Thrivent Financial Challenges DOL Fiduciary Rule, Joining Fray

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Sept. 29 — Thrivent Financial for Lutherans is accusing the Department of Labor of exceeding its statutory authority by attempting, with its new fiduciary rule, to force all disputes into federal court rather than allowing for alternative dispute resolution methods ( Thrivent Financial for Lutherans v. Perez , D. Minn., No. 0:16-cv-03289, complaint filed 9/29/16 ).

Thrivent’s lawsuit, filed Sept. 29 in the U.S. District Court for the District of Minnesota, takes aim at the rule’s “best interest contract” (BIC) exemption. The exemption allows financial advisers to use certain compensation arrangements that might otherwise be forbidden as long as they put their client’s best interest first. The BIC exemption would require Thrivent, a fraternal benefit society based in Minnesota, to cease conducting certain business or to “abandon its longstanding commitment” to resolving member disputes through alternative dispute resolution methods, the complaint said.

The new lawsuit is the sixth filed since June against the DOL over its fiduciary rule. The other lawsuits have been brought mainly by industry groups, including the U.S. Chamber of Commerce, the National Association of Fixed Annuities, the American Council of Life Insurers, the Indexed Annuity Leadership Council and Market Synergy Group Inc.

In this new challenge, Thrivent distanced itself from the other lawsuits by expressly saying that it wasn’t challenging the validity of the new rule. Instead, its challenge is directed only to the DOL’s adoption of the BIC exemption to the extent that it requires Thrivent to abandon its ADR methods.

Thrivent alleges that its long-standing practice of paying its sales representatives on a commission basis would be treated as a prohibited transaction under the Employee Retirement Income Security Act. To avoid any ERISA violations under the new rule, Thrivent would have to follow the BIC exemption, the complaint said.

However, under the exemption, Thrivent must agree that its customers can proceed against it for breach of contract and can participate in judicial class actions. This action would force Thrivent to abandon the dispute resolution procedures that support its members and “maintain its fraternal character,” the complaint said.

Thrivent alleges that there is no provision in ERISA that indicates Congress’s intent to create a class action remedy that must be exclusively pursued in courts. To the extent that Congress has addressed the issue, it has said in the Federal Arbitration Act that private arbitration agreements must be honored, Thrivent alleged. As a result, insofar as the DOL tried to adopt the BIC exemption, it exceeded its authority under the Administrative Procedure Act, the complaint said.

Greene Espel PLLP represents Thrivent.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Pension & Benefits Daily