…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.
By now we presume everybody is aware that the DOL yesterday released its “Halloween Rule”.
While FACC is still analyzing the rule and our viewpoint may evolve – we wanted to share initial reactions to these latest developments:
- DOL proves again it just cannot take no for an answer. This is the same old rule that was floated in 2010 but pulled back, proposed with fanfare in 2016 but struck down in its entirety by the Fifth Circuit, reproposed again in 2020 through stealthy reinterpretations that are still under legal challenge, and now trotted out yet again with the same tired themes and overreaching proposals. We hope industry will join FACC in making clear that this proposal is a non-starter and would not survive a court challenge.
- We think 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.
- We are struck by the audacity of the DOL in defying the Fifth Circuit Chamber of Commerce decision and other relevant case law interpreting ERISA. Apparently the DOL cannot be bothered to explain how its new rulemaking could be squared with the Fifth Circuit decision. It will be remembered the Fifth Circuit said it is “ordinarily inconceivable” that salespeople would have a fiduciary relationship of trust and confidence with a client in the case of one-time transactions involving rollovers. The Fifth Circuit made clear an agent can only be a fiduciary if there is a “special relationship of trust and confidence” under common law which means among other things that advice incident to sales is typically not fiduciary advice. DOL tries to shrug it all off but DOL needs to be reminded there are three branches of government and it cannot run roughshod over decisions of the US Court of Appeals.
- FACC’s lawsuit is now more relevant than ever. FACC takes the view – which is now borne out – that DOL has never given up on treating everyday insurance agents as fiduciaries contrary to ERISA. We contend it is now even more apparent that DOL’s reinterpretation contained in the PTE 2020-02 preamble was nothing more than a veiled attempt to reinstate the 2016 rule. This latest proposal proves the point that DOL does not understand or intend to enforce the Fifth Circuit decision on who is a fiduciary. Thus, the 2016 proposal, the 2020 guidance, and this new proposal are all cut from the same cloth. As Yogi Berra would say – it’s déjà vu all over again. FACC intends to ask the Judge in our current case to accept briefing on how this latest DOL proposal supports FACC’s argument that DOL is ignoring the Fifth Circuit decision and testing ways to reinstate the discredited 2016 rule.
- FACC completely rejects the DOL narrative that says annuities are overpriced or that consumers in the IRA marketplace need the protections of the DOL. ERISA was created to protect those consumers captive to employer and union plans where choices are limited and fees susceptible to easy abuses. The IRA marketplace is a completely different market in which there are countless products and providers and complete freedom of choice for consumers. It is also a very highly regulated marketplace which does not need yet another layer of regulation based on perceived needs of federal bureaucrats. FACC also intends to look closer at DOL’s confusing simplistic allegations that FIAs somehow result in excessive fees which we think is a canard that fails to account for the peace of mind provided by FIAs and comparable costs incurred by consumers buying other kinds of financial products. Our past experience tells us that DOL plays fast and loose with this kind of information which often crumbles when subjected to more fulsome analysis.
Obviously, this new rule proposal is large – running hundreds of pages – and contains several components including highly problematic revisions to PTE 84-24. FACC will be studying it all closely in the days ahead. But it is clear already this latest DOL proposal is yet another blatant overreach by the DOL and must be fought vigorously. FACC intends to help lead that fight.