IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN ...

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

________________________________________________

)

CHAMBER OF COMMERCE OF THE

)

UNITED STATES OF AMERICA, et al.,

)

)

Plaintiffs,

)

)

Civil Action

v.

)

No. 3:16-cv-1476-M

)

THOMAS E. PEREZ, SECRETARY OF LABOR, and )

Consolidated with

UNITED STATES DEPARTMENT OF LABOR,

)

3:16-cv-1530-C

)

3:16-cv-1537-N

Defendants.

)

)

________________________________________________)

MEMORANDUM FOR AARP AND AARP FOUNDATION AS AMICI CURIAE URGING

SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS

Mary Ellen Signorille* *Pro Hac Vice Pending AARP Foundation Litigation 601 E Street, NW Washington, DC 20049 Telephone: 202.434.2060 Facsimile: 202.434.6424 msignorille@

Bernard A. Guerrini Texas Bar #:08581700 BERNARD A. GUERRINI, P.C. 6500 Greenville Avenue, Ste. 320 Dallas, Texas 75206 Telephone: 214.692.6556 Facsimile: 214.692.6578 guerrinipc@

Attorneys for Amici Curiae

TABLE OF CONTENTS PAGE

TABLE OF AUTHORITIES .......................................................................................................... ii INTEREST OF AMICI CURIAE....................................................................................................1 ARGUMENT ...................................................................................................................................3 BECAUSE SIGNIFICANT CHANGES IN THE RETIREMENT SYSTEM HAVE FORCED INDIVIDUALS TO MANAGE THEIR OWN RETIREMENT MONIES, RETIREMENT INVESTORS NEED GREATER PROTECTIONS FROM CONFLICTED INVESTMENT ADVICE..........................................................................3

A. Retirement Monies Should Receive a Higher Level Protection Than Other Types of Investments Because The Significant Tax Incentives That Congress Has Granted Reflect Their Importance to the Public Welfare ...............................................................................................3

B. Conflicted Investment Advice Works Against The Congressional And Individual Goals Of Retirement Security Because It Can Significantly Reduce Retirement Savings Due To Higher Fees, Higher-Risk Investments, And Excessive Transaction Costs..................................5

C. The Decision To Rollover Employer-Sponsored Plan Assets To An IRA Must Be Protected From The Negative Impact Of Conflicted Investment Advice Because It Is One Of The Most Significant Financial Transactions That Individuals Will Make................................................8

D. The Rule Is Consistent with And Responsive To Individuals' Belief That Investment Advisors, Brokers And Insurance Agents Are Already Required To Give Retirement Investors Advice In Their Best Interest ...........................................................................................................13

CONCLUSION..............................................................................................................................15 CERTIFICATE OF SERVICE ......................................................................................................16

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TABLE OF AUTHORITIES

CASES Cigna Corp. v. Amara,

563 U.S. 421 (2011)............................................................................................................ 1

Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014)........................................................................................................ 1

Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000)............................................................................................................ 1

LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008)............................................................................................................ 1

Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985)............................................................................................................ 5

Patterson v. Shumate, 504 U.S. 753 (1992)............................................................................................................ 5

Rousey v. Jacoway, 544 U.S. 320 (2005)............................................................................................................ 5

Tibble v. Edison Int'l, 135 S. Ct. 1823 (2015)........................................................................................................ 1

Varity Corp. v. Howe, 516 U.S. 489 (1996)............................................................................................................ 1

REGULATIONS

Definition of the Term ``Fiduciary''; Conflict of Interest Rule--Retirement Investment Advice, 81 Fed. Reg. 20,946 (Apr. 8, 2016).................................................... 2

26 C.F.R. ? 1.401(a)(9)-5................................................................................................................ 4 26 C.F.R. ? 1.401(a)(9)-6................................................................................................................ 4

40 Fed. Reg. 50,842 (Oct. 31, 1975)............................................................................................... 5

Internal Revenue Serv., Certain Cash or Deferred Arrangements Under Employee Plans, 46 Fed. Reg. 55,544 (Nov. 10, 1981). ..................................................................... 6

