DOL Fiduciary Rule – Conjunction “Injunction,” What’s Your Function? 

The U.S. District Court for Northern Texas recently granted a stay on the effective date of the Department of Labor's new fiduciary rule, marking a significant victory in the lawsuit brought by Finseca and our partners. Armstrong Robinson, our Chief Advocacy Officer, and Brad Campbell, counsel with Faegre Drinker Biddle & Reath LLP – discussed the injunctive relief and implications for Finseca members and their clients. 

Brief History – How We Got Here 

In April of this year, the DOL issued its new fiduciary rule, the Retirement Security Rule, which was scheduled to take effect on September 23, 2024. This new fiduciary rule was introduced despite the U.S. Court of Appeals vacating a similar rule published by the DOL in 2016. The updated rule disregards existing state and federal guardrails overlooks the critical distinctions between securities and annuities and imposes burdensome regulations that could restrict financial security professions and limit access to products essential for Americans' financial and retirement security. 

In response, Finseca, along with our partners ACLI, IRI, NAFA, and NAIFA, filed a lawsuit against the DOL to overturn the regulation, which makes every financial security professional a fiduciary and limits access for their clients. The lawsuit included a request for a preliminary injunction to stay or block the rule from taking effect until litigation was completed. 

Note that another trade association filed a separate lawsuit against the DOL in a different Texas court, within the jurisdiction of the 5th Circuit Court of Appeals. The lawsuit sought injunctive relief but with a narrower scope. 

Both Texas judges granted the preliminary injunction requests, halting the DOL's implementation of the new fiduciary rule. 

Breakdown of Injunction 

Federal Judge Reed C. O'Connor's decision also highlights some positive news for the litigation process. The court had to meet a high standard to grant the stay. 

1. Merit: Finseca and our partners had to demonstrate a substantial likelihood of success on the case's merits. Judge O'Connor indicated a high likelihood of success because he viewed the new fiduciary rule as almost identical to the one vacated by the 5th Circuit Court of Appeals in 2018. This assessment bodes well for the litigation, especially since Judge O'Connor granted the stay and will preside over and rule on the case rather than a jury.
2. Irreparable Harm: The requirement that immediate and irreparable injury, loss, or damage will result. The judge pointed out that the DOL also concluded that the new rule cost would be almost half a billion dollars in the first year and $2.5 billion afterward. The DOL did not provide substantive evidence of cost analysis and will seek to focus its arguments exclusively on the merits.
3. Hardship: Balancing the harm if the injunction is granted or denied. Judge O'Connor indicated that allowing an agency to proceed with an unlawful regulation is not in the public's interest. Since it took eight years to create a new rule, maintaining the status quo is unlikely to cause public disservice. 

Injunction: What's your Function? 

As a result of the stay order, the DOL's fiduciary rules are now on hold until the litigation and any appeals are completed. The September 23 effective date is no longer applicable. 

With the new fiduciary rule on hold, the five-part test from the 1975 regulation is now applicable in determining fiduciary status. In 2020, the DOL expanded its interpretation of the rule, but a Florida court subsequently parsed it back a bit. Another ongoing litigation in Texas seeks to challenge the entirety of DOL's 2020 expansion of the five-part test, a pending decision. 

Please feel free to share feedback or questions with Alex Kim, VP of Public Policy.

What is Presidential Candidate Harris’s History on Tax? 

As President Biden steps down, all eyes are on Vice President Harris as she takes center stage. With $200 million raised in less than 48 hours, 66% from first-time donors, and renewed energy from the party, the question being asked is: Where does she stand on Finseca's priorities? While we still have much to learn, we can glean information from previous articles:

• Tax History: What Would Harris Do? The Vice President’s Progressive Tax Plans
• A Harris Economy Could Prove More Progressive Than ‘Bidenomics’ - The New York Times (nytimes.com)
• How Kamala Harris’ platform could differ from Joe Biden’s (politico.com)
• POLITICO Pro | Article | Harris' tax platform would likely target the rich 

Nebraska Special Session—Sales Tax on Investment Advice 

In a Kentucky-like flashback, Governor Pillen in Nebraska has called the legislature into a special session to address property taxes. One proposed solution, LB 1, aims to reduce property taxes on 110 new items, including:

The gross income received for providing investment advice.

