Court Opinion

ID: 4254086
Source: CourtListenerOpinion
Date Created: 2018-03-13 19:00:41.125775+00
Date Added: 2024-06-11T14:44:28.460329
License: Public Domain

FILED
                                                                     United States Court of Appeals
                                      PUBLISH                                Tenth Circuit

                       UNITED STATES COURT OF APPEALS                      March 13, 2018

                                                                         Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                           Clerk of Court
                         _________________________________

MARKET SYNERGY GROUP, INC.,

      Plaintiff - Appellant,

v.                                                         No. 17-3038

UNITED STATES DEPARTMENT OF
LABOR; R. ALEXANDER ACOSTA, in
his official capacity as Secretary of the
United States Department of Labor;
PHYLLIS C. BORZI, in her official
capacity as Assistant Secretary of the
United States Department of Labor,

       Defendants - Appellees.
---------------
AARP; AARP FOUNDATION;
AMERICANS FOR FINANCIAL
REFORM; BETTER MARKETS;
CONSUMER FEDERATION OF
AMERICA; NATIONAL EMPLOYMENT
LAW PROJECT; PUBLIC INVESTORS
ARBITRATION BAR ASSOCIATION,

      Amici Curiae.
                         _________________________________

                      Appeal from the United States District Court
                               for the District of Kansas
                         (D.C. No. 5:16-CV-04083-DDC-KGS)
                        _________________________________

James F. Jorden (Brian P. Perryman of Carlton Fields Jorden Burt, P.A., Washington,
D.C.; Michael A. Valerio of Carlton Fields Jorden Burt, P.A., Hartford, Connecticut; J.
Michael Vaughan of Walters Bender Strohbehn & Vaughan, P.C., Kansas City, Missouri,
with him on the briefs), for Plaintiff - Appellant.
Michael Shih (Michael S. Raab and Thais-Lyn Trayer, Civil Division, U.S. Department
of Justice; Hashim M. Mooppan, Deputy Assistant Attorney General, Tom Beall, United
States Attorney; Of Counsel: Nicholas C. Geale, Acting Solicitor of Labor, G. William
Scott, Associate Solicitor, Edward D. Sieger, Senior Attorney, Thomas Tso, Counsel for
Appellate Litigation, and Megan Hansen, Attorney for Regulations, U.S. Department of
Labor, Office of the Solicitor, with him on the brief), Washington, D.C., for Defendants -
Appellees.

Mary Ellen Signorille and William Alvarado Rivera of AARP Foundation Litigation,
Washington, D.C. for Amici Curiae.
                        _________________________________

Before LUCERO, KELLY, and MATHESON, Circuit Judges.
                  _________________________________

KELLY, Circuit Judge.
                        _________________________________

      Plaintiff-Appellant Market Synergy Group appeals from the district court’s

judgment in favor of Defendant-Appellee United States Department of Labor. Having

jurisdiction under 28 U.S.C. § 1291, we affirm.

                                      Background

      This case stems from the Department of Labor’s (DOL) final regulatory action on

April 8, 2016, as it applies to fixed indexed annuity (FIA) sales. See Amendment to and

Partial Revocation of Prohibited Transaction Exemption (PTE) 84-24 for Certain

Transactions Involving Insurance Agents and Brokers, Pension Consultants, Insurance

Companies, and Investment Company Principal Underwriters (Final PTE 84-24), 81 Fed.

Reg. 21,147 (Apr. 8, 2016) (to be codified at 29 C.F.R. pt. 2550).1 Plaintiff-Appellant

      1
        While enforcement of the regulation has been postponed until July 1, 2019,
see 82 Fed. Reg. 56,545 (Nov. 29, 2017), the DOL maintains that the rule’s
                                            2
Market Synergy Group (MSG) is a licensed insurance agency that works with insurers to

develop specialized, proprietary FIAs and other insurance products for exclusive

distribution. It partners with independent marketing organizations2 (IMOs) to distribute

these products. MSG does not directly sell FIAs but conducts market research and

provides training and products for IMO member networks and the independent insurance

agents that IMOs recruit. Market Synergy and its 11 IMO network members had $15

billion in FIA sales in 2015 and substantially all of Market Synergy’s revenues involve

developing, marketing, and distributing FIAs. Aplt. Br. at 7–8.

