____________________

Circular 230 disclosure: This document was not intended or written to be used, and cannot be used, to: 

(1) avoid tax penalties, or (2) promote, market or recommend any tax plan or arrangement. 

American Council of Life Insurers

101 Constitution Avenue, NW, Washington, DC 20001-2133 

(202) 624-2378 t (866) 953-4149 f jimszostek@acli.com 

www.acli.com

James Szostek 

Vice President, Taxes & Retirement Security 

July 21, 2015 

Submitted Electronically 

Office of Regulations and Interpretations 

Office of Exemption Determinations 

Employee Benefits Security Administration 

Attn: Conflict of Interest Rule, Room N-5655; D-11850; D-11712 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Subject: Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice (RIN 

1210-AB32); 

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 (RIN 

1210-ZA25); and 

Proposed Best Interest Contract Exemption (RIN 1210-ZA25)

Greetings: 

On behalf of the American Council of Life Insurers (“ACLI”)1, we offer comment on the 

Department of Labor’s (“Department”) proposed rule and prohibited transaction exemptions 

promulgated under Sections 3(21)(A)(ii) and 2510.3-21 of the Employee Retirement Income Security Act 

(“ERISA”)(collectively, the “Proposal”). The Proposal would cause irreparable harm to small balance 

retirement plan investors, including many middle and lower income investors. More specifically, the 

Proposal would effectively limit or deny access to guaranteed income products that are increasingly 

important to millions of Americans who no longer have access to a traditional pension. 

 1 The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with 284 member companies 

operating in the United States and abroad. ACLI advocates in federal, state, and international forums for public policy that 

supports the industry marketplace and the 75 million American families that rely on life insurers’ products for financial and 

retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term care and disability income 

insurance, and reinsurance, representing more than 90 percent of industry assets and premiums. ACLI member companies 

offer insurance contracts and other investment products and services to qualified retirement plans, including defined benefit 

pension and 401(k) arrangements, and to individuals through individual retirement arrangements (IRAs) or on a non-qualified 

basis. ACLI member companies also are employer sponsors of retirement plans for their own employees. 
2 

 

Executive Summary and Index of ACLI Comments 

Introduction and Key Principles (pp. 5-7) 

x It is essential that revisions be made to the Proposal to: 

o Ensure that providers, plan sponsors, plan fiduciaries, and IRA owners retain the freedom 

to define the nature and scope of their relationship. 

o Preserve and expand the investment education principles of Interpretive Bulletin 96-1 

which have served participants well for nearly 20 years. 

o Preserve reasonable and customary commission-based practices with an exemption that 

offers compliance certainty and avoids increased costs. 

o Be protective of the interests of savers and retirees through a workable rule that not only 

addresses conflicts of interests, but supports and encourages key educational activities 

when interests align. 

o Encourage access to a savings plan at work and provide the opportunity to learn about 

and access annuities, the sole means available in the market place by which retirees can 

secure income for life. 

o Ensure access to important workplace benefits such as life, disability income, long-term 

care, and other non-medical insurance products. 

o Enable insurers and their distribution partners to engage small business owners to 

encourage them to establish savings plans for employees. 

o Encourage access to annuities for workers and retirees so that they may save and secure 

additional guaranteed lifetime income beyond Social Security. 

o Base the cost-benefit analysis on a carefully examination of the impact of the rule on the 

availability of annuities and workplace benefit insurance products. 

Specific Comments on the Fiduciary Proposal 

I. The Proposal’s definition of “advice” is unnecessarily broad and should be narrowed and/or 

clarified (pp. 7 – 11) 

A. The Department should clarify that advice “individualized to the advice recipient” is not 

simply personalized, but is advice that implicates relationships of trust and expectations 

of impartiality, as described in the Proposal (pp. 7 - 8) 

B. “Directed to” is not synonymous with “individualized” advice and should be eliminated 

from the definition (p. 8) 

C. The regulatory definition should clearly link fiduciary advice with a contemporaneous 

transaction (pp. 9) 

D. Clarify agreements, arrangements, and understandings are to be mutual (p. 9) 
3 

E. The regulatory definition must more closely align itself with the statute and past practice 

in focusing on activities which are “investment” in nature (p. 9 - 10) 

F. The regulatory definition should be revised to exclude welfare benefit plans (p. 10) 

G. Suggested edits to the Proposed §2510.3-21 definition of “Fiduciary” and addition of two 

new terms to clarify application of the rule (pp. 10 – 11) 

II. The proposed exceptions or “carve-outs” are unnecessarily narrow, inconsistent with policies 

to expand retirement coverage and savings, and generally disruptive to the marketplace, 

without any discernible economic or other net benefit to consumers (pp. 11 – 18) 

A. The counter-party carve-out should be expanded to cover all plans and IRA accounts (pp. 

12 -14) 

B. The platform carve-out should clarify that an annuity contract is a “platform or similar 

mechanism” and should be extended to IRAs (pp. 14 – 15) 

C. The Proposal should include an exception for financial professional responses to 

proposal requests (pp. 15 – 16) 

D. The education carve-out should be amended (pp. 16 – 18) 

1. The availability of distribution guidance should be expanded 

2. Education regarding features inherent in previously-purchased products should 

be included in the carve-out 

3. Education as to which investment options fit into various asset classes should be 

permitted 

4. “Anti-cashout” interventions should be included in the carve-out 

III. PTE 84-24 must be revised to ensure sufficient exemptive relief for annuities and other 

insurance contracts (pp. 18 – 22) 

IV. The Best Interest Contract Exemption (BICE) must be revised and re-proposed since, absent 

substantial changes, it has no utility for the insured retirement industry (pp. 22 – 39) 

A. The impartial conduct standards that form the foundation of the BICE are unacceptably 

ambiguous (pp. 26 – 31) 

1. The BICE is not clear as to which forms of variable compensation are permissible 

2. The prohibition on differential compensation should be eliminated 

3. The Proposal should utilize one definition of reasonable "and customary" 

4. The structure of the BICE makes compliance uncertain and therefore, 

unworkable 

5. The definition of Financial Institution and the imposition of fiduciary status 

through the BICE, not the definition of fiduciary, are unacceptable 

B. Even if the compliance ambiguities were clarified, the technical requirements under the 

BICE render the exemption unworkable in the absence of significant changes (pp. 31 – 

39) 

1. The Best Interest contract standard as drafted is unduly restrictive and 

impractical 

2. The BICE pre-recommendation contract requirement is incompatible with 

customary business practices in the financial services industry, and is simply 

impracticable 
4 

3. BICE contracts should be subject to negative consent and should not require the 

adviser to be a party 

4. The narrow scope of the exemption will eliminate an adviser's ability to provide 

advice to certain small plans and plan participants eligible for a distribution 

5. The BICE has implications under Investment Advisers Act for agents and brokers 

that enter BICE agreements acknowledging fiduciary status 

6. The exception's requirements for advisers that offer a limited range of investment 

options or proprietary products render it unfeasible 

7. The required BICE disclosures should be harmonized with other disclosures 

8. Forego a "low cost" prohibited transaction exemption 

9. The BICE language, at various points, should be amended to target actual, rather 

than perceived, conflicts 

V. The proposed transition rule should be revised and expanded (pp. 39 - 40) 

 

VI. Eight month delayed applicability date is unreasonable (p. 40) 

VII. The cost-benefit analysis in the proposal is deficient (pp. 40 – 56) 

A. Executive, statutory and judicial precedent (pp. 40 – 42) 

B. Measuring the regulatory impact analysis against executive, statutory and judicial 

precedent (pp. 42 – 49) 

1. The statement of potential benefits is flawed 

2. The Proposal inflicts an “advice gap” on individuals who can no longer obtain 

financial advice 

3. Insufficient analysis of direct costs 

4. The cost-benefit analysis does not consider annuities 

C. The Proposal unacceptably excludes the protections of the current regulatory framework 

from its quantification of need (pp. 49 – 50) 

D. The status of non-cash compensation regulation (pp. 51 – 52) 

E. Commissions compared to fee-only investment advice (pp. 52 - 53) 

F. Correcting observations of fact and law (pp. 53 – 55) 

G. Concluding observations about the Proposal’s fulfillment of executive, statutory and 

judicial standards governing cost-benefit analyses in rulemaking (pp. 55 – 56) 

Appendix 

 
5 

Introduction and Key Principles 

 ACLI has long supported responsible regulation that brings confidence to the marketplace. We 

believe such regulation is a win-win, a win for consumers and a win for ACLI member companies, who 

take pride in offering savings and investment services and retirement income solutions to millions of 

Americans. However laudable the goal of this particular rulemaking, care must be taken to ensure that 

unintended consequences do not serve to deprive or limit access to the products and services 

Americans need for meaningful savings and a secure retirement. Caution is particularly appropriate 

when considering rules that will significantly limit access to investment information, assistance, 

education and guidance, as well as to important income protection products. While the Department 

estimates – for purposes of the Proposal - investor losses due to conflicts at $21 billion per year 

(somewhat higher than the Council of Economic Advisor’s estimate of $17 billion per year), investor 

losses associated with an absence of professional assistance, according to the Department’s own 

figures, were estimated to be $114 billion in 2010 alone,2 almost seven times greater per year. Without 

significant changes to the Department’s Proposal, ACLI is concerned that there will be a dramatic 

decrease in: 

x access to guaranteed lifetime income solutions; 

x the number of small business retirement plans; 

x access to important workplace benefits such as life, disability income, long-term care, and other 

non-medical insurance products; and 

x investment and distribution education and guidance. 

These results will come at a cost to plan sponsors, participants, beneficiaries and IRA owners far in excess of 

the Department’s estimates. In summary, unintended consequences should – and do – matter. 

ACLI supports rulemaking that is consistent with the Department’s statutory authority, 

accommodates the Department’s interest in minimizing the impact of conflicts of interest on plans, 

participants and IRA owners, and avoids significant disruptions in access to saving and retirement 

products and services. At a minimum, a rule defining “fiduciary” status for purposes of investment 

advice should: 

x Ensure that service providers, financial professionals, plan sponsors, plan fiduciaries, plan 

participants and IRA owners retain the freedom to define the nature and scope of their 

relationships, including the freedom to sell, purchase, negotiate and contract without a 

regulatory presumption of a fiduciary relationship and without codifying assumptions regarding 

the assumed competence – or lack thereof – of any group of plan fiduciaries or the general 

public. 

x Preserve reasonable and customary commission-based practices with an exemption that offers 

compliance certainty and avoids increased costs. 

x Narrowly focus on persons who provide advice regarding investments. 

 

2 76 Fed Reg 66151 (October 25, 2011). While the Department estimated reductions in that figure resulting from advice 

provided pursuant to the statutory exemption under ERISA section 408(g) and Internal Revenue Code section 4975(f)(8), the 

fact is that the exemption is not relied upon heavily, therefore any likely reductions in investor losses attributable to their own 

errors would be marginal. 
6 

x Preserve and expand the current rules regarding investment education in the Department’s 

Interpretive Bulletin 96-1, the benefits of which were recognized by the Department in 2010 and 

have served participants well for nearly 20 years. 

To protect the interests of savers and retirees, there must be a workable rule that not only 

addresses conflicts of interests, but supports and encourages activities when interests align. For 

example, the insurance industry and its distribution partners encourage greater savings, which can help 

Americans secure life-long income. Both industry and the saver benefit when that goal is achieved. This 

alignment of interest must be fostered, not encumbered. Likewise, retirees need a variety of guaranteed 

lifetime income solutions from which to choose the level of security they desire and for which they are 

willing to pay. Rules and exemptions should not frustrate, through expressed limitations or ambiguity and 

uncertainty, this alignment of interests. To do otherwise would harm, not help, the interests of savers 

and retirees. 

 With so many Americans reaching retirement age each day and given the decline of traditional 

employer-sponsored pension plans, now more than ever, seniors need the income protection available in 

annuities and other guaranteed lifetime income products offered by America’s life insurance industry. 

Many people first learn of the benefits of annuities from a life insurance agent or broker. Continued 

access to information and education regarding annuities is consistent with the Administration’s efforts to 

facilitate access to lifetime income. However, if the Department’s fiduciary proposal moves forward 

without substantial changes, Americans’ understanding of and access to guaranteed lifetime income in 

retirement will be effectively limited, and longstanding and customary practices involving retirement plan 

and IRA guidance will be prohibited. 

Annuities are the sole means available in the market place today by which retirees can secure 

income for life. With fewer and fewer workers eligible for workplace pensions, there is a greater need to 

save for retirement in 401(k) and other defined contribution plans as well as IRAs. Annuities serve as a 

means to convert these savings into a personal pension to supplement Social Security. To ensure that 

Americans have a secure retirement, it is of utmost importance that they have access to a savings plan 

at work and the opportunity to learn about and access annuities. Without substantive changes, ACLI is 

seriously concerned that, under the proposal, insurers and their distribution partners will no longer be 

able to engage small business owners to encourage them to establish savings plans for employees. 

Without access, workers are less likely to save and secure additional guaranteed lifetime income beyond 

Social Security. 

 Annuities are not well known by the general public. Academics write of the “annuity puzzle,” i.e., 

why so few retirees annuitize defined contribution benefits when annuities provide much needed income 

protections. Research shows that people have difficulty placing a value on annuities.3 They 

underestimate the value of the annuity when considering a purchase. This adds to the challenge faced 

by insurers, agents and brokers. They must introduce savers and retirees to annuities, help them to 

understand the value proposition, and educate them on the variety of annuities available with features 

that can address concerns regarding liquidity, inflation, premature death, etc. Given the need for a high 

level of education about annuities and the buy and hold nature of guaranteed lifetime income products, 

it is important that the Department recognize that these elements led to the customary compensation 

practices in place which differ from those that govern the sale of other types of investments or 

investment advisory and management services. ACLI members are gravely concerned that the Proposal, 

as currently drafted, will drive distributors to level compensation structures that will no longer 

appropriately compensate agents for the sale of annuities which in turn will result in less access by the 

public to these important retirement security products. 

 

3 “Cognitive Constraints on Valuing Annuities” by Brown, Kapteyn, Luttmer, Mitchell – Pension Research Council October 2014. 
7 

 When writing rules, agencies are required to “strike the right balance” and develop more 

affordable, less intrusive rules to achieve the same ends, giving careful consideration to benefits and 

costs. While the Proposal mentions annuities 172 times, acknowledges that “31 percent of IRAs include 

investments in annuities,” and notes that “insurance companies [will] be significantly affected by the 

proposal,” the cost-benefit analysis fails to examine the impact of the Proposal on insurers, the annuity 

market, or on the availability of lifetime income. 

 Finally, it is well recognized that workplace saving programs play a critical role in retirement 

preparedness. As leading providers in the small plan formation marketplace, life insurers are 

particularly concerned that this Proposal would impede the important policy goal of expanding small plan 

coverage. The Proposal negatively impacts small plan formation by restricting sales activities that 

encourage small business owners (those with less than 100 employees) to start, maintain, or improve 

their employee benefit plans. The DOL has limited the “sales exception” to certain large plans, while 

impeding the sale of products and services to small businesses. Only 50 percent of workers employed in 

small businesses have access to a workplace retirement plan. There needs to be greater incentives for 

these small businesses to start and maintain retirement plans—not new barriers. 

 

The Fiduciary Proposal 

We share the Department’s interest in seeing that plan sponsors, plan participants and IRA 

owners receive advice that is in their best interest. At the same time, we are concerned that, in its 

pursuit of this objective, the Department has crafted a proposal that creates risks and uncertainties for 

insurers, their agents, and brokers that may result in less, not more, investment and annuity information. 

Our comments are consistent with the Department’s objective of protecting retirement investors while 

avoiding unnecessary disruption and negative impacts to plans, participants and individuals. 

 Plans, plan participants and beneficiaries, IRA owners and small business owners need a 

financial services market place that engages them and assists them in saving and investing and in 

addressing critical needs for income in retirement. An unnecessarily narrow focus on conflicts of interest 

oversimplifies the massive undertaking this nation faces in getting workers to save and retirees to 

secure guaranteed lifetime income. Insurers, agents, brokers, and savers/investors need to have 

confidence that a fiduciary standard will not disallow the reasonable and customary payment of sales 

commissions and other traditional forms of distribution-related compensation nor expose them to 

unnecessary litigation. This is required to ensure that American retirees maintain free and unfettered 

access to educated and committed financial intermediaries. Parties engaged in transactions with ERISA 

plans and IRAs need clear, unambiguous rules by which to determine their duties and obligations in 

order for them to effectively and confidently serve the marketplace and to ensure that plans, plan 

participants, and IRA owners continue to have access to a broad range of insurance products and 

services, investment advice and educational services. We offer these comments to assist in the 

development of such rules. However, given the voluminous and complex nature of the Proposal, we 

intend to continue our review and may submit additional or supplemental comments to the Department. 

I. ACLI members are concerned that the definition of “advice” is unnecessarily broad and 

provides the following recommendations for the Department’s consideration. 

 

A. The Department must clarify that advice “individualized to the advice recipient” is not 

simply personalized, but is advice that implicates relationships of trust and expectations 

of impartiality, as described in the Proposal. 

 The current regulatory definition provides that, in order to be considered a fiduciary by nature of 

providing investment advice, a person must “ render individualized investment advice to the plan based 

on the particular needs of the plan regarding such matters as, among other things, investment policies 
8 

or strategy, overall portfolio composition, or diversification of plan assets.”4 The degree of clarity in the 

existing definition has allowed the investment advice community to draw clear distinctions between 

advice that may be personalized, but not “individualized to” an advice recipient for purposes of ERISA. 

This would include general investment communications delivered via targeted sales calls, individually 

addressed marketing materials, or brochures selected and distributed in an effort to match 

informational content with a particular investor’s potential needs. Simply adding a salutation to the 

beginning of a letter should not be deemed to be “individualized” although it might be considered 

“personalized.” Instead, “individualized to the advice recipient” should be read to include 

recommendations that take into account a particular individual’s unique circumstances. It would be 

helpful if the Department clarified this interpretation in the preamble of the regulation. 

 

 In order to clarify the Department’s intent, we recommend adopting language outlined in the 

preamble to describe the relationships that the Department seeks to cover – specifically, those 

relationships that create an expectation of trust between the financial professional and the investor. 

Section I(G) includes suggested changes to the text of the Proposal to address this point. 

 

B. “Directed to” is not synonymous with “individualized” advice and should be eliminated 

from the definition. 

 We believe the “directed to” concept adds complexity and ambiguity to investment advice 

determinations that will only serve to significantly limit one-on-one communications between providers 

and potential or existing customers. The Department itself cited studies that show historically in-person 

engagements may produce benefits that are not afforded by similar on-line services.5 The ACLI sees no 

benefit to plan sponsors, plan participants or IRA owners of discouraging one-on-one or other personal 

contacts given their obvious value toward understanding products, services, and choices. 

 The investment advice industry has long functioned under the premise that “investment advice” 

that creates a trusted relationship between the financial professional and an investor must be 

customized and deemed suitable for and based on the needs of the specific investor. The Department’s 

decision to capture communications that are merely “directed to” the recipient upends traditional 

passive marketing activity that is often the primary way by which investors become aware of their 

product and service options. In effect, the inclusion of “directed to” serves to create a presumption of 

investment advice/fiduciary status, in circumstances when neither was intended, expected or agreed 

upon. Further, the lack of clarity within the rule will have a chilling effect on all types of marketing 

activity, because the line between traditional marketing and fiduciary investment advice cannot be 

determined in advance with any degree of certainty. 

 Directed communications, by definition, are not “individualized” communications, and should not 

be treated as individualized for purposes of determining ERISA fiduciary status. For instance, directed 

mailings, general advertising focused in specialty markets, group communications that are focused on 

the needs of investors of a particular age, marital status, or demographic region, and general investment 

seminars open to members of a particular organization or community are all advice communications that 

may be “directed to” a recipient, but should not be treated as an attempt to offer fiduciary investment 

advice. 

 Accordingly, the definition should be limited to fiduciary advice that is truly “individualized” and 

understood to be “individualized” by the parties. Again, the “directed to” language should be eliminated. 

Section I(G) includes suggested changes to the text of the Proposal to address this point. 

 

 

4 42 CFR 2510.3-21(c)(1)(ii)(B) 

5 76 Fed Reg 66155 (October 25, 2011) 
9 

C. The regulatory definition must clearly link fiduciary advice with a contemporaneous 

transaction. 

 

 With the Department’s decision to significantly broaden the definition of “fiduciary”, including the 

elimination of certain tests that served to place parameters around the advice being rendered, such as 

the “regular basis” requirement, ACLI members are concerned that advice, when provided, may be 

construed by a plan sponsor, participant or IRA owner as on-going in nature, rather than constrained by 

context, events and/or time. Typically, a recommendation to engage in or refrain from taking a particular 

course of action is based on a variety of factors then prevailing. A financial professional should not be 

liable for transactions that occur after a change in the relevant factors (e.g., market conditions, interest 

rates). In this regard, we recommend that the Department make clear that, as part of an agreement or 

understanding, the parties are free to define the period to which the advice applies. We also 

recommend that, in the absence of any such agreement or understanding, there is presumption that the 

advice will be acted upon within a time frame that is reasonably contemporaneous in light of the type of 

recommendation given with the rendering of the advice, in the absence of facts to the contrary. 

D. Clarify agreements, arrangements and understandings are to be mutual. 

 

 A written or verbal agreement is, by its nature, mutual. So too is a written or verbal arrangement. 

However, an understanding may not necessarily be mutual. We suggest that “written or verbal” also affix 

to “arrangement” and that “mutual” be a condition of any understanding. Section I(G) includes 

suggested changes to the text of the Proposal to address this point. 

E. The regulatory definition must more closely align itself with the statute and past practice 

in focusing on activities which are “investment” in nature. 

 

 ERISA section 3(21)(a)(ii) states that a person is an investment advice fiduciary only to the extent 

that he provides ‘‘investment advice for a fee or other compensation, direct or indirect, with respect to 

any moneys or other property of such plan . . . ’’. The functional nature of this statutory definition limits 

the Department’s regulatory interpretation to certain activities that relate to the investment or 

management of assets. While the term “investment” has a number of meanings, to stay within the 

authority granted by Congress, the rule should be limited to advice regarding the investment of plan 

assets. 

 The term “investment” should not include a contract issued by an insurance company for the 

provision of benefits under a welfare benefit plan such as a life, disability income, or long term care 

contract. Investment activities generally involve an expectation of achieving a profit. Thus, while these 

insurance contracts may be an investment as that term is used to describe a good use of resources, they 

are not investments as that term is used in the phrase “investment advice” under ERISA. 

In addition, a recommendation regarding a person who may be willing to serve and might be 

hired as an investment advice fiduciary is not a recommendation regarding the investment of plan 

assets. Whether or not such person is to be “entrusted with investment authority” is a determination to 

be made by another party. The Department should not discourage parties-in-interest from helping plan 

fiduciaries identify other possible service providers. 

Also, absent specific advice regarding investments, a recommendation regarding the distribution 

of benefits is not investment advice. For example, a recommendation from a party-in-interest regarding 

the availability of a hardship withdrawal to a homeowner in need of funds to make repairs to her home 

after a major storm should not be construed as investment advice. While distributions do require 

investment activity, when investments are disposed to fund the proceeds of a withdrawal either in 

accordance with the terms of the plan or at the direction of the investor without a recommendation to do 

so, no “investment advice” has occurred. 
10 

There is no indication that Congress intended or directed that the Department extend its 

regulatory interpretation beyond advice regarding an investor’s portfolio or investment products. 

However, the Department’s current revision of the definition of investment advice appears to do just 

that, potentially capturing discussions relating to the purchase of products and activity never intended to 

be captured by this rule. This expansion of the statute not only is inconsistent with the Department’s 

interpretation of “investment advice” for any other purpose under ERISA, it is also a considerable 

expansion of the statutory language. 

Finally, while we understand that a person may, through or together with an affiliate of such 

person, “indirectly” represent or acknowledge that it is acting as a fiduciary, we cannot understand how 

one would indirectly render investment advice. The Department does not explain the application of the 

phrase “through or together with an affiliate.” Fiduciary status should not apply to persons that are not 

directly involved with the provision of advice. There is no reason why the status quo should change. 

ERISA §(3(21)) does not contemplate “indirect” investment advice. 

Section I(G) includes suggested changes to the text of the Proposal to address these points. 

 

F. The regulatory definition should be revised to exclude welfare benefit plans. 

 Furthermore, ACLI recommends that the Department exclude welfare benefit plans from 

this rule, preserving both the current rule and prohibited transaction exemptions pending further 

analysis. Regarding welfare benefit plans, we note the lack of any analysis or explanation in the 

preamble to the Proposal regarding the application of law or the Proposal to these plans, an absence of 

any analysis of the impact of the Proposal on these plans in the Regulatory Impact Analysis, nor an 

attempt to conform the proposed new and amended prohibited transaction exemptions to provide clear 

exemptive relief to transactions involving these plans. Should the Department decide to act on 

rulemaking regarding these plans, we ask that the Department: (1) clearly identify the statutory authority 

to capture recommendations regarding the purchase of a contract to provide welfare benefits under the 

definition of “fiduciary investment advice” and seek public comment on its position; (2) afford the public 

an opportunity to comment on its regulatory impact analysis regarding the impact of such rulemaking to 

welfare benefit plans; and (3) propose prohibited transaction exemptions or appropriate amendments 

that conform to transactions involving welfare benefit plans. Section I(G) includes suggested changes to 

the text of the Proposal to address this recommendation. 

G. Taken together, our suggestions in Section I would revise the base definition and add two 

new terms to clarify the application of the rule as follows: 

 

§ 2510.3-21 Definition of “Fiduciary.” 

 (a) Investment advice. For purposes of section 3(21)(A)(ii) of the Employee 

Retirement Income Security Act of 1974 (Act) and section 4975(e)(3)(B) of the Internal 

Revenue Code (Code), except as provided in paragraph (b) and (g) of this section, a 

person renders investment advice with respect to moneys or other property of a plan or 

IRA described in paragraph (f)(2) of this section if— 

 (1) Such person provides, directly to an investor a plan, plan fiduciary, plan 

participant or beneficiary, IRA, or IRA owner the following types of investment advice, 

whether one time or ongoing, in exchange for a fee or other compensation, whether 

direct or indirect: 

 (i) A recommendation as to the advisability of acquiring, holding, disposing or 

exchanging investmentssecurities or other property, including a recommendation to take 

a distribution of benefits or that includes a recommendation as to the investment of 

assetssecurities or other property to be rolled over or otherwise distributed from the plan 

or IRA; 
11 

 (ii) A recommendation as to the discretionary management of investments by a 

party other than the party making the recommendation securities or other property, 

including recommendations as to the management of moneyssecurities or other 

property to be rolled over or otherwise distributed from the plan or IRA; 

 (iii) An appraisal, fairness opinion, or similar statement whether verbal or written 

concerning the value of investmentsecurities or other property if provided in connection 

with a specific transaction or transactions involving the acquisition, disposition, or 

exchange, of such investmentsecurities or other property by the plan or IRA; 

 (iv) A recommendation of a person who is also going to receive a fee or other 

compensation for providing any of the types of advice described in paragraphs (i) 

through (iii); and 

 (2) Such person, either directly or indirectly (e.g., through or together with any 

affiliate),— 

 (i) Represents or acknowledges, either directly or indirectly (e.g., through or 

together with any affiliate), that it is acting as a fiduciary within the meaning of the Act 

with respect to the investment advice described in paragraph (a)(1) of this section; or 

 (ii) Renders the investment advice pursuant to a written or verbal agreement, or 

arrangement, or mutual understanding that the advice is individualized or that such 

advice is specifically directed to, the advice recipient for consideration in making 

investment or management decisions with respect to securities or other property of the 

plan or IRA. to meet the specific investment goals of the investor, and is provided at the 

request of the investor pursuant to the agreement, arrangement, or understanding. 

 (f) Defintions. For purposes of this section – 

 (2)(i) “Plan” means any employee benefit plan described in section 3(32) of the 

Act .... 

 (9) “Investor” means a plan, plan fiduciary (with discretionary authority over plan 

assets), plan participant or beneficiary, IRA, or IRA owner. 

 (10) “Investments” means securities, insurance and annuity contracts, property 

or other financial instruments held by a plan or IRA. The term “investments” does not 

include any contract issued by an insurance company for the provision of benefits under 

a plan described in section 3(1) of the Act . 

 (g) Welfare benefit plans. For purposes of section 3(21)(A)(ii) of the Act, with 

respect to a plan described in section 3(1) of the Act, the definition of “fiduciary” set 

forth in §2510.3-21 as filed with the Federal Register on October 28, 1975 shall apply. 

II. ACLI members are concerned that the proposed exceptions or “carve-outs” are 

unnecessarily narrow, inconsistent with policies to expand retirement coverage and 

savings, and generally disruptive to the marketplace, without any discernible economic 

or other net benefit to consumers. 

 According to the Proposal, the revised definition of investment advice fiduciary is subject to 

certain specific exceptions (referred to in the Department’s Proposal as ‘carve-outs’) for communications 

that are “best understood as non-fiduciary in nature” and that “parties would not ordinarily view as 

communications characterized by a relationship of trust or impartiality”.6 However, the proposed 

exceptions exclude critical details regarding investment activities that are not considered fiduciary in 

nature, or advance inaccurate assumptions regarding plan and investor activity that erode the efficacy of 

the exception. Furthermore, in order to preserve access to traditional assistance for retirement investors 

with smaller accounts, several specific exceptions must be included in the final rule. 

 

6 21929 
12 

A. The counter-party carve-out should be expanded to cover all plans and IRA accounts. 

 

According to the preamble, the purpose of the seller’s exception is to “avoid imposing ERISA 

fiduciary obligations on sales pitches that are part of an arm’s length transactions where neither side 

assumes the counterparty to the plan is acting as an impartial trusted adviser, but the seller is making 

representations about the value and benefits of proposed deals.”7 The Department’s stated purpose 

recognizes that sales activities naturally include recommendations to purchase and invest in products 

and services offered by the seller, and that financial institutions such as life insurers and their sales 

representatives should not be categorized as fiduciaries under ERISA or Code section 4975(e)(3)(B) 

when they are engaged in selling activities and are clear that they are acting in a sales capacity. 

Unfortunately, we do not believe the Department’s recognition of the distinction between sales 

and advice in the preamble or in the Department’s prior proposal is adequately reflected in the limited 

scope of the sellers/counterparty carve-out in the operative language. In fact, rather than recognizing 

that marketing and sales activities do not constitute advice, the Department appears to start from the 

premise that those activities traditionally thought of as sales and marketing are tantamount to rendering 

investment advice---- unless such activities meet certain conditions, without regard, to any understanding 

or agreement on the part of the parties that such activities are in fact sales or marketing. And, to further 

confuse things, the Department, with no pertinent economic or other analytical support, opts to treat all 

selling and marketing activities as fiduciary investment advice when that activity is directed to small 

plans and IRA accounts; again, without regard to any understanding or agreement of the parties to the 

contrary. 

 We are concerned that the Department’s efforts go far beyond the statute in its interference into 

practices that are clearly recognized as the sales and marketing of products and services. We also are 

concerned with the apparent arbitrariness of the Department’s framework, as well the supposition that 

size is a substitute for understanding one’s responsibilities under ERISA, even if one is otherwise held 

accountable for understanding and compliance with the – reporting, disclosure, fiduciary, and prohibited 

transaction – rules.8 In essence, the Proposal creates a new second-class plan fiduciary for small plans 

and calls into question whether the Department would support a lower standard of care for small plan 

fiduciaries generally given this assumption that these employers lack sophistication. Similarly, we are 

concerned with the Department’s assumption, again with little, if any, support, that IRA owners generally 

are not sufficiently sophisticated to distinguish advice from sales and marketing. A simplified disclosure 

describing the sales function would be a much better option than forcing financial professionals to 

abandon the small balance investor. The approach pursued by the Department in the Proposal 

effectively eliminates for all plan sponsors, participants, IRA owners, the ability to acknowledge and 

define the parameters of their engagements with third parties. We believe this, and other aspects, of the 

Proposal go far beyond what Congress intended and far beyond what can be construed as a reasonable 

reading of the statute. 

Most importantly, we are concerned that the Proposal will unnecessarily complicate interactions 

with all plans, as well as increase operational and compliance costs for providers and their customers. 

Further, the inability to conduct traditional sales and marketing efforts to small plans will significantly 

impede, if not preclude, efforts to close the retirement coverage gap, which is particularly acute among 

small employers. As the Department is aware, millions of working Americans do not currently have 

retirement savings opportunities through their workplace. The Department’s Proposal will significantly 

increase costs and risks attendant to reaching out to the small employer community and, in our opinion, 

further exacerbate private-sector efforts to bring retirement savings opportunities to all working 

 

7 80 FR 21941. 

8 Under the proposal, the exception may apply to sales activities relating to an employer’s 120 participant 401(k) 

plan, but not the employer’s 65 participant defined benefit plan or 70 participant frozen welfare benefit 

arrangement. The exception may apply to sales activities relating to a $100 million dollar defined benefit plan 

trust, but not to sales of insurance contracts to a large unfunded welfare benefit plan. 
13 

Americans. For many of the same reasons, the Department’s limits on sales and marketing to new and 

existing IRA owners will, in our view, increase the risk of leakage, thereby reducing retirement savings. 

An inability to reach out to potential and existing IRA owners in an efficient and cost effective way will 

leave far too many individuals and retirees on their own to gather information and materials about their 

options, while being subject to potentially competing demands from family and others to use 

accumulated savings for non-retirement purposes. Marketing and sales activities serve to educate 

consumers about their choices and ensure competitive pricing of products and services. 