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STATUTES

Employee Retirement Income Security Act of 1974, ? 2(a), 29 U.S.C. ? 1001(a)................................................................................................. 4 ? 3(21), 29 U.S.C. ? 1002(21) ............................................................................................ 5 ? 202, 29 U.S.C. ? 1052...................................................................................................... 4 ? 203, 29 U.S.C. ? 1053...................................................................................................... 4 ? 204, 29 U.S.C. ? 1054...................................................................................................... 4 ? 205(b), 29 U.S.C. ? 1005(b). ........................................................................................... 4 ? 205(c), 29 U.S.C. ? 1005(c)............................................................................................. 4 ? 205(d), 29 U.S.C. ? 1005(d). ........................................................................................... 4 ? 206(d)(1), 29 U.S.C. ? 1056(d)(1) ................................................................................... 4 ? 404, 29 U.S.C. ?1104....................................................................................................... 5 ? 406, 29 U.S.C. ?1106....................................................................................................... 5

Internal Revenue Code (IRC), ? 401(a)(9) .......................................................................................................................... 4 ? 401(a)(13) ........................................................................................................................ 4 ? 402.................................................................................................................................... 3 ? 404.................................................................................................................................... 3 ? 408.................................................................................................................................... 6 ? 410.................................................................................................................................... 4 ? 411.................................................................................................................................... 4 ? 501(a) .............................................................................................................................. 3

Revenue Act of 1978, Pub. L. No. 95-600, ? 135(a) ................................................................................................................................6 ? 141(f)(3)............................................................................................................................6 ? 143(a) ................................................................................................................................6 ? 152(e) ................................................................................................................................6

LEGISLATIVE HISTORY

J. Comm. on Taxation, Estimates Of Federal Tax Expenditures For Fiscal Years 2014?2018 (JCX-97-14), Aug. 1, 2014, . html?func=startdown&id=4663.......................................................................................... 3

TREATISES

Jeffrey Lewis et al., EMPLOYEE BENEFITS LAW (3d ed. 2012)...................................................... 13

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OTHER AUTHORITIES

William Baldwin, Deferred Variable Annuities: Pros and Cons, FORBES (Sept. 8, 2014), ........................................................................... 12

Sudipto Banerjee, Income Composition, Income Trends, and Income Shortfalls of Older Households, EBRI ISSUE BRIEF NO. 383 (Feb. 2013), . pdf/briefspdf/ebri_ib_02-13.no383.incmeld.pdf ................................................. 8

Tara Siegel Bernard, As Cognition Slips Financial Skills Are Often the First to Go, NEW YORK TIMES (Apr. 24, 2015), .............. 10

S. Kathi Brown, AARP Research, Attitudes Toward the Importance of Unbiased Financial Advice (May 2016), economics/-2016/attitudes-toward-unbiased-financial-advice.html ................................. 13

S. Kathi Brown, AARP Research, Fiduciary Duty and Investment Advice: Attitudes of 401(k) and 403(b) Participants (Sept. 2013), . org/research/topics/economics/info-2014/fiduciary-duty-and-investmentadvice---attitudes-of-401-k--and-4.html ..................................................................... 13, 14

S. Kathi Brown, AARP Research, Fiduciary Duty and Investment Advice: Attitudes of Plan Sponsors (Mar. 2014), topics/economics/info -2014/fiduciary-duty-and-investment-advice--attitudes-of-plan-sponsor.html ..........................................................................................13

John Chalmers & Jonathan Reuter, Is Conflicted Investment Advice Better than No Advice? Nat'l Bureau of Econ. Research Working Paper 18,158 (June 2012), ............................................................. 7

Craig Copeland, Individual Retirement Account Balances, Contributions, and Rollovers, 2013; With Longitudinal Results 2010?2013: The EBRI IRA Database, EBRI ISSUE BRIEF NO. 414 (May 2015), pdf/briefspdf/EBRI_IB_414.May15 ............................................................................. 9, 10

Conrad de Aenlle, Annuities Not For Everyone, But They Have A Place, NEW YORK TIMES (Mar. 12, 2014), business/retirementspecial/annuities-not-for-everyone-but-they-have-aplace.html?_r=0 ................................................................................................................ 11

FINRA Inv'r Educ. Found., Financial Capability in the United States 2016 (July 2016), NFCS_2015 _Report_ Natl_Findings.pdf ............................................................................................. 10

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