       Annuities are investments, often for retirement, sold by financial institutions

including life insurers. An annuity involves a promise to pay amounts on a regular basis

for a set period of time. Deferred annuities have a deferral or accumulation phase where

the contract accumulates value through premiums paid and interest credited. The payout

phase occurs when the contract holder receives a set stream of payments, for example,

upon attaining a certain age. What that interest will be during the deferred phase

generally separates the three types of annuities at issue in this case — fixed rate (or fixed

declared rate), fixed indexed, and variable.3

       In a fixed rate annuity, the insurer guarantees a return of principal and minimum

crediting rate during the deferral or accumulation phase. When the annuity reaches the

substantive provisions will remain unchanged, see Aplee. Supp. Authority (filed Nov.
30, 2017).
       2
         An IMO is essentially an intermediary between insurers and independent
agents. Insurers generally pay IMOs a commission based on the amount of sales
generated by independent agents. IMOs in turn often pay a predetermined percentage
to the independent agent.
       3
         As we will see later, the difference is not so simple.
                                                3
payout phase, minimum payments are based upon rates guaranteed at issuance. In

contrast, a variable annuity’s return is not guaranteed but rather based upon the returns or

losses of the underlying assets in which the funds are invested. Variable annuities are

securities.

       A fixed indexed annuity falls somewhere in-between a fixed rate and variable

annuity. Like a fixed rate annuity, principal and prior credited interest are protected from

market downturns. Like a variable annuity, however, the amount of interest actually

credited varies based on a market index the FIA is tied to, such as the S&P 500 index.

Unlike a variable annuity though, FIAs are not actually invested in the market; rather, the

market index’s performance is used simply as a reference to determine the amount of

interest credited. The crediting rate for an FIA is never less than zero. FIAs, like fixed

rate annuities, generally are governed by state insurance law and are exempt from federal

securities law.

       When an investor speaks with an insurance agent about buying an annuity, that

insurance agent will often give advice and receive a commission for selling the annuity.

This conduct is governed under Title II of the Employee Retirement Income Security Act

(ERISA) and the Internal Revenue Code, which broadly defines a fiduciary as someone

who “renders investment advice for a fee.”4 26 U.S.C. § 4975(e)(3)(B). These insurance

agents selling annuities would generally be classified as fiduciaries and therefore be

       4
         The DOL established a five-part test in 1975 defining when a person “renders
investment advice,” but modified that definition as part of the current regulation at
issue in this case. See Definition of the Term “Fiduciary”; Conflict of Interest Rule
— Retirement Investment Advice, 81 Fed. Reg. 20,946 (Apr. 8, 2016) (to be codified
at 29 C.F.R. pts. 2509, 2510, 2550).
                                             4
barred from receiving commissions; however, they are exempt from that prohibition

under a Department of Labor rule — Prohibited Transaction Exemption (PTE) 84-24.5

       In April 2015, the DOL issued a proposed rule redefining who is a “fiduciary” of

an employee benefit plan under ERISA and the Internal Revenue Code, which would

“update existing rules to distinguish more appropriately between the sorts of advice

relationships that should be treated as fiduciary in nature and those that should not.”