We recommend that the sellers/counterparty exception be modified to: 

x Include sales to any investor. The definition should provide that, without regard to plan size or 

whether the engagement involves a plan participant or IRA owner, in the absence of a mutual 

understanding or agreement that products or services are being offered or marketed in a 

fiduciary capacity, such offerings or products shall be treated as sales/marketing not covered by 

the “advice” definition. Plan fiduciaries are, by law – and without regard to the size of their plan 

or the amount of assets within the plan -, required to act prudently and in the interest of the 

plan’s participants and beneficiaries. We believe that such standard imposes an obligation – 

and not a particularly difficult one – to ascertain the nature of the relationships in which they 

engage, including distinguishing a sales activity from a fiduciary activity (with respect to which 

they may have co-fiduciary liability). In the case of a plan participant considering a rollover or IRA 

owners generally, they too are expected to be cognizant of the rules and tax considerations 

governing IRAs and, in many cases, have reviewed the IRA marketplace in conjunction with 

selection an IRA with investments and fees that meet their criteria. Unlike plan participants, IRA 

owners have the flexibility – and therefore an inherent protection – to transfer their assets to a 

competing IRA if and when they become dissatisfied with investments and/or services. The 

knowledge and understanding of IRA owners should not be discounted by the Department in the 

absence of an empirical assessment of IRA owners’ capabilities and the impacts on the 

Departments regulations on those owners. 

x Remove the requirement to obtain a written representation when acting in a sales capacity. The 

definition should be revised to eliminate any requirement for a seller/counterparty to obtain 

written representations regarding the capacity in which a plan fiduciary is acting (or regarding 

plan size, assets – see above) or the plan fiduciary’s understanding that the seller/counterparty 

is not acting in a fiduciary capacity. Such representations are not, and should not be, part of presales or sales discussions. Starting any relationship with an explanation that the seller is not 

permitted to discuss product or service offerings until written representations are obtained, that 

the individual is in a position to act and that she is sufficiently sophisticated to understand that 

the seller is a seller, not a fiduciary – may be received as unwelcomed and condescending. 

Despite the Department’s perception, albeit unfounded, that no one is really capable of 

distinguishing sales from fiduciary activities, we believe such confusion has not been an issue of 

any measurable degree and that this requirement should be eliminated. 

x Remove the burden of proof from the seller. The definition should be revised to eliminate 

putting a seller/counterparty in the position of having to establish/prove that any given fiduciary 

has sufficient expertise to evaluate the transaction and determine the prudence of the 

transaction with respect to the plan. We believe if a plan fiduciary is acting as such in 

connection with a sales or marketing engagement, it is reasonable for any seller/counterparty to 

assume that the fiduciary understands their duties under ERISA (or the in case of an IRA account 

owners, their right to act on information they determine to be in their best interest). Moreover, 

the Department does not provide guidance on how one could possibly discharge such an 

obligation with any degree of certainty. If the Department is intent on a test, we strongly suggest 

that the requirement be reframed to establish a presumption of competence on the part of a 

plan fiduciary, in the absence of clear evidence indicating otherwise. In this regard, we note that 
14 

even ERISA fiduciaries – directed trustees – are not required to second guess the competence of 

a named fiduciary absent extraordinary circumstances.9 Certainly a seller/counterparty should 

not be held to a higher standard that a directed trustee. 

x Remove any doubt that common pre-sale activities could be considered fiduciary advice. The 

definition should clarify that pre-sales activities, such as responses to RFP’s and similar 

solicitations in which a seller/counter is not initiating an action, but rather is providing 

information regarding products and services in the context of a request, the parameters of which 

are defined by a plan fiduciary or IRA owner constitute activities covered by the 

sale/counterparty exception. 

In the alternative, the current seller’s carve-out should be eliminated in favor of a carve-out that 

requires the seller to fairly inform the investor that: (A) such person is not undertaking to provide 

impartial financial advice (i.e., not acting as a fiduciary for purposes of ERISA); and (B) such person has a 

financial interest in the matter. This approach achieves the Department’s stated goals without codifying 

assumptions regarding the assumed competence – or lack thereof – of any group of plan fiduciaries or 

the general public. 

ACLI recommends the following revision to the text of the Proposal. 

“§ 2510.3-21(b)(1)(i) Counterparties to the investor -- In such person's capacity as a 

counterparty (or representative of a counterparty) to an investor, the person provides 

advice to an investor who is independent of such person and who exercises authority or 

control with respect to the management or disposition of investments held by a plan or 

IRA, with respect to an arm's length transaction, if, prior to providing any 

recommendation with respect to the transaction, such person has not acknowledged in 

writing that it is acting as a fiduciary (within the meaning of this subsection) with respect 

to the transaction and the person does not receive a specific separate advisory fee for 

such recommendation; such person fairly informs the investor that: (A) such person is 

not undertaking to provide impartial financial advice; and (B) such person has a financial 

interest in the matter.” 

 

B. The platform carve-out should clarify that an annuity contract is a “platform or similar 

mechanism” and should be extended to apply to IRAs. 

 

As with other carve-outs proposed by the Department, the platform carve-out is “designed to 

draw an appropriate line between fiduciary and non-fiduciary communications, consistent with the text 

and purpose of the statutory provisions.” The platform carve-out appears to be intended to allow 

platform providers who provide access to investments through a retirement plan platform and help plan 

fiduciaries select or monitor investment alternatives perform those services without triggering fiduciary 

status. 

The platform provider exception is made available to individuals who market and make available 

“securities or other property through a platform or similar mechanism”. However, the carve-out stops 

short of defining “other property” or a “similar mechanism” that might be an appropriate vehicle for the 

carve-out. While our members presume that annuity contracts are a “platform or similar mechanism” for 

purposes of the carve-out, for the avoidance of doubt, the Department should make this clear. Failure to 

clarify this point would place insurance companies, the sole manufacturers of variable annuity products, 

at a serious competitive disadvantage with regard to other financial institutions in the retirement plan 

market. 

 

9 Field Assistance Bulletin 2004-03 (December 17, 2004) 
15 

The Department requested comments on whether the scope of the platform provider exception 

should be limited to large plans similar to the scope of the seller’s exception. ACLI recommends that this 

exception apply to all plans, regardless of plan size, as currently provided in the Proposal. Adequate 

protection is provided to small plans due to the disclosures that are required of providers relying on this 

exception. 

Furthermore, while the preamble suggests that the “platform” carve-out is available for a 

platform that has preset investment options, this is not entirely evident from the text. Many platform 

providers offer participant-directed plans platforms with pre-selected investments, chosen without 

regard to the individualized needs of any particular plan or plan participant. Since there is no inherent 

conflict in the selection of these standardized investment platforms, they should be explicitly covered by 

the carve-out. Additionally, the carve-out should make clear that the platform can include products such 

as annuity contracts, including one or more deferred annuities and/or qualified longevity annuity 

contracts or “QLACs.” 

ACLI further suggests that where a provider is merely offering a platform of predefined 

investment options, the offering of such platforms or platform choices, like sales, should not be treated 

as advice. In such situations, the provider is merely offering a non-individualized platform of investment 

options from which an IRA owner can choose or monitor on a take it or leave it basis. For this reason, 

ACLI also supports extending the selection and monitoring exception in order to ensure that providers 

can, without assuming fiduciary liability, be responsive to an IRA owners request for investments meeting 

specific objective criteria specified by the IRA owner. The fact is that IRA owners can only benefit from 

information – and the ability to compare products and services – in a competitive marketplace. The 

Department should be encouraging and facilitating IRA owner access to this information, not, as under 

the Proposal, creating impediments to affording IRA owners options for enhancing their retirement 

savings. 

ACLI members therefore recommend the following change to 2510.3-21(b)(3) and (4): 

(3) Platform providers. The person merely markets and makes available to an Investor, 

without regard to the individualized needs of the Investor, investments through a platform or 

similar mechanism (which may include one or more annuity contracts) from which an Investor 

may select or monitor investment alternatives offered without regard to the individualized needs 

of the Investor, if the person discloses in writing to the Investor that the person is not 

undertaking to provide impartial investment advice or to give advice in a fiduciary capacity. 

(4) Selection and monitoring assistance. In connection with the activities described in 

(b)(3) of this section with respect to an employee benefit plan (as described in section 3(3) of 

the Act), the person – 

 Note that the language above assumes the Department will include the definition of 

“Investments” offered in Section I(G) above. If not, we ask that the phrase “insurance and annuity 

contracts” be included along with “securities, or other property.” 

C. The Proposal should include an exception for financial professional responses to 

proposal requests. 

 

Under the Proposal, any communication that constitutes a “recommendation” falls within the 

scope of fiduciary investment advice. A ‘‘recommendation’’ is defined as a communication that, based 

on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice 

recipient engage in or refrain from taking a particular course of action.10 While ACLI members 

 

10 80 Fed. Reg. at 21960. 
16 

appreciate the opportunity to offer further comment on the appropriateness of this definition, at base, it 

is currently drafted broadly enough to require several revisions to protect customary marketing practices. 

For instance, insurance companies routinely market themselves in response to requests for proposal 

which are, by definition, intended to encourage plan sponsors to engage in a “particular course of 

action”. In some cases, a response to a request for proposal may be binding if accepted. It appears that 

such responses would be considered “recommendations” – and by extension, investment advice – 

under the current definition. The plan size and asset restrictions currently made part of the seller’s 

exception do not rectify this inadvertent fiduciary problem. While there is an indication in the preamble 

that a response to a request for a proposal is not fiduciary advice, members seek a specific carve-out for 

requests for proposals. 

Such carve-out could be worded as follows: 

“(X) Certain Proposal Responses and Related Activity. The person merely markets and makes 

available to an employee benefit plan (as described in section 3(3) of the Act), informational, 

marketing or similar materials at the request of a plan fiduciary, in order to encourage a plan 

fiduciary to engage the services of the adviser and/or an affiliate, irrespective of whether such 

materials or information are specifically individualized or directed to the plan or identify 

individual offered investment alternatives.” 

D. The education carve-out should be amended. 

 

 At the outset, we wish to commend the Department for recognizing the importance of retirementrelated materials and programs and extending the principles of Interpretive Bulletin (IB) 96-1 to 

encompass such as part of the proposed rule. With 10,000 individuals reaching retirement age every 

day, the importance of helping individuals prepare for their retirement years is of critical importance and 

by clarifying that many activities designed to assist them do not constitute fiduciary investment advice is, 

in our view, a major step forward. 

However, while taking a step forward in encouraging and facilitating the education of plan 

participants, the Department simultaneously took a major step backward in the area of investment 

education. For almost 20 years, the principles of IB 96-1 have served to afford participants access to 

meaningful investment-related educational materials and programs. The value and benefits of IB 96-1 

were evident in the Department’s 2010 effort to modify the “fiduciary” definition. In that proposal, the 

Department could not have been clearer in its recognition of the importance of IB 96-1 by preserving IB 

96-1 in its entirety and without change. In this Proposal, however, the Department takes the position 

that any reference of investments or options in conjunction with asset allocation models or other 

materials constitute “advice.” Not only a major change to well-established and relied upon guidelines 

that have proved valuable to millions of plan participants, but change that appears wholly premised on 

speculation (from a GAO report) that some participants “may” or “might” believe such references 

constitute advice – despite representations to the contrary or that some participants “may” or “might” 

not understand – despite explanations – that other investments might be available to them. With the 

proposed change, the Department has effectively shifted the obligation to populate asset allocation 

models to the plan participant, who for a wide variety of reasons is unlikely to do so, thereby significantly 

undermining what has been a valuable tool for millions of plan participants. 

Participants and IRA owners need more, not less, education on annuities and other distributions 

options. The education carve-out requirement to avoid specificity regarding the investment or 

distribution options available under a plan or IRA should be amended to preserve investor education 

activities that are critical to managing longevity risk and stemming retirement plan leakage. While the 

Department makes attempts to cover common distribution-related information “including information 
17 

relating to annuitizations and other forms of lifetime income payment”11, the text of the carve-out falls 

short of achieving its stated goal. 

Interpretive Bulletin (IB) 96-1, as restated and incorporated into a Department’s regulation, 

acknowledges the important role of financial professionals in providing participants with educational 

materials without exposing them to potential fiduciary liability. The Proposal’s replacement of IB 96-1 

with a carve-out renders it only marginally useful in this regard. Specifically, the Department’s 

narrowing of the definition of investment education with respect to specific investments makes it less 

effective, at best, and counterproductive, at worst. Investors will expect that the education received from 

financial professionals provides them with sufficient information to make informed investment decisions 

on their own; in fact, this will no longer be case. 

The education carve out should extend to participant enrollment services where participants are 

being enrolled into investments that have been designated by a plan fiduciary who is independent of the 

party providing the enrollment services, provided that no recommendations of specific investments are 

made in the course of such enrollment, and in the case of an investment product under the plan, such 

as an annuity contract, that is distributed in-kind from the plan, whether as an IRA (and thus effectively a 

rollover) or a non-transferable 401(g) annuity. 

ACLI members therefore have specific suggestions for improving this carve-out. Each of these 

changes fit squarely into the Department’s intent to carve-out “general information that helps an 

individual assess and understand income needs past retirement and associated risks (e.g. longevity and 

inflation risk) or explains general methods for the individual to manage those risks both within and 

outside the plan...”12 

1. Distribution guidance should be expanded. For education to be meaningful, the 

requirement to avoid specificity on distribution options available under the plan or IRA must be 

eliminated. 

2. Education regarding features inherent in previously-purchased products should be 

included in the carve-out. As the carve-out is currently written, it appears that a plan or an 

insurer cannot educate a participant or IRA investor about the features of a particular product 

that has already been purchased. For example, a customer service representative could not 

educate a policyholder about the decision to annuitize a previously-purchased contract, because 

that discussion would involve a communication regarding a “specific investment”. Similarly, a 

customer service representative could not read the terms of the annuity contract to the policy 

holder, answer routine questions regarding the annuity or restate contract terms or that of a 

prospectus. 

3. Education as to which investment options fit into various asset classes should be 

permitted. Participants and IRA owners need more information about investments, not less. 

Plan service providers should be permitted to assist the public in classifying investment options 

into the correct asset class without fear that they are inadvertently providing advice. More 

importantly, we need to be helpful to plan participants. General information about asset 

allocation that omits any information about available investment options will only confuse and 

frustrate participants. 

4. “Anti-cashout” interventions should be included in the carve-out. Plan service providers 

have a financial interest that supports the public interest in retaining participant assets in 

employer sponsored plans and IRAs. Investment education discouraging participants and IRA 

owners from “cashing out” their accounts, and investment education promoting IRA rollovers 

 

11 80 Fed. Reg. at 21939. 

12 Id. at 21944. 
18 

(including rollovers into IRAs affiliated with the person providing the education) by participants, 

owners, and beneficiaries who are and as an alternative to a cash-out must be permitted. Taking 

an early lump-sum can have a devastating impact on retirement security. Firms should be 

encouraged to intervene to educate terminated participants about the consequences of taking 

their savings out to the tax-advantaged retirement system. 

 With these goals in mind, ACLI members offer the following revisions to the investment education 

carve-out: 

“(6) Investment education. The person furnishes or makes available any of the following 

categories of investment-related information and materials described in paragraphs (b)(6)(i) 

through(iv) of this section to a plan, plan fiduciary, participant or beneficiary,... 

 (ii) General financial, investment and retirement information. Information and 

materials on financial, investment and retirement matters that do not address specific 

investment products, specific plan or IRA alternatives or distribution options available to 

the plan or IRA or to participants (other than a limited menu of options approved by the 

plan fiduciary or IRA owner), beneficiaries and IRA owners, or specific alternatives or 

services offered outside the plan or IRA, and inform the plan fiduciary, participant or 

beneficiary, or IRA owner about— 

 (A) General financial and investment.. 

 (iii) Asset allocation models.... 

(C) Such models do not include or identify any specific investment 

product or specific alternative available under the plan or IRATo the extent that 

an asset allocation model and related materials identify one or more investment 

alternatives or products available under the plan or IRA, the model is 

accompanied by a statement indicating that other investment alternatives having 

similar risk and return characteristics may be available under the plan or IRA and 

identifying where information on those investment alternatives may be obtained; 

and 

 ...(v) Anti-cashout information. General methods and strategies that encourage 

participants to avoid in-service distributions when possible or suggest alternative postdistribution retirement plan savings vehicles designed to preserve retirement savings, 

including IRAs and similar products.” 

III. PTE 84-24 must be revised to ensure sufficient exemptive relief for annuities and other 

insurance contracts. 

 

 In order to allow both plans and IRAs to continue to purchase insurance and annuity contracts in 

the normal course of business, PTE 84-24 should be expanded to treat variable annuity purchases as 

covered transactions, and should allow for greater flexibility within the definition of “commission” to 

allow for traditional forms of adviser compensation. Furthermore, the exemption should clarify that 

compensation and other possible revenue or profit received by the insurer (rather than the adviser) is 

not subject to consideration, should provide for relief for existing transactions that rely on the exemption 

in its current form, and should clarify the Proposal’s definition of a “material conflict” that is subject to 

disclosure. We ask that the conditions imposed in Section IV with respect to insurance sales be no more 

cumbersome than those imposed on mutual fund sales. Finally, we suggest edits to clarify the 

application of PTE 84-24 to IRA transactions. 
19 

 As proposed, the Department’s amendments would revoke PTE 84-24 for advice provided to IRA 

owners with respect to transactions involving variable annuity contracts and other annuity contracts that 

constitute securities under federal securities law, as well as transactions involving the purchase of 

mutual fund shares. According to its Regulatory Impact Analysis, the Department believes that 

investment advice transactions involving variable annuity contracts and mutual fund shares are so 

similar to securities transactions that they should occur under the conditions of the BICE.13 However, the 

Department’s assessment in this regard ignores certain critical risk characteristics of variable annuity 

contracts that align these contracts more closely with insurance than securities. Thus the Department’s 

failure to include these contracts under the amended PTE is unwarranted and does not contribute to 

investor protections. 

 An annuity contract does not convert from an insurance product to a securities product with the 

addition of a variable investment feature. Variable annuity contracts are not simply securities products; 

they are first insurance contracts. Contrary to the Department’s assertions in the preamble, they do not 

cease being the latter when they become the former. Instead, a variable annuity combines traditional 

insurance concepts with certain mutual fund principals to solve two increasingly important problems in 

retirement planning – rising life expectancy and the declining value of the dollar.14 Variable annuity 

contracts share many of the features of a fixed annuity contract, including fixed (general account) option 

with interest guarantees, mortality-based investment guarantees, retirement income guarantees, and 

the availability of additional life-contingent withdrawal options. These features are not available in a 

securities investment. Also unlike an investment in securities, both fixed and variable annuities provide 

for the liquidation of principal and income actuarially over a lifetime, with the insurance company 

assuming the risk of miscalculating mortality predictions in computing benefit payments.15 Whether an 

annuity contract is fixed or variable, the insurance company still bears the risk of the investor outliving 

capital. Given that, in practice, both fixed and variable annuity contracts require the company to bear 

longevity risk, these arrangements are far more similar to each other than to securities investments in 

any regard. Accordingly, the Department should reconsider the current distinction between these 

contracts under the amended PTE 84-24, and revise the PTE to cover the sale of all annuity contracts to 

IRAs.16

 In addition, the definition of “insurance commissions” under the amended PTE is far to narrow, 

and should be broadened to include more traditional forms of compensation. Under the Proposal, 

insurance commissions would be newly defined as commissions paid by the insurance company or any 

affiliate of the insurance agent, insurance broker, or pension consultant for effecting the purchase or 

sale of an insurance or annuity contract.17 It would include renewal fees and trailers, but would prohibit 

advisers from receiving relief under the PTE for many other traditional revenue sources, such as revenue 

sharing and administrative and marketing fees, as well as payments from third parties. This revision 

would prohibit advisers from receiving these types of payments for sales to both plans and to IRA 

owners. 

 

 This is a significant constriction of the protection afforded by the exemption as it has been 

interpreted for more than 30 years. While ACLI appreciates the Department’s attempt to carve certain 

forms of potentially conflicted revenue sources out of the exemption, defining commissions largely by 

 

13 U.S. Department of Labor, “Fiduciary Investment Advice: Regulatory Impact Analysis,” April 14, 2015, p.4, available at 

http://www.dol.gov/ebsa/pdf/conflictsofinterestria.pdf. 14 Regulation of Variable Annuity Sales: The Aftermath of SEC v. VALIC, 1959 Wash U. Law. Q. 206(1959). Available at 

http://openscholarship.wustl.edu/cgi/viewcontent.cgi?article=3325&context=law_lawreview 

15 See SEC v. VALIC, 79 S.Ct. 618,___ (1959). 

16 Although ACLI members understand that relief for the sale of variable annuity contracts may still be available under the BICE 

exemption, due to the uncertainties regarding that exemption’s “reasonable compensation” requirement, the inability of the 

industry to access and compile information necessary for the required disclosures, and the general liability risks created for 

advisers and affiliates under the exemption, the BICE is not a viable option of the sale of these contracts. Please see section

___ of this comment letter for additional details. 

17 80 Fed. Reg. 22010, 22020 (April 20, 2015). 
20 

indicating what the term excludes, rather than what the term includes, will create an uncertain 

compliance environment for insurers. In its current form, the amended definition forces advisers to 

postulate as to the Department’s expectations regarding other types of permissible commission sales 

under an exemption relied upon heavily by the industry. Insurance companies will have no guidance as 

to whether other basic revenue sources, such as sales incentives that allow advisers to earn credits 

toward retirement and health benefits and guaranteed income overrides to third parties paid for 

overseeing adviser activity, remain permissible. For instance, the revised definition would prohibit 

payments from third parties and payments that result from the underlying investments that are held 

pursuant to the insurance contract. This prohibition, as it is currently worded, could restrict the sale of 

annuities entirely, since both variable and fixed annuities generally include an account that has the 

potential to generate revenue to the insurer. 

 An inclusive definition of “insurance commission” would be a helpful step toward alleviating 

these concerns and correcting the practical issues raised by the amended PTE. However, given the 

complexity of the insurance market and the various methods insurers use to help facilitate distribution, 

an inclusive definition of commissions should be flexible enough to allow for the various interpretation 

and terms used to identify permissible compensation sources. 

 

 In addition, we ask the Department to confirm that when necessary, Section I(a)(4) of PTE 84-24 

covers an insurance company’s receipt of the revenue and any profit that is the necessary result of the 

sale. This is critical for the sales of proprietary annuities by an insurance company, including its 

employees, and sales by advisers associated with affiliated selling firms. If the insurance company’s 

revenues and profits are not permitted, this exemption will have no utility for proprietary product sales, 

which we do not believe is the Department’s intent. 

 Furthermore, the Department offers no reason why an exemption that allows for additional 

traditional forms of compensation, such as revenue sharing, cannot be fashioned to protect investors’ 

rights. A robust disclosure structure that fully and accurately describes any potential conflict associated 

with variable sources of revenue would reduce disruption in the market and provide for greater choice 

for investors. To this end, ACLI members assert that the categories of commissions that would align with 

Congressional directives under ERISA section 408(a) are far broader than simply renewal fees and 

trailers. We note that these other forms of commissions, including revenue sharing and similar forms of 

compensation, are already subject to ERISA’s reasonable compensation standards through the 

disclosure regime currently in place pursuant to section 408(b)(2). Specifically, those disclosures 

require service providers to disclose any compensation paid from the provider to third parties or affiliates 

acting as subcontractors if paid on a transaction basis. Such disclosures are also required to the extent 

such compensation is charged directly against the covered plan’s investment and reflected in the net 

asset value of the investment. Given that this compliance structure already drives the types and amount 

of commissions that can reasonably be paid to financial professionals, there is little to no additional 

benefit to be gained by using a highly restrictive definition of “insurance commissions” in the proposed 

amendment to PTE 84-24. 

 The insurance industry has taken great pains to deliver quality products, compensate financial 

professionals, and protect the best interests of retirement investors in a manner that complies with 

ERISA, securities law, FINRA guidance and applicable state law. The ability to protect that revenue from 

ERISA prohibited transaction laws does not rest with restricting the types of commissions advisers 

receive. It rests instead with the Department’s success in crafting clear, definitive compliance 

parameters for investment advice fiduciaries that align with the interests of investors – including their 

interest in the availability of a wide range of annuities and other investment products. 

 With respect to proprietary sales, the amended PTE must clarify that revenues to the insurer for 

group annuity recommendations will not be restricted by the revised definition of “insurance 

commissions.” Often, insurance companies will receive various sources of revenue when group annuity 
21 

products are offered to plan sponsors by an affiliated or unaffiliated financial professional, including 

revenue payments from third parties. These payments present no potential conflict, because their 

receipt by the company does not influence the adviser’s recommendations. Because these revenues 

are not included in the definition of “commissions”, it not clear that such revenue would receive the 

protection of the PTE, even if the revenue does not vary depending on the product chosen by the plan 

fiduciary. We therefore strongly encourage the Department to add clarifying language to provide for this 

protection in the final exemption. 

 

 The revised exemption also provides no protection for arrangements that currently rely on PTE 

84-24. Variable commission sales and sales involving 12b-1 commissions, for instance, would be 

stripped of the exemption’s protection, without immediate recourse for advisers and investors who have 

relied on the existing interpretation in good faith. If the Department truly seeks to protect customary 

retirement savings arrangements that have been successfully executed over the past 30 years, the final 

exemption should provide grandfather protection for existing contracts that currently fall outside of the 

bounds of the amended PTE. 

 Regarding the Impartial Conduct Standards, while we agree that disclosure of material conflicts 

of interest is not only optimal, but absolutely crucial to protecting investor interests, the proposed 

amendments to PTE 84-24 do not sufficiently define the term “material conflict”. Again, further 

clarification regarding this standard will be critical if the failure to disclose a material conflict of interest 

will be deemed to be a misleading statement, and will violate a key exemption requirement. To the 

extent that PTE 84-24 compliance is premised on such an opaque standard, the insurance industry will 

find it necessary to discontinue relationships that have traditionally relied on the protection of 

exemption. As a result, investor access to professional advice from highly-regarded financial 

professionals will be reduced, particularly among IRA owners. There is a risk that an inadvertent failure 

to disclose something minor, for example the fiduciary’s receipt of a minor benefit such as a routine 

lunch or dinner paid for by the insurance company issuing the insurance or annuity contract, would 

result in the transaction and all attendant compensation being prohibited and subject to disgorgement 

and excise taxes. This result would be harmful and wholly disproportionate to any possible harm caused 

by the inadvertent disclosure failure. 

 With respect to transactions involving insurance and annuity contracts, Section IV(b)(2) of the 

proposed PTE 84-24 requires that the “independent fiduciary acknowledge in writing the receipt of the 

required disclosures . For transactions involving mutual funds, Section IV(c)(2) requires the 

independent fiduciary to approve the transaction following the receipt of the required disclosures. ACLI 

asks that these be aligned to require the approval of the transaction without the need for a “written 

acknowledgement.” 

 While the amendments to PTE 84-24 are characterized as covering transactions involving IRAs, 

the covered transactions and conditions for relief do not describe IRAs (e.g., the use of the phrase “with 

plan assets”). This language should be revised to clearly include the assets of an IRA. Likewise, the 

conditions in Section IV require the engagement of an independent fiduciary. This person should also 

include an IRA owner or a fiduciary engaged by the IRA owner to act on their behalf. 

 

 While ACLI members appreciate the certainty that a definition brings to the existing exemption, 

significant amendments will be necessary in order to make the exemption a viable option for the 

insurance industry going forward. 

 Accordingly, ACLI recommends the following changes to the text of the exemption in its proposed 

form: 

Revise the phrase “with plan assets” to read “with plan or IRA assets” as it appears in Section 

I(a)(1)-(4). 
22 

Revise each instance the phrase “independent fiduciary” appears in Section IV to read 

“independent fiduciary or IRA owner.” 

 

 Revise Section I(a)(4) as follows: 

(4) The purchase, with plan assets, of an insurance or annuity contract from an 

insurance company and the resulting receipt of compensation by the insurance company in 

connection with the purchase. 

 

 Strike Section I(b). 

 Revise Section VI(b) as follows: 

(b) The insurance agent or broker, pension consultant, insurance company or investment 

company Principal Underwriter that is a fiduciary acts in the “Best Interest” of the plan or IRA is 

when the fiduciary acts with the care, skill, prudence, and diligence under the circumstances 

then prevailing that a prudent person would exercise based on the investment objectives, risk 

tolerance, financial circumstances and needs of the plan or IRA, without regard to by placing the 

interests of the Retirement Investor before the financial or other interests of the fiduciary, any 

affiliate or other party. 

Revise Section VI(f) as follows: 

(f) The term “Insurance Commission” means (1) a sales commission paid by the 

insurance company or an Affiliate to the insurance agent or broker or pension consultant for the 

service of effecting the purchase or sale of an insurance or annuity contract, including renewal 

fees, trailers, gross dealer concessions and overrides, and but not(2)revenue sharing payments, 

administrative fees, marketing payments, and other payments from parties other than the 

insurance company or its Affiliates. 

 Revise Section VI(h) as follows: 

(h) A “Material Conflict of Interest” exists when a person has a material financial interest 

that could affect the exercise of its best judgment as a fiduciary in rendering advice to a plan or 

IRA. 

 

IV. The Best Interest Contract Exemption (BICE) must be revised and re-proposed since, 

absent substantial changes, it has no utility for the insured retirement industry. 

 

 In theory, the BICE would permit investment advice fiduciaries to receive otherwise prohibited 

compensation in connection with transactions involving IRA owners, plan participants and beneficiaries 

with direct investment authority, and plan sponsors of certain non-participant directed plans. These 

individuals are referred to collectively in the exemption as “Retirement Investors.” To receive the 

protection of the exemption, fiduciaries would need to: 

x Act in the “Best Interest” of the Retirement Investor, and 

x Receive no more than “reasonable compensation”, and 

x Not make any misleading statements, and 

x Admit fiduciary status under ERISA, and 

x Prior to offering any recommendation, along with a “Financial Institution,” enter into a contract 

with the Retirement Investor that: 
23 

o Includes warranties that state that the fiduciary and “Financial Institution” – 

 Will comply with all applicable federal and state securities laws, and 

 Has written policies and procedures to mitigate conflicts of interest, and 

 Has identified any material conflicts and adopted measures to make sure that 

they do not violate the BICE “impartial conduct standards”, and 

 Does not use incentives, quotas or other personnel actions, bonuses, contests, 

special awards, differential compensation or other actions that would encourage 

an adviser to make recommendations that are not in the Best Interest of the 

investor, and 

 Does not contain any exculpatory provisions disclaiming or otherwise limiting the 

liability of the adviser or financial institution for a violation of the contract’s 

terms, or waives their right to bring a class action regarding the dispute. 

In addition, the fiduciary must: 

 Detail material conflicts of interest; 

 Inform the Retirement Investor of his or her right to obtain information about 

fees; 

 Disclose whether the fiduciary offers proprietary products or receives 3rd party 

payments with respect to the purchase, sale, or holding of any asset, and 

provides the website where that information can be located (the “initial 

disclosure”); 

 Provide point of sale disclosures explaining the total projected cost of the assets 

available for investment (the “point of sale disclosure”); 

 Provide an annual disclosure of each asset purchased and sold in the past year, 

and the compensation received by the adviser (the “annual disclosure”); 

 Maintain a website that shows the cost and the direct and indirect compensation 

paid to the adviser, the financial institution, and each affiliate for each assets in 

the plan (the “website disclosure”); 

 Make a range of investment options available that is broad enough to enable the 

adviser to make recommendations from all the asset classes “reasonably 

necessary to serve the investor’s Best Interest, or, if they do not offer such range, 

make a written finding that limits on the assets offered do not prevent the 

adviser from providing advice that is in the Best Interest of the Retirement 

Investor; and 

 Provide, upon request, detailed and sensitive information related to the activity 

within a customer’s account, personal information related to advisers which the 

Department can post publicly and detailed information related to investments 

offered under the exemption. 

 The BICE does not meet the administrative exemption requirements under ERISA §408(a), and 

therefore should re-proposed after further consideration. We also ask that a final rule regarding the 

definition of fiduciary not be effective until a workable exemption is also made final and effective. 

 ERISA §408(a) grants the Department authority to grant administrative exemptions from the 

prohibited transaction provisions of ERISA and the Code for a class of transactions or for individual 

transactions. However, in order to grant an administrative exemption, the Department must make a 

determination that the exemption is (1) administratively feasible; (2) in the interest of the plan and its 

participants and beneficiaries; and (3) protective of the rights of plan participants and beneficiaries. 

 The BICE does not meet the requirements for an administrative exemption under §408(a). As 

detailed herein, the BICE is far from administratively feasible -- it requires entities that are not functional 
24 

ERISA fiduciaries to adopt fiduciary status; it is strikingly opaque regarding basic compliance concepts 

such as 'reasonable compensation'; it is incompatible with standard business practices in the financial 

services industry; it may inadvertently subject agents and brokers to the Investment Advisers Act of 

1940; and its disclosure requirements potentially conflict with SEC and FINRA compliance rules. While a 

broad exemption is clearly necessary under the Proposal, BICE also does not serve the interests of plans, 

participants, and IRA owners, because its will eliminate financial professionals' ability to provide advice 

to certain small plans and participants eligible for a distribution. Finally, the BICE is not protective of the 

rights of plan participants and beneficiaries, because it will reduce access to the types of helpful 

investment education that participants in self-directed plans and IRAs have come to expect, and 

provides no substantive transition relief to allow retirement investors to maintain their existing 

arrangements under the current terms if they so choose. 

 Given that the Department has issued more than 120 separate requests for public comment and 

assistance with regard to the BICE alone, it stands to reason that the exemption deserves further agency 

attention consistent with the administrative exemption principles in ERISA §408(a). ACLI therefore urges 

the Department to withdraw the BICE, and to consider re-proposing the exemption following a more 

robust period of public comment in which all stakeholders have the opportunity to address the 

Department's questions and concerns. 

 In the preamble to the BICE, the Department inquired as to the distribution methods and 

channels applicable to annuity products that are not securities. As you consider the following 

comments, it is important to note that annuities are offered through a broad spectrum of distribution 

channels. These include agents (via insurance agencies or by insurer’s own employees), affiliated or 

independent broker-dealers, wirehouses, financial planners, and financial institutions such as banks. 

Agents appointed by a company offering annuities may be “captive,” offering only that company’s 

proprietary products. Some annuity companies may allow their agents to offer other companies’ 

products in limited circumstances, such as when the customer is looking for a type of annuity the carrier 

does not offer. Some insurers and external distribution partners such as banks, wirehouses, and 

independent broker-dealers offer products including annuity products in addition to an insurer’s 

proprietary products. Some annuity carriers contract with independent “marketing organizations” that 

act as an intermediary between independent insurance agents and the annuity carrier. These marketing 

organizations may perform services such as agent recruiting, contracting, licensing, continuing 

education, and sales support. 

