As we previously noted, 2018 promises to be an eventful year at the state level for the regulation of the sale of life insurance and annuity products. Today, New York issued its much anticipated final regulation that imposes a “best interest” standard. The regulation requires insurers to, among other things, put in place policies and procedures to ensure that agents and brokers put the interests of consumers ahead of their own when making a recommendation regarding a life insurance product or annuity. The New York rule comes out before the National Association of Insurance Commissioners (NAIC) holds its August 4, 2018 meeting to address revisions to its existing annuity suitability rule, which could impact the laws of numerous states. Unlike New York’s new regulation, NAIC’s existing suitability regulation and proposed “best interest” regulation to be addressed at the August 4, 2018 meeting apply only to the sale of annuity products. Stay tuned for our forthcoming analysis of the New York regulation, its implications for the life insurance/annuity industry, and its potential impact on the discussions at the upcoming NAIC meeting.
DC plan fiduciaries evidently remain skeptical of ESG investment options within DC plans (public and private). There are myriad explanations for this gap between DC plans and other institutional investors, including, but not limited to, fiduciary duty concerns. In fact, Callan’s excellent ESG/DC plan surveys show fiduciary duty concerns are receding in the minds of fiduciaries. Nevertheless, adoption rates remain relatively low. Here is an update from Callan.
When the Fifth Circuit finally entered its mandate and judgment on June 21, 2018 “vacat[ing] the Fiduciary Rule in toto”, the DOL’s fiduciary rule, as a matter of law, officially became a dead letter. But on remand, the United States District Court for the Northern District of Texas created a narrow opening through which, in theory, the parties who unsuccessfully sought to intervene in the Fifth Circuit could make yet another attempt to save the fiduciary rule. Specifically, the district court issued an Order on June 28, 2018 requiring any party seeking “further relief” to notify the court by July 12, 2018. The court further stated that “[i]f no notice is received, the case will be dismissed with prejudice and without further notice.” The District Court did not specify any “further relief” that it believes could be sought, but the court may want to determine whether the unsuccessful attempted intervenors in the Fifth Circuit will file a petition for a writ of certiorari with the United States Supreme Court. The deadline for the attempted intervenors to do so is July 31, 2018.
The odds that the Supreme Court would grant certiorari to the attempted intervenors are extremely long because, among other reasons, the petitions to intervene were not well founded, as the Fifth Circuit recognized. Nevertheless, the parties, including the DOL, in Thrivent Financial for Lutherans v. R. Alexander Acosta, et al., U.S.D.C. Minn., Civ. A. No. 16-cv-03289, have asked the United States District Court for the District of Minnesota to continue a previously entered stay in that litigation pending the July 12 deadline set by the United States District Court for the Northern District of Texas. While it is highly unlikely that a petition for certiorari by the attempted intervenors will succeed, they may nonetheless seek further review as noted by the parties in Thrivent Financial. It is important, however, to keep in mind that the fiduciary rule should still be deemed vacated, even if a petition for certiorari is filed, because the Fifth Circuit’s mandate remains effective absent a stay, which seems extremely unlikely at this point. We will have a further update on June 12 regarding whether the attempted intervenors respond to the North District of Texas’ Order.