Proposed Amendment to and Proposed Partial Revocation of Prohibited Transaction

Exemption (PTE) 84-24 for Certain Transactions Involving Insurance Agents and

Brokers, Pension Consultants, Insurance Companies and Investment Company Principal

Underwriters (Proposed PTE 84-24), 80 Fed. Reg. 22,010, 22,011 (Apr. 20, 2015) (to be

codified at 29 C.F.R. pt. 2550). The final rule contained two changes important to this

case.6 First, it created a new exemption, with added regulatory requirements, entitled the

Best Interest Contract Exemption (BICE). Much like PTE 84-24, the BICE “would allow

certain investment advice fiduciaries . . . to receive . . . compensation.” Proposed Best

Interest Contract Exemption (Proposed BICE), 80 Fed. Reg. 21,960, 21,961 (Apr. 20,

2015) (to be codified at 29 C.F.R pt. 2550). The BICE, however, also imposes a more

stringent set of requirements on prohibited transactions than those required under PTE

       5
         The DOL has the statutory authority to craft this exemption in accordance
with 26 U.S.C. § 4975(c)(2) and Reorganization Plan No. 4 of 1978 (5 U.S.C. app.
243, 244 (2016)). To grant an exemption, the DOL need only find that the exemption
is “(1) administratively feasible, (2) in the interests of the plan and of its participants
and beneficiaries, and (3) protective of the rights of participants and beneficiaries of
the plan.” 26 U.S.C. § 4975(c)(2).
       6
         MSG does not challenge the DOL’s authority to issue the rule nor does it
challenge the DOL’s new definition of “fiduciary.” Aplt. Br. at 2–3.
                                             5
84-24. See Final Best Interest Contract Exemption (Final BICE), 81 Fed. Reg. 21,002,

21,007 (Apr. 8, 2016) (to be codified at 29 C.F.R. pt. 2550).

       Second, the DOL removed FIAs (as well as variable annuities) from the PTE 84-

24 exemption and placed them in the newly created BICE. Final PTE 84-24, 81 Fed.

Reg. at 21,152–53. Fixed rate annuities, however, were kept within the PTE 84-24

exemption. The DOL’s stated reason for this change was because FIAs (1) require the

customer to shoulder significant investment risk, (2) “do not offer the same predictability

of payments as Fixed Rate Annuity Contracts,” (3) are “often quite complex,” and (4) are

“subject to significant conflicts of interest at the point of sale.” Final PTE 84-24, 81 Fed.

Reg. at 21,152–53. Those engaged in selling FIAs would now have to satisfy the

conditions set forth in the BICE to be granted an exemption.

       MSG then filed this suit under the Administrative Procedure Act (APA) and the

Regulatory Flexibility Act (RFA). Only the APA claim is at issue on appeal. MSG

claimed that the DOL violated the APA in three ways: (1) it failed to provide adequate

notice of its intention to exclude transactions involving FIAs from PTE 84-24, (2) it

arbitrarily treated FIAs differently from other fixed annuities by excluding FIAs from

PTE 84-24, and (3) it did not adequately consider the detrimental economic impact of its

exclusion of FIAs from PTE 84-24. MSG alleged that it would lose 80% of its revenue if

the new regulation were to be enforced and sought a preliminary injunction to prevent the

DOL from implementing the new regulation. The district court denied the preliminary

injunction. On cross-motions for summary judgment, the district court ruled in favor of

the DOL, finding that there was adequate notice, no arbitrary treatment of FIAs as

                                              6
compared to other fixed annuities, and an adequate economic impact analysis. MSG filed

this timely appeal.

                                         Discussion

       The district court’s grant of summary judgment is reviewed de novo. Cerveny v.

Aventis, Inc., 855 F.3d 1091, 1095 (10th Cir. 2017). The APA grants federal courts the

authority to review agency action, 5 U.S.C. § 702, and requires a court to set aside

agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law,” id. § 706(2)(A).

A.     The DOL Provided Sufficient Notice

       MSG first argues that the DOL did not provide sufficient notice of the possible

final rule in its Notice of Proposed Rule Making (NPRM). Agencies must provide

“either the terms or substance of the proposed rule or a description of the subjects and

issues involved,” id. § 553(b)(3), which, in turn, “give[s] interested persons an

opportunity to participate in the rule making through submission of” written comments,

id. § 553(c).