 Individuals that offer an insurer’s fixed annuities and other non-security annuity contracts must 

be appropriately licensed and appointed by the company. For an annuity that is a security (i.e. a variable 

annuity), the individual also must have a security license and also be properly registered with FINRA and 

applicable state security departments. Annuities that are securities may be offered through affiliated or 

non-affiliated broker-dealers. 

 As for the types of annuities that are offered and to whom they are offered, this varies. Some 

insurance companies only utilize agents whereas others utilize the full spectrum of agent and third party 

distribution partners. Sales of proprietary products may be more concentrated within an insurer’s career 

agent salesforce. Broker Dealers may sell annuity-based IRAs and nonqualified annuities to individuals, 

while annuity sales to qualified plans may be more concentrated in a smaller number of registered 

representatives. Bank channels may sell more fixed than variable annuity products while wirehouses 

tend to offer more variable products such as variable annuities with living benefits. However, there does 

not appear to be a consistent trend in the prevalence of the type of annuities that are offered through 

different distribution methods across insurers. 

 In our review of the BICE, by any measure, it is the most prescriptive exemption ever issued by 

the Department. We have a number of concerns regarding the BICE as proposed. Set forth below is an 
25 

explanation of these concerns, as well as recommendations for the Department’s consideration as to 

how the BICE could be modified. 

 The BICE imposes fiduciary status on insurers even when the insurer is not a fiduciary under the 

proposed definition. The proposed definition requires that a person both (1) provide a recommendation 

regarding an investment or financial professional (or offer and appraisal), directly to a plan or IRA owner 

and (2) acknowledge fiduciary status or provide advice pursuant to an arrangement or understanding. 

Under the BICE, a “Financial Institution” is defined as an entity that retains an Adviser who is an 

independent contractor, agent or registered representative. Financial Institutions do not provide advice 

directly to plans or IRA owners; as such, they would not be fiduciaries under the proposed regulatory 

definition. However, although not fiduciaries, Financial Institutions must nevertheless agree to be 

fiduciaries in order for the Adviser to take advantage of the exemptive relief of the BICE. As the BICE 

requires a contract be signed before a recommendation could be made, Advisers who conduct business 

with a variety of Financial Institutions and/or are retained by more than one Financial Institution will 

need to have the investor sign agreements with each and every one before they enter into a discussion. 

 Generally, if a fiduciary does not comply with the every requirement of the BICE, the fiduciary 

risks engaging in a prohibited transaction. However, certain requirements of the exemption are so 

ambiguous that it would be difficult for any fiduciary to confirm that she is in compliance with BICE. The 

Impartial Conduct Standard requires that the adviser and financial institution agree contractually that 

they will not recommend an investment if the total amount of compensation anticipated to be received in 

connection with the recommended transaction exceeds reasonable compensation in relation to the total 

services provided. ACLI is concerned that the use and meaning of “reasonable compensation,” which is 

not explained in the exemption, is intended to have some meaning other than as applied under the 

statutory exemption found at ERISA §408(b)(2) and the regulations promulgated thereunder. ACLI also 

questions the propriety of measuring the sum total of all compensation received in connection with the 

sale of a proprietary annuity product against the reasonable costs of services provided to the advice 

recipient. Insurance products include charges that are assessed not merely for the provision of services, 

but also for the provision of the guarantees and other financial benefits set forth in the insurance 

contract. Prohibited Transaction Exemption 84-24, which also contains a reasonable compensation 

condition, takes this incremental additional cost into account by including not just the costs of fees 

related to the provision of services but also the fees and other considerations received in connection 

with the purchase of the insurance or annuity contract for purposes of determining the reasonableness 

of total cost. ACLI urges the Department to extend this approach to the BICE. 

 The BICE requires advisers and financial services companies to represent that the investment 

will, in essence, meet the ERISA prudent man standard. As noted in an April 2005 article in the Journal 

of Pension Benefits, “The prudent man rule is only 42 words long, but it is the parent of scores of 

litigated cases and millions of words of analysis. Despite this volume of information the rule still creates 

confusion and discomfort. That is doubly true in the context of participant directed plans.” The Second 

Circuit Court of Appeals called the ERISA prudence standard “one of the highest duties known in the 

law”.18 To add additional untested and undefined standards to the prudence obligation leaves the 

overall requirements for the BICE so uncertain as to expose fiduciaries seeking to utilize the exemption 

to potentially enormous financial risks, the scope of which cannot reliably be estimated in light of the 

legal uncertainties introduced by the Department’s new language. These uncertainties are so great that 

many financial institutions may conclude that reliance on the BICE would itself be imprudent to the 

company’s other constituencies, including its other policyholders, its employees and shareholders. ACLI 

requests that, at a minimum, the changes recommended here be adopted and that the Department 

consider providing a detailed definition of each standard. 

 

18 See Donovan v. Bierwirth, 680 F.2nd 263, 272 n.8 (2nd Cir. 1982).
26 

A. The impartial conduct standards that form the foundation of the BICE are unacceptably 

ambiguous. 

 

1. The BICE is not clear as to which forms of variable compensation are permissible. 

 

 The BICE impartial conduct standards include two separate requirements that create 

unacceptable ambiguity as to whether the customary compensation practices would be permitted going 

forward. First, the BICE requires financial institutions to warrant that they do not pay their advisers 

differential compensation that would tend to incent the adviser to make recommendations that are not 

in the best interest in of Retirement Investors. Second, financial institutions are required to represent 

that the compensation received by the financial institution, the adviser, affiliates and related parties is 

reasonable for the services provided to the retirement investor. Furthermore, if the financial institution 

places limits on the investments it offers, then under Section IV of the exemption, the Department sets 

forth an even higher standard that requires the financial institution to justify each payment stream with 

separate and distinct services. These requirements are over and above the basic requirement that the 

adviser only make recommendations that are in the best interest of investors. These additional 

requirements under the BICE impartial conduct standards should be eliminated, sufficiently 

contextualized, or the extent of the obligations should be clearly defined. The Department states in the 

preamble to the exemption that the BICE is designed to allow continued receipt of commissions, yet the 

text of the rule does not create a clear, operational standard that accounts for the industry’s diverse 

business models. BICE ambiguity as to permissible compensation structures results in the courts or the 

Department, rather than the Retirement Investor or the market, deciding the manner in which a 

retirement investor can pay for services. Allowing a court or a regulator to decide after the fact whether 

differential compensation in the form of commissions satisfies this standard is plainly unworkable. 

 2. The prohibition on differential compensation should be eliminated. 

The Department describes the BICE exemption as a business model-neutral means by which a 

fiduciary may receive differential compensation without triggering a prohibited transaction. By the 

Department’s determination, the BICE “accommodates a wide range of current business practices while 

minimizing the impact of Conflicts of Interest...”19 However, in practice, the BICE is primarily suited for a 

business model that does not actually exist among insurance-based financial services institutions – one 

that does not pay advisers differential compensation for the sale of products. According to the BICE, 

“[n]either the Financial Institution nor (to the best of its knowledge) any Affiliate or Related Entity uses 

quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential 

compensation or other actions or incentives to the extent they would tend to encourage individual 

Advisers to make recommendations that are not in the Best Interest of the Retirement Investor. 

Notwithstanding the foregoing, the contractual warranty set forth in this Section II(d)(4) does not prevent 

the Financial Institution or its Affiliates and Related Entities from providing Advisers with differential 

compensation based on investments by Plans, participant or beneficiary accounts, or IRAs, to the extent 

such compensation would not encourage advice that runs counter to the Best Interest of the Retirement 

Investor (e.g., differential compensation based on such neutral factors as the difference in time and 

analysis necessary to provide prudent advice with respect to different types of investments would be 

permissible).” (emphasis added).20 Given this highly subjective, ambiguous text, this condition creates 

considerable uncertainty as to how the Department would interpret—after the fact—whether Financial 

Institutions used differential compensation, or took other actions, that “tended” to encourage “individual 

Advisers” to make recommendations that are not in the Best Interest of the Retirement Investor. This 

can be interpreted to require that each firm prove that the differences in the compensation received by 

the adviser and firm (e.g., commission rates, loads, third party payments, breakpoints, payout grids, etc.) 

amongst and within different products (e.g., stocks, bonds, annuities, mutual funds, etc.) are justified 

based on neutral factors (and are therefore in the client’s best interests) rather than set by the market. 

 

19 80 FR 21947 

20 80 Fed. Reg. at 21984. 
27 

The Department states in the Preamble that the BICE is designed to allow continued receipt 

of commissions, yet the text of the rule does not create a clear, operational standard that accounts 

for the industry’s broker-dealer models. In fact, the financial services industry is vast, the products 

are varied, and the distribution channels and compensation structures are far more complex than 

anticipated by the Department. This is evident, for example, in the “neutral” differential 

compensation models identified as permissible, such as models that compensate advisers based on 

“time and analysis” necessary to provide advice with respect to different types of investments, use a 

fee-offset model, or rely strictly on an “assets invested” calculation. These models are not currently 

employed by most insurers, and even if they were more clearly defined, could not be instituted 

without significant changes to the very core of their compensation models. The result is that middle 

class Americans could lose access to commission-based products, including annuities and mutual 

funds, the very products they should be invested in to fund their retirement. Currently, 98% of 

investor accounts with $25,000 or less in their IRAs are in brokerage relationships.21 This makes 

commission based accounts the most effective way for middle class investors to save for retirement 

and secure guaranteed lifetime income so that they do not outlive their retirement assets. 

In the preamble to the proposed BICE, there are a number of examples of how a firm may 

mitigate conflicts. We ask that, when issuing a final BICE, the following example be included to 

illustrate how a firm may reasonably mitigate conflicts when customary compensation differs based 

on products and services. As proposed, the BICE would not provide this firm any certainty as to 

whether compensation paid is permitted or prohibited. 

Example: Balancing of asset-based and commission compensation. The Financial Institution 

permits the Adviser to receive either a commission or asset-based compensation, but not both, 

for any single affiliated or unaffiliated investment product, provided however that only a 

commission may be paid with respect to an investment product with no account value, such as 

an immediate annuity or a qualifying longevity annuity contract (QLAC), unless an actuarial 

present value will be provided periodically by the contract issuer. The Financial Institution does 

not offer any investment product or alternative that pays a commission which materially exceeds 

the average commission rates for similar products (as determined through periodic market 

surveys or analysis), or for which the aggregate of product fees and account advisory fees would 

exceed the cost to the client of a comparable commissioned product available to the Financial 

Institution and the Adviser. The Financial Institution also encourages, but does not require, the 

use of financial plans applying generally recognized principles of retirement income planning, to 

determine an appropriate allocation to annuity contract income guarantees.

Under the Proposal, however, clients will likely be required to enter into a managed account (an 

account favored by the BICE) and such clients may find that managed accounts are the only accounts 

available in order to receive any guidance: 

x Advisory-fee based accounts typically require minimum investment of amounts between $50,000 

to $250,000 (depending upon the services and whether it is a retirement account). Thus, 

commission-based accounts are often the only way in which investors with less to invest can 

obtain any form of guidance. 

x Managed programs, which charge ongoing fees based upon assets under management, can be 

more expensive and are generally not a good choice for buy and hold investors, such as those 

investors who seek lifetime income guarantees. 

 

21 Oliver Wyman report: Assessment of the impact of the Department of Labor’s proposed “fiduciary” definition rule on IRA 

consumers, April 12, 2011, available at https://www.dol.gov/ebsa/pdf/WymanStudy041211.pdf. 
28 

x Annuities are generally sold on a commission basis and not in a managed account, decreasing a 

retiree’s opportunity for guaranteed retirement income. 

x FINRA and the SEC do not consider managed accounts suitable for investors who do not trade 

very often. The SEC encourages such investors to maintain brokerage accounts rather than 

paying an ongoing fee in an advisory account. 

The cost of losing access to retirement security products and services is not something American 

savers and retirees can afford. An Oliver Wyman study estimated that direct costs to savers who use 

brokers and are forced into managed accounts in order to continue to receive access to retirement 

products and services would increase from anywhere from 75 percent to 195 percent. In response to 

various stakeholders raising this concern, the Department has consistently assured Congress, 

consumers and financial professionals that their Proposal would not ban commission based products 

and services. The Department has essentially banned commission-based products and accounts by 

adding conditions that simply do not work for brokerage accounts and annuities. 

The current language regarding compensation models that “tend to” encourage conflicts should 

be eliminated. The standard is far too broad. Rather than forming the basis of an objectively 

determinable standard, this particular language assures subjectivity and confusion among plaintiffs, 

defendants and the courts themselves. We would suggest that the warranty section related to policies 

and procedures should be eliminated entirely. Firms will have sufficient incentive to adopt policies and 

procedures given the impartial conduct standard requirements of the contract. Adding additional 

requirements that create confusion and ambiguity related to commission-based sales is not helpful or 

necessary. The Impartial Conduct Standards and the other affirmations made under the Section II(d) 

Warranties provide extensive and sufficient consumer protections. These warranties include the 

disclosure of Material Conflicts of Interest. Thus, Section II(d)(4) is not only redundant, but unnecessarily 

creates uncertainty as to the utility of the BICE. This further supports the need to re-propose the 

exemption in a workable form. 

 ACLI recommends Section II(d)(4) be eliminated. 

 3. The Proposal should utilize one definition of reasonable “and customary” compensation. 

The Department uses three different formulations of the concept of “reasonable compensation” 

within the BICE creating unnecessary and harmful confusion. With respect to the “reasonable 

compensation” requirement under the BICE’s impartial conduct standard as well as the supposedly 

heightened standard found in Section IV of the BICE, we are concerned that the wording used by the 

Department seems to require fiduciaries to justify each third-party payment they receive in relation to 

specific services provided to a particular IRA owner or 401(k) participant. Consistent with revenue 

sharing practices used for many years in the 401(k) industry, it is common for providers, like brokerdealers, who offer IRAs to use third-party payments like revenue sharing and sub-transfer-agent fees to 

help pay for the platform and keep down direct costs to the clients. Due to economies of scale, these 

negotiations with the product providers are done at a book of business level, rather than at an individual 

investor level, and are based on the relevant negotiating powers of the parties. Third-party payments, 

like revenue sharing, are not typically paid to advisers so generally do not create a conflict under the 

differential compensation warranty mentioned above. Furthermore, it would be untenable to match up 

any particular payment to any particular investor. In fact, some investors may pay slightly more due to 

the funds they select while others may pay slightly less even though the services are basically the same. 

Higher net-worth clients with larger account balances subsidize those with more modest lower account 

balances. This subsidization permits investors with smaller balances to save for retirement at lower costs 

and is inherent in many investment products in the market place, including mutual funds, which by their 

very nature and purpose mutualize the costs of investing. We would appreciate the Department clarifying 

that such variances are reasonable by deleting the “in relation to the total services they provide to the 
29 

Retirement Investor” language in Section II(c)(2) and by deleting the supposedly heightened “reasonable 

compensation” provision in Section IV (we explain why the entire Section IV is misguided and should be 

deleted in its entirety later in this letter).

 Our members know of no repository, public or private, of information regarding market rates for 

various types of firms, advisers, investments, or services. Without a measurable standard, not only is 

the reasonable compensation standard meaningless, it is impossible to meet this standard with any 

degree of accuracy. Furthermore, the Department offers no proposed definition of reasonable 

compensation that would specifically offer us the opportunity to offer meaningful comment. Although the 

Department makes reference to reasonable compensation “under the circumstances” in the preamble, 

no such context is made part of the proposed exemption. Any such references presumably are to the 

standard generally applicable to fiduciaries when they are engaging a third party to provide a product or 

service to the plan. Such a fiduciary is generally expected to have a reasonable process for determining 

the reasonability of the compensation, whether based on multiple bids or otherwise. Under the 

Department’s Proposal, it is that same fiduciary – or plan participant or IRA owner – who will instead be 

challenging the reasonability of the compensation, and absent further clarification from the Department 

the fiduciary adviser will have no clear standard to assert in its defense, whatever the level of the 

compensation may be. The Department should confirm that a reasonable process for the investment 

advice fiduciary would be sufficient to establish that the fiduciary’s compensation is reasonable and 

customary. 

The concept of reasonable compensation is already inherent in ERISA, and is therefore 

redundant as part of the exemption as to retirement plans. ERISA section 408(b)(2) provides an 

exception for “reasonable arrangements” for necessary services for which no more than “reasonable 

compensation” is paid. While this standard does not apply to IRA plans, the Department would eliminate 

significant administrative duplicity by simply requiring a warranty with regard to reasonable and 

customary compensation – and an identifiable standard therefore – as part of the BICE as it applies to 

IRAs. 

With these points in mind, ACLI members recommend amending Section II(c)(2) as follows: 

“...., if the total amount of compensation anticipated to be received by the 

Adviser, and Financial Institution and, Affiliates and Related Entities in 

connection with the purchase, sale or holding of the Asset by the Plan, 

participant or beneficiary account or IRA, will exceed that which is reasonable 

and customary for the products and services provided reasonable compensation 

in relation to the total services they provide to the Retirement Investor; and 

comply with the following:” 

 4. The Structure of the BICE Makes Compliance Uncertain and Therefore, Unworkable 

 

The principles-based nature of the BICE creates considerable exposure for advisers seeking 

the protection of the exemption, rendering it unusable from a compliance standpoint. In order to 

meet the requirements of the BICE and avoid a prohibited transaction, fiduciaries would not only be 

required to contractually obligate themselves to act in the client’s best interest but would also have 

to comply with the best interest standard to avoid a prohibited transaction. This formulation makes 

it impossible for financial institutions to have confidence that they have ever met the conditions of 

the BICE and is unnecessary to protect retirement investors. By requiring a contractual obligation, 

the Retirement Investor will have a legally enforceable cause of action against a financial institution 

for breach of contract if the client is harmed by recommendations that were not in his or her best 

interest. This legal cause of action is what the Department claimed was necessary to protect 

Retirement Investors. However, the Department also makes compliance with the best interest 

standard a condition of the exemption itself. Because such compliance is purely subjective, financial 
30 

institutions will never be certain whether the conditions have been met and that no excise taxes are 

owed. Furthermore, the penalty for breach of contract will be to compensate the Retirement Investor 

for any harm suffered. The penalty for a prohibited transaction is an excise tax that is due regardless 

of whether any harm occurred. 

In addition, financial institutions are also required to warrant, or guarantee, certain 

conditions that are likely to be determined only in retrospect, such as: 

x That they are in continuous compliance with all state and federal securities laws, 

x That each “material” conflict has been identified and disclosed; and, 

x That they have personnel policies appropriately align with the Best Interest standard. 

If a court determines that a fiduciary breached any of these warranties, or even if a court 

determined that a fiduciary’s fees were “unreasonable”, the fiduciary could be subject to 

undeterminable monetary damages based on a new state-law contract right of action. Allowing 

courts to be determine ERISA fiduciary compliance in hindsight without any clear mitigation strategy 

is simply not an acceptable business model for any responsible ERISA fiduciary, and many advisers 

will strongly consider exiting the retirement market due to inability to properly assess the risks. 

Even in the absence of litigation, it is not clear that an adviser would be able to determine 

whether an excise tax is due. A fiduciary that takes reasonable measures to maintain reasonable 

fees may find that as market conditions shift, those fees may be deemed ‘unreasonable’ under the 

very same standard. As the law develops in this area, a fiduciary may find that her firms’ 

compensation practices may be deemed to inappropriately promote propriety products over nonproprietary products. It is unclear, under the BICE, whether this knowledge alone triggers an excise 

tax under Code section 4975, and an attendant duty to self-report. 

The language in the preamble to the BICE only adds to the ambiguity associated with 

compliance. The preamble states that the “effect of noncompliance with any condition [of the 

exemption] depends on whether the condition applies to a single transaction or multiple 

transactions. The compensation associated with the prohibited transaction, or segment of the 

prohibited transaction, would not receive the relief.”22 This language is wholly unhelpful in assessing 

compliance risk associated with the BICE. 

 As currently constructed, no fiduciary could ever be certain that the BICE applied to its advice, 

exposing fiduciaries to a punitive excise tax scheme even for an inadvertent failure to comply. There 

would be no need for the Retirement Investor to demonstrate that harm has occurred, or even to 

demonstrate that he or she did not benefit from the recommendation. 

 The BICE exemption should be overhauled to include bright-line rules for compliance and safe 

harbors that would allow a fiduciary, at the first instance, and a court, at the second, to determine when 

compliance is compromised. The impartial conduct standards that are not objectively measurable, such 

as whether a fiduciary has acted in the Best Interest of a customer, whether his or her compensation is 

reasonable, and whether a potential conflict is ‘material’ enough to trigger a disclosure requirement, 

should be made contractual representations, rather than conditions of the exemption. 

 

 

22 80 FR 21976 
31 

 At minimum, section II(c) of the BICE should be amended as follows: 

“Impartial Conduct Standards. The Adviser and the Financial Institution 

affirmatively agree to, and comply with, the following:” 

5. The definition of Financial Institution and the imposition of fiduciary status through the 

BICE, not the definition of fiduciary, are unacceptable. 

 Fiduciary status should be addressed by the definition promulgated under ERISA §3(21)(A)(ii) 

and not imposed as a condition of exemptive relief. Financial Institutions that do not provide advice 

directly to plans or IRA owners would not be fiduciaries under the proposed regulatory definition. 

Under the BICE definition, in addition to an employer of an Adviser, a Financial Institution is to 

include any entity that “otherwise retains such individual as an independent contractor, agent or 

registered representative...” Thus, firms that have granted the Adviser permission to sell products 

and who otherwise are not treated as fiduciaries under the ERISA or the proposed regulatory 

definition nevertheless must agree to fiduciary status under the BICE in order to sell products and 

allow the Adviser to obtain the relief provided by the exemption. This is the case despite the fact 

that they do not function as ERISA fiduciaries, do not directly control the actions of the Adviser, and 

have no ability to influence the Adviser’s recommendations. This is not acceptable. 

 Furthermore, the application of this particular provision of the BICE on Advisers that have 

numerous relationships with a number of entities including multiple insurance companies is not 

administratively feasible. An Adviser may serve as a licensed investment adviser for a registered 

investment advisory firm, a registered representative of a broker dealer, and a licensed insurance 

agent of an insurance agency. She may be an employee of one of these firms. She may have a 

variety of products to offer a customer from a multitude of product manufacturers. Under the BICE, 

the Adviser and every potential “Financial Institution” that may be a part of her discussion with the 

investor must enter into a contract with an investor prior to a recommendation and, as noted, the 

acknowledge status as a fiduciary. 

 ACLI recommends that the BICE definition of “Financial Institution” be limited to only those 

entities that are fiduciaries under the definition of fiduciary. Entities that, under the definition of a 

fiduciary, would not be treated as a fiduciary under the definition of fiduciary should be required to 

accept such status under the BICE. 

 Section VIII(e) of BICE should be revised to read as follows: 

“(e) "Financial Institution" means an entity that is an "affiliate" (as defined in ERISA 

§2510.3-21(f)(7)) of the Adviser who, together with the Adviser, functions as a 

fiduciary under ERISA §2510.3-21 for purposes of the covered transaction.” 

B. Even if the compliance ambiguities were clarified, the technical requirements under the BICE 

render the exemption unworkable in the absence of significant changes. 

 

Even aside from the compliance risks associated with the BICE, our members believe that 

they would not be able to preserve their current business models and rely on the BICE for a number 

of very fundamental reasons. Each of these reasons is itemized and reviewed in detail below. 
32 

1. The Best Interest contract standard as drafted is unduly restrictive and impractical. 

 

Section VIII(d) of the BICE states investment advice is in the ‘‘Best Interest’’ of the 

Retirement Investor when the Adviser and Financial Institution providing the advice act with the care, 

skill, prudence, and diligence under the circumstances then prevailing... without regard to the 

financial or other interests of the Adviser, Financial Institution or any Affiliate, Related Entity, or other 

party.23

This provision could easily be interpreted to imply that if an adviser has any financial interest 

in a retirement plan or IRA the transaction at all, he or she has violated the Best Interest standard. 

This includes having an interest in receiving any commission in any amount. This standard is more 

restrictive than even the standard for fiduciaries under ERISA, which the Department has recognized 

allows for certain incidental benefits due to the fiduciary’s relationship to the plan.24 While it is 

unlikely that the Department expects that advisers as fiduciaries could interact with any customer 

entirely without regard to whether or not they will be compensated, the definition should be 

amended to make this fact clear. 

The definition of Best Interest in Section VIII(d) should therefore be amended as follows: 

“...and needs of the Retirement Investor, without regard toplacing the 

interests of the Retirement Investor before the financial or other interest of 

the Adviser, Financial Institution or any Affiliate, Related Entity, or other 

party);”25

Corresponding revisions should be made to the following sections: 

Section II(c)(1): 

“...and needs of the Retirement Investor, without regard toplacing the 

interests of the Retirement Investor before the financial interests of the 

Adviser, Financial Institution or any Affiliate;” 

 Section IV(b)(4): 

“...and needs of the Retirement Investor, without regard toplacing the 

interests of the Retirement Investor before the financial or other interests of 

the Adviser, Financial Institution or any Affiliate, Related Entity, or other 

party) or otherwise adhering to the Impartial Conduct Standards;” 

 

2. The BICE pre-recommendation contract requirement is incompatible with customary 

business practices in the financial services industry, and is simply impracticable. 

 

As written, the BICE requires that a customer execute a contract prior to any discussion 

occurring. This requirement is inconsistent with the manner in which advisers currently conduct business 

– imagine walking into a store and being asked to sign a contract before you can view any of the store’s 

merchandise -- and creates significant operational challenges for most financial professionals’ business 

models. 

 

23 80 FR 21987 

24 See ERISA Advisory Op. 2001-01A (January 18, 2001). 25 We bring to the Department’s attention that the language of the preamble, which states that the Best Interest standard 

requires advisers to “put the interests of the Retirement Investor ahead of the financial interests of the Adviser”, which 

approaches the standard recommended by ACLI here. 
33 

 It is impractical for an investor to execute a legally binding contract before she can determine 

whether to do business with a financial professional. It is also impractical under standard corporate 

governance to have every employee of the firm and its affiliates enter into legally binding contracts on 

behalf of the firm. It is common that only those individuals at a relatively high level within the firm may 

execute contracts on behalf of the firm. Furthermore, the BICE would require a contract between the 

investor and each employee at the firm who may be treated as a fiduciary under the broad terms of this 

Proposal. As a practical matter, we expect the public would not find this to be a positive customer service 

experience. We request that a contract issued by the fiduciary or the fiduciary’s employer concurrent 

with a transaction executed through negative consent be sufficient. 

Additionally, financial professionals generally begin their discussions with a new customer with a 

general consultation. This consultation may include a sales pitch in some form. It may also involve an 

offering of basic, high-level suggestions regarding investment strategies as a way to demonstrate their 

competency and communication style. The customer has an opportunity to ask questions about the 

adviser and to assess whether the services that the adviser offers meet his or her individual financial 

needs. The adviser may offer a pre-analysis with suggested approaches based on preliminary financial 

data from the potential customer. The adviser will also surmise whether the customer meets the 

adviser’s customer criteria. Only after the parties agree that the relationship would be mutually 

beneficial would the adviser then take the first “live order” and enter into an engagement agreement. 

Requiring advisers to enter into an agreement during the first meeting in which a potential 

“recommendation” is made is far too early in the relationship, and would require contracts to be 

executed prior to an adviser having a conversation about what products and services the adviser has to 

offer. ACLI members propose that the exemption require any contract to be executed within a 

“reasonable period of time” before or after the commencement of any trading or transaction activity. In 

order to protect prior recommendations, the contract could contain a provision that retroactively applies 

the Best Interest standard to any recommendations made prior to execution. The contract would provide 

that fiduciary status would affix concurrently with the receipt of compensation to the adviser. 

In addition to creating operational difficulties for new customers, the need for a prerecommendation contract will frustrate the use of the BICE by financial institutions that employ staff 

to engage with benefit eligible participants seeking lump sum distributions. These interventions 

result in assets remaining in plans or in the savings system via rollovers, and reduce retirement plan 

leakage. A retro-active contract executed once the transaction commences would therefore preserve 

plan assets as well. 

3. BICE contracts should be subject to negative consent and should not require the Adviser 

to be a party. 

 

The exemption should allow for negative consent to the BICE contract as the Department 

requires the key terms of the contract to favor the investor. In addition, the requirement that the 

adviser also be a party to the contract is inconsistent with industry practice, is unnecessary and 

would create operational headaches that would not benefit anyone. As long as the financial 

institution is a party to the contract and takes responsibility for the actions of its advisers then there 

would be no additional protection provided to the retirement investor by having the adviser be a 

party to the contract. However, it would be extremely difficult to operationalize this requirement 

where a retirement investor works with multiple advisers. Take for example a financial institution 

that provides plan participants or IRA owners with recommendations through a call center. Would 

each phone representative have to be a party to each contract or would calls have to be directed to 

the adviser or advisers that were a party to the contract for that particular plan participant or IRA 

owner? Either way, if there is any level of turnover then the contract would need to be amended to 

add new advisers on a constant basis. Even with respect to advisers who work in a close one-on-one 

basis with retirement investors it has become more common for these advisers to work in a team 
34 

practice with advisers that specialize in different products and issues. Such a team practice 

environment acknowledges the difficulty in being an expert at everything and should be encouraged 

as it benefits retirement investors. However, it creates the same problem as the call center example 

above as turnover on teams is to be expected particularly as younger advisers decide to start up 

their own practices and are replaced with new advisers. For these reasons we respectfully request 

that the Department change the requirement to require that only the financial institution be a party 

to the contract. 

4. The narrow scope of the exemption will eliminate an adviser’s ability to provide advice to 

certain small plans and plan participants eligible for a distribution. 

 

 As it is currently written, the BICE is not available for fiduciaries that provide advice to small 

participant-directed plans. Clearly, the employers that offer these plans should have the same access to 

advice that is in their best interest as any other employer. There does not seem to be any policy reason 

to exclude these employers from receiving the guidance they currently enjoy and expect to continue to be 

available in the future. ACLI members request that these plans be included so as to not be inadvertently 

disadvantaged. 

 In addition, under the Proposal, recommendations to distribute benefits and/or rollover benefits 

are fiduciary recommendations regardless of whether the recommendation identifies specific 

investments to purchase or sell. In Section I of this letter, we recommend a change to the definition of 

fiduciary that treats a distribution recommendation as advice only when it is in conjunction with a 

recommendation regarding the disposal or exchange of an investment. Should the Department refrain 

from incorporating our suggested change, we ask that the BICE be extended to distribution and rollover 

recommendations. 

 

5. The BICE has implications under Investment Advisers Act for agents and brokers that 

enter BICE agreements acknowledging fiduciary status. 

 Investment Advisers Act of 1940 (the “Advisers Act”) establishes a clear line between selling 

agents who are primarily in the business of selling securities for a commission and investment advisers 

who offer advice regarding investments and receive a fee for their expertise in that regard. Under the 

Advisers Act, anyone who is in the business of providing investment advice for compensation must 

register as an investment adviser.26 However, in order avoid an overly broad application of the law, the 

Advisers Act specifically excludes certain individuals, companies, and services from coverage and 

registration. These include lawyers, accountants, engineers, and teachers who provide investment 

advice that is solely incidental to the practice of their profession; publishers of a bona fide newspaper, 

magazine, or financial publications that may include investment advice; and any broker or dealer whose 

performance of advice services is solely incidental to the conduct of his business, and who receives no 

special compensation therefore.27

 Insurance-based broker-dealers have carefully complied with this requirement, taking great pains 

to provide no more than incidental advice in order to avoid the need to submit to the SEC’s regulatory 

scheme under the Advisers Act. The BICE will call these efforts into question, at best, and may 

involuntarily make broker-dealers subject to the Advisers Act, at worst. BICE will require broker-dealers 

to admit fiduciary status at the outset of any sales transaction, irrespective of whether any investment 

advice provided by the broker is incidental to the sale of a product. This admission of fiduciary status 

will likely cause the broker-dealer to fall outside of the current Advisers Act exception for non-fiduciary, 

 

 

26 Section 202(a)(11), Investment Advisers Act.

27 Certain Broker-Dealers Deemed Not To Be Investment Advisers, Investment Advisers Act Release No. 2376 (Apr. 12, 2005) 

(“Release 2376”), available at http://www.sec.gov/rules/final/34-51523.pdf. 
35 

“incidental” advice, and may obligate the broker monitor that advice on an ongoing basis. This will be 

the case despite the fact that most investors do not expect, or may not want to pay additional fees for 

such monitoring by a broker-dealer who is primarily a sales agent. 

Ultimately, the true impact of the required fiduciary declaration under the BICE for Advisers Act 

purposes will rest with the SEC. Given this potential conflict between the BICE and the Advisers Act, ACLI 

encourages the Department to coordinate with the SEC as part of the BICE comment and review process 

in order to manage this conflict. If the fiduciary declaration requirement is made part of the final BICE, 

ACLI further requests that the Department work with the SEC to issue guidance contemporaneous with 

the final BICE that offers comfort that broker-dealers will not be subject to statutory investment adviser 

status by seeking the protection of the exemption. 

 

6. The exemption’s requirements for advisers that offer a limited range of investment 

options or proprietary products render it unfeasible. 

 

 ACLI members recommend that the Department eliminate the requirements in Section IV, 

instead, require the fiduciary to disclose to the investor if the fiduciary offers only certain types of 

investments or proprietary products and whether the fiduciary is subject to any other limits on its advice 

recommendations. 

 The exemption currently requires a financial institution to offer a range of investment options 

that is broad enough to enable the adviser to make recommendations from all of the asset classes 

reasonably necessary to serve the investor’s Best Interest. This requirement is simply unfeasible in 

a number of respects. We have several concerns with this requirement. 

 First, this suggests that the BICE is not available to financial institutions that specialize in 

one type of product or investment. For instance, a broker who specializes in international bonds 

would apparently not be able to use the BICE even if they were willing to be held to a best interest 

standard when selling those bonds to an IRA or retirement plan. Second, the Department has not 

identified any objective standard for determining what this test would require. Our members feel 

strongly that they do offer a broad range of investment options such that advisers can make 

recommendations in the best interest of clients. However, subsection (b) provides additional rules 

where an investment provider has limited the Assets available for purchase, sale or holding based on 

whether the Assets are Proprietary Products, generate Third Party Payments, or for other reasons. It 

is not clear how subsections (a) and (b) are meant to work together. We would note as a threshold 

matter that we know of no Financial Institution that makes every Asset available for purchase. On 

the other hand, virtually every Financial Institution makes a range of investment options that is broad 

enough to permit advisers to make recommendations in the best interest of clients. Thus, it is 

entirely unclear whether anyone or everyone is required to meet the heightened requirements of 

subsection (b). 

