On Sept. 8, 2023, the U.S. Department of Labor (DOL) sent a proposal for a new fiduciary rule for investment advice professionals to the White House for its review. The DOL has been signaling its intention to promulgate new fiduciary rulemaking for several years as a priority in its regulatory initiatives. While we do not yet know the specifics of this new rule, we are concerned that the DOL is once again pursuing overreach that threatens to yield potentially harmful effects for industry professionals and consumers alike.

Moreover, two significant regulatory changes have been implemented since the DOL’s previous attempts to impose broader applicability of ERISA fiduciary obligations: The SEC’s Regulation Best Interest (Reg BI) standard for securities recommendations took effect in June 2020, and the NAIC’s revised best interest standard for annuity transactions was approved February 2020, having since been adopted by 40 states.

These heightened standards of conduct provide robust protections for retirement savers, while supporting their opportunity to choose from an array of products and advice that best suit their individual financial needs and objectives. Shoehorning all retirement and investment strategy under a fiduciary-only standard would only harm consumers, with such harm falling disproportionately on low- and middle-income Americans.

Next steps

Once the White House Office of Management and Budget (OMB) finishes its review of the proposed rule, we expect that the DOL will issue a Notice of Proposed Rulemaking (NPRM) in the Federal Register and will open the proposed rule for public comments. Because of the time constraints imposed under the Congressional Review Act for an agency rule to take effect, it is anticipated that the Department of Labor and the Biden Administration will try to finalize the rule no later than November 2024.

(Note: One of the factors confounding potential timing is the undetermined outcome of the FACC v. DOL lawsuit. It’s currently pending in the Fifth Circuit Court of Appeals where DOL’s Obama-era fiduciary rule was struck down.)

NAFA, in alliance with our joint trade partners, has been and will continue working with Congressional offices, the White House and the DOL to provide information and analysis on the benefits of the significant industry changes described above. Once the NPRM is issued, NAFA will analyze the rule’s potential impact, gather input and viewpoints from our diverse membership, and respond to the DOL individually and/or as part of efforts in alignment with our sister trade organizations. We will also work with our legislative contacts to determine how our feedback can be used to move any levers that may be available to us.

After the comment period concludes, if DOL chooses to finalize a version of the regulation we perceive as harmful to our stakeholders — including the millions of Americans who rely on the products and professional advice our members passionately provide — NAFA will use all means necessary, either in conjunction with the joint trades or independently, to litigate this matter once again.

We appreciate our members’ input and coalescence around NAFA’s ongoing advocacy and outreach initiatives to help protect independent financial professionals and the consumers they serve. Your voice, your viewpoints and your resources are invaluable in strengthening the work we do on behalf of the fixed annuity industry.