HOUSE APPROPRIATIONS COMMITTEE ENCOURAGES SEC TO IMPROVE REGISTRATION PROCESS FOR REGISTERED INDEX-LINKED ANNUITIES

Posted on July 31, 2020

Report Language Reflects Bipartisan Legislation Seeking Remedy for Bureaucratic Hurdles

WASHINGTON, D.C. – The U.S. House of Representatives today approved a funding bill for several federal agencies including the U.S. Securities and Exchange Commission (SEC). An accompanying Appropriations Committee report called on the SEC to alleviate a significant regulatory barrier that is preventing an innovative retirement income product, registered index linked annuities (RILA), from being used by more investors.

The Insured Retirement Institute (IRI) welcomed the inclusion of the report language by Representatives Michael Quigley (D-Illinois), Chairman, and Tom Graves (R-Georgia), Ranking Member, of the House Financial Services and General Government Appropriations Subcommittee. The language reflects the goal of “The Registered Indexed Linked Annuities Act” (H.R. 6994), a bipartisan bill introduced by Rep. Dean Phillips (D-Minn.) and Rep. Steve Stivers (R-Ohio) in May to require the SEC to create a new, properly calibrated registration form that would give investors access to a broader, more competitive market for RILAs.

Committee reports accompany legislation and contain information about the measure, votes, and policies. Often, the report includes language expressing the desire of committee members for agencies to act on specific policies. While it does not have the force of law, report language signals the committee’s interest and concern and serves to identify issues for congressional oversight of an agency’s actions.

The report language to the Appropriations legislation says, “The Committee is concerned that the current registration process for registered index linked annuities (RILAs) is cumbersome and requires significant information not needed for other registered insurance products. The Committee encourages the SEC to create a tailored filing form for RILAs.”

“We appreciate that the House has included report language that agrees with the goal of the Registered Indexed Linked Annuities Act encouraging the SEC to devise a new form for annuity issuers to use when filing RILAs,” said Paul Richman, IRI Chief Government and Political Affairs Officer. “Removing this regulatory barrier will offer investors more opportunities to purchase an innovative guaranteed insurance product which allows for participation in some market growth, while at the same time partially protecting against market losses.”

A RILA can bring balance to retirement portfolios by allowing participation in market growth while reducing exposure to market loss, helping savers reach retirement goals.

IRI is leading a coalition of industry groups that are urging a resolution to this issue. The American Council of Life Insurers (ACLI), Committee of Annuity Insurers (CAI), and the National Association of Insurance and Financial Advisors (NAIFA) also support the House RILA legislation and a companion Senate measure (S. 3795) sponsored by Senators Thom Tillis (R-N.C.) and Tina Smith (D-Minn.).

Under current SEC rules, RILAs and other innovative new products must be registered using forms that are designed primarily for equity offerings and therefore require extensive information that is not relevant to prospective annuity purchasers. These forms also require disclosure of financial information prepared in accordance with generally accepted accounting principles (“GAAP”), which many insurers are not otherwise required to produce.

The Registered Indexed Linked Annuities Act would require the SEC to create a new registration form more closely tailored to RILAs than the forms currently being used to register these products. It would contain only the relevant information consumers need to make an informed choice about purchasing a RILA, eliminating extraneous information that currently makes the filing process more onerous and understanding the product more difficult.

“We appreciate the leadership of the House and Senate bill sponsors and will continue to work to build support for the legislation,” Richman said. “The modernized approach contemplated by this measure 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.”  

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Contact: Dan Zielinski