 To the extent that subsection (b) is determined to apply, our members assert that it is 

inappropriate, at best, for the Department to require an investment provider to offer any specific product 

or range of products, or to require an adviser to disclose if the he or she does not offer every product 

ever made available in the marketplace. Insurers, as product providers, and agents and brokers who 

sell these products should have the freedom to choose what products are offered without an undefined 

disclosure that the products offered are “limited,” especially if the product recommended meets 

customer needs. For broker dealers, the discrimination regarding products offered is the result of careful 

due diligence and vetting for FINRA Rule 2111 suitability standards, and is not a reflection of a lack of 

prudence in recommendation of securities. Even if an institution is a fiduciary, the decision by a 

financial institution to decide which products or investment funds to offer on its platform is a settlor 

function. Based on a firm’s individual business models, risk profiles, and particular customer-bases, 

each firm makes its own independent determination as to which products to offer. 
36 

 Second, the impartial conduct standard of Section II already requires the adviser to make 

recommendations that are in the best interest of the client and the reasonable compensation provision 

requires that the total compensation paid by the retirement investor is reasonable in light of the services 

they have received. It is difficult to understand why the Department feels it necessary to layer on even 

more requirements unless it is to make absolutely sure no firm that sells proprietary products or receives 

third party payments can use the exemption. If that is the Department’s intent, then the Department 

needs to do so in a transparent manner so that financial services firms can have a meaningful 

opportunity to comment. Furthermore, the reasonable compensation requirement at Section IV(b)(2) 

differs from all of the other instances in which reasonable compensation applies within the Proposal, the 

BICE and other prohibited transaction exemptions including ERISA §408(b)(2). This particular 

requirement is not business model neutral, but rather envisions the deconstruction of products and 

services into a la carte offerings. How one will determine the fair market value of a 1-800 call center, 

internet or mobile app account service? If such services are made available, but not used, have they 

been “specifically provided?” 

7. The required BICE disclosures should be harmonized with other disclosures. 

 

 The Department should consider the effects of its proposed BICE disclosures on plan 

participants and IRA owners. The BICE disclosures are to be delivered in addition to all other 

applicable disclosures required by ERISA and other federal and state law. At the very least, the 

Department should seek to align the BICE requirements with ERISA’s existing disclosure regime. 

ACLI members would propose substantial changes to the initial, annual, point-of-sale, and website 

disclosures required under the exemption. The insurance and financial services industries have 

consistently supported disclosure requirements to mitigate potential conflicts. We also believe that 

markets should hold firms accountable to ensure that fees are reasonable. However, firms do not 

currently have the capabilities necessary to comply with the disclosure rules. Much of the 

information requested by the Department does not exist in the format requested or must be 

obtained from third parties, such as fund manufacturers. For liability reasons, it would be 

inappropriate for advisers and firms to deliver third-party data on projected costs, for instance, 

without any way to verify that data. In addition, the disclosures may be cost-prohibitive for small 

firms to develop a disclosure system that would comply with the exemptions’ requirements, limiting 

annuity sales opportunities for those institutions. 

We are particularly concerned about the annual disclosure because it requires the disclosure 

of all compensation paid to the adviser and financial institution. The requirement is so broad that 

the Department has not been willing to state that it would not require the disclosure of spread 

revenue. Spread revenue is earned by financial institutions in a wide range of products including 

bank deposits, corporate bonds, and fixed accounts within both fixed and variable annuity products. 

No financial institution can determine the exact amount of spread revenue it has earned over any 

particular period not should it have to. The Department has consistently, and appropriately, 

considered spread revenue to be outside the term “compensation” because it is more accurately 

considered to be akin to investment earnings. The financial institution takes on risk and if it 

successfully manages that risk it earns spread revenue. However, in some cases the financial 

institution may experience risk losses and lose revenue. The Department should clarify in BICE that 

spread revenue is not compensation that the financial institution must disclose on an annual basis 

or on its website. 

Second, it will be extremely difficult if not impossible for firms to identify the total indirect 

compensation paid by each retirement investor on its platform. In particular, it will be extremely 

expensive for financial institutions to track the movements of each retirement investor’s account and 

then match up the retirement investor’s holding each day with the internal expense ratio of each 
37 

investment. Such detailed disclosure is not required under the Department’s 404(a)(5) disclosures 

presumably because it would be too costly yet the Department somehow thinks it would be feasible 

under the BICE. 

Third, the website disclosure would require the development of a website that included 

specific information related to every investment available on the financial institution’s platform. For 

many brokers, this would require disclosure at the CUSIP level of thousands and thousands of 

individual stocks, bonds, mutual funds, ETF’s, variable annuities, etc. Even worse, because the 

website must include specific information related to how much an adviser is paid on each of these 

individual CUSIPs, a financial institution would likely have to create a separate website disclosure for 

each financial adviser! This could mean the creation of 10,000 websites for a financial institution 

who compensates advisers differently depending on a number of factors. This is not some 

hypothetical issue but rather the customary way that brokers pay their registered representatives 

today. 

 Fourth, the reporting obligations of Section IX are truly unprecedented. We particularly object to 

the concept of the Department gathering account level data related to our customers (including unique 

identifiers necessary for the Department to track each client’s individual returns and tie those returns to 

their adviser) and then reserving the right to publish that data aggregated at an adviser level. The idea 

that the Department would identify individual advisers on its website along with the rate of return of the 

advisers’ client is truly misguided. We note that the Department has not requested any specific 

information related to the adviser’s clients that might be helpful in informing an opinion as to whether 

the adviser is doing a good job for each client. For instance, the Department is not looking for the age or 

risk tolerance of the adviser’s clients, whether the adviser made any recommendations to the client 

and/or whether the client followed such recommendations, or whether other factors might have played a 

role in the returns such as an investment strategy that was otherwise sound but did not work well in a 

particular market environment. Instead, the Department appears satisfied to use such data to impugn 

the reputation of any adviser whose clients experience a lower return than the clients of other advisers 

even when that adviser provides services to more conservative investors. The Department should not 

take any step that may discourage advice that includes a recommendation to invest in a fund with low 

risk/return characteristics. 

 Even if the Department did not threaten to publish the data, the mere collecting of client 

data is very troubling. Given recent headlines related to data held by the federal government that 

was hacked by third parties, we suspect that many investors will be concerned that their data is 

being handed over to the federal government. 

 

 Information disclosures should be meaningful and actionable for retirement investors. The 

current disclosures under ERISA sections 408(b)(2) and 404(a)(5) should, in fact for point of sale 

purposes, suffice for many accounts. Those disclosures require detailed information regarding 

“reasonable compensation,” much of which overlaps with the information requested under the BICE. 

Additionally, the annual disclosures required under Form 5500 Schedules A and C are not 

coordinated with the newly required annual disclosures in the BICE. Complying with the disclosure 

requirement by referencing existing ERISA disclosures will reduce the potential for investor 

information overload, and will make it more likely that investors will recognize the importance of the 

disclosure regime that the Department has worked very hard to develop for the retirement plan 

market. 

 To the extent that existing ERISA disclosures are not sufficient (for instance, in the IRA 

context), the Department should harmonize BICE disclosures with other disclosure regimes already 

existing in the securities industry. For instance, advisers should be permitted to disclose information 

requested by reference to documents such as the Form ADV disclosure, the prospectus, the NSCC 

database, some variation of the “compensation grid” used by used by a firm or adviser, the 
38 

SEC/FINRA “fund analyzer”, and certain private, independent 3rd party data sources on variable 

annuities. 

 

 Regarding IRAs, the Department should consider harmonizing the BICE point-of-sale disclosure 

requirements with current IRA disclosure requirements under Treasury Regulation. §1.408-6. We 

understand that the Department may be reluctant harmonize BICE disclosures with the current 

compensation and fee disclosure requirements issued pursuant ERISA section 408(b)(2), since these 

requirements apply only to plans, not IRAs. However, because IRAs are already subject to a separate, 

comprehensive cost and fee disclosure regime under Internal Revenue Service regulations, we 

encourage the Department to harmonize the BICE point-of-sale disclosures for IRAs with these existing 

rules. 

 Pursuant to Treasury Regulation §1.408-6, IRA providers must give IRA owners certain 

disclosures upon the establishment of an IRA and periodically thereafter. The regulations require 

providers to issue a disclosure statement and a copy of the governing instrument to the owner at 

establishment of the IRA, and to update these later with any amendments. The disclosure statement 

must set forth, in nontechnical language, concise explanations of the requirements of Code section 408, 

the income tax consequences of establishing the account and certain statements regarding the 

consequences of engaging in a prohibited transaction. 

 In addition, the disclosure statement must also contain a financial disclosure explaining the 

potential value of the account at various points in the future. The disclosure must comply with different 

rules depending on whether any assets are subject to guaranteed contracts. If no amount is guaranteed 

under the account and no projection can be made, the financial disclosure must assume level annual 

contributions of $1,000 and must describe, in nontechnical language, (1) each type of charge (and 

amount) which may be made against a contribution, (2) the method for computing and allocating annual 

earnings, and (3) each other charge which can be applied to the account in determining the net amount 

of money available to the IRA owner. 

 These existing disclosure requirements for IRAs approximate, in streamlined form, the 

information required under proposed BICE point-of-sale disclosure requirements. Allowing this 

disclosure (or a substantially similar form of this disclosure) to stand as the point-of-sale disclosure for 

IRAs under the BICE achieves the Department's goals of making the total cost of the IRA "clear and 

salient" to the Retirement Investor, providing cost information that can be compared across different 

Assets, an informing the Retirement Investor of the impact of costs for the IRA over time. In addition, 

these disclosures would be combined with the disclosures required for the underlying investments, such 

as mutual funds, to provide even greater cost transparency for IRA owners. 

 ACLI members have been encouraged by recent statements from the Secretary suggesting that 

the Department will work to deliver finalized guidance that "accomplishes [the Proposal's] goals in the 

simplest, least burdensome way for all concerned". We encourage the Department to take a small step 

forward in this vein by harmonizing the BICE point-of-sale disclosure requirements with the existing IRA 

disclosure requirements under Treasury Regulation §1.408-6. 

 

8. Forego a “low cost” prohibited transaction exemption. 

 

 We agree with the Department’s repeated caution to plan fiduciaries that fees are a 

consideration but certainly not the only consideration, and we believe that caution answers why a 

low cost prohibited transaction exemption would be inappropriate. The only rational response to 

such an exemption would be for a fiduciary to avoid offering certain services and products in order to 

achieve the fee level required for the fiduciary to rely on the low cost prohibited transaction 

exemption. Not only would that be a grave error on its own, it would substantially reduce the 

likelihood that critical retirement lifetime income guarantees would be available to individual plan 
39 

participants and IRA owners. Rather than push for a streamlined exemption for the types of 

investments the Department may favor at this time, we would urge the Department to resist the urge 

to pick winners and losers and rather let the market decide which products should be offered in the 

marketplace. We believe the Department should work to make the BICE a streamlined and workable 

exemption. 

9. The BICE language, at various points, should be amended to target actual, rather 

than perceived, conflicts. 

 It is common for a plan sponsor to designate a menu of plan investments from which 

participants and beneficiaries may select. In so doing, a responsible plan fiduciary must determine 

whether the compensation to be received by the financial institution providing such investments 

receives reasonable compensation for its services. We suggest that when advice is provide to plan 

participants and beneficiaries regarding the plan’s designated investments, there is no need for 

fiduciary advisers to second guess the plan’s determination regarding the reasonableness of any 

compensation to be received. 

 We recommend Section II(c)(2) be revised as follows: 

“... regarding the Asset other than an Asset which is a designated 

investment alternative under the Plan, ....” 

 State law bars insurers from making false statements. Clearly, statements on which an 

investor relies for her investment decision must not mislead. However, the phrase “relevant to a 

Retirement Investor” raises a subjective rather than objective analysis of whether or a particular 

statement is “misleading.” 

 

We recommend Section II(c)(3) be revised to provide greater certainty as to 

the exemption relief offered by the BICE: 

 

“(3) The Adviser’s and Financial Institution’s statements about the Asset, 

fees, Material Conflicts of Interest, and any other matters relevant to 

reasonably relied upon by a Retirement Investor’s when making an 

investment decisions, will are not be misleading. 

V. The proposed transition rule should be revised and expanded. 

 We urge the Department to make application of a final regulation, including changes to 

prohibited transaction exemptions (particularly PTE 84-24) prospective only to apply to fiduciary advice 

with respect to retirement accounts opened or insurance contracts issued after the regulation’s 

compliance date. Prospective application would allow for continued ongoing customer assistance for 

existing accounts. This is particularly important for commission-based annuity contracts, as retirement 

investors may have already paid for services. If the Proposal is applied retroactively, annuity owners 

would incur additional expense to transition to fee-based arrangements. For IRA owners with variable 

annuity contracts sold in reliance on PTE 84-24, the Proposal does not provide recourse for advisors and 

investors who have relied on this exemption in good faith. Without a reasonable grandfather provision, 

IRA owners may be compelled to surrender their annuity contracts to obtain advice. 

 While ACLI appreciates that the Department has included a form of transition relief in its 

BICE proposal, such relief is extremely narrow, and it is questionable whether it provides any 

meaningful relief beyond what would be provided by operation of law. 
40 

 First, transition relief should be provided for excluded assets. Investments that do not meet 

the definition of “Assets” under the BICE may not be liquid and readily sold. As a result, financial 

institutions will have no way to dispose of these assets prior to the effective date of the new 

regulatory regime. Even when liquid, financial institutions generally do not have discretionary 

authority to sell out an investor’s account. The only way for an institution to “get rid” of these 

investments is to resign as the IRA custodian which may result in a taxable distribution and 

potentially a 10% early withdrawal penalty. It seems unlikely that this is the intent of the Proposal, 

yet there is no discussion of this issue in the preamble or regulatory impact analysis. 

 At a minimum, fiduciaries should be able to make sell and hold recommendations on any 

investments that the Department excludes from relief under the BICE, to the extent that the excluded 

assets were purchased before the regulation became effective. Furthermore, to the extent that the 

excluded asset includes rights that are appurtenant to the investment, fiduciaries should be able to 

provide recommendations related to the exercise of those rights as long as the fiduciary does not 

earn additional compensation related to such recommendations. 

 Second, relief is needed for existing customers who reject the Best Interest Contract. When a 

new contract requirement is imposed, it is inevitable that there will be some percentage of 

customers that will not sign or agree to the new contract. Even if the Department permits negative 

consent as we have requested, there may be agreements in place that do not permit amendments 

via negative consent. Transition relief is necessary to permit the financial institution to amend 

existing contracts or bring an orderly close to these accounts. 

 Third, if transition relief is not expanded, investors will be unable to obtain any information 

about existing products from service providers unwilling or unable to service in an ERISA fiduciary 

capacity. 

VI. Eight month delayed applicability date is unreasonable. 

 Assuming the substantial modifications necessary to make the exemption workable raised here, 

compliance with the Proposal will be a major undertaking for financial institutions and advisers. The 

Proposal will not be administrable within the proposed applicability date of 8 months from the 

publication of a final exemption. ACLI recommends the Department provide at least three (3) years for 

the public to digest the final rule and the final exemptions, including the final amended PTE 84-24 (the 

Department plans to provide at least 140 days for a review of the Proposal), plan and implement 

changes to comply with the rule including the development and implementation of proper disclosures, 

the training of advisers to ensure compliance with each of the conditions, a review of all marketing 

materials, and the building appropriate supervisory procedures. Of note, the Department provided two 

years from the publication of interim final regulations under ERISA Section 408(b)(2) and the effective 

date of final regulations. 

VII. The cost-benefit analysis in the Proposal is deficient. 

 Congress, courts, and the executive branch of government have issued unequivocal guidance 

mandating thorough, objective cost-benefit analysis in rulemaking. Collectively, these standards ensure 

that federal agencies “strike the right balance,” and develop “more affordable, less intrusive rules to 

achieve the same ends--giving careful consideration to benefits and costs.”28 Notwithstanding its 

extensive “regulatory impact analysis,” the Department of Labor failed these standards by overstating 

benefits, understating costs, and disregarding harm to small retirement plans. Our suggested revisions 

 

28 Op-Ed, President Barak Obama, Toward a 21st Century Regulatory System, Wall Street Journal (Jan. 18, 2011). The 

President’s Op-Ed coincided with his issuance of Executive Order 13,563, which set strict standards for cost-benefit analysis in 

federal agency rulemaking. 
41 

to the rule rectify these shortcomings, and more accurately balance benefits against costs. The costbenefit standards and deficiencies are explained below. 

A. Executive, statutory and judicial precedent. 

 Executive branch mandates for cost-benefit analysis began in 1981 with Executive Order 12,291 

that created a new procedure for the Office of Management and Budget (OMB) to review proposed 

agency regulations, and ensured the president would have greater control over agencies and improve 

the quality and consistency of agency rulemaking. Cost-benefit analysis formed the core of the review 

process. The order unambiguously stated that “regulatory action shall not be undertaken unless the 

potential benefits to society for the regulation outweigh the potential costs to society.”29 Regulatory 

agencies, therefore, must balance the benefits of proposed rules against their costs. 

 In 1993 Executive Order 12,866 superseded the 1981 order, but retained cost-benefit analysis 

as a fundamental requirement in rulemaking. Executive Order 12,866 instructs that “in deciding whether 

and how to regulate, agencies should assess all costs and benefits of available regulatory alternatives, 

including the alternative of not regulating.”30 In a manner parallel to the 1981 order, Executive Order 

12,866 advises that agencies must perform their analysis and choose the regulatory approach that 

maximizes net benefits.31

 President Obama reaffirmed the importance of cost-benefit analysis in 2011 through Executive 

Order 13,563, and reinforced the core principles in Executive Order 12,866 by emphasizing that “each 

agency must . . . propose or adopt a regulation only upon a reasoned determination that its benefits 

justify its costs.”32 Importantly, five administrations between 1981 to present have consistently made 

cost-benefit analysis a threshold for federal agency rulemaking. 

 The OMB provided federal agencies with extensive guidance to perform cost-benefit analysis in 

its Circular A-4.21 C33, which identifies three fundamental elements to federal agency rulemaking: (i) a 

statement of the need for the proposed regulation; (ii) discussion of alternative regulatory approaches; 

and, (iii) an analysis of both qualitative and quantitative costs and benefits of the proposed action and 

the leading alternatives. The analysis should attempt to express both benefits and costs in a common 

measure—monetary units—to facilitate the assessment. When benefits or costs cannot be quantified in 

monetary terms or in some other quantitative measure, the agency should describe them qualitatively.34

 The Administrative Procedure Act (APA) provides comprehensive standards governing federal 

agency rulemaking, and includes guideposts for judicial review of agency rulemaking under an arbitrary 

and capricious threshold. The Regulatory Flexibility Act (RFA) of 1980 (5 U.S.C. §§601-612) requires 

federal agencies to assess the impact of their forthcoming regulations on “small entities,” which the RFA 

 

29 46 Fed. Reg. 13193, 13193 (Feb. 17, 1981). 

30 Exec. Order No. 12,866, 3 C.F.R. 638 (1993). 

31 The 1981 and the 1993 executive orders emphasize different approaches to the same cost –benefit end. The 1981order 

required that the benefits “outweigh” the costs, while the 1993 order required only that the benefits “justify” the costs. See 

generally Peter M. Shane, Political Accountability in a System of Checks and Balances: The Case of Presidential Review of 

Rulemaking, 48 ARK. L. REV. 161, 176-78 (1994) (comparison of 1981 and 1993 executive orders with additional detail and 

observing that the 1993 “order focuses on a similar mandate, but describes it with greater nuance”). 

32 Exec. Order 13,563, § 1(b), 76 Fed. Reg. 3821 (Jan. 18, 2011). The order further notes that “each agency is directed to use 

the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” 

Additional analysis of this order can be found in Helen G. Boutrous, Regulatory Review in the Obama Administration: CostBenefit Analysis for Everyone, 62 ADMIN. L. REV. 243, 260 (2010). 33 Office of Mgmt. & Budget, Circular No. A-4, Regulatory Analysis (Sept. 17, 2003), last available at http:// 

www.whitehouse.gov/OMB/circulars/a004/a-4.pdf. OMB invited full public comment on his 48-page circular in draft form, 

which contains detailed instructions about conducing cost-benefit analysis, and provides a standard template for running the 

analysis. 

34 To ensure that agencies properly perform cost-benefit analysis and select the most cost-effective regulatory options, OMB and 

the White House Office of Information and Regulatory Affairs (OIRA) review agency cost-benefit analysis before proposed 

regulations become effective. 
42 

defines as including small businesses, small governmental jurisdictions, and certain small not-for-profit 

organizations. Under the RFA, cabinet agencies must prepare a “regulatory flexibility analysis” when final 

rules are issued. The RFA requires the analysis to describe, among other things, (1) reasons why the 

regulatory action is being considered; (2) small entities to which the proposed rule will apply and, where 

feasible, an estimate of their number; (3) projected compliance burdens of the proposed rule; and (4) 

any significant alternatives to the rule that would accomplish the statutory objectives while minimizing 

the impact on small entities. 

In three significant cases involving SEC rulemaking beginning in 2005, the Court of Appeals for 

the District of Columbia Circuit overturned major rules due to the SEC’s failure to conduct adequate costbenefit analysis which the court viewed as arbitrary and capricious actions contrary to the mandates of 

the APA.35 The holdings depart from the court’s traditionally more deferential approach to review of 

agency rulemaking in other administrative law contexts and provide a template for measuring 

appropriate cost-benefit analysis in federal agency rulemaking. These three rulings are significant 

because they were rendered by the federal court that typically reviews agency actions and, thus, serves 

as a touchstone for appropriate federal rulemaking in general. Additionally, the rulings provide an 

avoidable roadmap to litigation for insufficient cost-benefit analysis in rulemaking. On June 29, 2015, 

the U.S. Supreme Court underscored the primacy of a carefully balanced and quantified cost-benefit 

analysis in federal agency rulemaking. 36 In sum, therefore, the guidance established by statutes, 

executive Orders, and seminal recent court cases strongly warrant a more carefully balanced and 

detailed cost-benefit analysis before the Proposal moves forward.37

B. Measuring the regulatory impact analysis against executive, statutory and judicial 

precedent. 

 The Proposal was accompanied by a 243 page “regulatory impact analysis” and seven 

supporting documents.38 While significant in length, this cost-benefit analysis is fundamentally flawed in 

several significant respects, particularly as it pertains to variable annuities. 

 The Department justifies its Proposal with the claim that there is a “substantial failure in the 

market for retirement advice”.39 The Department’s analysis fails to prove this assertion and contains at 

least three significant flaws which undermine its proposed solution. Specifically, the regulatory impact 

analysis: (1) calculates the cost of conflicted advice and the benefits of the proposed rule through 

selective and imbalanced use of academic studies of mutual funds that are misinterpreted and 

misapplied to the entire market for retirement advice; (2) overlooks the negative impact of the proposed 

 

35 See Chamber of Commerce v. SEC, 412 F.3d 133 (D.C. Cir. 2005), Am. Equity Inv. Life Ins. Co. v. SEC, 613 F.3d 166 (D.C. Cir. 

2010), and Bus. Roundtable & U.S. Chamber of Commerce v. SEC, 647 F.3d 1144 (D.C. Cir. 2011). In the Business Roundtable 

and US Chamber of Commerce case, the D.C. Circuit overturned proxy access Rule 14a-11 adopted by the SEC in August 2010. 

The court determined that the SEC's failure to "apprise itself—and hence the public and the Congress—of the economic 

consequences of a proposed regulation" made promulgation of the rule arbitrary and capricious and not in accordance with law. 

The American Equity case involved the SEC’s adoption of Rule 151A under the Securities Act of 1933 which provided guidance 

as to whether fixed index annuities were entitled to rely on the exclusion provided under Section 3(a)(8) of that act. The court 

indicated that the SEC did not disclose a reasoned basis for its conclusion that Rule 151A would increase competition and the 

SEC did not make any finding as to existing level of competition in the marketplace under state insurance law regimes or the 

efficiency of existing state insurance law regimes. The Court remanded Rule 151A back to the SEC for “reconsideration,” solely 

because it found that the SEC had not given proper consideration to the rule's effect on “efficiency, competition, and capital 

formation” in the annuity industry. 

36 Michigan v. EPA, No. 14-46 (June 29, 2015) http://www.supremecourt.gov/opinions/14pdf/13-1314_3ea4.pdf. In this case, 

the Court sent a rule under the Clean Air Act back to the EPA to objectively quantify and balance the benefits and costs under 

the rule before it could become operative. 37 See generally Peter M. Shane, Political Accountability in a System of Checks and Balances: The Case of Presidential Review 

of Rulemaking, 48 ARK. L. REV. 161, 176-78 (1994). 38 Department of Labor documents pertaining to the proposed rule can be found here: 

http://www.dol.gov/ebsa/regs/conflictsofinterest.html. 39 U.S. Department of Labor, “Fiduciary Investment Advice: Regulatory Impact Analysis”, April 14, 2015, p. 7. 
43 

rule on lower-wealth investors, the likelihood that the supply of financial advice will decline and price of 

advice increase, and the increased costs inflicted on employer plan participants; and, (3) bases 

estimates of direct costs of the Proposal on inadequate and incomplete data and insufficient 

consideration of the time required to implement changes necessary to comply with the Proposal. 

 Additionally, though the proposed rule and cost-benefit analysis mention annuities a total of 172 

times and acknowledge that “31 percent of IRAs include investments in annuities” (p. 54) and that 

“insurance companies [will] be significantly affected by the proposal” (p. 56), the cost-benefit analysis 

makes no attempt to examine the impact of the proposed rule on insurers, the annuity market, or on the 

availability of lifetime income, nor does it attempt to assess the value of variable annuities or their role in 

retirement security. 

1. The statement of potential benefits is flawed. 

The Department justifies the need for the proposed rule based on a selective review of six 

refereed studies and three working papers (see pp. 95-96 of the CBA for the complete list of studies),40 

Though the primary justification of the proposed rule is the elimination of conflicts of interest, the 

Department admits that “[n]one of these papers attempts to detect some major possible sources of 

underperformance of IRA assets attributable to conflicts of interest” (p. 97). The studies do, however, 

focus on either the returns of load vs. no-load mutual funds or the returns of broker-sold vs. direct-sold 

mutual funds. Most of these studies found that during the period under consideration broker-sold frontload mutual funds (which comprise only about 13 percent of the IRA market) may not have performed as 

well as other funds and that direct-sold mutual funds may have performed better than broker-sold 

mutual funds. None provide support for the assertion that fiduciary-advised accounts perform better 

than other types of accounts. The Department relies on these very narrowly focused studies as proof of 

market failure and does not utilize other bodies of work which would be useful for their analysis, such as 

the literature on the benefits of using a financial adviser.41 

 Based on the cited studies, and on the assumption that IRA holders who purchase broker-sold 

front-load mutual funds received conflicted investment advice which resulted in lower returns,, the 

Department determined that investors holding such funds can expect their investments to underperform 

by an average of 100 basis points annually. Using this figure and implicitly assuming that this level of 

underperformance will continue and that investors will not adjust their portfolios, the Department 

concludes that “underperformance associated with conflicts of interest -- associated with the mutual 

fund segment alone -- could cost investors more than $210 billion over the next 10 years and nearly 

$500 over the next 20 years (p. 13).”42 The Department contends that if the Proposal is adopted and 

conflicted advice eliminated, costs would be lowered, and IRA investors would benefit by “approximately 

$40 billion over 10 years and almost $90 billion over 20 years (p. 101).” 

 

40 A comprehensive review of the studies referred to in the DOL's CBA can be found in: Berkowitz, Jeremy; Comolli, Renzo; 

Conroy, Patrick, “Review of the White House Report Titled ‘The Effects of Conflicted Investment Advice on Retirement Savings’”,

NERA Economic Consulting, March 15, 2015. 

41 Montmarquette, Claude; Viennot-Briot, Nathalie, “The Value of Financial Advice”, Annals of Economics and Finance, vol 16., 

no. 1, pp 69-94, 2015. This study finds that over the course of several years, investors who use advisers obtained greater 

returns than those who don’t. For an explanation of the role and value of life insurance agents in assuring retirement security, 

see: Rosh, Robert M., “Death of a Salesman: The Rise and Unfortunate Potential Demise of the Full-Time Life Insurance 

Salesman”, St. John’s Law Review, vol. 88, Winter 2014, No. 4, pp. 985-1021. 42 Throughout their analysis the Department provides a very wide range of cost estimates associated with conflicted advice and 

with the benefits of the proposed rule. On the lower end, the Department estimates that the “expected gain would total 

between $20 billion and $22 billion over 10 years (p. 108)”. On the higher end, the Department estimates that “under current 

rules, advisor conflicts could cost IRA investors as much as $410 billion over 10 years, and $1 trillion over 20 years (p. 8)”, and 

that “underperformance associated with conflicts of interest ... could cost IRA investors $210 to $430 billion over the next 10

years and approximately $500 billion to $1 trillion over the next 20 years (p. 211)”. In a related analysis, the Council of 

Economic Advisors estimates that conflicted advice costs investors $17 billion annually. 
44 

 There are, however, at least three major weaknesses in relying on these studies and estimating 

the benefit of the proposed rule based on their results. First, all of the studies use data from the 1990s 

and early to mid 2000s. This is highly problematic because competition has significantly increased in 

recent years, driving down fees. In effect, the market has changed such that any analysis based on old 

data is in no way applicable in the current market and should not be used to formulate or substantiate 

regulations. For example, contrary to the findings of the cited studies, by some estimates, front-load 

fund shares sold between 2007 and 2013 outperformed Morningstar average returns for all funds with 

similar objectives by 27 basis points per year.43

 Secondly, none of the cited studies examine a representative sample of investor portfolios

through time, but rather the performance of one type of mutual fund at one point in time. The relative 

performance of only one type of fund in a given year offers a very limited view of the world. By relying 

solely on the cited studies to formulate the cost estimates of conflicted advice and benefit estimates of 

the proposed rule, the Department implicitly assumes that all investors, whether using a broker or not, 

are “buy and hold” investors. This is not a realistic assumption. In a competitive market, if returns are 

low investors will eventually shift their assets to more appropriate funds. Ideally, the performance of 

representative samples of entire portfolios which would include various types of funds and annuities, 

through time, should be considered. Such an approach would more properly control for critical 

additional factors, including demographics, wealth, investor sophistication, and different levels of risk 

tolerance, generating a more accurate analysis of the market. Although the working paper by Chalmers 

and Reuter cited in the Department analysis consider portfolio-level data, their sample is not 

representative of the US population -- and their data is unacceptably stale.44 Chalmers and Reuter 

examine defined contribution plan accounts of faculty and administrators employed by the Oregon 

University System from 1996 to 2007. This is hardly representative of the general U.S. population today. 

 Finally, though results may be fairly consistent with regard to front-load mutual funds sold 

through broker-dealers in the 1990s and part of the 2000s, the results concerning other types of 

investments, such as revenue-sharing mutual funds, are much less conclusive. In fact, Christoffersen, 

Evans, and Musto (2013), a study the Department analysis relies upon most heavily and which appears 

to underpin all of the Department’s benefit estimates, do not contain strong evidence of a negative 

relationship between broker-sold revenue-sharing mutual funds and performance, suggesting that the 

Department may have selectively used more favorable results to estimate the benefit of the proposed 

rule. For these reasons, the cited studies should not be used to justify the need for, or determine the 

potential benefits of, the proposed rule and should not be relied on to formulate well-intentioned rules 

which can, in fact, have a detrimental impact on plan participants, particularly retirees and pre-retirees, 

as well as the financial services industry overall. 

2. The Proposal inflicts an “advice gap” on individuals who can no longer obtain 

financial advice. 

 

 In the Proposal, the Department acknowledges that a comprehensive analysis of the proposed 

rule “would consider pure social welfare costs – that is, reductions in economic efficiency – which are 

not the same as simple compliance costs (p. 99)”. Although the Department analysis evaluates indirect 

effects and social welfare implications, including the impact on supply and demand for advisory services, 

it does so inadequately and unrealistically. 

 

 

43 Statement of Brian Reid, Chief Economist, Investment Company Institute, Hearing on “Restricting Access to Financial Advice: 

Evaluating the Costs and Consequences for Working Families and Retirees”; Subcommittee on Health, Employment, Labor, and 

Pensions’ Committee on Education and the workforce; United States House of Representatives, June 17, 2015. 

44 Chalmers, John; Reuter, Jonathan, “What is the Impact of Financial Advisors on Retirement Portfolio choices and Outcomes?”, 

working paper, May 6, 2014.
45 

 The Department cost-benefit analysis asserts that: 

“Advisers can provide the same quality of advice while receiving non-conflict-based payments as 

they can when receiving a payment of equal amount based in conflict. The cost of advice 

depends primarily on the resources necessary to provide it ... rather than the form of the 

adviser’s compensation. Thus, an adviser receiving payment through non-conflicted structures 

should be able to provide advice at the same cost as an adviser receiving conflicted payments, 

as long as the inputs in time and infrastructure are equal (p. 217)”. 

 It is unclear why the Department assumes that inputs in time and infrastructure would be equal 

or that the market for financial advice would not change. The price of financial advice is determined by 

supply and demand. The time, resources and financial burdens of complying with the proposed rule will 

be greater than under current regulations. This, along with the increased risk of litigation, will induce 

some advisers to leave the business, lowering supply and increasing the price of advice. This will be 

particularly true of life insurance agents, a very large percentage of whom are nearing retirement age. 

Because consumers will face a higher price, many will be priced out of the market and may face the 

prospect of retirement planning without a financial professional. The advisers who remain in business 

are more likely to focus on wealthier customers. An increase in the cost of advice and fewer financial 

professionals will most impact small account IRA rollovers, the segment of the market the Department is 

most concerned with. In fact, most IRA rollovers are for small amounts. In 2013, 61.4% of IRA rollovers 

were for amounts less than $50,000 and 75.1% were under $100,000.45 Almost half (47.8%) were for 

amounts less than $25,000. 

