Grassroots Effort Underway to Block Fiduciary Regulation

Its efforts having fallen short in the courts, a trade group has launched a grassroots campaign to derail the Labor Department’s fiduciary regulation.

The National Association for Fixed Annuities (NAFA) says it has launched a White House grassroots campaign “…because we want the Administration to understand the disappointment and anxiety being felt by our membership, which thought President Trump would never allow such a far-reaching excessive regulation to get this far.” The organization says that more than 2,000 NAFA members have already written the White House, and that they “…anticipate hundreds more will be doing so in the weeks ahead.”

In a press release, NAFA expressed its gratitude to members of Congress who have urged the Labor Department to delay the fiduciary regulation, but said that the organization will appeal “directly to President Trump and Secretary Acosta to exercise their authority to stop any part of this Rule from going into effect before the DOL has completed its reexamination of the Rule as called for by the President’s own February 3rd memorandum.”

Last December, NAFA’s request for an injunction pending appeal was rejected by the U.S. Court of Appeals for the D.C. Circuit. That, in turn, was in response to an earlier request seeking a motion for a preliminary injunction to prevent the new rules from taking effect “until at least ten months (or as much as two years) following the final disposition of th[e] litigation,” and a motion seeking either an “expedited status conference” or “expedited relief” on NAFA’s renewed motion for a preliminary injunction. Judge Randolph Moss of the U.S. District Court for the District of Columbia had earlier denied motions for summary judgment as well as a preliminary injunction barring the fiduciary regulation from taking effect.

“We have a little more than a month to stop this runaway train. NAFA is pulling out all the stops to try to prevent any part of this rule going live on June 9th.”

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  1. url url'>Kerry Pechter
    Posted May 9, 2017 at 11:13 am | Permalink

    The $60 billion indexed annuity industry, first built by Bob McDonald at LifeUSA before he sold to Allianz Life, has traditionally relied for its distribution services on independent insurance agents who received manufacturer-paid commissions that are higher than on most other financial products. The DOL came to believe that agents were often steering prospects, including IRA clients with big lump-sum rollovers, toward these products precisely for the large commission. That’s why the DOL singled out FIAs (along with variable annuities) for removal from PTE 8424 and subjected them to the higher standard of the Best Interest Contract on IRA rollover sales. The DOL rule asserted that IRA rollover money should be as protected and highly-regulated as 401(k) money, because rollover money came from 401(k)s and remains tax-deferred (i.e., publicly subsidized). It’s clearly painful for insurance agents and IMOs to lose access to the huge rollover market. But from the DOL’s POV, they should never have had access to it in the first place: It’s just 401(k) money that happened to leak into the retail space. Bottom line: FIAs might be good or even excellent for some people, but the DOL didn’t care. The high potential for over-selling and inappropriate sales, encouraged by the heat commissions (whose cost to the client was hidden in the crediting rates), motivated the DOL to act as it did. You can call it over-reach, but at your own peril. If you win this battle, remove the fiduciary rule, and regain the right to treat rollover money like any other retail brokerage money, people will start asking if rollovers should remain tax-deferred. Budget hawks may even ask if the $100 billion-a-year tax expenditure for retirement savings still makes sense.

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