A bill was introduced in the U.S. Senate last week that would require the U.S. Securities and Exchange Commission (SEC) to revise its rules on index-linked annuities.
The Registration for Index-Linked Annuities Act, introduced by U.S. Sens. Tina Smith (D-MN) and Thom Tillis (R-NC), directs the SEC to devise a new form for annuity issuers to use when filing registered index-linked annuities (RILAs).
Currently, these new products must be registered using forms designed primarily for equity offerings. As such, they require extensive information that is not relevant to prospective annuity purchasers. Further, they require disclosure of financial information prepared in accordance with generally accepted accounting principles, which many insurers are not otherwise required to produce.
This legislation addresses the misalignment between the current registration forms used for RILAs and the information needed by investors. It has the full support of the Insured Retirement Institute (IRI), which listed it as a priority in its 2021 Federal Retirement Security Blueprint, released earlier this year.
“We see solid momentum to address an issue that is limiting consumer choice to innovative retirement planning products,” IRI President and CEO Wayne Chopus said. “The current rules and processes to register RILAs stymies innovation, creates a barrier to entry into this growing market for insurers that do not produce GAAP financials, and impedes consumer comprehension and choice with excessive and confusing information. “A new registration form more closely tailored to the particular products being offered would ensure that consumers have access to the pertinent information they need to make an informed investment decision.”
Chopus said the current regulatory structure impairs consumer choice and offers no corresponding benefit to consumers or the SEC.
“The modernized approach contemplated by this legislation will encourage innovation and ensure investors can easily find the information they need about RILAs and other innovative products without having to wade through irrelevant, excessive, and confusing disclosure documents,” he added.