Though the cost-benefit analysis claims the opposite, there is compelling evidence that following 

the introduction of the Retail Distribution Review (RDR) in the U.K., which the Department extols in 

support of the Proposal, a significant percentage of small investors were priced out of the market and 

are now considered ‘stranded customers’. Due to the parallels between the Proposal and the RDR, the 

same regrettable consequences may also occur in the US due to the Proposal if adopted. 

 In June 2006 the United Kingdom’s financial regulator, the Financial Services Authority (FSA), 

created its Retail Distribution Review (RDR) program with the intention of enhancing consumer 

confidence in the retail investment market and eliminating ‘conflict risk’. In June 2007, the principal 

discussion paper on RDR was published, and on December 31, 2012, the RDR was implemented. The 

RDR has three general components: (1) a clear division between independent and restricted advice; (2) 

a ban on commissions; and, (3) greater minimum qualifications for investment advisers and a 

requirement that knowledge be maintained. Critics were concerned that the RDR would inherently 

change the incentives faced by investment advisers resulting in fewer advisers and a shift in focus 

toward high net worth investors, resulting in an ‘advice gap’ and a large number of ‘stranded customers’. 

Their assessment was correct. 

 Though the RDR was implemented at year-end 2012, the UK’s financial services industry was 

adjusting to the coming changes in the years leading up to implementation. The number of investment 

advisers was steadily declining pre-RDR. According to the Association of Professional Financial Advisers 

(APFA), in 2010 there were 43,937 investment advisers in the U.K. and by 2013 there were 31,132, 

almost a 30% decline. This decline can be primarily attributed to the new qualification standards and 

the ban on commissions, and to many older advisers choosing to retire earlier than they had planned 

rather than navagate the new system. 

 There is also evidence that there is indeed a growing ‘advice gap’. According to data collected by 

the APFA, in the years leading up to the implementation of RDR, about two-thirds of financial product 

sales took place with the help of an adviser. By 2012/2013 (the latest data available) this had declined 

 

45 Copeland, Craig, Individual Retirement Account Balances, Contributions, and Rollovers, 2013; With Longitudinal Results 

2010-2013: The EBRI IRA Database, Employee Benefit Research Institute, no. 414, May 2015. 
46 

to half and has likely declined since. This is further supported by the results of an annual survey 

conducted by Mintel, a well-respected marketing research firm. Mintel has administered an annual 

survey of retail financial advice for U.K. investors since 2009. Their data shows that the number of 

investors who received financial advice in the wake of the RDR regulation has declined dramatically (see 

table below). In fact, about half as many investors get advice from the largest advice channel in the U.K. 

than before the regulations took effect, and the second largest channel has been on a downward trend 

since the RDR was implemented on December 31, 2012. 

Financial Advice Usage in the U.K.* 

Year Bank or 

Building 

Society 

Staff/Adviser 

Independent 

Financial 

Adviser or 

Planner 

Total 

2009 32.0% 22.0% 54.0% 

2010 28.0% 24.0% 52.0% 

2011 29.0% 14.0% 43.0% 

2012 31.0% 12.2% 43.2% 

2013 24.5% 17.3% 41.8% 

2014 20.3% 14.7% 35.0% 

2015 16.0% 12.2% 28.2% 

 *Source: Mintel. Survey response to “which of 

 the following, if any, have you used for financial 

 advice in the last 3 years?”. 

 A recent City University of London study noted that “the unintended consequences of the RDR 

initiative, accompanied by rapid change in technology and social media, is likely to further extend the 

‘advice gap’, leaving aside those who have too few assets to merit attention from professional advisers, 

though they may well be in need of financial advice. This is an undesirable outcome (see Clare, Andrew; 

Thomas, Stephen; Walgama, Omal; Makris, Christina, “The Impact of the RDR on the UK’s Market for 

Financial Advice: Challenge and Opportunity”, Cass Consulting, Cass Business School, City University of 

London, June 2013). 

 An August 28, 2014 story by Morningstar UK reported that “eleven million investors consider 

financial advice too expensive and have fallen through the ‘advice gap’ following industry regulation”, 

and that “some investors prefer not to have an upfront cost for financial advice – as this prices them out 

of the advice market. Investors with a portfolio of £10,000 for example would understandably be 

unwilling to hand over a tenth of their assets for an initial consultation cost – whereas the old advice 

model which took out of the profits along the way would be easier to swallow”. 

 Even regulators have admitted that there is a growing advice gap. According to a September 10, 

2013 Financial Times report, “FCA chief executive Martin Wheatley has admitted ‘concern’ over the postRDR advice gap”. According to Wheatly “it is a concern that people with portfolios below £50,000 to 

£100,000 are not getting the same service they were getting...most advisers have worked out you can’t 

provide a fully advised service without five or six hours work and that costs money. Therefore we are 

seeing less of that model but we are seeing more web-based, entrepreneurial models delivering advice 

in a different form.” In fact, automated ‘web-based’ advice is being aggressively pushed by the UK 

regulator, though it is likely not a good substitute for face-to-face advice or for “five or six hours of work” 

by an investment professional. 

 

 
47 

Though seemingly upbeat in it’s assessment, in a recent post-RDR review, the UK’s Financial 

Conduct Authority concluded that “by revealing the true cost of advice, the RDR has led some consumers 

to consider the extent to which the advice they receive represents value for money, and in some cases 

conclude it does not” (see: Financial Conduct Authority, “Post-Implementation Review of the Retail 

Distribution Review – Phase 1”, December 2014). A related analysis by the firm Europe Economics finds 

that “...advice can be seen as a credence good, with its fundamental quality difficult for the consumer to 

assess ex ante – or even ex post. This means that there is a scope for advisers to compete on measures 

which consumers believe are good proxies for quality, but which may not in fact be reliable indications of 

underlying quality”, and that “[f]irms are increasingly segmenting their consumers and considering the 

service they provide to different groups of consumers, with some focusing on services to those with 

higher levels of investible assets” (see: Europe Economics, “Retail Distribution Review: Post 

Implementation Review”, December 16, 2014). 

 Several years ago the European Union Directorate General on Internal Markets and Services 

considered a ban on commissions in the insurance market. The EU asked the consulting firm PWC 

Luxembourg to conduct a study, part of which considered the impact of different solutions to conflicts of 

interest and remuneration.46 The study concluded that a ban on commissions could have a negative 

impact on consumers and would create an information gap. Due in part to that experience, a European 

standard setting group has declined to uniformly impose a ban on commissioned sales, and chose 

instead to leave the commission issue to each state. 

 The Department acknowledges that comment letters on its 2010 proposal made a case that the 

initiative would result in diminished access to investment advice, particularly for low-balance savers, but 

appears unconcerned with this possibility, suggesting that ‘robo-advisers’ will fill any gaps that result 

from the proposed regulation. 47 However, robo-advisers are a new and untested method of providing 

financial advice and are not necessarily more cost-effective than in-person advice.48 At year-end 2014 

robo-advisers managed only $19 billion in assets, compared to $24.7 trillion in total U.S. retirement 

assets, about 0.077% of the market or 77 cents out of every $1,000.49 

 There are no rigorous, refereed studies examining whether a robo-adviser is a good substitute for 

a human being. Numerous scholarly studies have shown, however, that there are clear positive effects 

from dealing with a human adviser, such as: encouragement to save more, less speculative trading, a 

more diversified portfolio, and greater discipline when faced with a volatile market. In fact, during 

financial downturns and market volatility, investors turn to human advisers for reassurance and are 

typically dissuaded from emotional investing. Because it is so recent, robo-advising has only been in 

existence during a bull market. It is unclear how this system would fare in a downturn. Depending on 

how many people utilize such a resource, there could be systemic implications which would be 

particularly devastating to retirees and pre-retirees, as well as the economy as a whole. 

 As noted above, the proposed rule will significantly increase the costs and risks associated with 

selling and marketing to small employers (99 employees or less). Life insurers provide products and 

services to 31.8 million employer plan participants, about 35% of the entire market. About 60% of plan 

participants who work for a small employer (7.1 million employees) rely on life insurers for products and 

services.50 Virtually all small plan participants will be adversely impacted by the proposed rule. 

 

46 PriceWaterhouseCoopers, Study on the Impact of the Revision of the Insurance Mediation Directive (ETD/2007/IM/B2/51): 

Final Report, Prepared for the European Commission DG Internal Market and Services, May 23, 2011. 47 See Regulatory Impact Analysis at p.109. 48 Fox, Justin, “Investing: Inside the Robo-Adviser Wars”, Bloomberg View, July 9, 2015. 49 This assumes that the entire $19 billion were retirement assets. It is likely that considerably less than $19 billion is in roboadviser IRAs. See ICI and www.wsj.com/articles/putting-robo-advisers-to-the-test-1429887456 and 

http://www.forbes.com/sites/samanthasharf/2015/01/28/can-robo-advisers-survive-a-bear-market/. 50 Based on a 2015 ACLI survey of life insurers. Survey respondents represent 81% of industry assets. 
48 

3. Insufficient analysis of direct costs. 

 

 The Department estimated that the cost of complying with the proposed rule would range from 

$2.4 billion to $5.7 billion over ten years, and assert that the higher end of the range is likely an 

overestimate. Shockingly, these estimates are based on two comment letters from trade associations 

(neither of which represent the life insurance industry), one of which is admittedly a rough estimate 

based on a survey of only 18 members and which was discounted by the Department because “the data 

appear to significantly overstate the cost of compliance”.51 Relying on two comment letters and entirely 

ignoring the implementation and compliance cost imposed on the life insurance industry to estimate the 

cost of significant new regulation on a $24.7 trillion industry is wholly insufficient. Further, the likelihood 

that a greater regulatory burden and new administrative and compliance costs would negatively affect 

positive innovation is not sufficiently considered in the initiative. 

 Additionally, the cost-benefit analysis does not adequately consider the time needed to 

implement the changes required to comply with the proposed rule. According to a recent industry 

survey, on average, life insurers will require at least 24 months to fully implement changes necessary to 

comply with the proposed rule, with 20% of companies requiring at least 36 months. 

4. The cost-benefit analysis does not consider annuities. 

 

 One element of the Department’s regulatory impact analysis calculates the burden of fees and 

charges on the performance of selected investments. However, the Department’s analysis does not offer 

any direct evidence on the costs of conflict related to variable annuities, but rather applies academic 

studies on mutual fund costs to variable annuity products held in IRA accounts. In effect, because the 

Department presents no empirical analysis of any costs of conflicted advice for variable annuity 

products, the many cost estimates provided are not relevant to this sector of the market. 

 The Department also does not consider the benefits of variable annuity products for IRA holders. 

Variable annuities are not simply investments, but rather insurance products which can ensure wellbeing and financial security for life. According to a 2013 Gallup survey, 87 percent of annuity owners 

intend to use their annuity as a financial cushion for living beyond their life expectancy.52 Variable 

annuities offer consumers a variety of insurance features, including the option of enhanced death 

benefits, accrual guarantees, and lifetime withdrawal benefits. Customers actively and voluntarily 

choose to elect various combinations of features tailored to their specific insurance needs and risk 

profiles. Survey data shows that annuity owners are pleased with the products they purchase. 

According to a recent LIMRA study, the vast majority of variable annuity owners are satisfied with their 

annuity, and five out of six deferred annuity owners would recommend an annuity to their family and 

friends.53 Additionally, a recent study by Towers Watson found that among retirees of similar wealth and 

health characteristics, those with annuitized incomes are happiest.54 Much like buying a house or 

choosing where to send your children to college, choosing the right annuity requires time, education, and 

guidance in order to make the right decision. The current Proposal may effectively eliminate or curtail 

these services. 

 As is the case in any competitive market, the costs of the variable annuity products vary in 

relation to the number of features selected. Some consumers choose to pay more in order to have 

greater risk protection and insurance benefits. According to a recent, ongoing study which relies on a 

unique sample of contract-level variable annuity qualified account data from 13 life insurance 

 

51 See DOL cost-benefit analysis p. 157 for details. 52 From: the Gallup Organization and Matthew Greenwald and Associates, 2013 Survey of Owners of Individual Annuity 

Contracts (conducted for the Committee of Annuity Insurers). 

53 LIMRA International, “LIMRA Secure Retirement Study: Knowledge of Annuities Boosts Ownership”, October 20, 2014.

54 Nyce, Steve; Quade, Billie Jean, “Annuities and Retirement Happiness”, Towers Watson Insider, September 2012. 
49 

companies representing over 25% of the variable annuity industry, and which includes a representative 

sample of over 237,000 individual contracts, 40% variable annuity customers have chosen a living 

benefit, about one-third elected some form of enhanced death benefit, and 7% explicitly included an 

accumulation guarantee benefit which may guarantee growth rates or lock-in returns during the 

accumulation phase, before the owner chooses to annuitize.”55 

 Concerning surrender charges associated with insurance products like annuities, it appears that 

the Department presumes that: (1) all annuities have surrender charges; (2) all surrenders are for the 

full amount of the annuity; (3) annuity contracts never waive surrender charges in cases of hardship 

(such as serious illness or entering a nursing home); and, (4) surrender charges are applied 100% of the 

time. None of these presumptions are correct. In fact, if an annuity has a surrender charge it is 

contingent and incurs only if a contract is discontinued before the conclusion of the surrender period, 

which typically is about seven years. 

 In order to offer guarantees, protection, and insurance features, insurer’s are required to set 

aside reserves and hold capital. Given the nature of how insurers are required to invest and the nature 

of guarantees they offer, it is reasonable to discourage withdrawals for a period of time. Thus, if an 

annuity has a surrender charge, and if the contract owner does not surrender the contract prematurely, 

surrender charges will not be incurred. In fact, very few contract holders pay surrender charges. Based 

on contract-level data collected from life insurers, a recent ongoing study has found that 17.8% of 

annuity contracts do not have surrender fees and that a large majority of companies offer at least some 

contracts with no surrender fees. Of those contracts which do have surrender fees, when a surrender or 

withdrawal occurs over 75% of annuity owners do not pay any surrender fees (i.e. the median surrender 

fee paid is 0%).56 Surrenders can be full, where the entire account is withdrawn, or partial, where only 

some portion of the account is withdrawn. Considering only partial surrenders, 81.7% paid no surrender 

fee. The average fee paid for all surrenders was 0.84% and for partial surrenders only 0.39%, 616 bps 

and 661 bps below the 7.00% the Department suggests is the norm. It is also important to note that, in 

the database referred to above, 100% of the firms that offer policies with surrender charges in the 

sample considered allowing contract holders to withdraw some percentage of their account balance 

each year with no fee. Additionally, in the sample, most firms that offer policies with surrender charges 

allow contract holders a contingency event waiver in the event of healthcare emergencies such as being 

checked into a nursing home. 

 Additionally, allegations of ‘churning’ also appear to be unfounded. According to the study 

referred to above, less than 2% of contracts issued in 2012, 2013, 2014, or 2015 have been fully 

surrendered. These findings demonstrate that the Department’s assumptions regarding surrender 

charges are grossly overstated and inflate the Department’s conclusions. 

C. The Proposal unacceptably excludes the protections of the current regulatory framework 

from its quantification of need. 

 In its justification for the Proposal, Department asserts that current regulatory protections are 

inadequate to address Department’s concerns about advice to retirement plan participants. We disagree 

with the wholesale disregard of detailed systems of significant protection from the analysis of regulatory 

need. The scope of the Proposal can be responsibly tempered with an objective integration of these 

fundamental protections and prophylactics in the redesign of the Department Proposal. It is contrary to 

the guiding statutory, executive, and judicial standards to impose new and redundant elements 

governing advice to plan participants that are already served quite well under complementary patterns of 

significant regulation. 

 

55 NERA study, forthcoming. 

56 NERA study, forthcoming.
50 

 A detailed regulatory framework governs conduct in the sale of insurance products. A brief 

synopsis about these requirements provides helpful background to the issues under study. Life 

insurance companies and their associated persons currently fulfill a broad array of regulation 

administered by state insurance departments, the Securities and Exchange Commission (SEC), the 

Department, the Financial Industry Regulatory Authority (FINRA), and various state securities 

departments. 

 We offer input about this comprehensive regulatory framework to provide background for 

evaluating the benefits, needs and the costs of the Department Proposal. Business conduct standards 

regulate important aspects of the customer relationship, including suitability standards, disclosure, 

advertising, supervision, maintenance of customer account assets, data collection, training, 

compensation, and supervision of associated persons. In general, the federal securities laws and FINRA 

rules govern individual variable insurance contracts, and state insurance laws and regulations apply to 

fixed insurance products. In some cases, insurance products invoke both federal and state laws. 

Collectively, this body of regulatory provisions and oversight provide important consumer protection and 

strong enforcement tools. 

 We have attached an Appendix to highlight the extensive network of laws and regulations 

governing insurance product sales activities. Laws and regulations most relevant include: 

x The NAIC Suitability in Annuity Transactions Model Regulation; 

x FINRA Rule 2330 governing suitability and supervision in the sale of variable annuities; 

x FINRA Rule 2320 governing non-cash compensation for variable products and mutual funds; 

x The NAIC Annuity Disclosure Model Regulation; 

x The NAIC Model Replacements Regulation, and state insurance regulations such as New 

York Regulation 60 which governs replacements; 

x The NAIC Unfair Trade Practices Act and the prohibition on “unfair financial planning 

practices;” and, 

x State insurance consulting laws governing the simultaneous receipt of product commissions 

and fees for insurance consulting services. 

 Life Insurers provide significant written disclosures at the point of sale to satisfy multiple 

regulators’ requirements and to help customers understand the nature of their various products and 

relationships. These disclosures include many product related materials (insurance sales illustrations, 

policy contracts, required “buyers guides,” prospectuses), marketing materials describing the firm’s 

offerings, documents that provide the terms for a brokerage or advisory relationship (brokerage account 

agreements, advisory account agreements, Form ADV, investment policy statements), and other required 

disclosures. There also is a considerable amount of post-sale disclosure depending on the nature of 

products and services provided, such as in-force insurance ledgers, transaction confirmations, periodic 

performance reporting for investment accounts, and updated Form ADV brochures. Several state and 

federal laws are designed to ensure appropriate sales practices and suitable recommendations 

consistent with customers’ financial objectives and best interests. 

 Insurance products are the only products in today’s financial marketplace with free-look 

provisions extending for 10, or more, days. These features give consumers a meaningful opportunity to 

carefully evaluate purchases after the sale and to change their mind for any reason, including cost 

factors, to receive a refund. 
51 

D. The status of non-cash compensation regulation. 

 Discussion surrounding the Department Proposal has referenced inappropriate influences of 

non-cash compensation. Many of the observations reflect isolated circumstances and appear ignorant of 

significant constraints on non-cash compensation practices. A brief explanation about the standards 

governing non-cash compensation may illuminate objective analysis leading to more balanced revisions 

to the Proposal. 

 Life insurers comply with regulations that regulate permitted non-cash compensation practices. 

FINRA Rule 2320 applies to broker-dealers selling variable insurance contracts and mutual funds, 

respectively, and limit non-cash compensation to: (1) gifts of up to $100 per associated person annually; 

(2) an occasional meal, ticket to a sporting event or theater, or comparable entertainment; (3) payment 

or reimbursement for training and education meetings held by broker-dealers or issuers/sponsors for the 

purpose of educating associated persons of broker-dealers, so long as certain conditions are met; (4) inhouse sales incentive programs of broker-dealers for their own associated persons; and, (5) 

contributions by any company or other FINRA member to a broker-dealer’s permissible in-house sales 

incentive program, subject to the following explicit conditions: 

x Non-cash compensation arrangements between a broker-dealer and its associated persons or a 

company and its sales personnel who are associated persons of an affiliated member, are 

conditioned on (1) the member's or non-member's non-cash compensation arrangement, if it 

includes variable contract securities, is based on the total production of associated persons with 

respect to all variable contract securities distributed by the member; (2) the non-cash 

compensation arrangement requires that the credit received for each variable contract security 

is equally weighted; (3) no unaffiliated non-member company or other unaffiliated member 

directly or indirectly participates in the member's or non-member's organization of a permissible 

non-cash compensation arrangement; and (4) the record keeping requirement in the rule is 

satisfied. 

x With regard to training and education meetings, the rule imposes strict additional conditions that 

require associated persons to obtain their broker-dealers’ prior approval to attend the meeting 

and that (1) attendance by a member’s associated persons is not conditioned by the brokerdealer on the achievement of a sales target or any other incentives pursuant to a non-cash 

compensation arrangement permitted by the rule; (2) the location is appropriate to the purpose 

of the meeting, which shall mean an office of the offeror or the broker-dealer, or a facility located 

in the vicinity of such office, or a regional location with respect to regional meetings; (3) the 

payment or reimbursement is not applied to the expenses of guests of the associated person; 

and, (4) the payment or reimbursement by the offeror is not conditioned by the offeror on the 

achievement of a sales target or any other non-cash compensation arrangement allowed under 

the rule. These limitations successfully assure that training and education meetings are 

appropriate. 

 Rule 2320 requires broker-dealers to maintain records of all non-cash compensation received by 

the broker-dealer or its associated persons in permitted non-cash compensation arrangements. The 

records must include: the names of the offerors, companies or other broker-dealers making the noncash compensation contributions; the names of the associated persons participating in the 

arrangements; the nature and value of non-cash compensation received; the location of training and 

education meetings; and any other information that proves compliance by the broker-dealer and its 

associated persons with the rule. 

 
52 

 Life insurers support the spirit and purpose of Rule 2320, and actively participated in its 

development through comment letters and constructive suggestions to achieve an effective, consumerprotective regulation.57 ACLI regularly compiles and digests all FINRA disciplinary actions to capture data 

involving the distribution of variable products and broker-dealers affiliated with life insurance 

companies. In a survey of the past five years, there have been no reported disciplinary actions involving 

non-cash compensation associated with insurance product sales. These results demonstrate that FINRA 

Rule 2320 works efficiently and effectively. 

E. Commissions compared to fee-only investment advice.

 The Proposal is founded on a premise that commissioned products influence advisers to provide 

conflicted advice to the detriment of retirement plan participants. As such, the Proposal elevates feebased advice and automated robo-advice systems as preferable alternatives because they are cheaper 

and aligned with the interests of retirement plan participants. These premises are incorrect in many 

cases. Recommendations under the Proposal may generate the least expensive product that may 

actually disserve and impair the participant’s best interests. While fee-based or automated advice is 

appropriate for some individuals, it is not necessarily appropriate for all. 

 In truth, financial product recommendations and associated compensation arrangements are 

most objectively evaluated according to the unique facts and needs of each financial customer and the 

individual compensation arrangement. Financial advisers who obtain their compensation through annual 

fees based on assets under management (“wrap fees”) would not likely recommend certain commissionbased products, like annuities, because that purchase is not generally included within the assets under 

management on which the annual, recurrent fees are assessed by this type of fee-based financial 

adviser. Recurrent annual fees may be ill-suited to individuals with moderate assets needing little annual 

advice, and may exceed the total value of a commissioned-based adviser. 

 FINRA issued guidance about fee-based arrangements, recognizing that while fee-based 

programs are beneficial for some customers, “they are not appropriate in all circumstances.”58 FINRA 

instructs that 

Firms must consider the overall needs and objectives of the customer when determining the 

benefits of a fee-based account for that customer, including the anticipated level of trading 

activity in the account and non-price factors such as the importance that a customer places on 

 

 

57 In a similar regulatory vein, New York Insurance Code Section 4228 permits certain non-cash compensation practices for 

life insurance policies and annuities. New York Insurance Code Section 4228(e)(6) provides that: 

A company, including any person, firm or corporation on its behalf or under any agreement with it, may pay or award, 

or permit to be paid or awarded, prizes and awards to agents and brokers pursuant to a plan of agent or broker 

compensation, provided that no single prize or award may exceed a value of two hundred fifty dollars, and that the 

total value of such prizes and awards paid or awarded to any agent or broker within a calendar year may not exceed 

one thousand dollars. Notwithstanding the foregoing, a company may also pay or award not more frequently than 

monthly a prize or award valued at not more than twenty-five dollars. 

An implementing regulation places monetary limits on the value of prizes and awards that insurers can provide agents. The 

records must include: the names of the offerors, companies or other broker-dealers making the non-cash compensation 

contributions; the names of the associated persons participating in the arrangements; the nature and value of non-cash 

compensation received; the location of training and education meetings; and any other information that proves compliance by 

the broker-dealer and its associated persons with the rule. The New York Department of Financial Services website contains 

additional information about what steps life insurers must take to comply with Section 4228. 

http://www.dfs.ny.gov/insurance/life/agcomp/life4228.htm 58 See Notice to Members 03-68, Fee-Based Compensation-NASD Reminds Members That Fee-Based Compensation Programs 

Must Be Appropriate, http://www.finra.org/sites/default/files/NoticeDocument/p003079.pdf . 
53 

aligning his or her interests with the broker. Additionally, firms must take into account the nature 

of the services provided, the benefits of other available fee structures, and the customer's fee 

structure preferences.59 

 As FINRA aptly observes, under some customer circumstances, compensation through 

commission arrangements may be more appropriate than fee-based arrangements. Quite correctly, 

FINRA explained that the appropriateness of fee-only financial arrangements should be evaluated on the 

unique circumstances of each customer and their financial needs. The same is true with evaluations of 

commissioned recommendations to purchase certain financial products like annuities.60 There are many 

customers for whom annuities provide a valuable and appropriate means to achieving retirement 

security and guaranteed lifetime income. The fact that the salesperson was compensated by 

commissions does not diminish the important role annuities play in financial and retirement security. 

Commission-based compensation can be the most economical and appropriate form of compensation in 

advisory arrangements with consumers owning moderate amounts of retirement assets, and may be 

significantly less expensive than non-commissioned forms of compensation, such as asset management 

fees. 

For all of these reasons, the Proposal’s recurrent conviction that commission-based advice is 

always conflicted fails to fulfill the statutory, executive, and judicial mandates that the cost-benefit 

analysis should be balanced, and consider several solutions to proposed rulemaking. 

F. Correcting observations of fact and law. 

 

 To ensure that agencies properly perform cost-benefit analysis and select the most cost-effective 

regulatory options, the White House Office of Information and Regulatory Affairs (OIRA) reviews agency 

cost-benefit analysis before proposed regulations become effective. To the extent views from that office 

reflect the January 15, 2015, White House Memorandum and the White House Fact Sheet61 supporting 

the Department of Labor’s proposed fiduciary rule, we offer some corrections of fact and law that may be 

helpful in the Proposal’s cost-benefit analysis. 

 According to the memorandum “many firms recommend that prospective customers roll over 

401(K) plan assets into an IRA without any knowledge of a customer’s financial situation.” Salespersons 

recommending the purchase of a variable annuity on an IRA roll over must fulfill FINRA’s suitability and 

supervision Rule 2330, which requires the salesperson to obtain specific information from the customer 

(such as the customer’s investment objectives, liquid net worth, financial sophistication, and tax status). 

This information is recorded on a customer account record that forms the basis of suitability 

determinations and supervisory review. Further, Rule 2330 requires the salesperson to make an 

 

59 See Fee-Based Questions and Answers, http://www.finra.org/industry/fee-based-account-questions-answers . FINRA stated 

that 

Certain potential problems have been identified through our examination program. For example, it is not always clear 

that customers receive adequate disclosure about the distinctions and features of fee-based versus commissionbased accounts, including the differences in fee structures and that fees will probably be higher in a fee-based 

account if the level of activity is modest. Training and education at some firms are minimal, particularly in giving 

brokers guidance on how to evaluate whether a customer is appropriate for a fee-based account. 

60 Elisse B. Walter, who served as acting SEC chair, SEC Commissioner, and FINRA Senior Executive Vice President, noted: 

In a nutshell, while fee based accounts can be a good thing, they are not always the right thing, or the best thing. We 

need you to look at each customer and determine what kind of fee works best for him or her. The Tully Report itself 

recognized that investors with low trading activity would probably be better off with a commission-based program that 

charges only when trades are made. See Elisse Walter, Current NASD Regulatory Issues on Sales and Marketing

(Sept. 28, 2004) http://www.finra.org/newsroom/speeches/092804-remarks-27th-annual-sia-sales-and-marketingconference. 61 The Fact Sheet is entitled Middle Class Economics: Strengthening Retirement Security by Cracking Down on Backdoor 

Payments and hidden Fees and was released February 23, 2015 . 
54 

affirmative determination that the “customer would benefit from certain features of a deferred variable 

annuity (e.g., tax-deferred growth, annuitization or death benefit.” 

 Rule 2330 imposes a significant supervisory obligation requiring the broker-dealer’s 

registered principal to review the recommendation and consider the extent to which: 

x the customer would benefit from certain features of a deferred variable annuity; 

x the customer’s age or liquidity needs make the investment inappropriate; and, 

 

x the customer involved an exchange of a deferred variable annuity: will incur 

surrender charges, face a new surrender period, lose death or existing benefits, have 

increased mortality and expense fees, appears to have a need for any potential 

product enhancements and improvements, or had another deferred variable annuity 

exchange within the preceding 36 months. 

 Likewise, the NAIC Suitability in Annuity Transactions Regulation imposes suitability and 

supervision standards for fixed annuity sales that are modeled on FINRA Rule 2330. This model 

regulation has been adopted in most jurisdictions. It is factually incorrect, therefore, that 

recommendations to purchase a fixed or variable annuity in an IRA roll over are done “without any 

knowledge of the customer’s financial situation.” 

 The memorandum states that “advisers steer investors into variable annuities and other complex 

products with high fees. Advisers can exploit their customer’s low level of financial literacy by 

recommending riskier and more complex investments.” (emphasis added). Most, but not all, 

contemporary fixed and variable annuities have surrender fees, which only occur if the customer cancels 

the contract within a specified period, usually about seven years on average. Annuities are purchased 

and sold as long-term accumulation vehicles for retirement security, not as short-term trading vehicles. If 

customers purchase the contract and hold it for the surrender period, they will not incur surrender 

charges. The White House memorandum does not appear to understand these mechanics. 

 As explained above, FINRA Rule 2330 and the NAIC Suitability in Annuity Transactions Model 

Regulation impose suitability and supervision standards that are designed to ensure that annuity 

purchases are appropriate for customers, including those with low levels of financial literacy. 

 Variable annuities provide permanent annuity purchase rate guarantees for purchasers upon 

annuitization, and many variable annuities provide optional riders for guaranteed benefits, such as 

lifetime payouts, withdrawals and death benefits. Variable annuities are designed to track the growth in 

the economy and provide protection against lower purchasing power due to inflation. The White House 

statement overlooks the fact that variable annuities can provide a valuable solution to the risk that 

consumers will have inadequate retirement assets. The memorandum’s statements associating variable 

annuity recommendations with high fees, exploitation of low financial literacy and riskier investments is 

generally incorrect. 

 The memorandum states that “consumer protections for investment advice in the retail and 

small plan markets are inadequate.” This unqualified observation is overbroad and ignores substantial 

consumer protections under the federal securities laws governing the activities of investment advisers 

and broker-dealers. Likewise, it ignores analogous protections under state laws such as the NAIC 

Suitability in Annuities Transactions Model Regulation. A fiduciary duty is currently enforced under the 

Investment Advisers Act for registered investment advisers that may be involved in recommendations 

about IRA roll over options. SEC Commissioner Daniel Gallagher addressed this observation in a recent 

public speech, noting that the memorandum’s statement 
55 

is not accompanied by any analysis or study of the current protections consumers receive from 

the regulatory oversight of brokers and investment advisers by the SEC and SROs-in fact, it 

blatantly ignores this comprehensive regulatory oversight. Indeed, the memo manages to avoid 

any mention of either the SEC or FINRA.62

 The statement in the memorandum disregards other significant regulatory protections that 

currently exist under the federal securities laws. 

 The Fact Sheet references “outdated regulations” that provide consumer protections under IRA 

roll over recommendations. FINRA Rule 2330 and the NAIC Suitability in Annuities Regulation were 

recently adopted to significantly upgrade consumer protections in fixed and variable annuity sales. 

 The memorandum states that “loads encourage advisers to excessively churn their customers’ 

investments.” FINRA and SEC regulations explicitly prohibit churning of customer accounts. Indeed, 

FINRA Rule 2330 requires the adviser and supervisor to specifically consider whether a customer 

involved an exchange of a deferred variable annuity: 

will incur surrender charges, face a new surrender period, lose death or existing benefits, have 

increased mortality and expense fees, appears to have a need for any potential product 

enhancements and improvements, or had another deferred variable annuity exchange within the 

preceding 36 months. 

 In response to this assertion in the memorandum, SEC Commissioner Gallagher noted “our (SEC) 

rules expressly prohibit brokers from churning customer accounts, and the SEC and SROS have 

sophisticated tools designed to monitor for such activity.”63 Likewise, the NAIC Suitability in Annuities 

Transaction demands that recommendations, and accompanying supervision, are suitable. Churning 

would not be suitable. 

G. Concluding observations about the Proposal’s fulfillment of executive, statutory and 

judicial standards governing cost-benefit analyses in rulemaking. 

 Our submission provides numerous suggestions that will more appropriately align the Proposal 

with the Department’s mission and the Proposal’s purpose in a manner that respects the proper balance 

of costs and benefits while also protecting retirement plan participants. Our suggestions achieve a 

constructive improvement to the original proposal and help the Department forestall post-adoption 

challenges to the adequacy of its cost-benefit analysis as required under executive, statutory and judicial 

standards. 

 The Proposal is exposed to judicial challenge because it: 

x Fails to calculate the impairment to small retirement plans through the loss of advisory 

channels, as required under the Regulatory Flexibility Act; 

x Presents inflexible approaches that are arbitrary and capricious under APA standards and 

bypassing less burdensome alternatives on a cost-benefit yardstick; 

x Neglects the judicial precedent in the trio of recent cases rejecting SEC rulemaking due to 

defective cost-benefit analysis; 

x Rejects or ignores the comprehensive pattern of regulation that imposes significant protections 

against conflicts of interest and erects prophylactics to protect retirement plan participants; and 

 

62 See Remarks at The SEC Speaks by Daniel M. Gallagher (Feb. 20, 2015) at 3. 63 See Remarks at The SEC Speaks by Daniel M. Gallagher (Feb. 20, 2015) at 3.
56 

x Ignores the impact of the rule on small businesses as required under the Regulatory Flexibility 

Act. 

