being considered fiduciaries under ERISA or the Code where they never were before and never would be under the common law meaning of the term fiduciary. The DOL’s attempt to broaden the definition of fiduciary to encompass ordinary salespeople who only provide advice incidental to the sale of products cannot be squared with the holding of Chamber of Commerce. In concluding otherwise, the Magistrate Judge’s Recommendations regularly mischaracterize or minimize Plaintiffs’ arguments, ignore or misinterpret the language of the New Interpretation, and disregard the unequivocal holdings of the Fifth Circuit regarding Congress’ intent in using the term fiduciary in ERISA. This was plainly erroneous.