Art by Kyle Stecker
DOL Fiduciary Rule Posts Key Court Victory
The U.S. District Court for the District of Columbia has
rejected a lawsuit filed by the National Association for Fixed Annuities (NAFA)
that had asked the court for “declaratory, injunctive and other appropriate
relief” that would have halted the implementation of the Department of Labor
(DOL)’s new fiduciary rule.
The suit sought relief under the Regulatory Flexibility Act
(RFA), suggesting that the DOL conflict of interest rule, with its sweeping
advice reforms, moves far too quickly to install overly broad restrictions to
currently accepted business practices. “Specifically, in promulgating the Rule
and the Exemptions, the Department exceeded the authority granted to it by
Congress under ERISA, the [Internal Revenue] Code [IRC], and Reorganization
Plan No. 4 of 1978,” the suit contended. “In addition, the Rule and the
Exemptions are arbitrary and capricious, not in accordance with law,
impermissibly vague, and otherwise promulgated in violation of federal law.”
A variety of arguments were leveled in the NAFA complaint
along these lines, but clearly they did not prevail, given that the D.C.
District Court has flatly opposed NAFA’s dual requests for preliminary
injunction and summary judgment. Instead, the court actually granted the DOL’s
cross-motion for summary judgment, which argued, naturally, that all tenets of
the rulemaking fit squarely within the DOL’s existing authority.
Third Wells Fargo ERISA Stock Drop Complaint Filed
Another participant is suing Wells Fargo and its executives
after losing money on company stock following revelations involving unethical
sales practices within the organization’s consumer/retail banking divisions.
Like the previous complaints, this one seeks class action
status under the Employee Retirement Income Security Act (ERISA) and alleges
that the Wells Fargo executives who oversee the company’s retirement plan—and
its offering of Wells Fargo stock to employees as an investment option—knew
about the sales practice failures well in advance of the public disclosures.
Thus, according to the reasoning in the complaint, they should have dropped the
company stock as an imprudent investment option—knowing the illegal sales
practices would eventually and necessarily be disclosed and thereby correct the
inflated stock price.
The text of the complaint lays out by-now familiar
allegations that the aggressive sales requirements the company placed on
low-level banking professionals directly inspired the opening of millions of
unauthorized customer accounts.
DOL Publishes Detailed Fiduciary Rule FAQ
The Department of Labor (DOL) published an in-depth FAQ
document based on the input received from the financial services industry and
others in response to the April finalization of the new, stricter fiduciary
standard to be applied starting next year under the Employee Retirement Income
Security Act (ERISA).
“These questions are an important part of the regulatory
process, as they allow the department to clarify important parts of the rule,”
explains Phyllis Borzi, assistant secretary for the Employee Benefits Security
Administration (EBSA) of the DOL, “and to head off misunderstandings that could
lead to bad results for retirement savers or financial services professionals.”
Borzi adds that, in the coming months, the DOL will publish
additional FAQ to lend clarity to the new rule. The first document answers
general questions such as “How will the Labor Department approach
implementation of the new rule and exemptions during the period when financial
institutions and advisers are coming into compliance?” as well as much more
exacting questions about specific circumstances advisory firms will likely
IRS Announces 2017 Plan Limitations
The Internal Revenue Service (IRS) announced cost-of-living
adjustments affecting dollar limitations for pension plans and other
retirement-related items for tax year 2017, in Notice 2016-62.
The contribution limit for employees who participate in
401(k), 403(b), most 457 plans or the federal government’s Thrift Savings Plan
remains unchanged at $18,000. In addition, the catch-up contribution limit for
employees ages 50 and older who participate in any of those plans remains
unchanged at $6,000.