 The Proposal’s exposure to post-adoption legal challenges can be mitigated by incorporating our 

recommended modifications. In the end, the Proposal should fully evidence the 2011 Executive Order 

issued by President Obama and the spirit of his comments, which emphasized: 

x “Sometimes, rules have gotten out of balance, placing unreasonable burdens on business—

burdens that have stifled innovation;”64

x “As the executive order I am signing makes clear, we are seeking more affordable, less intrusive 

means to achieve the same ends—giving careful consideration to benefits and costs. This means 

writing rules with more input from experts, businesses and ordinary citizens. It means using 

disclosure as a tool to inform consumers of their choices, rather than restricting those 

choices;”65 and, 

x “We're looking at the system as a whole to make sure we avoid excessive, inconsistent and 

redundant regulation. And finally, today I am directing federal agencies to do more to account 

for—and reduce—the burdens regulations may place on small businesses.”66

***** 

On behalf of the ACLI member companies, thank you for consideration of these comments. We 

welcome the opportunity to discuss these comments and engage in a productive dialogue with the 

Department on this Proposal. 

 

Respectfully, 

James H. Szostek 

 

64 Op-Ed, President Barack Obama, Toward a 21st Century Regulatory System, Wall Street Journal (Jan. 18, 2011). The 

President’s Op-Ed coincided with his issuance of Executive Order 13,563, which set strict standards for cost-benefit analysis in 

federal agency rulemaking. 

65 Id. 66 Id.
Table of Contents for Appendix to ACLI Submission to the Department of Labor on the 

Fiduciary Rule

FINRA Rule 2330: Suitability and Supervision in the Sale of Variable Annuity Contracts...1

NAIC Suitability in Annuity Transactions Model Regulation: A Coordinated Approach to 

Suitability and Supervision in the Sale of Individual Annuity Contracts...........................8

ACLI Issues Status Chart: NAIC Annuity Disclosure, Suitability in Annuity Transactions & 

Senior Specific Certifications Model Regulations..................................................... .15

State Laws Governing Suitability in Variable Life Insurance Sales................................53

The NAIC Annuity Disclosure Model Regulation: Disclosure Standards in Annuity 

Distribution...........................................................................................................59

NAIC Buyer’s Guide for Deferred Annuities...............................................................64

NAIC Buyer’s Guide for Fixed Deferred Annuities with Appendix for Equity-Indexed 

Annuities...............................................................................................................75

NAIC Insurance and Annuities Replacement Model Regulation..................................104

ACLI Law Survey: Replacement of Life and Insurance and Annuities..........................119

NAIC Model Regulation on the Use of Senior-Specific Certifications and Professional 

Designations in the Sale of Life Insurance and Annuities..........................................168

The Impact of State Insurance Consulting Laws on Producers Performing Financial 

Planning Services................................................................................................171

A Comprehensive System of State Regulations Governs the Distribution of Insurance 

and Annuity Contracts..........................................................................................196

ACLI Law Survey: Free Look/Right to Return Requirements......................................203
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Page 14 of Appendix 
NAIC Annuity Disclosure, Suitability, & Senior Designations (#002) 

Page 1 of 38 pages 

© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Issue Status Chart: 

NAIC Annuity Disclosure, Suitability in Annuity Transactions, 

& Senior-Specific Certifications Model Regulations 

(As of May 8, 2015) 

The chart tracks state adoption of the NAIC Suitability (formerly Senior Protection) in Annuity Transactions Model Regulation, the NAIC Annuity Disclosure Model Regulation, Use of Senior-Specific Certifications and variations of the models. ACLI actively supports state adoption on a uniform basis of the NAIC Suitability in Annuity Transactions 

Model Regulation, the NAIC Annuity Disclosure Model Regulation, and Use of NAIC Senior-Specific Certifications. Bill text, digest and legislative history are available in ACLI's Legislative Tracker. Also, proposed and adopted regulations are available through ACLI's Advance Services and the Market Conduct Compliance Service. 

Contacts: Kristin Abbott 202.624.2162. *Annuities: Creating Guaranteed Income for Life (3/24/2014): This issue brief explains the important role annuities play in retirement as well as the strong public policy behind their current tax treatment. This document was produced in coordination with the Association for Advanced Life Underwriting (AALU), GAMA International, the Insured Retirement Institute (IRI), the National Association of Insurance and Financial Advisors (NAIFA), and the National Association of Independent Life Brokerage Agencies (NAILBA). Download the brief Annuities: Creating Guaranteed Income for Life (PDF).Additional Resources: Annuity Issue Page; Annuity Compliance Service; Law Survey: Use of Disclosure Documents- Life Insurance and Annuities; Law Survey: Producer 

Use of Senior-Specific Certifications; Issue Status Chart: Individual Annuity Reserve Table. OVERVIEW OF STATE ACTIVITY TO DATE: 32 states have adopted NAIC Senior-Specific Certifications. 

Alaska ArkansasColoradoConnecticutDist. of ColumbiaHawaii

Illinois IndianaIowaKansasKentuckyMaryland

Minnesota MissouriNevadaNew HampshireNew Jersey 

New York North CarolinaOhioOklahoma Oregon

Rhode Island South CarolinaTexasUtahVermont

Virginia WashingtonWest VirginiaWisconsinWyoming 

15 states have adopted the NAIC Suitability in Annuity Transactions Model (2006 version). 

Alabama ArkansasArizona

Georgia IndianaLouisiana

Maine MassachusettsMontana

Nevada North CarolinaOklahoma

Pennsylvania TennesseeVirginia

4 states have proposed the NAIC Suitability in Annuity Transactions Model (2010 version). 

Georgia Maine Massachusetts Tennessee 

Page 15 of Appendix 
ACLI Issue Status Chart NAIC Annuity Disclosure, Suitability & Senior Designations 

Page 2 of 38 pages 

© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

32 states have adopted the NAIC Suitability in Annuity Transactions Model (2010 version). 

Alaska CaliforniaColoradoConnecticutDist. Of ColumbiaFlorida 

Hawaii IdahoIllinoisIowaKansas Kentucky

Maryland MichiganMinnesotaMississippiNebraskaNew Hampshire

New Jersey New YorkNorth DakotaOhioOregonRhode Island

South Carolina South DakotaTexasUtahWashingtonWest Virginia

Wisconsin Wyoming

 1 state has adopted the NAIC Senior Protection in Annuity Transactions Model Regulation. 

Delaware 

 2_states have other suitability standards. 

Missouri Vermont 

 2_states have NO suitability standards. 

New Mexico Puerto Rico 

23 states have adopted variations of older versions of the NAIC Annuity Disclosure Model Regulation 

Alaska ArizonaArkansas FloridaHawaii

Idaho KentuckyMaineMaryland Missouri 

Montana NevadaNew HampshireNew Mexico New York

North Carolina North DakotaOregon PennsylvaniaSouth Carolina

Texas Washington Wisconsin

10 states have adopted the recent version of the NAIC Annuity Disclosure Model Regulation 

Alabama ColoradoGeorgia

Iowa New JerseyOhio

Oklahoma Rhode IslandUtah

West Virginia 

(Updates in bold. Shaded boxes denote activity prior to 2015.) Updates This Publication Include: CT, TN, WV

Page 16 of Appendix 
ACLI Issue Status Chart NAIC Annuity Disclosure, Suitability & Senior Designations 

Page 3 of 38 pages 

© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

ALABAMAReg.482-1-129 X Effective: 03/01/15 Amends annuity disclosure rule to expand the definitions section, 

add a section on standards for annuity illustrations, and replace the existing buyer’s guide with an annuity illustration example. Incorporates the 2011 revisions to the NAIC’s Annuity Disclosure Model Regulation. 

Ch. 482-1-129.05 X Adopted 2006. Similar to the NAIC Annuity Disclosure Model. AL ADC 830-X-3-.28 X Adopted 2008. Includes portions of NAIC Senior-Specific Certifications Model AL Admin. Code 482-1-137 X Adopted 2006. Similar to the 2006 NAIC Suitability Model. ALASKAReg. 3 AAC 26.770+ X Reg. Effective: 10/16/11 Similar to the 2010 NAIC Suitability Model. Adopted Regulation 3 AAC 26.750+ 

X Effective July 25, 2008

Notice Of Proposed Changes In TheRegulations Of The Division Of Insurance

X The Insurance Division has published a Notice of proposed new rules 

relating to the use of senior-specific certifications and professional designations in connection with a solicitation, sale or purchase of, or advice made in connection with a life insurance or annuity contract by an insurance producer. 

Reg. 3 AAC 26.820+ X Effective: 6/28/09 Establishes standards and requirements for the use of seniorspecific certifications and professional designations in the 

solicitation, sale, purchase, or advice made in connection with a life insurance or an annuity contract by an insurance producer. The rules substantively follow the NAIC model regulation, except the rules use the term annuity “product” instead of “contract”, includes a non-model provision in 3 AAC 26.825(a)(2) adding “oral statements or representation”, and omits NAIC Model language, “There is a rebuttable presumption”, at the beginning of 3 AAC 26.825(c). 

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ARKANSAS AR ADC INS 82 X Effective: 7/15/09 Similar to the 2006 NAIC Suitability Model. Rule 96 X Effective: 7/15/09 Establishes standards and requirements for the use of seniorspecific certifications and professional designations by an insurance 

producer in the sale of life insurance and annuities.

Rule 98 X Effective: 7/15/09 The new annuity disclosure rule by and large adheres to the NAIC 

model. It deviates from the model in that it adds a provision to the disclosure document and buyer’s guide standards stating that disclosure statements must be signed and dated by the insurance producer and maintained by the producer and issuing company for five years. And, as in the revised version of the rule, the scope now incorporates pre-need policies. 

ARIZONARev. Stat. Ann. §§ 20-1243+

X Enacted 2006. (HB 2162) Similar to the 2006 NAIC Suitability Model.

Rev. Stat. Ann. §§ 20-1242+ 

X Enacted 2003. 

Admin. Comp. R20-6-212.01 

X Adopted 2004. 

CALIFORNIACA Ins. §10509.911 X Signed by Governor: 

9/20/11

Similar to the 2010 NAIC Suitability Model. 

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Dept. of Insurance Notice Dated: 12/6/11 Notice to licensed insurers clarifies California Department of 

Insurance annuity training requirements. Insurance producers shall not solicit the sale of an annuity product unless the producer has adequate knowledge of the product to recommend the annuity and the insurance producer is in compliance with the insurer’s standards for product training. The hours of training needed before soliciting consumers to sell annuities and hours of training needed for license renewal are also outlined in the notice. The new requirements become effective January 1, 2012. 

COLORADOReg. 4-1-12 X Effective: 06/01/14 The amendments to the annuity disclosure regulation include, but 

are not limited to, adding a new section on standards for annuity illustrations, expanding the definitions section, and updating the enforcement, severability and incorporated materials sections, as well as adding an annuity illustration example. 

Reg. 4-1-2 X Effective: 07/01/14 The amendments to the rule on advertising and sales of life 

insurance and annuities include, in addition to technical changes, adding new disclosure requirements and deleting the section on conflict with other laws or regulations. 

Bulletin B-4.67 X Dated: 1/14/14 This bulletin informs insurers that the NAIC has revised its Buyer’s 

Guide to Fixed Deferred Annuities and that the state plans to revise its regulation concerning requirements for annuity transactions to refer to the 2013 NAIC Buyer’s Guide for Deferred Annuities. It also urges insurers to examine the revised buyer’s guide and make any essential changes to preserve compliance with Colorado insurance regulations. 

3 CO ADC INS 702-4:4-1-11 

X Effective: 8/1/11 Similar to the 2010 NAIC Suitability Model. 

Reg. 4-1-12 ACLI Comment Letter on proposed amendments 

X Effective 1/1/07. Offers criteria for the disclosure of specified data about annuity 

contracts to make certain that purchasers comprehend essential aspects of the contracts.Re-proposed to change sections including requiring a free look period of at least 15 days at or prior to the time of application in the absence of a Buyer’s Guide and a disclosure document and having the reg. apply to contracts sold on or after 1/1/07, the same day the amended reg. becomes effective.ACLI submitted a comment letter on the proposed amendments to Regulation 4-1-12. The proposed amendments would adopt the latest updates to the NAIC Annuity Disclosure Model Regulation. 

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ACLI’s letter focuses on one portion of the proposed amendments which the NAIC has indicated states should consider omitting. ACLI’s letter urges omission of the language. 

Reg. 1-2-18 X Effective: 6/1/09 Establishes standards and requirements for the use of seniorspecific certifications and professional designations in the 

solicitation, recommendation, sale or acquisition of life insurance and annuity products. 

CONNECTICUTH. 6772 X Introduced February 11, 2015. Would require an insurance company 

to provide disclosures to employees and retirees of an employer when the company issues a group annuity contract to provide retirement benefits. Would protect amounts payable under the issued annuity contract from creditors of participants and beneficiaries.*Passed House on April 22, 2015. To Senate for consideration. Would place restrictions and disclosures on pension derisking transactions. Section 1, which has now been deleted, contained onerous limitations on these transactions: providing a disclosure to beneficiaries stating that they will no longer have ERISA protection; providing detailed annual statement from the insurer regarding assets; and the limitation that derisking transactions must be approved by the commissioner. Section 2 of the bill, which is all that now remains, would protect annuity proceeds from creditors. 

Reg.38a-432-1+ X Reg. Effective: 2/18/12 Similar to the 2010 NAIC Suitability Model. Reg. 38a-432b-1+ X Effective: 7/7/2010 Establishes standards and requirements for the use of seniorspecific certifications and professional designations in the sale of 

insurance, including annuities. 

DELAWAREReg. 1214 X Adopted 2005. Similar to the 2003 NAIC Senior Protection Model. 

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DISTRICT OF COLUMBIA DC Mun. Regs. Tit. 26-A §8401

X Reg. Effective: 12/24/10 Similar to the 2010 NAIC Suitability Model.

Rule 5800+ X Effective: 7/30/10 Substantially similar to NAIC Senior Specific Certifications Model. FLORIDARule 69B-162.011 Notice of CorrectionUpdate and Clarification

X Effective: 10/21/14 The amendments modify provisions on annuity suitability and 

disclosure to conform to revisions enacted by SB 166 that revised consumer protection laws relating to the sales of annuities by incorporating the 2010 NAIC Suitability in Annuity Transactions Model Regulation. They include extending protections previously afforded only to senior consumers to consumers of any age, revising Forms DFS-H1-1980 and DFS-H1-1981 to reflect the standards, procedures and guidelines of the model regulation, and changing the title to better reflect the proposed rule's scope.* Amendments to Rule 69B-162.011, relating to suitability and disclosure in annuity investments were adopted on October 1, 2014. The forms (Disclosure and Comparison of Annuity Contracts and Annuity Suitability Questionnaire) incorporated in the rule were adopted as well. The rule and forms will become effective on October 21, 2014.Similar to the 2010 NAIC Suitability Model. 

S. 166 ACLI Comment LetterOIR Informational Memorandum

X Signed by governor: 

6/14/13Effective: 10/1/13

Provides that recommendations relating to annuities made by an insurer or its agents apply to all consumers not just to senior consumers. Increases the period of time that an unconditional refund must remain available with respect to certain annuity contracts. Makes such unconditional refunds available to all prospective annuity contract buyers without regard to the buyer’s age; consistent with NAIC model guidance; incorporates Florida consumer protections; required suitability and comparison forms, cover page, limitation on deferred sales charges.* On August 6, ACLI staff remitted a compilation of member company inquiries (PDF) regarding the implementation of S. 166, Suitability in Annuities Transactions, to both the Department of Financial Services, Division of Agent and Agency Services and the Office of Insurance Regulation senior staff. ACLI staff was advised on August 26 that regulatory legal staff are still working on 

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responses which they will provide to ACLI staff as soon as possible. On January 22, 2014, ACLI staff sought clarification from Department of Financial Services, Division of Agent and Agency Services, on the applicability of the “FINRA Safe Harbor” provision. 

S. 2176 X Effective: 1/1/11 Among other things, requires that the buyer’s guide for fixed 

annuities be in the form provided by the National Association of Insurance Commissioners Annuity Disclosure Model Regulation and authorizes the use of policy summary as part of prospectus for variable annuities until the NAIC or the department develops a buyer’s guide 

Prop. Rule 69B-215.235 X Effective: 11/16/11 The new rule on the use of designations clarifies that the only legal 

designations that may be used are ones permitted by established organizations retaining published criteria and practices guaranteeing the constant proficiency and ethical behavior of members or conferees and forbids the use of self-bestowed or baseless designations.

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Rule 69B-162.011 Comment Letter

X X Effective: November 15, 

2009**Suitability Rule and Forms adopted on October 27th and as published on Florida Administrative Weekly website and FL DFS site stipulates an effective date of November 15. This is a clerical error on the part of Secretary State’s office. The statute, which controls, provides an effective date of January 1, 2009 or 60 days following the adoption of the rule, which would be December 25th. The Joint Administrative Procedure Committee has advised FL DFS that the effective date provided in the rule is a “nullity” and should be disregarded. FL DFS is considering a General Bulletin to this effect. 

Establishes the duties required of insurers and insurance producers in the sale of annuity contracts to senior consumers, including the purchase, exchange, and replacement of such contracts. Also incorporates by reference an annuity suitability questionnaire and an annuity contracts disclosure form.

S. 2082 Signed by Governor: 

6/30/08. 

Effective upon this act becoming a law, Department of Financial Services may adopt rules to implement this act. Sec. 9 of this act and such implementing rules shall take effect 60 days after date on which the final rule is adopted or 1/1/09, whichever is later. 

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Stat. § 626.99 Enacted 1982 and 1991. Requires delivery of Annuity Disclosure Model Buyer’s Guide.GEORGIAProposed Repeal and Readoption of Regulation 120-2-94-.01+ 

X The proposed amendments would repeal the suitability in annuity 

transactions regulation, readopting it to incorporate the NAIC's most recent model on suitability in annuity transactions. 

ACLI/IRI teleconference with DOI staffDOI CommentsReg. 120-2-73-.05 ACLI Comments GA Proposed Reg.120-2-73-.05 Bulletin 15-EX-1 

X Effective: 1/7/14

Implementation Date: 3/1/14

On Friday, January 30, ACLI staff and Insured Retirement Institute (IRI) staff hosted a teleconference with Department of Insurance (DOI) senior staff regarding member company concerns with the recent adoption of Annuity Disclosure Regulation 12-2-73. The new rule, effective January 1, 2015, provided for the adoption of the recently updated National Association of Insurance Commissioners' Annuities Buyer's Guides (Guide for Fixed and Variable, Deferred Fixed & Variable Only). As part of the department's adoption under 120-2-73, struck from the scope of the then extant regulation was the exception for variable annuities since the change to the regulation's appendix incorporated the variable annuities buyer's guide. Unfortunately, with that strike of the exception, the regulation now otherwise requires the provision of a consumer contract summary, a publication that does not accommodate the variable space for consumer education and is not required in any other state. On the teleconference, based on ACLI and IRI input, DOI said that, in the short term, they are looking at developing a department directive to provide that a prospectus will serve as a contract summary for the purpose of compliance with the regulation. In the long term, they would like to amend the current rule to reflect that same policy, exempting variable annuity products from the contract summary requirement.The amendments repeal the Buyer’s Guide to Annuities, an appendix to the regulation on disclosure requirements, and adopt a new appendix that incorporates an updated NAIC Buyer’s Guide to Annuities. Insurance Department to correct oversight from recently promulgated amended Annuity Buyer’s Guide regulation in an upcoming hearing. Department advises that companies are free to include omitted language in their distributed guides in the interim. 

Admin. Comp. ch. 120-2-73 

Enacted 1996. Variation of the NAIC Annuity Disclosure Model. 

Rule Ch. 120-2-94 X Adopted 2006. Similar to the 2006 NAIC Suitability Model. 

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HAWAIIHI Rev. Stat. Ann. §431:10D-621 

Similar to the 2010 NAIC Suitability Model. 

S. 2768 X Signed by the Governor: 

4/24/12Retroactive Effective Date: 1/1/12 

Section 14 amends existing producer training requirements pertaining to annuity sales, pursuant to NAIC Model requirements. * After working with the Insurance Division for well over a year, on August 19, 2013, ACLI and other insurance industry representatives were able to reach an agreement with the division regarding a life insurer’s role and responsibilities in verifying a producer’s compliance with the annuity training required by S. 2768, passed by Hawaii’s legislature in 2012. The insurance division had earlier announced that it would be amending its producer appointment form (Form APPT – Rev, 2/16/2012) to include a footnote stating that by signing the form the life insurer verifies that the appointed producer has completed the training or would complete that training “before soliciting the sale of annuity products”. As part of the parties’ agreement the insurance division agreed to remove the footnote from the form. A revised “Notice of New Appointment” form has now been posted on the division’s website. 

S. 1278 X X Signed by the Governor: 

6/14/11 

Adopts both the NAIC’s Annuity Suitability and Senior Designations Models. Revised Memorandum 2011-2LIC Informs insurance producers that the Insurance Division will recognize annuity training completed in another jurisdiction. 

S. 1008 X Signed by governor 7/5/07. 

Effective 1/1/08.

Enacts the NAIC’s Suitability in Annuity Transaction Model Regulation. Amends “general agent” to read “managing general agent”. Specifies applicability to an insurer, general agent, independent agencies, or a producer in terms of the penalty being reduced or eliminated for corrective action of a violation. Adds “failure to obtain information” as definition of unfair methods of competition and unfair or deceptive acts or practices. Provides that nothing in this Act shall be construed to supersede in any manner any provision of the Uniform Securities Act and nothing shall affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before the act’s effective date. 

Stat. § 431:10D-601 et seq. 

X Enacted 2006 (SB 2434) Similar to the NAIC Annuity Disclosure Model. 

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IDAHOBulletin 13-06 X Dated: 12/13/13 This bulletin informs insurers and producers that they may satisfy 

the buyer’s guide statutory requirement by providing consumers with either the NAIC Buyer’s Guide to Fixed Deferred Annuities with Appendix for Equity-Indexed Annuities last revised in 2007 – ANB̻LE (1999, 2007), or the 2013 NAIC Buyer’s Guide for Deferred Annuities – Fixed – ANB̻LE (2013). 

ID Admin. Code 18.01.09.001 

X Similar to the 2010 NAIC Suitability Model.

S. 1327 X Signed by Governor: 4/8/10 

Effective: 7/1/10 

Adds s. 41-1941 to adopt key provisions of the NAIC model annuity disclosure law and allow the Director to adopt the remainder of the model by rule. The law contains two variations from the model: a 20-day free look provision reflecting current law, and a provision added by the Department of Insurance that requires the producer and company to obtain a signed copy of the disclosure document from the applicant. 

H. 411 X Signed by Governor: 

3/19/08. Effective: 7/1/08. 

Proposed Regulation text: ID Prop Reg 18.01.09Temporary Rule: ID Ad Reg Temporary 18.01.09 

X Comments by: 8/27/08

Effective: 7/1/08

The proposed amendments to the annuity suitability rule would remove the references to seniors, making it pertinent to all consumers.

Stat. § 41-1940 X Enacted 2005. (HB 117) From the NAIC Senior Protection Model, contains Section 6A-C 

“Duties of Insurers and Insurance Producers.” Language deviates from the NAIC model in section addressing exempted contracts. Excludes Sect. 6D, system of supervision, and Sect. 6E, compliance with NASD conduct rules.Applies to consumers over 65. 

Rule IDAPA 18.01.09 X Adopted 2006. Similar to the NAIC Senior Protection Model Reg. ILLINOISRule 3120.01+ X Reg. Effective: 9/26/11 Similar to the 2010 NAIC Suitability Model. 

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Bulletin 2011-13 X Dated: 10/31/11 Bulletin clarifies when amendments to Rule 3120 Suitability In 

Annuity Transactions become operative. The bulletin states that producers who hold a life insurance line of authority and intend sell annuities have until July 1, 2012, to complete the training requirements. The bulletin also states that insurer supervisory requirements contained in the regulation also become operative on July 1, 2012. 

S. 1607 X Signed by Governor: 

8/23/11Effective: 8/23/11 

Adopts the NAIC Senior-Specific Certifications Model. 

Rule 130.855 X Effective: 9/8/09 The amendments to the securities rule add new provisions 

concerning the treatment by financial advisers of senior certifications and professional designations based on the NASAA Model. 

INDIANA760 IAC 1-79-1 to 1-79-4 X Sets forth standards to safeguard consumers from deceptive and 

duplicitous marketing practices with respect to the use of seniorspecific certifications and professional designations in the solicitation, sale, or purchase of, or advice made concerning, a life insurance or annuity product. Adopts a substantially similar version of the NAIC Model. 

Prop. Rule 760 IAC 1-79 X Hearing date: 5/7/12 The proposed new rule sets forth standards to safeguard consumers 

from deceptive and duplicitous marketing practices with respect to the use of senior-specific certifications and professional designations in the solicitation, sale, or purchase of, or advice made concerning, a life insurance or annuity product. Would adopt a substantially similar version of the NAIC Model. 

760 IN Admin. Code 1-72-1 

X Signed by the Governor: 

4/6/11 

Similar to the 2006 NAIC Suitability Model. 

Bulletin 184 X Annuity Training Course 

Requirement (Agents Licensed Prior to 1/1/12): 7/1/12Annuity Training Course Requirement (Agents Licensed After 1/1/12): Immediate 

Provides clarification to HB 1015 and HB 1486 regarding the effective dates for the implementation of the training provisions and the requirement for variable licensing. The Bulletin also provides clarification for the insurer training provisions as well as an exemption to the variable licensing provisions for those producers who only sell, solicit or negotiate to pension, retirement, or profitsharing plans. The ACLI worked closely with the Department on the details of the Bulletin, and in particular, sought further clarification 

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Product Specific Training Requirement: 1/1/12 

on a reasonable effective date as well as the exemption to the variable licensing law.

Rule 710 IAC 4-10-2 X Effective: 6/28/10 The new rule, based on the North American Securities 

Administrators Association model rule, prohibits the use of senior specific designations or certifications to imply special training or knowledge when advising senior citizens or retirees about investing, purchasing or selling securities. 

IOWABest Practices Letter X On April 14, the Insurance Division sent a “best practices” letter to 

all Iowa licensed annuity sellers. The letter provides guidance from the division on the interpretation of 191 IAC 15.75, suitability in annuity transactions. It describes areas a report should contain to determine the effectiveness of the Supervision System. 

Bulletin 13-03 X Date: 10/21/13 This bulletin alerts insurers about the three new versions of the 

deferred annuity buyer's guide adopted by the NAIC. Insurers and producers are encouraged to use the appropriate newer versions as soon as possible although they can use an appropriate version of the new NAIC deferred annuity buyer's guide or the older version of the NAIC deferred annuity buyer's through March 31, 2014. After that date, companies and producers selling any fixed annuity and those selling variable annuities or other securities registered products must use an appropriate version of the new NAIC annuity buyer's guide. 

Bulletin 13-01 X Date: 4/3/13 This bulletin provides guidance concerning provisions on annuity 

disclosure requirements including standards for annuity illustrations, the Buyer's Guide, and the content of disclosure documents. This bulletin supersedes prior memos and related e-mail. 

Rule 191-15.61+ X Effective: 4/11/12 Amendments bring the annuity disclosure rules of the unfair trade 

practices chapter into conformity with the NAIC model. The amendments include expanding the section on applicability and scope, adding new definitions and specifying requirements for providing the Buyer's Guide to mail solicitation and Internet applicants. The amended rule contains various compliance dates.

Rule 191-15.68+ X Effective: 01/01/11 Similar to the 2010 NAIC Suitability Model. 

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Bulletin 09-04 X On March 26, 2009, the Division of Insurance issued Bulletin 09-04 

addressing Life Insurance and Annuity Sales Practices, Replacements and Suitability. ACLI has received several questions concerning the reporting requirements. It appears the Division will rely on companies to implement their own monitoring system. Following is guidance we received from the Division. 

Admin. Code §191-10.19(522B) & §191-15.8(3) 

X Adopted 2008

Effective: 1/1/09 

Producers shall comply with rule 191-10.19(522B) in using seniorspecific certifications and professional designations in the sale of life insurance and annuities. 

Admin. Code §191-15.8 General suitability standards not based on NAIC Senior Protection 

Model. Reg. 191-15.68+[507B] (below) amended § 191-15.8 to remove references to annuities. 

Admin. Code §§ 191-15.61 to 191-15.67 

X Adopted 2003.

KANSASReg. K.A.R. 40-2-14a Policy and Procedure Regarding Suitability in Annuity Transactions

X Reg. Effective: 6/1/13 Amended regulation adopts by reference the November 29, 2012, 

version of the Kansas Insurance Department's "Policy and Procedure Regarding Suitability in Annuity Transactions." The amended regulation brings Kansas law into conformity with the revised NAIC Model.Similar to the 2010 NAIC Suitability Model.

Reg. K.A.R. 40-9-23 X Effective: 1/14/11 Adopts the NAIC model regulation on the use of senior-specific 

certifications and professional designations in the sale of life insurance and annuities. Earlier this year Kansas had already issued a policies and procedures document which adopted the substance of the NAIC model. Regulation 40-9-23 merely codifies the NAIC model as law. 

Reg. K.A.R. 81-3-6+ X Effective: 5/22/09 The amendments to the Office of the Securities Commissioner's 

regulations make it disreputable for a broker-dealer, agent, investment adviser or investment adviser representative to use a professional designation or certification that generates a deceptive inference that the user has specialized instruction in counseling senior citizens. They set out the fraudulent and unprincipled procedures that comprise justification for discipline. The amendments are based on the March 2008 North American Securities Administrators Association Model Rule on the Use of Senior-Specific Certifications and Professional Designation. 

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KENTUCKYMemo: Annuity Suitability Training

X Dated: 12/14/11 Memo outlines the product specific continuing education and 

training requirements for any resident insurance producers who sell, solicit, or negotiate the sale of an annuity. The memo states that insurers who offer annuities shall get verification that producers receive training, maintain records under Kentucky's record retention requirement, and make the verification available to the Commissioner upon request. 

Reg. 806 KAR 9:020ACLI Comments

X Effective: 12/2/11 Amended regulation includes some of the provisions in the NAIC 

Model Regulation on the Use of Senior-Specific Certifications and Professional Designations In The State of Life Insurance and Annuities (NAIC 278-1). Specifically, it adds a provision stating that a person shall not imply or purport to convey greater skill or knowledge advising seniors in the sale or solicitation of life insurance or annuity products (Section 2(3)). The regulation also includes new language regarding the “combination of words” and exemptions for certain job titles (similar to sections C and D of the NAIC Model). The regulation does not adopt the entire NAIC Model and the amendments are not word-for-word NAIC. 

Reg. 806 KAR 12:120ACLI Comments

X Reg. Effective: 1/1/12 Similar to the 2010 NAIC Suitability Model.

Reg. 806 KAR 9:220 X Reg. Effective: 10/7/11 Amends regulation to require insurance producers who sell, solicit or 

negotiate the sale of annuities to complete four hours of training in the classification and use of annuities, taxation, sales practices, and replacement and disclosure requirements. 

Reg. 808 KAR 10:042 X Effective: 2/6/09 Establishes standards and requirements for use of senior-specific 

certifications and designations in sale of securities. 

Reg. 806 KAR 12:150 X Adopted 2007

Effective 1/1/08

This new version was amended to incorporate comments received after hearings were held on June 26 with comments requested by July 6. 

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LOUISIANA37 LA ADC Pt XIII, §11703 X Similar to the 2006 NAIC Suitability Model. MAINEProposed Rule R. 02-031 Ch. 917ACLI Comments

X The proposed amendments to the rule on suitability in annuity 

transactions would provide a significantly altered framework for determining annuity suitability, require producer training and require, where feasible, suitability standards consistent with those imposed by FINRA. The amended rule would also reflect 2010 changes to the NAIC Suitability in Annuity Transactions Model Regulation. 

Proposed amendments to Rule Chapter 915 and to Rule Chapter 917ACLI Comment Letter(Disclosure)ACLI Comment Letter(Suitability)

X X The Bureau of Insurance has proposed amendments to Rule Chapter 

915 (Annuity Disclosure) and to Rule Chapter 917 (Annuity Suitability). The purposes of the proposed amendments to Rule 915 are to incorporate National Association of Insurance Commissioner (NAIC) Annuity Disclosure Model Regulation requirements relating to illustrations and recordkeeping relating to disclosures, as well as to repeal the required use of an outdated NAIC Annuity Buyer's Guide and replace it with current versions. The bureau will hold a public hearing on the proposed amendments to Rule 915 at the Department of Professional and Financial Regulation building, 76 Northern Avenue, Gardiner, Maine at 9:00 a.m. on December 17. The proposed amendments to Rule 917 would establish suitability standards and producer training requirements with respect to annuity recommendations made by insurance producers or companies. They are intended to reflect changes made in 2010 to the NAIC Suitability in Annuity Transactions Model Regulation in light of the Harkins-Meek Amendment to the Dodd-Frank Act; that amendment provides a "safe harbor" from treatment of equityindexed annuities as federal securities in jurisdictions which have adopted the 2010 amendments to the NAIC Suitability in Annuity Transactions Model Regulation. 

Bulletin 389 X Dated: 10/8/13 This bulletin alerts insurers and producers that until the Insurance 

Bureau officially revises Maine Rule 915 (Annuity Disclosure), Section 5 (Standards for the Disclosure Document and Buyer's Guide), they are permitted to use the NAIC's recently revised Buyer's Guide in their annuity disclosures in place of the outdated 1998 Buyer's Guide. 

Ins. Reg. ch. 915 X Adopted 2004. Code ME R. 02-031 Ch. X Adopted 2007. Similar to the 2006 NAIC Suitability Model. 

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© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

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917 §2 MARYLANDReg. 31.09.12.01+Bulletin 11-28 Bulletin 11-10 

X X X 

Reg. Effective: 11/1/11Product Specific Training Requirement: 11/1/11Annuity Training Course Requirement (Agents Licensed Prior to Reg. Effective Date): 5/1/12 Annuity Training Course Requirement (Agents Licensed After Reg. Effective Date): ImmediateDated: 9/13/11Dated: 5/13/11

The suitability in annuity transactions regulation, which generally follows the NAIC model regulation with minor deviations, adopt amendments to sections on duties of insurers and producers, definitions, supervision systems, producer prohibited acts, FINRA requirements, producer training, and compliance. Bulletin answers questions regarding the adoption of the National Association of Insurance Commissioners Suitability in Annuity Transactions Model Regulation and new requirements for insurance producers selling annuity products effective November 1, 2011.This bulletin notifies insurers of amendments to the suitability in annuity transactions regulation which generally follows the NAIC model with minor deviations. The amendments are effective November 1, 2011. 