This expansion of sales tax to the work done by financial advisors with their clients could significantly impact and affect the financial planning process, which includes retirement, life insurance, and investments. The lack of a clear definition of "investment advice" means this legislation could have broader implications than anticipated.

In response, Finseca has initiated a grassroots campaign in Nebraska and is collaborating with joint trade partners and the Nebraska Insurance Federation to oppose this proposal. Please share our campaign with any contacts you have in Nebraska.

Questions? Contact Melissa Bova, SVP of State Affairs & Policy. 

California SB 263 Training…Slowly..Becomes Available 

Some of the training requirements that were part of CA SB 263 are starting to be available to producers. Resident and non-resident agents can begin compliance with two of the three training provisions in the legislation. Approved providers can be found here. Search for the training in Category Type.  

• A 4-hour Life Insurance Training course is required by all resident and nonresident life agents licensed after January 1, 2024. This training must be completed by January 1, 2025. Three providers are currently offering this training.
• 2 Hour Variable Life Training required by all resident and nonresident life agents and must be completed before license renewal, beginning January 1, 2025. One provider is currently offering this training.  

The 2025 Annuity 8-Hour Training, the remaining required training, is not available yet, but it will be soon. All resident and nonresident life agents currently licensed must complete this training by July 1, 2025. For any NEW license application for a resident or nonresident agent who intends to offer annuities and applies AFTER January 1, 2025, the training must be completed before submitting the application.

Tax Teams: Prepping for 2025 Tax Reform 

Education Needed: 

Recognizing the massive amount of turnover in Congress – and specifically the Ways + Means committee,  Chairman Jason Smith (R-MO) and Tax Subcommittee Chairman Mike Kelly (R-PA) announced the formation of ten Committee Tax Teams, comprised of Ways and Means Republican members, to study key tax provisions from TCJA that are set to expire in 2025 and “identify legislative solutions that will continue to help families, workers, and small businesses struggling.” 

Engaging in the Process: 

Congressman Brian Fitzpatrick (R-PA) invited Finseca to participate in a field hearing for the Working Families Tax Team. The Working Families Tax Team's mission is to develop legislative solutions that will protect and support working families and ensure a strong American workforce. Tim Maguire, a Finseca board member of Karr Barth, represented the financial security profession among two dozen other participants. Tim emphasized the importance of financial security for everyone, advocating for a predictable tax code and affordable products to help Americans save for retirement and protect their families and businesses.

What’s Next: 

The financial security profession has priorities that span across multiple tax teams. The Finseca team will actively seek out more opportunities to ensure that the message of Finseca is being heard. This fall, we will take part in a hearing hosted by Rep. Lloyd Smucker (R-PA), who chairs the Main Street Tax team and is focused on the 199A small business deduction.

Finseca will engage with both Democrats and Republicans to enhance education and understanding of the profession’s priorities through tax reform.

If you have questions or want to be involved, contact Jen Fox, Vice President of Federal Affairs.  

Past & Upcoming Webinars 

Did you miss last week’s Politics & Policy, Supreme Court Decisions—Connelly & Moore & All The Fun?  You can watch it here. 

Did you miss the link to our DOL Recap? Here you go! 

While our monthly Politics & Policy webinar will be on vacation during August, stay tuned for our Road to Tax & Election Coverage series, which will begin in September! 

The Finseca Policy is a bi-weekly eNewsletter that provides essential regulatory and policy updates, straight from the experts in Washington, D.C. and across the country.

Member content, like the Finseca Policy, is meaningfully subsidized by membership dues and therefore exclusively reserved for Finseca members as a valuable member benefit. We do not endorse or encourage members to share outside the Finseca membership.

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