       While the agency must give notice of the rule it proposes to implement, “[i]t is a

well settled and sound rule which permits administrative agencies to make changes in the

proposed rule after the comment period without a new round of hearings.” Beirne v.

Sec’y of Dep’t of Agric., 645 F.2d 862, 865 (10th Cir. 1981). The final rule must,

however, be a “logical outgrowth” of the proposed rule. “A final rule qualifies as

a logical outgrowth ‘if interested parties “should have anticipated” that the change was

                                              7
possible, and thus reasonably should have filed their comments on the subject during the

notice-and-comment period.’” CSX Transp., Inc. v. Surface Transp. Bd., 584 F.3d 1076,

1079–80 (D.C. Cir. 2009) (quoting Ne. Md. Waste Disposal Auth. v. EPA, 358 F.3d 936,

952 (D.C. Cir. 2004)).

       In the DOL’s NPRM to amend and partially revoke PTE 84-24, the agency stated

what it was considering: (1) removing “variable annuity contracts and other annuity

contracts that are securities under federal securities laws” from the PTE 84-24 exemption

and moving them to the new BICE exemption and (2) keeping fixed rate and FIA

transactions “under [PTE 84-24], with the added protections of the Impartial Conduct

Standards.” Proposed PTE 84-24, 80 Fed. Reg. at 22,012, 22,015. The distinction was

proper because “annuity contracts that are securities [(variable annuities)] . . . are

distributed through the same channels as many other investments covered by the [BICE],

and . . . the conditions of the proposed [BICE] are appropriately tailored for such

transactions.” Id. at 22,015.

       The DOL, however, requested comment on the above approach: “In particular,

the [DOL] requests comment on whether the proposal to revoke relief for securities

transactions involving IRAs (i.e., annuities that are securities and mutual funds) but leave

in place relief for IRA transactions involving insurance and annuity contracts that are not

securities [(fixed rate annuities and FIAs)] strikes the appropriate balance and is

protective of the interests of the IRAs.” Id. (emphasis added).

                                               8
       MSG acknowledges, as it must, that the DOL asked for comment, but argues it

was unclear on what specific topic comment was sought.7 Aplt. Br. at 28. According to

MSG, the DOL simply did not give notice that it might exclude FIAs from PTE 84-24

and therefore did not give adequate notice of the final rule. We are unpersuaded. The

NPRM clearly asks for comment on whether removing variable annuities from PTE 84-

24 but leaving FIAs and fixed rate annuities struck the appropriate balance. This

provides a “description of the subjects and issues involved,” 5 U.S.C. § 553(b)(3), and

“give[s] interested persons an opportunity to participate in the rule making through

submission of” written comments, id. § 553(c).8 MSG could have commented that they

thought the DOL had struck the appropriate balance by keeping FIAs within PTE 84-24,

but failed to do so.

       MSG also argues that the final rule was not a logical outgrowth of the proposed

rule because interested parties could not have anticipated that the change was possible.

See CSX Transp., Inc., 584 F.3d at 1079–80. Specifically, MSG reminds us that the

DOL apparently intended to allow FIAs in amended PTE 84-24. But the DOL did not

determine anything — it raised the issue and invited comment. Indeed, the “whole

       7
         MSG also argues that the DOL failed to identify the standards by which they
would distinguish FIAs from other fixed annuities. Aplt. Br. at 30. The question for
this court, however, is not whether the agency provided every detail of how it would
approach regulating fixed annuities versus variable annuities, but rather whether the
final rule was a logical outgrowth of the proposed rule.
       8
         Two other district courts have also held there was sufficient notice
concerning this regulation. See Chamber of Commerce of the U.S. v. Hugler, 231 F.
Supp. 3d 152, 185 (N.D. Tex. 2017), appeal docketed, No. 17-10238 (5th Cir. argued
July 31, 2017); Nat’l Ass’n for Fixed Annuities v. Perez, 217 F. Supp. 3d 1, 48
(D.D.C. 2016), appeal docketed, No. 16-5345 (D.C. Cir. Nov. 28, 2016).
                                             9
rationale of notice and comment rests on the expectation that the final rules will be

somewhat different — and improved — from the rules originally proposed by the

agency.” Am. Fed’n of Labor & Cong. of Indus. Orgs. v. Donovan, 757 F.2d 330, 338