Reg. 31.03.15 X Effective: 4/4/2011 Defines what constitutes misleading use of a senior retiree 

credential or designation by advisors and insurance producers in connection with life insurance, health insurance, or annuities. Adopts a substantially similar version of the NAIC Senior Designations Model. 

S. 774H. 882

X X 

Signed by Governor: 5/20/10Effective: 7/1/2010

Sets forth standards to protect consumers from dishonest, deceptive, misleading and fraudulent trade practices in the use of senior-specific certifications and professional designations in the marketing, solicitation, negotiation, sale, and purchase of, and advice given in connection with, life insurance, health insurance and annuities. Prohibits a person from using a senior-specific certification or professional designation in a way that would mislead a purchaser of life insurance, health insurance, or an annuity about specified matters. Requires the insurance commissioner, by regulation or order, to specify what constitutes a misleading use of senior-specific certifications or professional designations. 

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Legislative or 

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H. 571 X Signed by Governor: 5/7/09 

Effective: 5/7/09

As enacted, prohibits a person from using a senior or retiree credential or designation in a way that is misleading in connection with the offer, sale, or purchase of any security, or in advising another person as to the value, purchase, or sale of any security. Specifies the factors to be considered in determining whether a person is using a senior-specific certification or professional designation. (Same as HB571) [Note: "security" is defined to not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum, periodically for life, or some other specified period."] 

S. 684 X Signed by Governor: 5/7/09 

Effective: 5/7/09 

(Same as H. 571) 

Admin. Code §§ 31.15.04.01 to 31.15.04.07 

Adopted 1980. Variation of the NAIC Annuity Disclosure Model. 

Reg. 31.09.12.01+ X Adopted 2007. 

Effective: 7/1/07. 

Similar to the NAIC Suitability Model. ACLI submitted comments on 2/1/07.Sec. 6 of the adopted reg. has been amended slightly (from the proposed reg.) to reflect that compliance with the NASD Conduct Rules satisfies compliance with the regulation. 

MASSACHUSETTSProposed Reg. 211 CMR 96.01+

X The proposed amendments to the regulation on consumer 

protection in annuity transactions would make it comply with the updated NAIC Model regulation, including adding training requirements for insurance producer’s selling annuities. They would also include expanding the section on duties of insurance producers and insurers, and adding definitions.Similar to the 2010 NAIC Suitability Model. 

Opinion Letter The Division of Insurance published an opinion letter dated August 

5, 2009, on the "straight through processing" standards initiative being advocated by ACLI and the Insured Retirement Institute (formerly NAVA) that recognizes the ability to process the sale of annuities electronically in Massachusetts. August 6 State News Weekly

Reg. 211 CMR 96 X Adopted 2006. Similar to the 2006 NAIC Suitability Model. 

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MICHIGANMI Comp. Laws Ann. §500.4153

X Law Effective: 6/1/13 Similar to the 2010 NAIC Suitability Model. 

MINNESOTAMN Stat. Ann. §72A.203-72A.2036

X Law Effective: 6/1/13 Similar to the 2010 NAIC Suitability Model.

H. 1853 X Enacted 2009 Adopts the NAIC model on Senior-Specific Certifications and 

Professional Designations in the Sale of Life Insurance and Annuities (Section 43). 

Stat. § 72A.20 Enacted 1995. Regulation of Trade Practices- Annuity Solicitation Standards. Stat. § 60k.46 Enacted 2002. Insurance Producers- Annuity Solicitation Standards. MISSISSIPPI MS ADC 19-2:18.01 X Rule Effective: 4/10/13 Similar to the 2010 NAIC Suitability Model.MISSOURIRule 20 CSR 700-1.140 X Effective: 1/1/09 The new section, which is consistent with the NAIC model 

regulation, establishes provisions on the permissible use of seniorspecific certifications and professional designations. Includes prohibited uses of such certifications and designations and accepted accrediting entities. 

Rule 20 CSR 700-1.146 Effective: 7/30/08 Amends the standards of professional conduct for insurance 

producers selling variable annuities and variable life insurance. Also includes new sections on standards of producer conduct for fixed and indexed annuities. 

Rule 20 CSR 700-1.147 Effective: 7/30/08 This rule amends provisions on supervision in the sale of variable 

annuities and variable life insurance to replace references to the National Association of Securities Dealers (NASD) with the Financial Industry Regulatory Authority (FINRA). 

Rule 20 CSR 700-1.148 Effective: 12/30/08 Rule 20 CSR 400-5.410 X Adopted 2007.

Effective: 1/30/07 

Similar to the NAIC Disclosure Model. 

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MO Ann. Stat. §376.671 20 MO Code Regs. 400-1.020 20 MO Code Regs. 700-1.146 

X Non model, suitability provisions.

MONTANAAdmin. R. 6.6.801- 6.6.806 X Adopted 1998 and 1999. MT Code Ann. §33-20-802 X Signed by the governor on 

5/8/07. Effective 10/1/07. 

Similar to the 2010 NAIC Suitability Model.

NEBRASKANE Rev. St. §44-8103 X Law Effective: 7/19/12 Similar to the 2010 NAIC Suitability Model.Bulletin CB-128 X Dated: July 6, 2012 Bulletin responds to queries received by the Nebraska Department 

of Insurance regarding annuity training requirements for producers who hold a life insurance line of authority. Insurance producers who hold a life insurance line of authority and want to solicit the sale of annuity products are required to complete, within 6 months after July 19, 2012, a one-time, four-credit training course approved by the Department of Insurance. 

NEVADAReg. Chapter 686A X Effective: 7/1/11 Adopts new provisions regulating the use of senior-specific 

certifications and professional designations, including prohibiting a producer from using senior-specific certifications or professional designations when the producer has not received any specialized training in the servicing of seniors from a qualified organization (Similar to NAIC Model). 

NV ST §688A.450 X X Adopted 2005. 

Re-proposed and adopted in 2006. 

Similar to the 2006 NAIC Suitability Model. Also see Bulletin No. 06-004. 

NEW HAMPSHIRENH Code Admin. R. Ins. 305.02NH Bulletin INS 14-036-AB 

X Effective: 1/1/2015 Similar to the 2010 NAIC Suitability Model. 

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Admin. Code Ins. 301.06(1)

Commissioner Sevigny has published a Bulletin (07-47-AB) that outlines the Department's position on suitability standard to both life insurance and annuities. ACLI has commented to the Commissioner of Insurance on his recent suitability Bulletin 07-047-AB, expressing its deep concerns with the new compliance requirements for insurers set forth in the Bulletin. 

Rule 311.01+ X Effective: 3/1/09 The new rule on using senior specific certifications and professional 

designations is based on the NAIC model and establishes measures for using the designations in the solicitation, recommendation, sale or acquisition of life insurance and annuity products. 

Admin. Code Ins. 306.02 to 306.9 

Adopted 1983 and 2001. Variation of the NAIC Annuity Disclosure Model. These sections 

have all expired as of 2009. 

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NEW JERSEYBulletin 14-05 x Effective: 06/30/14 Bulletin provides insurers and insurance producers with an updated 

NAIC Buyer's Guide for Deferred Annuities, use of which is required by June 30, 2014. Per the Bulletin, the DOBI is notifying all authorized/admitted insurers and all insurance producers/agents that transact annuity business in New Jersey, that the NAIC has adopted a new Buyer's Guide and the DOBI has posted the new Buyer's Guide on its website. Pursuant to N.J.A.C. 11:4-59.3(b), an insurer shall provide a consumer who applies for an annuity, a buyer's guide regarding the sale of annuities, as approved by the NAIC and shall utilize the Buyer's Guide to Fixed Deferred Annuities. Insurers and individuals subject to the notice requirement may begin to use the posted Buyer's Guide immediately, but must utilize it no later than June, 30, 2014.Bulletin Clarification: As previously reported, the New Jersey Department of Banking and Insurance (DOBI) issued Bulletin No. 14-05, Use of Annuity Buyer’s Guide, on April 2, 2014. This bulletin notifies all authorized/admitted insurers and all insurance producers/agents that transact annuity business in New Jersey, that the NAIC has adopted a new buyer's guide and the DOBI has posted the new buyer’s guide on its website. Per the bulletin, pursuant to N.J.A.C. 11:4-59.3(b), an insurer shall provide a consumer who applies for an annuity a buyer’s guide regarding the sale of annuities, as approved by the NAIC and shall utilize the NAIC Buyer’s Guide to Fixed Deferred Annuities. Insurers and individuals subject to the notice requirement may begin to use the posted buyer’s guide immediately, but must utilize it no later than June, 30, 2014. The bulletin further provides that the buyer’s guide shall be “modified” to reflect the 10 and 15 cancellation periods per New Jersey law 11:4-59.3. ACLI has confirmed with the DOBI that it is not the intent of the DOBI to require insurers to modify the NAIC Buyer’s Guide free look language. Per the DOBI, New Jersey’s free look laws are adequately described in the new NAIC Buyer’s Guide and there is no need for insurers to make any changes. Update: As previously reported, the Department of Banking and Insurance (DOBI) issued Bulletin No. 14-05 notifying insurers that effective June 30, 2014, they must use the new NAIC Buyer's Guide to Fixed Deferred Annuities. ACLI became aware that the Buyer’s Guide originally posted on the DOBI’s website was incorrect. It is now corrected. ACLI has confirmed with the DOBI that companies may also continue to use NAIC version ANB-LA, Buyer's Guide for Deferred Annuities - Fixed and Variable (2013). 

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NJ Admin. Code §11:4-59A.1 

X Reg. Effective: 2/4/13 Similar to the 2010 NAIC Suitability Model. 

Bulletin 13-01 X Dated: 2/6/13 This Bulletin clarifies that by delaying the operative date of certain 

provisions on producer training and the sale of annuities until August 4, 2013, producers newly licensed to sell annuities on or after February 4, 2013 may sell the types of annuities to which the rules apply, but must complete the required training course by August 4, 2013 in order to continue to sell those annuities after that date. The Bulletin also provides information on approved annuity training courses. 

Rule 11:4-60.1+ X Effective: 3/7/11 Establishes limitations on insurance producers, insurers and 

fraternal benefit society representatives regarding the use of certifications, professional designations, or forms of advertising expressing that the person or entity has special education, training or experience in advising or servicing senior citizens or retirees, in connection with the solicitation, negotiation of sale of life insurance. 

S. 1745 X Effective: 7/6/10 Adopts a substantially similar version of the NASAA Model Rule on 

the Use of Senior-Specific Certifications and Professional Designations and applies its prohibitions to the offer, sale or purchase of a security. 

Rev. Stat. § 17B:25-20 Enacted 1981 and 2005. Limits maturity dates & surrender charges for annuities sold to 

seniors. 

NEW MEXICO12 N.M. Admin. Code § 11.17.1+

X (NASAA) Effective: 1/1/10 Establishes standards and requirements for use of senior-specific 

certifications and designations in sale of securities. (Based on NASAA Model) 

13 N.M. Admin. Code §§ 9.12.1 to 9.12.13 

X Adopted 1997 and 2000.

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NEW YORKA. 1787/S. 7254 X Effective: 11/21/2014 Legislation (A. 1787/S. 7254) enacted in New York requires a 

person or business using a senior specific designation in advertising to disclose the basis or source for the designation. Policymakers passed the new law to give consumers additional information about the legitimacy of senior designations. If in writing, the disclosure regarding the designation must be in a size sufficient to be noticeable for an ordinary consumer to read and understand. If provided orally, the message regarding the senior designation must be communicated in such a way that the consumer can hear and comprehend the notice. The new law amends the general business section of the New York statutes and is applicable to all businesses. The law is not insurance specific and does not follow the NAIC Model Regulation on the Use of Senior Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities. 

11 NYCRR 224.1 X Effective: 8/14/13 Similar to the 2010 NAIC Suitability Model. A. 634 Introduced: 1/9/13 Would place restrictions on the sale of annuities to seniors and 

provide for suitability requirements and the establishment of a system to supervise recommendations. Would, among other provisions, require annual 3 hours training on suitability in annuity and life insurance transactions and would prohibit the false use of insurance designations. 

Reg. 199 X Effective: 2/20/13 New rule establish standards and requirements for the use of 

senior-specific certifications and designations in the sale of life insurance and annuities. Also, specifies prohibited uses of seniorspecific certifications and professional designations. Follows the NAIC Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities. 

Emergency Reg. 199 X Effective: 2/1/13 

Expires: 4/2/13 

Emergency regulation establishes standards and requirements for the use of senior-specific certifications and designations in the sale of life insurance and annuities. Specifies prohibited uses of seniorspecific certifications and professional designations. Emergency regulation expires April 2, 2013. 

Emergency Reg. 187 X Effective: 5/31/13 

Expires:7/29/13 

Emergency regulation establishes requirements for insurers and producers to determine a consumers' suitability prior to recommending or selling an annuity. This emergency regulation is substantially similar to the NAIC Suitability in Annuity Transactions Model Regulation. Emergency regulation expires July 29, 2013. 

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Admin. Code tit. 11 §§ 40.0 to 40.6 (Reg. 139) (1990) §§ 53-1.1 to 53-1.6 (Reg. 74) 

Adopted 1990, 1997 and 2003.

Variation of the NAIC Annuity Disclosure Model addressing group annuity contracts and funding agreements.

NORTH CAROLINARule 11 NCAC 12.0461 X Effective: 2/1/10 Incorporates by reference the NAIC Model Regulation on the Use of 

Senior-Specific Certifications and Professional Designations, which establishes standards and requirements for the use of seniorspecific certifications and professional designations in the sale of life insurance and annuities. 

Admin. Code tit. 11 ch. 12 § .0420 

Adopted 1976 and 1992. Requires submission of suitability form.

Gen. Statutes §58-60+ X Enacted 2005. (HB 655) Omnibus bill including NAIC Annuity Disclosure model language. NC Gen. Stat. §58-60-155 X Signed by the Governor 

7/28/07. Effective 1/1/08. 

Similar to the 2006 NAIC Suitability Model. 

NORTH DAKOTAND Cent. Code §26.1-34.2-01.1

X Law Effective: 8/1/11 Similar to the 2010 NAIC Suitability Model. 

S. 2155 X Signed by the Governor 

4/12/07.Effective: 8/1/07.

Similar to the NAIC Suitability Model. There is a deviation in the Mitigation of Responsibility section. It appears to be a drafting error and is expected be corrected before the hearing.Passed Senate unanimously with an amendment correcting the deviation in the section mentioned above. 

Admin. Code § 45-02-02-14 

Adopted 1984 and 2001. Rules cover recommendations to consumers over 65.

OHIORescission Of Rule 3901-6-14

X Effective: 01/01/15 The amendments rescind the annuity disclosure rule because it does 

not include reference to the updated version of the NAIC Annuity Disclosure Buyer's Guide. 

Rule 3901-6-14 X Effective: 01/01/15 The amendments to the annuity disclosure rule include references to 

the updated version of the NAIC Annuity Disclosure Buyer’s Guide. 

Rule 3901-6-13 X Reg. Effective: 7/1/11 Similar to the 2010 NAIC Suitability Model. 

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Bulletin 2011-07 X Dated: 5/10/11 The bulletin provides a reminder that as of July 1, 2011, the 

suitability of annuity sales rule imposes a new one-time annuityspecific continuing education requirement on insurance agents who engage in the sale, solicitation or negotiation of annuity products. This one-time requirement is in addition to the company provided product specific training. 

Rule 3901-5-11 X Effective: 7/1/09 Creates procedures and prerequisites in the application of seniorspecific certifications and designations by insurance agents in the 

counseling, sale, solicitation or negotiation of life or health insurance policies or annuity products. 

Reg. 3901-6-14 X Adopted: 2007. 

Effective: 3/1/07. 

Similar to the NAIC Annuity Disclosure Model. 

OKLAHOMARule 365:25-19-5 X Effective: 09/15/14. Amends annuity disclosure provisions that require insurers to use 

the buyer's guide found in Appendix S by revoking Appendix S and instead requiring insurers to use the most current version of the NAIC Buyer's Guide to Annuities. 

Bulletin 2013-02 X Dated: 10/24/13 This bulletin informs insurers that the Insurance Department in 

2014 will amend its rule on Standards for the Disclosure Document and Buyer's Guide to include language in the updated 2013 NAIC Buyer’s Guide to Annuities. Until that time, the Insurance Department will allow insurers and producers to use either the version currently being used or the recently updated NAIC Buyer's Guide. 

Annuity Training Notice X Dated: 1/11/12 Notice states that the 4 hour annuity training requirement for 

producers selling annuities is now applicable to resident and nonresident producers. The Insurance Department will allow a 90 day grace period for nonresident producers to comply. Those producers who have satisfied an annuity training requirement in another state with substantially similar provisions as the Oklahoma rule will be deemed to satisfy the Oklahoma requirement, according to the notice. 

OK Admin. Code §365:25-17-2 

X Effective: 7/14/10 Similar to the 2006 NAIC Suitability Model. 

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Rule 365:25+ X Effective: 7/14/09 The rule amends provisions on standards for determining if an 

insurance company is in a hazardous financial condition, requirements for prepaid funeral benefits, conversion from trust to insurance funded contracts, commissioner’s authority, and viatical settlement licensing and reporting requirements. Adds a new regulation on the use of senior-specific certifications and professional designations in the sale of life insurance and annuities and new sections on viatical settlement standards for evaluation of reasonable payments for terminally ill insureds, advertising filing requirements, prohibited practices, insurance company practices, and the transition period for existing licenses. Also revokes Subchapter 13 on the regulation of life settlements and adds new appendices for a required brochure and forms for viatical settlements. 

OK Rule 365:25-19-5 X Effective: 09/15/14. Amends annuity disclosure provisions that require insurers to use 

the buyer's guide found in Appendix S by revoking Appendix S and instead requiring insurers to use the most current version of the NAIC Buyer's Guide to Annuities. 

Rule 365:25-19-1 X Adopted 2006. Similar to the NAIC Annuity Disclosure Model. OREGONRule 836-080-0170+ X Reg. Effective: 7/1/11 Similar to the 2010 NAIC Suitability Model. Rule 836-080-0160 X Effective: 11/1/09 Establishes criteria to safeguard consumers from deceptive and 

dishonest marketing practices. It provides protection relating to the use of distinctive descriptions and certifications in the solicitation, transaction or acquisition of, or counsel made, concerning an insurance product or in offering advice as to the value of or the suitability of purchasing insurance. The adopted rule goes beyond the NAIC model and applies to all designations, not just those used in the senior market. 

OAR 836-080-0090 Adopted 2004. General suitability standards not based on NAIC Senior Protection 

Model. 

OAR 836-051-0900 X Effective: 8/15/08 The Insurance Division has started a rulemaking process to adopt 

the Annuity Disclosure Model by rule. A rulemaking advisory committee meeting will be held 5/5. 

PENNSYLVANIA40 PA Cons. Stat. Ann. §627-2 

X Similar to the 2006 NAIC Suitability Model.

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Admin. Code tit. 31 §§ 85.38 to 85.39 

Adopted 1978. Variation of the NAIC Annuity Disclosure Model addressing variable 

annuity and variable accumulation annuity contracts. 

RHODE ISLANDReg. 41ACLI Comments 

X Effective 02/18/14. Brings rule into compliance with the NAIC model act. Includes 

requiring a new Buyer's Guide, adding a new section describing the criteria for annuity illustrations and augmenting the essentials necessary in the disclosure document. 

Reg. Securities 501-1 X Effective: 1/13/11 Regulation establishes standards and requirements for the use of 

senior specific certifications and designations in the offer, sale, or purchase of securities. The regulation is substantially similar to the NAIC Model Regulation on the Use of Senior-Specific Certifications and Professional Designation with the exception of certain stylistic drafting changes. 

RI ADC 11-5-12:3 X Reg. Effective: 1/20/11 Similar to the 2010 NAIC Suitability Model. Bulletin 2011-02 X Dated: 4/22/11

Effective: 6/1/11

Details producer training requirements for annuity suitability prior to the sale, solicitation, or negotiation of policies or contracts, effective June 1, 2011. Includes details on course approval, hours of training required, evidence of compliance with training requirements, and record retention. 

Reg. 41 X Effective: 9/30/09 The new regulation stipulates the minimum information that is 

required to be disclosed and the manner for disclosing it relating to the sale of annuity contracts. It makes certain that consumers comprehend specific essential attributes of annuity contracts and is based on the NAIC model. 

Reg. 112 X Effective: 5/26/09 Based on the NAIC model, the new regulation on senior 

specifications was adopted to offer continuity with other states. It establishes criteria to protect consumers from deceptive marketing practices concerning the use of senior-specific certifications and professional designations in the purchase, solicitation, sale or advice made in connection with life insurance or annuity products. 

SOUTH CAROLINAReg. 69-29 X Reg. Effective: 9/25/11 Similar to the 2010 NAIC Suitability Model. Ins. Reg. 69-39 Adopted 1986. Older version of the NAIC Annuity Disclosure Model. Reg. 69-40.1 X Effective: 5/28/10 Based on the NAIC model regulation, establishes standards and 

requirements for the use of senior-specific certifications and 

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designations in the sale of life insurance and annuities. 

SOUTH DAKOTASD Codified Laws §58-33A13 to 58-33A-27 X Signed by Governor: 2/23/12 Similar to the 2010 NAIC Suitability Model.Rule 20:08:03 X*(NASAA) Effective: 12/9/10 Adds new rule to prohibit the use of senior specific designations or 

certifications to imply special training or knowledge when advising senior citizens or retirees about investing, purchasing or selling securities (adopts NASAA Model). Also replaces the name "National Association of Securities Dealers" with "Financial Industry Regulatory Authority, Inc." 

TENNESSEEProposed Regulation 0780-01-86-.01 

X The Insurance Department published Proposed Regulation 0780-01-

86-.01 on Annuity Suitability. As published, the regulation deviates 

(PDF) from the model for insurance producer training as it does not contain a six month grace period. ACLI submitted a comment letter (PDF) to the department asking that the model regulation language be used in Tennessee. A hearing on the regulation is scheduled for May 5 at 9:00 a.m.

*On May 5, the Department of Commerce and Insurance held a hearing on proposed regulation, 0780-01-86, Suitability in 

Annuity Transactions. ACLI testified in support of the 

regulation, but requested a lead time for compliance of 6 months from the effective date. The record has been left open for 2 weeks to allow for additional comments. 

Bulletin X Date: 5/22/13 On May 22, 2013, a Bulletin was issued addressing questions arising 

from Reg. sec. 0780-1-86 suitability in annuity transactions. The department’s insurance and securities divisions jointly authored the bulletin to provide guidance to insurance producers, investment advisers, investment adviser representatives and broker-dealer agents about the permissible and prohibited activities of InsuranceOnly and Securities-Only persons. The bulletin follows Iowa Insurance Bulletin 11-4, a bulletin that had the approval of industry. 

TN Ad Reg 0780-01-86+ X Effective: 7/6/08 Similar to the 2006 NAIC Suitability Model. TEXASAnnuity Training The Department of Insurance (TDI) has taken action to update and 

extend reciprocity on agents' annuity training to all states that have adopted the NAIC Suitability in Annuity Transactions Model 

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Regulation (NAIC model). After Texas enacted the NAIC model through legislation in 2011, TDI only acknowledged about 18 states as being reciprocal and lagged in updating its website to add states that subsequently adopted the NAIC model. Outreach by ACLI and TALHI over the past year prompted TDI to revise its web page on July 11, 2014 to remove the listing of states and instead provide that a Texas resident or non-resident agent may meet the Texas annuity initial training requirement by having completed an initial training course that has been approved in Texas or in a state that is also compliant with the National Association of Insurance Commissioners (NAIC) annuity training model requirements.

TX Ins. Code Ann. §1115.003 

X Signed by the Governor: 

6/17/11 

Similar to the 2010 NAIC Suitability Model. 

Rule 28 TAC 3.9701+ X Effective: 3/1/11 Adopts annuity disclosure rules that require insurers provide specific 

disclosures to both annuity applicants and annuity contract owners. The annuity disclosure rule deviates from the NAIC model regulation and follows the substance of H. 1293, which passed during the 2009 legislative session but was vetoed by Governor Perry because the bill contained a private right of action. The rules are applicable to annuity transactions that occur on or after the date that is six months after the effective date of the rule. [Ed. Note: Please see the 2/15/11 State News Flash for additional information.] 

H. 1294 X Signed by the governor 

6/19/09

As enacted, relates to the use of senior-specific certifications and professional designations in the sale of life insurance and annuities. Follows the NAIC Senior Designations and Professional Certifications Model Regulation. Also includes agent education requirements in the sale of annuity products and applicable only to resident agents. Provides an April 1, 2010 compliance date for the agent continuing education requirements. Effective date is September 1, and applies only to the solicitation of, sale of, or advice made in connection with, a life insurance or annuity product by an insurance agent on or after January 1, 2010. 

H. 4492 X Signed by Gov: 6/19/09 

Effective: 9/1/09. Chapter No. 1093 

As enacted, amends the suitability law to address annuities registered under the Securities Act of 1933 and update reference from NASD to FINRA. 

Page 45 of Appendix 
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Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

UTAHRule R590-229-4+ X Effective: 3/11/14 Amendments to the annuity disclosure rule update the incorporated 

NAIC Annuity Buyer's Guide to the 2013 versions. The revised Buyer's Guides include annuities in general, fixed annuities and variable annuities as well as deferred annuity, deferred annuity fixed and deferred annuity variable buyer's guides. The Insurance Department has amended Regulation R590-229-9 to extend the enforcement date from 45 days after the regulation’s effective date to 65 days after the regulation’s effective date. The effective date of the regulation is May 27, 2014.

Rule R590-230-1+ X Rule Effective: 3/26/12 Similar to the 2010 NAIC Suitability Model.R590-252 X Effective: 2/25/09 The new rule institutes criteria for using senior-specific certifications 

and professional designations by insurance producers and consultants, broker-dealers and investment advisors in the sale of life insurance, annuities, and accident and health products. 

R590-229-1 X Adopted 2004.VERMONT Reg. SI-11-03 X Effective: 9/1/11 Adopted rule prohibits the use of senior specific-certifications and 

designations to imply special training or knowledge in the offer, sale, or purchase of securities or insurance, or in providing investment advice regarding securities or insurance. Adopts a similar version of the NAIC Model Regulation on the Use of SeniorSpecific Certifications and Professional Designations. 

H. 222 X* Signed by Governor 

6/1/09. This act shall take effect on July 1, 2009, except that Secs. 1, 2, and 5 of this act shall take effect January 1, 2010.

Creates new law authorizing the Commissioner of Business, Insurance, Securities and Health Care Administration (BISHCA) to extensively regulate life settlements, while specifically prohibiting stranger-originated life insurance (STOLI) transactions. Authorizes BISHCA to adopt rules that would govern credentials, certifications, and designations of those holding themselves out as possessing special levels of expertise regarding senior investments. 

VT Stat. Ann. Tit. 8 §4724(16) 

X Non model, suitability provision.

VIRGINIAReg 14 VAC 5-43-10+ X Effective: 5/15/09 The new regulation, which closely follows the NAIC model 

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© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

regulation, establishes standards and requirements for the use of senior-specific certifications and designations by insurance agents in the marketing, sale, or purchase of a life or accident and health insurance policy, or annuity products. Applicability includes the marketing, sale, or purchase of disability income insurance policies, long-term care insurance policies, long-term care partnership policies, and fixed and variable annuities. 

14 VAC 5-30-10+ Adopted: 2006.

Effective: 4/1/07 

Life Insurance and Annuity Replacements

14 VA Admin. Code §5-45-10

X Adopted: 2006. 

Effective: 4/1/07. 

Similar to the 2006 NAIC Suitability Model. 

WASHINGTONRule 284-17-265 and Rule 284-23-390 ACLI Comments 

X Rule Effective: 3/29/12 Similar to the 2010 NAIC Suitability Model. 

Rule 284-17-605 ACLI Comments 

X Effective: 3/16/12 New rule establishes standards and requirements for the use of 

senior-specific certifications and designations in the sale of life insurance and annuities, similar to the NAIC Model.

Admin. Code R. §§ 284-23-300 to 284-23-380 

Adopted 1980. Older version of the NAIC Annuity Disclosure Model.

S. 5671 X Signed by governor 

3/30/09. Chapter 18. Effective 7/26/09

Requires that annuities sold in the state be appropriate for the age and financial situation of the owner. Sets forth various requirements for insurers and producers concerning the sale of annuities. Requires the Commissioner to adopt by rule, annuity suitability standards, upon reviewing standards previously established by the NAIC and other states. Includes the Mitigation of Responsibility section of the NAIC model and updates the FINRA safe harbor language to refer to "registered" annuities. Requires the Commissioner to notify the Legislature if a change is made in the types of annuities subject to registration under the Securities Act of 1933. (Same as H. 1563) 

WEST VIRGINIAS. 187S. 189

 X Effective: 02/28/2015 Senate Bill 187 was signed into law on March 5, 2015. The bill 

authorizes the adoption of rulemaking put forward by the office of the insurance commissioner in 2014, which provides for the 

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Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

H. 2334ACLI Comment Letter

adoption of the NAIC 2012 Individual Annuity Reserve Table (2012 IAR table) and the revised NAIC Annuity Disclosure Model Regulation. Since these rules were placed in a bundled bill which includes other agency rules, the bill contains an “effective immediately upon passage” mandate. ACLI contacted the office of the insurance commissioner’s general counsel and was advised that in these situations the offices have entertained a phase-in period for 

compliance which is sometimes provided by informational letter or further directives at a later date. The department indicated that they are open to suggestions and comments. ACLI will be 

submitting comments this week requesting a delayed effective date for the annuity disclosure rule.*As previously reported, S. 187 was signed into law on March 5, 2015. The bill authorizes the adoption of rulemaking put forward by the Offices of the Insurance Commissioner (OIC) in 2014, which provides for the adoption of the NAIC 2012 Individual Annuity Reserve Table (2012 IAR table) and the revised NAIC Annuity Disclosure Model Regulation. Since these rules were placed in a bundled bill which includes other agency rules, the bill contains an "effective immediately upon passage" mandate. However, the actual effective date for each of the rules was ultimately dependent on the 

OIC final filing of the rules with the Secretary of State. Shortly after the bill was enacted, ACLI submitted a comment letter requesting a delayed effective date for the annuity disclosure rule in order to provide member companies with adequate lead time to develop and implement the procedures and systems changes necessary to comply with the rule.

On April 24, both rules were final filed with the Secretary of State with July 23, 2015 effective dates. 

Proposed Rule 114-11E-1+ Comment Letter

X Comment Date: 07/24/14 The proposed amendments to the annuity disclosure rule, based on 

the 2011-amended NAIC Annuity Disclosure Model Regulation, would include adding a new section on standards for annuity illustrations, adding to the "non applicability" list, adding new definitions and renumbering the section on report to contract owners. They also would include removing the appendices on Equity-Indexed Annuities and Buyer's Guide, and replacing them with an Annuity Illustration Example. 

Rule 114-11B X Reg. Effective: 7/1/11 Similar to the 2010 NAIC Suitability Model. Rule 114-89 X Effective: 7/1/10 Establishes standards and requirements for the use of seniorspecific certifications and professional designations in the sale of life 

Page 48 of Appendix 
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© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

Rule 114-11E S.407

X X X 

Effective: 7/16/10Signed by Governor: 4/2/10 Effective: 3/13/10

insurance and annuities. (NAIC Senior Designations Model) Establishes requirements for the disclosure of information in relation to the sale of annuity contracts. Includes requirements for the content of the disclosure document and the Buyer's Guide. (NAIC Annuity Disclosure Model)

This bill adopts various regulations, including Annuity Disclosure 

(Prop. Rule 114-11E) and Use of Senior Designation (Prop. Rule 114-89). While the legislation itself is effective, ACLI is working with the Insurance Department on effective dates for the Rules.

Code of State Rules § 114-11-6(g) 

Adopted 1974. General suitability standard not based on the NAIC Suitability Model. 

WISCONSINProposed Rule ADC Ins 2.14+

X The Office of the Commissioner of Insurance published Proposed 

Rule ADC Ins 2.14+ that would allow insurers and agents to use the most current version of the applicable NAIC Buyer's Guide for Deferred Annuities, thereby discontinuing use of the outdated Wisconsin Buyer's Guide to Annuities. The hearing for the proposed regulation is scheduled for January 23 and comments are due by February 6. 

Annuities Buyers Guide X The Office of the Commissioner of Insurance (OCI) intends to 

update its Buyers Guide for Annuities by implementing the NAIC version that was revised in 2013. Wisconsin currently has its own Buyers Guide and such a proposal (PDF) would make this guide obsolete. The OCI is requesting data from insurers regarding financial impact to insurers as the NAIC requires a 35 cent fee for each guide distributed by a company to a Wisconsin resident. ACLI member companies may provide such data to the OCI directly or to ACLI. 

WI Stat. Ann. §628.347 X Signed by Governor: 

5/13/10 

Similar to the 2010 NAIC Suitability Model. 

Page 49 of Appendix 
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Page 36 of 38 pages 

© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

Rule Ins. 6.90 X Effective: 1/1/10 The new rule creates criteria to shield consumers from deceitful 

practices with respect to the use of senior-specific certifications and professional designations in the advertising, solicitation, sale or purchase of life insurance, annuity products or health insurance. It follows closely the NAIC model with two discrepancies. The new rule adds advertising to the list of practices and conduct, and health insurance to the list of products to which the rule applies. 

S. 294 X Signed by governor 

3/26/08. Effective 3/28/08except for following sections: Insurance Form Filing is effective 7/1/08 and Suitability of Annuities is effective 10/1/08.

