INDUSTRY GROUPS URGE CONGRESS TO ADVANCE RETIREMENT PRODUCT INNOVATION LEGISLATION

Posted on June 8, 2020

Measure Targets Excessive, Unnecessary Information Disclosure

WASHINGTON, D.C. – Four industry organizations are rallying behind legislation to lower barriers that restrict consumer access to innovative retirement products.

The measure, the Registration for Index Linked Annuities (RILA) Act, by Sen. Tina Smith (D-Minn.), Sen. Thom Tillis (R-N.C.), Rep. Dean Phillips (D-Minn.) and Rep. Steve Stivers (R-Ohio) directs the SEC to devise a new form for annuity issuers to use when filing registered index-linked annuities (RILAs). House and Senate versions of the legislation were introduced in May.

Joining the Insured Retirement Institute (IRI) in the effort are the American Council of Life Insurers (ACLI), Committee of Annuity Insurers (CAI), and the National Association of Insurance and Financial Advisors (NAIFA). The group sent a letter of support today to the sponsors of the legislation.

“This legislation will serve consumers by reducing regulatory barriers, facilitate the offering of innovative annuity products such as Registered Index Linked Annuities (RILAs), and ensure pertinent information is provided to consumers to make knowledgeable decisions about an annuity product they may choose to purchase,” said Wayne Chopus, IRI President and CEO.

A registered index-linked annuity (RILA) can bring balance to an investor’s portfolio. It allows the purchaser the opportunity to participate in some market growth while reducing exposure to market loss. A RILA is an annuity product that offers an investor opportunity for some market growth without all the risk that comes with investing directly in the market, along with reduced downside exposure to partially protect the investor from market losses.

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 bill requires the U.S. Securities and Exchange Commission (SEC) to modernize and replace the current forms being used to file RILAs with a new registration form more closely tailored to this product. 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.  

The groups wrote, “We support this bill because it will lower a significant barrier that is preventing this innovative retirement income product from being used by more consumers who desire an annuity product providing some protection of their investment principal from market loss volatility, while also allowing participation in market growth.”

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Contact: Dan Zielinski