(D.C. Cir. 1985). And while MSG may not have anticipated the final rule, other

commenters read the NPRM as asking for comment on whether to keep FIAs and fixed

rate annuities within PTE 84-24. Some commentators (including one of the IMOs in

MSG’s own network) suggested that FIAs be kept within PTE 84-24 while others

advocated for their removal. Compare 7 Aplt. App. 1647 (Cmt. of Indexed Annuity

Leadership Council), 1598–99 (Cmt. of Allianz Life Insurance Co. of North America),

1710–12 (Cmt. of Advisors Excel), with id. at 1674 (Cmt. of Fund Democracy); Aplee.

Supp. App. 20 (Cmt. of Investor Rights Clinic), 79 (Cmt. of Prof. Ron Rhoades). While

comments in and of themselves do not resolve the notice issue, they do suggest that

various parties anticipated that the final rule might include an option to remove FIAs

from PTE 84-24. We conclude that the NPRM gave sufficient notice and that the final

rule was a logical outgrowth of the proposed rule.

B.     The DOL Did Not Arbitrarily Treat FIAs Differently from Fixed Annuities

       MSG next argues that the DOL’s action of retaining the PTE 84-24 exemption for

fixed rate annuities, but moving FIAs to the BICE, was arbitrary and capricious for two

reasons. First, it argues that FIAs are virtually indistinguishable from fixed rate

annuities; therefore, separating them into different exemptions was arbitrary. Aplt. Br. at

39–41. Second, MSG argues that the DOL did not adequately take into account state

regulation already in place. Id. at 45.

                                             10
       An agency’s actions are arbitrary and capricious if it “entirely failed to consider an

important aspect of the problem [or] offered an explanation for its decision that runs

counter to the evidence before the agency.” Motor Vehicle Mfrs. Ass’n of the U.S., Inc.

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Under this framework, a court

will set aside the agency’s “factual determinations only if they are unsupported by

substantial evidence.” Forest Guardians v. U.S. Fish & Wildlife Serv., 611 F.3d 692, 704

(10th Cir. 2010). A court applying the arbitrary-and-capricious standard of review must

“ascertain whether the agency examined the relevant data and articulated a rational

connection between the facts found and the decision made.” Kobach v. U.S. Election

Assistance Comm’n, 772 F.3d 1183, 1196 (10th Cir. 2014) (quoting Aviva Life &

Annuity Co. v. FDIC, 654 F.3d 1129, 1131 (10th Cir. 2011)). The scope of review

“under this standard is ‘narrow’” and “a court is not to substitute its judgment for that of

the agency.” Judulang v. Holder, 565 U.S. 42, 52–53 (2011) (quoting Motor Vehicle

Mfrs., 463 U.S. at 43). The administrative record shows the DOL met this standard.

       1. Fixed Rate Annuities Are Not Identical to FIAs

       MSG argues that FIAs and fixed rate annuities are identical except for the amount

of interest accrued and therefore the DOL’s determination to separate them out into two

different exemptions was arbitrary. The DOL received some comments to this effect

(that FIAs are no different than fixed rate), but it also received comments stating that

FIAs are more akin to variable annuities. See Final PTE 84-24, 81 Fed. Reg. at 21,156–

57. After reviewing all of the comments, it acknowledged that “[f]ixed-indexed annuities

fall between fixed-rate annuities and variable annuities in terms of the extent to which

                                             11
insurers bear investment risks.” 3 Aplt. App. 821. However, it ultimately determined,

based on the record before it, that “the complexity, risk, and conflicts of interest

associated with recommendations of . . . indexed annuity contracts” demonstrated that

they were more akin to variable annuities and should therefore be treated as such.9 Final

PTE 84-24, 81 Fed. Reg. at 21,157–58. In making this determination, the DOL relied not

only on industry comments but also on publications from the Financial Industry

Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC). See id.

at 21,153–54.

       a. Complexity

       Concerning complexity, MSG argues that FIAs are no different than fixed rate

annuities except for the “method of calculating interest credited to the annuity.” Aplt. Br.

at 41. But the DOL disagreed — it explained that for an investor to “assess[] the

prudence of a particular indexed annuity,” he or she must have an understanding of

       surrender terms and charges; interest rate caps; the particular market index
       or indexes to which the annuity is linked; the scope of any downside risk;
       associated administrative and other charges; the insurer’s authority to revise
       terms and charges over the life of the investment; and the specific
       methodology used to compute the index-linked interest rate and any
       optional benefits that may be offered, such as living benefits and death
       benefits.

       9
        The D.C. Circuit’s holding in American Equity Investment Life Insurance
Co. v. SEC, 613 F.3d 166 (D.C. Cir. 2010), further supports this distinction. There,
the SEC had proposed regulations to exclude FIAs from the definition of “annuity
contract” because of their similarity to securities. 613 F.3d at 174. The D.C. Circuit
found that this interpretation was reasonable, which supports the conclusion that the
DOL’s interpretation is also reasonable. Id.
                                             12
Final PTE 84-24, 81 Fed. Reg. at 21,154. The DOL also observed that, “[i]n operation,

the index-linked interest rate can be affected by participation rates; spread, margin or

asset fees; interest rate caps; the particular method for determining the change in the

relevant index over the annuity’s period (annual, high water mark, or point-to-point); and

the method for calculating interest earned during the annuity’s term (e.g., simple or

compounded interest).” Id. The DOL amply supported its view that FIAs are more

complex than fixed rate annuities.

       b. Risk

       Concerning risk, the DOL found that there was significant risk compared to fixed

rate annuities: “Similar to variable annuities, the returns of fixed-indexed annuities can

vary widely, which results in a risk to investors. Furthermore, insurers generally reserve

rights to change participation rates, interest caps, and fees, which can limit the investor’s

exposure to the upside of the market and effectively transfer investment risks from

insurers to investors.” 3 Aplt. App. 821.

       In MSG’s view, FIAs are no more risky than fixed rate annuities because there is

no possibility of a loss of principal. Aplt. Br. at 42. MSG’s view is one shared by some

commenters, see Final PTE 84-24, 81 Fed. Reg. at 21,157; however, it does not make the

DOL’s view arbitrary or capricious. According to the DOL, as supported by the record,

because an FIA is a complex product where returns can be affected by a number of

variables as discussed above, an FIA is a riskier investment than a fixed rate annuity,

especially for retirees who depend on this income. 3 Aplt. App. 821, 982.

                                             13
       c. Conflicts of Interest

       The DOL also determined that sales of FIAs involve more conflicts of interest

than sales of other types of fixed annuity products. It explained that “the increasing

complexity and conflicted payment structures associated with these [indexed] annuity

products have heightened the conflicts of interest experienced by investment advice

providers that recommend them.” Final PTE 84-24, 81 Fed. Reg. at 21,154. In other

words, because indexed annuities are more complex than fixed rate annuities, “retirement

investors are acutely dependent on sound advice that is untainted by the conflicts of

interest posed by advisers’ incentives to secure the annuity purchase, which can be quite

substantial.” Id.

       The DOL considered both sides of this issue and ultimately decided to treat FIAs

differently than fixed rate annuities because of their risk, complexity, and conflicts of

interests. It did so with evidentiary support in the record. It is not this court’s role to

“displace the [agency’s] choice between two fairly conflicting views.” See Forest

Guardians, 611 F.3d at 704 (alteration in original) (quoting Wyoming Farm Bureau Fed’n

v. Babbitt, 199 F.3d 1224, 1231 (10th Cir. 2000)).

       2. The DOL Was Not Dismissive of State Regulation

       MSG also claims that the DOL unreasonably infringed on an area of State

concern, thereby missing an “important aspect of the problem.” But the DOL did

consider this aspect of the problem. It noted that there was not a uniform standard

adopted by all the states and this was “particularly concerning” for complex and risky

products such as FIAs. 3 Aplt. App. 740. It surveyed the state regulations and

                                              14
sought to ensure that the “requirements of this exemption work cohesively with the

requirements currently in place.” Final BICE, 81 Fed. Reg. at 21,018. Because the

agency adequately considered the issue, its decision was not arbitrary or capricious.

C.     Economic Impact Analysis

       Finally, MSG contends that the DOL violated the APA by failing to consider how

the regulation would affect the FIA industry. According to MSG, this new regulation

will cost billions of dollars and could potentially put the entire FIA industry out of

business. Aplt. Br. at 8, 50. MSG also argues that, much like the SEC in American

Equity Investment Life Insurance Co. v. SEC, 613 F.3d 166 (D.C. Cir. 2010), and the

EPA in Michigan v. EPA, 135 S. Ct. 2699 (2015), the DOL has a statutory requirement in

29 U.S.C. § 1135 to proscribe only “necessary or appropriate regulations,” and therefore

our review should be more probing. Aplt. Br. at 49–50. But the DOL did not rely on that

statutory provision — instead, it used its broad statutory authority under 26 U.S.C. §

4975(c)(2) to craft an exemption to the fiduciary rule.10 Final PTE 84-24, 81 Fed. Reg. at

21,148 n.2. Therefore, our review is limited to the arbitrary or capricious standard in

which we must “ascertain whether the agency examined the relevant data and articulated

a rational connection between the facts found and the decision made.” Kobach, 772 F.3d

at 1196 (quoting Aviva Life, 654 F.3d at 1131). The DOL met this standard.

       In its Regulatory Impact Analysis, the DOL addressed the effect implementation

of the BICE would have on the insurance market. While it found that some in the

       10
         This authority was transferred to the Secretary of the DOL from the
Secretary of the Treasury under Reorganization Plan No. 4 of 1978. 5 U.S.C. app.
243, 244 (2016).
                                             15
insurance market would be affected, it predicted that firms “will gravitate toward

structures and practices that efficiently avoid or manage conflicts to deliver impartial

advice consistent with fiduciary conduct standards.” 4 Aplt. App. 1008. Concerning

FIAs in particular, it took into consideration the fact that the FIA market relies “heavily”

on independent insurance agents. Id. at 802. It acknowledged, as argued by MSG, that

some “may incur some costs to find, acquire, and adjust to new services and products.”

Id. at 1007. It ultimately concluded that this fear was overstated and counteracted by the

benefit to investors. The DOL predicted that new markets would open, the regulation

would promote innovation, and it would save investors millions of dollars by reducing or

curtailing conflicted advice from fiduciaries. Id. at 1016–17, 1023. Relying on the

record before it, the DOL could reasonably conclude that the benefits to investors

outweighed the costs of compliance.11 See id. at 865–66, 983–84, 1024–25. The DOL’s

decision was not arbitrary or capricious.

       AFFIRMED.

       11
         The DOL acknowledged that compliance costs under BICE would be
“between $34.0 million and $37.8 million over ten years,” but balanced this cost with
the added protections to investors and its analysis that BICE costs would decrease
significantly after the first year. 4 Aplt. App. 983–84.
                                             16