Enacts the NAIC Interstate Insurance Product Regulation Compact with slight deviations. Amends the suitability of annuity sales statutes to make them apply to consumers of all ages, not just to a person 65 or older. This makes the statute consistent with the NAIC Suitability in Annuity Transactions Model Regulation. Provides that, with a number of specified exceptions, a form first used on or after the effective date of the provision that has not already been filed by that date may be used without approval by the commissioner. The specified exceptions, which must still be filed and approved before use, include, among others, forms for long-term care insurance. The Committee met on 4/22 and heard presentations from Jim Mumford of the Iowa Department, IMSA, and FINRA regarding their activities on suitability. The Committee has recently been given the task of developing baseline supervision standards for the NAIC Suitability of Annuity Sales Working Group. 

Stat. § 628.347 X Enacted 2004. Applies to consumers over 65. (SB 320) Admin. Code § INS. 2.15 Adopted 1982 & 1989. Variation of NAIC Annuity Disclosure Model. 

Page 50 of Appendix 
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Page 37 of 38 pages 

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Legislative or 

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Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

WYOMINGRule ADC Ins Gen Ch 64 §1+ 

X Similar to the 2010 NAIC Suitability Model.

Wyoming: Annuity Suitability: Update

X The Department of Insurance has informally clarified that the 

"FINRA safe-harbor" to sales of fixed annuities sold in compliance with FINRA rules applies to fixed annuities. At the request of several ACLI member companies, ACLI staff made outreach to the department to determine whether the deviation from the NAIC Suitability in Annuity Transactions Model Regulation in its recently adopted Chapter 64 regulation was intentional. As adopted, the new regulation extends the "FINRA safe-harbor" to sales of variable products only. Department senior staff responded that "[T]he intention is for all products (fixed or variable) sold pursuant to FINRA suitability rules will satisfy Wyoming law." The regulation will be reopened to include fixed annuities in §6(k). In light of the upcoming September effective date of the rules, ACLI requested and anticipates a department memorandum clarifying its intent of applicability to fixed annuities in advance of proposed changes to the regulation. 

Prop. Rule ADC Ins Gen Ch 64 §1+ACLI CommentsACLI State News Flash

X Comments: 8/11/13

Hearing: 10/29/13 

The Insurance Department has posted proposed rules creating a new Chapter 64 Regulation Governing Suitability in Life Insurance and Annuity Transactions. The department's Statement of Principal Reasons (PDF) for the new Chapter 64 regulation cites that the department has experienced "a growing number of requests for assistance following investment into products where the consumer did not fully understand." The proposed rules attempt to somewhat follow the NAIC Suitability in Annuity Transactions Model Regulation (NAIC Model), with the glaring addition of inclusion of life insurance throughout the proposal. There is also noted new language in the comparison of the proposal to the NAIC Model. ACLI received confirmation from insurance department staff that they are in the process of removing "life insurance" from the proposed Chapter 64 Regulation. It is our understanding that the department will either send out a notice of the rule change, or they may withdraw the pending proposal and submit a new proposal and allow for public comment. If the department chooses to amend and adopt the current proposed regulation, it will become effective six months after filing with the Wyoming Secretary of State. 

Rule 62 X Effective: 4/23/10 The new rule, which deviates from the NAIC model regulation, 

Page 51 of Appendix 
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Page 38 of 38 pages 

© American Council of Life Insurers, 101 Constitution Avenue, NW, Washington, D.C. 20001-2133. All rights reserved. 

Legislative or 

Regulatory Citation

Suitability 

Model 

Annuity 

Disclosure 

Model 

Senior 

Designation Status Comments 

establishes standards and requirements for the use of seniorspecific certifications and designations in the sale of annuities, accident and health insurance, and life insurance. Specifies prohibited uses of such certifications and designations. 

Ins. Reg. Ch. 27 § 11 Adopted 1968 & 1997. Variable contract regulation on suitability of sales. 

Page 52 of Appendix 
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Page 53 of Appendix 
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Page 55 of Appendix 
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Page 63 of Appendix 
Buyer’s Guide for

Deferred

Annuities

Deferred

Annuities

Page 64 of Appendix 
NAIC Buyer’s Guide for Deferred Annuities

It’s important that you understand how annuities can be different from each other so you can 

choose the type of annuity that’s best for you. The purpose of this Buyer’s Guide is to help you do 

that. This Buyer’s Guide isn’t meant to offer legal, financial, or tax advice. You may want to consult 

independent advisors that specialize in these areas.

This Buyer’s Guide is about deferred annuities in general and some of their most common 

features. It’s not about any particular annuity product. The annuity you select may have unique 

features this Guide doesn’t describe. It’s important for you to carefully read the material you’re 

given or ask your annuity salesperson, especially if you’re interested in a particular annuity or 

specific annuity features.

This Buyer’s Guide includes questions you should ask the insurance company or the annuity 

salesperson (the agent, producer, broker, or advisor). Be sure you’re satisfied with the answers before 

you buy an annuity. 

Page 65 of Appendix 
Buyer’s Guide for Deferred Annuities

© 2013 National Association of Insurance Commissioners

Table of Contents

Table of Contents

What Is an Annuity? ........................................................................................ 1

When Annuities Start to Make Income Payments ...................................................................1

 How Deferred Annuities Are Alike ..........................................................................................1

 How Deferred Annuities Are Different ....................................................................................2

How Does the Value of a Deferred Annuity Change? ........................................ 3

Fixed Annuities .........................................................................................................................3

 Fixed Indexed Annuities ...........................................................................................................3

 Variable Annuities .....................................................................................................................4

What Other Information Should You Consider? ............................................... 4

Fees, Charges, and Adjustments ................................................................................................4

 How Annuities Make Payments ...............................................................................................5

 How Annuities Are Taxed ........................................................................................................6

 Finding an Annuity That’s Right for You ..................................................................................6

 Questions You Should Ask .......................................................................................................7

 When You Receive Your Annuity Contract ..............................................................................7

Page 66 of Appendix 
Buyer’s Guide for Deferred Annuities

1 © 2013 National Association of Insurance Commissioners What Is an Annuity?

What Is an Annuity?

An annuity is a contract with an insurance company. All annuities have one feature in common, and it 

makes annuities different from other financial products. With an annuity, the insurance company promises to 

pay you income on a regular basis for a period of time you choose—including the rest of your life. 

When Annuities Start to Make Income Payments 

Some annuities begin paying income to you soon after you buy it (an immediate annuity). Others begin at 

some later date you choose (a deferred annuity).

How Deferred Annuities Are Alike

There are ways that most deferred annuities are alike. 

R5 They have an accumulation period and a payout period. During the accumulation period, the 

value of your annuity changes based on the type of annuity. During the payout period, the annuity 

makes income payments to you. 

R5 They offer a basic death benefit. If you die during the accumulation period, a deferred annuity 

with a basic death benefit pays some or all of the annuity’s value to your survivors (called 

beneficiaries) either in one payment or multiple payments over time. The amount is usually the 

greater of the annuity account value or the minimum guaranteed surrender value. If you die 

after you begin to receive income payments (annuitize), your chosen survivors may not receive 

anything unless: 1) your annuity guarantees to pay 

out at least as much as you paid into the annuity, or 

2) you chose a payout option that continues to make 

payments after your death. For an extra cost, you may 

be able to choose enhanced death benefits that increase 

the value of the basic death benefit.

R5 You usually have to pay a charge (called a surrender

or withdrawal charge) if you take some or all of 

your money out too early (usually before a set time 

period ends). Some annuities may not charge if you 

withdraw small amounts (for example, 10% or less 

of the account value) each year. 

R5 Any money your annuity earns is tax deferred. That 

means you won’t pay income tax on earnings until 

you take them out of the annuity.

R5 You can add features (called riders) to many 

annuities, usually at an extra cost.

R5 An annuity salesperson must be licensed by your 

state insurance department. A person selling a 

variable annuity also must be registered with 

FINRA1

 as a representative of a broker/dealer 

that’s a FINRA member. In some states, the state 

securities department also must license a person 

selling a variable annuity. 

1. FINRA (Financial Industry Regulatory Authority) regulates the companies and salespeople who sell variable annuities.

Sources of Information

Contract: The legal document 

between you and the insurance 

company that binds both of you to 

the terms of the agreement.

Disclosure: A document that 

describes the key features of your 

annuity, including what is guaranteed 

and what isn’t, and your annuity’s 

fees and charges. If you buy a variable 

annuity, you’ll receive a prospectus 

that includes detailed information 

about investment objectives, risks, 

charges, and expenses.

Illustration: A personalized 

document that shows how your 

annuity features might work. Ask 

what is guaranteed and what isn’t 

and what assumptions were made to 

create the illustration.

Page 67 of Appendix 
Buyer’s Guide for Deferred Annuities

© 2013 National Association of Insurance Commissioners 2What Is an Annuity?

R5 Insurance companies sell annuities. You want to buy from an insurance company that’s financially 

sound. There are various ways you can research an insurance company’s financial strength. You 

can visit the insurance company’s website or ask your annuity salesperson for more information. 

You also can review an insurance company’s rating from an independent rating agency. Four main 

firms currently rate insurance companies. They are A.M. Best Company, Standard and Poor’s 

Corporation, Moody’s Investors Service, and Fitch Ratings. Your insurance department may have 

more information about insurance companies. An easy way to find contact information for your 

insurance department is to visit www.naic.org and click on “States and Jurisdictions Map.” 

R5 Insurance companies usually pay the annuity salesperson after the sale, but the payment doesn’t 

reduce the amount you pay into the annuity. You can ask your salesperson how they earn money 

from the sale.

How Deferred Annuities Are Different

There are differences among deferred annuities. Some of the differences are:

R5 Whether you pay for the annuity with one or more than one payment (called a premium).

R5 The types and amounts of the fees, charges, and adjustments. While almost all annuities have 

some fees and charges that could reduce your account value, the types and amounts can be different 

among annuities. Read the Fees, Charges, and Adjustments section in this Buyer’s Guide for more 

information.

R5 Whether the annuity is a fixed annuity or a variable annuity. How the value of an annuity changes 

is different depending on whether the annuity is fixed or variable. 

 Fixed annuities guarantee your money will earn at least a minimum interest rate. Fixed 

 annuities may earn interest at a rate higher than the minimum but only the minimum rate is 

 guaranteed. The insurance company sets the rates. 

 Fixed indexed annuities are a type of fixed annuity that earns interest based on changes in 

 a market index, which measures how the market or part of the market performs. The interest rate is 

 guaranteed to never be less than zero, even if the market goes down. 

 Variable annuities earn investment returns based on the performance of the investment 

 portfolios, known as “subaccounts,” where you choose to put your money. The return earned in a 

 variable annuity isn’t guaranteed. The value of the subaccounts you choose could go up or down. If 

 they go up, you could make money. But, if the value of these subaccounts goes down, you could lose 

 money. Also, income payments to you could be less than you expected. 

5555555R5 )'5((/#.#-5)L·,55premium bonus, which usually is a lump sum amount the insurance company 

 adds to your annuity when you buy it or when you add money. It’s usually a set percentage of the 

 amount you put into the annuity. Other annuities offer an interest bonus, which is an amount the 

 insurance company adds to your annuity when you earn interest. It’s usually a set percentage of the 

 interest earned. You may not be able to withdraw some or all of your premium bonus for a set period 

 of time. Also, you could lose the bonus if you take some or all of the money out of your annuity 

 within a set period of time. 

Page 68 of Appendix 
Buyer’s Guide for Deferred Annuities

3 © 2013 National Association of Insurance Commissioners Value of a Deferred Annuity

How Does the Value of a Deferred Annuity Change?

Fixed Annuities

Money in a fixed deferred annuity earns interest at a rate the insurer sets. The rate is fixed (won’t change) for some 

period, usually a year. After that rate period ends, the insurance company will set another fixed interest rate for 

the next rate period. That rate could be higher or lower than the earlier rate.

Fixed deferred annuities do have a guaranteed minimum interest rate—the lowest rate the annuity can earn. 

It’s stated in your contract and disclosure and can’t change as long as you own the annuity. Ask about:

5555555R5 Ļ5initial interest rate – What is the rate? How long until it will change?

5555555R5 Ļ5renewal interest rate – When will it be announced? How will the insurance 

 company tell you what the new rate will be?

Fixed Indexed Annuities

Money in a fixed indexed annuity earns interest based on 

changes in an index. Some indexes are measures of how 

the overall financial markets perform (such as the S&P 

500 Index or Dow Jones Industrial Average) during 

a set period of time (called the index term). Others 

measure how a specific financial market performs 

(such as the Nasdaq) during the term. The insurance 

company uses a formula to determine how a change in 

the index affects the amount of interest to add to your 

annuity at the end of each index term. Once interest is 

added to your annuity for an index term, those earnings 

usually are locked in and changes in the index in the 

next index term don’t affect them. If you take money 

from an indexed annuity before an index term ends, the 

annuity may not add all of the index-linked interest for 

that term to your account.

Insurance companies use different formulas to calculate 

the interest to add to your annuity. They look at changes 

in the index over a period of time. See the box “Fixed 

Deferred Indexed Formulas” that describes how changes 

in an index are used to calculate interest.

The formulas insurance companies use often mean 

that interest added to your annuity is based on only 

part of a change in an index over a set period of 

time. Participation rates, cap rates, and spread rates

(sometimes called margin or asset fees) all are terms 

that describe ways the amount of interest added to your 

annuity may not reflect the full change in the index. 

But if the index goes down over that period, zero interest is 

added to your annuity. Then your annuity value won’t go 

down as long as you don’t withdraw the money. 

When you buy an indexed annuity, you aren’t investing 

directly in the market or the index. Some indexed annuities offer you more than one index choice. Many 

indexed annuities also offer the choice to put part of your money in a fixed interest rate account, with a rate 

that won’t change for a set period. 

Fixed Deferred Indexed 

Formulas

Annual Point-to-Point – Change in 

index calculated using two dates one 

year apart. 

Multi-Year Point-to-Point – Change 

in index calculated using two dates 

more than one year apart. 

Monthly or Daily Averaging – 

Change in index calculated using 

multiple dates (one day of every 

month for monthly averaging, every 

day the market is open for daily 

averaging). The average of these 

values is compared with the index 

value at the start of the index term. 

Monthly Point-to-Point – Change 

in index calculated for each month 

during the index term. Each monthly 

change is limited to the “cap rate” 

for positive changes, but not when 

the change is negative. At the end of 

the index term, all monthly changes 

(positive and negative) are added. If 

the result is positive, interest is added 

to the annuity. If the result is negative 

or zero, no interest (0%) is added.

Page 69 of Appendix 
Buyer’s Guide for Deferred Annuities

© 2013 National Association of Insurance Commissioners 4Fees, Charges, and Adjustments

Variable Annuities

Money in a variable annuity earns a return based on the performance of the investment portfolios, known 

as “subaccounts,” where you choose to put your money. Your investment choices likely will include 

subaccounts with different types and levels of risk. Your choices will affect the return you earn on your 

annuity. Subaccounts usually have no guaranteed return, but you may have a choice to put some money in a 

fixed interest rate account, with a rate that won’t change for a set period.

The value of your annuity can change every day as the subaccounts’ values change. If the subaccounts’ 

values increase, your annuity earns money. But there’s no guarantee that the values of the subaccounts will 

increase. If the subaccounts’ values go down, you may end up with less money in your annuity than you paid 

into it.

An insurer may offer several versions of a variable deferred annuity product. The different versions usually 

are identified as share classes. The key differences between the versions are the fees you’ll pay every year you 

own the annuity. The rules that apply if you take money out of the annuity also may be different. Read the 

prospectus carefully. Ask the annuity salesperson to explain the differences among the versions.

What Other Information 

Should You Consider?

Fees, Charges, and Adjustments

Fees and charges reduce the value of your annuity. They 

help cover the insurer’s costs to sell and manage the 

annuity and pay benefits. The insurer may subtract these 

costs directly from your annuity’s value. Most annuities 

have fees and charges but they can be different for 

different annuities. Read the contract and disclosure or 

prospectus carefully and ask the annuity salesperson to 

describe these costs.

A surrender or withdrawal charge is a charge if you 

take part or all of the money out of your annuity during 

a set period of time. The charge is a percentage of the 

amount you take out of the annuity. The percentage 

usually goes down each year until the surrender charge 

period ends. Look at the contract and the disclosure or 

prospectus for details about the charge. Also look for 

any waivers for events (such as a death) or the right to 

take out a small amount (usually up to 10%) each year 

without paying the charge. If you take all of your money 

out of an annuity, you’ve surrendered it and no longer 

have any right to future income payments.

Some annuities have a Market Value Adjustment 

(MVA). An MVA could increase or decrease your 

annuity’s account value, cash surrender value, and/or 

death benefit value if you withdraw money from your 

account. In general, if interest rates are lower when you 

How Insurers Determine 

Indexed Interest 

Participation Rate – Determines 

how much of the increase in the 

index is used to calculate index-linked 

interest. A participation rate usually 

is for a set period. The period can 

be from one year to the entire term. 

Some companies guarantee the rate 

can never be lower (higher) than a set 

minimum (maximum). Participation 

rates are often less than 100%, 

particularly when there’s no cap rate.

Cap Rate – Typically, the maximum 

rate of interest the annuity will 

earn during the index term. Some 

annuities guarantee that the cap rate 

will never be lower (higher) than a 

set minimum (maximum). Companies 

often use a cap rate, especially if the 

participation rate is 100%.

Spread Rate – A set percentage the 

insurer subtracts from any change 

in the index. Also called a “margin 

or asset fee.” Companies may use 

this instead of or in addition to a 

participation or cap rate.

Page 70 of Appendix 
Buyer’s Guide for Deferred Annuities

© 2013 National Association of Insurance Commissioners

withdraw money than they were when you bought the annuity, the MVA could increase the amount you 

could take from your annuity. If interest rates are higher than when you bought the annuity, the MVA 

could reduce the amount you could take from your annuity. Every MVA calculation is different. Check your 

contract and disclosure or prospectus for details.

How Annuities Make Payments

Annuitize

At some future time, you can choose to annuitize your 

annuity and start to receive guaranteed fixed income 

payments for life or a period of time you choose. After 

payments begin, you can’t take any other money out of 

the annuity. You also usually can’t change the amount 

of your payments. For more information, see “Payout 

Options” in this Buyer’s Guide. If you die before the 

payment period ends, your survivors may not receive 

any payments, depending on the payout option you 

choose. 

Full Withdrawal

You can withdraw the cash surrender value of the 

annuity in a lump sum payment and end your annuity. 

You’ll likely pay a charge to do this if it’s during the 

surrender charge period. If you withdraw your annuity’s 

cash surrender value, your annuity is cancelled. Once 

that happens, you can’t start or continue to receive 

regular income payments from the annuity. 

Partial Withdrawal

You may be able to withdraw some of the money from 

the annuity’s cash surrender value without ending the 

annuity. Most annuities with surrender charges let you 

take out a certain amount (usually up to 10%) each 

year without paying surrender charges on that amount. 

Check your contract and disclosure or prospectus. Ask 

your annuity salesperson about other ways you can take 

money from the annuity without paying charges. 

Living Benefits for Fixed Annuities

Some fixed annuities, especially fixed indexed annuities, 

offer a guaranteed living benefits rider, usually at an 

extra cost. A common type is called a guaranteed lifetime 

withdrawal benefit that guarantees to make income payments you can’t outlive. While you get payments, the 

money still in your annuity continues to earn interest. You can choose to stop and restart the payments or you 

might be able to take extra money from your annuity. Even if the payments reduce the annuity’s value to zero 

at some point, you’ll continue to get payments for the rest of your life. If you die while receiving payments, 

your survivors may get some or all of the money left in your annuity. 

5 How Annuities Make Payments

Annuity Fees 

and Charges

Contract fee Ȃƪ

percentage charged once or annually.

Percentage of purchase payment – 

A front-end sales load or other charge 

deducted from each premium paid. 

The percentage may vary over time.

Premium tax – A tax some states 

charge on annuities. The insurer 

may subtract the amount of the tax 

when you pay your premium, when 

you withdraw your contract value, 

when you start to receive income 

payments, or when it pays a death 

ƤƤǤ

Transaction fee – A charge for 

certain transactions, such as transfers 

or withdrawals.

* * *

Mortality and expense (M&E) 

risk charge – A fee charged on 

variable annuities. It’s a percentage 

of the account value invested in 

subaccounts.

Underlying fund charges –

Fees and charges on a variable 

annuity’s subaccounts; may include 

an investment management fee, 

distribution and service (12b-1) fees, 

and other fees.

Page 71 of Appendix 
Buyer’s Guide for Deferred Annuities

© 2013 National Association of Insurance Commissioners 6How Annuities Are Taxed

Living Benefits for Variable Annuities 

Variable annuities may offer a benefit at an extra cost 

that guarantees you a minimum account value, a 

minimum lifetime income, or minimum withdrawal 

amounts regardless of how your subaccounts perform. 

See “Variable Annuity Living Benefit Options” at right. 

Check your contract and disclosure or prospectus or ask 

your annuity salesperson about these options. 

How Annuities Are Taxed

Ask a tax professional about your individual situation. 

The information below is general and should not be 

considered tax advice.

Current federal law gives annuities special tax 

treatment. Income tax on annuities is deferred. That 

means you aren’t taxed on any interest or investment 

returns while your money is in the annuity. This isn’t 

the same as tax-free. You’ll pay ordinary income tax 

when you take a withdrawal, receive an income stream, 

or receive each annuity payment. When you die, your 

survivors will typically owe income taxes on any death 

benefit they receive from an annuity. 

There are other ways to save that offer tax advantages, 

including Individual Retirement Accounts (IRAs). You 

can buy an annuity to fund an IRA, but you also can fund 

your IRA other ways and get the same tax advantages. 

When you take a withdrawal or receive payments, you’ll 

pay ordinary income tax on all of the money you receive 

(not just the interest or the investment return). You 

also may have to pay a 10% tax penalty if you withdraw 

money before you’re age 591⁄2. 

Finding an Annuity That’s 

Right for You

An annuity salesperson who suggests an annuity must 

choose one that they think is right for you, based on 

information from you. They need complete information 

about your life and financial situation to make a 

suitable recommendation. Expect a salesperson to ask 

about your age; your financial situation (assets, debts, 

income, tax status, how you plan to pay for the annuity); 

your tolerance for risk; your financial objectives and 

experience; your family circumstances; and how you 

plan to use the annuity. If you aren’t comfortable with 

the annuity, ask your annuity salesperson to explain 

why they recommended it. Don’t buy an annuity you 

don’t understand or that doesn’t seem right for you. 

Variable Annuity Living 

Benefit Options

Guaranteed Minimum 

Accumulation Benefit (GMAB) –

Guarantees your account value will 

equal some percentage (typically 

100%) of premiums less withdrawals, 

at a set future date (for example, at 

maturity). If your annuity is worth 

less than the guaranteed amount at 

that date, your insurance company 

ơǤ

Guaranteed Minimum Income 

Benefit (GMIB) – Guarantees a 

minimum lifetime income. You usually 

Ƥ

buy the annuity and must annuitize 

ƤǤ

a waiting period before you can 

ƤǤ

Guaranteed Lifetime Withdrawal 

Benefit (GLWB) – Guarantees you 

can make withdrawals for the rest 

of your life, up to a set maximum 

percentage each year.

Payout Options

You’ll have a choice about how to 

receive income payments. These 

choices usually include:

Ȉ	

Ȉ	

 lifetime or your spouse’s 

 lifetime

Ȉ	

Ȉ	

 lifetime or a set time 

 period

Page 72 of Appendix 
Buyer’s Guide for Deferred Annuities

7 © 2013 National Association of Insurance Commissioners Finding the Annuity for You

Within each annuity, the insurer may guarantee some values but not others. Some guarantees may be 

only for a year or less while others could be longer. Ask about risks and decide if you can accept them. For 

example, it’s possible you won’t get all of your money back or the return on your annuity may be lower than 

you expected. It’s also possible you won’t be able to withdraw money you need from your annuity without 

paying fees or the annuity payments may not be as much as you need to reach your goals. These risks vary 

with the type of annuity you buy. All product guarantees depend on the insurance company’s financial 

strength and claims-paying ability.

Questions You Should Ask

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 paying a surrender charge? Is there a limit on the total amount I can withdraw 

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 payment from my annuity if I die?

If you don’t know the answers or have other questions, ask your annuity salesperson for help.

When You Receive Your Annuity Contract

When you receive your annuity contract, carefully review it. Be sure it matches your understanding. Also, 

read the disclosure or prospectus and other materials from the insurance company. Ask your annuity 

salesperson to explain anything you don’t understand. In many states, a law gives you a set number of days 

(usually 10 to 30 days) to change your mind about buying an annuity after you receive it. This often is called 

a free look or right to return period. Your contract and disclosure or prospectus should prominently state 

your free look period. If you decide during that time that you don’t want the annuity, you can contact the 

insurance company and return the contract. Depending on the state, you’ll either get back all of your money 

or your current account value.

Page 73 of Appendix 
Page 74 of Appendix 
BUYER’S GUIDE TO

FIXED DEFERRED 

ANNUITIES

WITH

APPENDIX FOR 

EQUITY-INDEXED

ANNUITIES

Page 75 of Appendix 
Prepared by the

NAIC

National Association of Insurance Commissioners

The National Association of Insurance Commissioners is an

association of state insurance regulatory officials. This 

association helps the various insurance departments to 

coordinate insurance laws for the benefit of all consumers.

This guide does not endorse any company or policy.

Reprinted by....

©1999 National Association of Insurance Commissioners

Page 76 of Appendix 
1

IT IS

IMPORTANT

That you understand the differences among various annuities so you can

choose the kind that best fits your needs. This guide focuses on fixed

deferred annuity contracts. There is, however, a brief description of variable annuities. If you're thinking of buying an equity-indexed annuity, an

appendix to this guide will give you specific information. This Guide

isn't meant to offer legal, financial or tax advice. You may want to consult independent advisors. At the end of this Guide are questions you

should ask your agent or the company. Make sure you're satisfied with

the answers before you buy.

Page 77 of Appendix 
WHAT IS

AN ANNUITY?

An annuity is a contract in which an insurance company makes a series of

income payments at regular intervals in return for a premium or premiums

you have paid. Annuities are most often bought for future retirement income.

Only an annuity can pay an income that can be guaranteed to last as long as

you live.

An annuity is neither a life insurance nor a health insurance policy. It's not a

savings account or a savings certificate. You shouldn't buy an annuity to

reach short-term financial goals. 

Your value in an annuity contract is the premiums

you've paid, less any applicable charges, plus interest credited. The insurance company uses the value

to figure the amount of most of the benefits that

you can choose to receive from an annuity contract.

This guide explains how interest is credited as well

as some typical charges and benefits of annuity

contracts.

A deferred annuity has two parts or periods.

During the accumulation period, the money you put

into the annuity, less any applicable charges, earns

interest. The earnings grow tax-deferred as long as

you leave them in the annuity. During the second

period, called the payout period, the company pays

income to you or to someone you choose.

WHAT ARE THE 

DIFFERENT KINDS 

OF ANNUITIES?

This guide explains major differences in different kinds of annuities to help

you understand how each might meet your needs. But look at the specific

terms of an individual contract you're considering and the disclosure document you receive. If your annuity is being used to fund or provide benefits

under a pension plan, the benefits you get will depend on the terms of the

plan. Contact your pension plan administrator for information.

This Buyer’s Guide will focus 

on individual fixed deferred annuities. 2

Page 78 of Appendix 
3

SINGLE PREMIUM OR MULTIPLE PREMIUM

You pay the insurance company only one payment for a single premium

annuity. You make a series of payments for a multiple premium annuity.

There are two kinds of multiple premium annuities. One kind is a flexible

premium contract. Within set limits, you pay as much premium as you

want, whenever you want. In the other kind, a scheduled premium annuity,

the contract spells out your payments and how often you'll make them.

IMMEDIATE OR DEFERRED

With an immediate annuity, income payments start no later than one year

after you pay the premium. You usually pay for an immediate annuity with

one payment. 

The income payments from a deferred annuity often start many years later.

Deferred annuities have an accumulation period, which is the time between

when you start paying premiums and when income payments start.

FIXED OR VARIABLE

OFixed

During the accumulation period of a fixed deferred annuity, your money

(less any applicable charges) earns interest at rates set by the insurance

company or in a way spelled out in the annuity contract. The company

guarantees that it will pay no less than a minimum rate of interest. During

the payout period, the amount of each income payment to you is generally

set when the payments start and will not change.

OVariable

During the accumulation period of a variable annuity, the insurance company puts your premiums (less any applicable charges) into a separate

account. You decide how the company will invest those premiums, depending on how much risk you want to take. You may put your premium into a

stock, bond or other account, with no guarantees, or into a fixed account,

with a minimum guaranteed interest. During the payout period of a variable

annuity, the amount of each income payment to you may be fixed (set at the

beginning) or variable (changing with the value of the investments in the

separate account).

Page 79 of Appendix 
HOW ARE THE 

INTEREST RATES SET FOR MY 

FIXED DEFERRED ANNUITY?

During the accumulation period, your money (less any applicable charges)

earns interest at rates that change from time to time. Usually, what these

rates will be is entirely up to the insurance company.

CURRENT INTEREST RATE

The current rate is the rate the company decides to credit to your contract at

a particular time. The company will guarantee it will not charge for some

time period.

O The initial rate is an interest rate the insurance company may credit for a

set period of time after you first buy your annuity. The initial rate in some

contracts may be higher than it will be later. This is often called a bonus

rate.

OThe renewal rate is the rate credited by the company after the end of the

set time period. The contract tells how the company will set the renewal

rate, which may be tied to an external reference or index.

MINIMUM GUARANTEED RATE

The minimum guaranteed interest rate is the lowest rate your annuity will

earn. This rate is stated in the contract.

MULTIPLE INTEREST

RATES

Some annuity contracts apply different interest rates to each premium

you pay or to premiums you pay during different time periods. 

Other annuity contracts may have

two or more accumulated values that

fund different benefit options. These

accumulated values may use different interest rates. You get only one

of the accumulated values depending

on which benefit you choose.

4

Page 80 of Appendix 
WHAT CHARGES MAY BE 

SUBTRACTED FROM MY

FIXED DEFERRED ANNUITY?

Most annuities have charges related to the cost of selling or servicing it.

These charges may be subtracted directly from the contract value. Ask your

agent or the company to describe the charges that apply to your annuity.

Some examples of charges, fees and taxes are:

SURRENDER OR WITHDRAWAL CHARGES

If you need access to your money, you may be able to take all or part of the

value out of your annuity at any time during the accumulation period. If you

take out part of the value, you may pay a withdrawal charge. If you take out

all of the value and surrender, or terminate, the annuity, you may pay a surrender charge. In either case, the company may figure the charge as a percentage of the value of the contract, of the premiums you've paid or of the

amount you're withdrawing. The company may reduce or even eliminate the

surrender charge after you've had the contract for a stated number of years. A

company may waive the surrender charge when it pays a death benefit.

Some annuities have stated terms. When the term is up, the contract may

automatically expire or renew. You're usually given a short period of time,

called a window, to decide if you want to renew or surrender the annuity. If

you surrender during the window, you won't have to pay surrender charges. If

you renew, the surrender or withdrawal charges may start over.

In some annuities, there is no charge if you surrender your contract when the

company's current interest rate falls below a certain level. This may be called

a bail-out option.

In a multiple-premium annuity, the surrender charge may apply to each premium paid for a certain period of time. This may be called a rolling surrender or withdrawal charge.

Some annuity contracts have a market value adjustment feature. If interest

rates are different when you surrender your annuity than when you bought it,

a market value adjustment may make the cash surrender value higher or

lower. Since you and the insurance company share this risk, an annuity with

an MVA feature may credit a higher rate than an annuity without the feature.

Be sure to read the Tax Treatment section and ask your tax advisor for information about possible tax penalties on withdrawals.

5

Page 81 of Appendix 
6

FREE WITHDRAWAL

Your annuity may have a limited free with

drawal feature. That lets you make one or 

more withdrawals without a charge. The 

size of the free withdrawal is often limited to

a set percentage of your contract value. If

you make a larger withdrawal, you may pay

withdrawal charges. You may lose any interest above the minimum guaranteed rate on

the amount withdrawn. Some annuities

waive withdrawal charges in certain situations, such as death, confinement in a nursing

home or terminal illness.

CONTRACT FEE

A contract fee is a flat dollar amount 

charged either once or annually.

TRANSACTION FEE

A transaction fee is a charge per premium

payment or other transaction.

PERCENTAGE OF PREMIUM CHARGE

A percentage of premium charge is a charge deducted from each premium

paid. The percentage may be lower after the contract has been in force for a

certain number of years or after total premiums paid have reached a certain

amount.

PREMIUM TAX

Some states charge a tax on annuities. The insurance company pays this tax

to the state. The company may subtract the amount of the tax when you pay

your premium, when you withdraw you contract value, when you start to

receive income payments or when it pays a death benefit to your beneficiary.

Page 82 of Appendix 
WHAT ARE SOME 

FIXED DEFERRED ANNUITY 

CONTRACT BENEFITS?

ANNUITY INCOME PAYMENTS

One of the most important benefits of deferred annuities is your ability to

use the value built up during the accumulation period to give you a lump

sum payment or to make income payments during the payout period.

Income payments are usually made monthly but you may choose to receive

them less often. The size of income payments is based on the accumulated

value in your annuity and the annuity's benefit rate in effect when income

payments start. The benefit rate usually depends on your age and sex, and

the annuity payment option you choose. For example, you might choose

payments that continue as long as you live, as long as your spouse lives or

for a set number of years.

There is a table of guaranteed benefit

rates in each annuity contract. Most

companies have current benefit rates as

well. The company can change the current rates at any time, but the current

rates can never be less than the guaranteed benefit rates. When income payments start, the insurance company

generally uses the benefit rate in effect

at the time to figure the amount of your

income payment.

Companies may offer various income

payment options. You (the owner) or

another person that you name may

choose the option. The options are

described here as if the payments are

made to you.

7

Page 83 of Appendix 
8

Life Only

The company pays income for your lifetime. It

doesn't make any payments to anyone after you

die. This payment option usually pays the highest income possible. You might choose it if you

have no dependents, if you have taken care of

them through other means or if the dependants

have enough income of their own.

Life Annuity with Period Certain

The company pays income for as long as you live

and guarantees to make payments for a set number of years even if you die. This period certain

is usually 10 or 20 years. If you live longer than

the period certain, you’ll continue to receive payments until you die. If you die during the period

certain, your beneficiary gets regular payments

for the rest of that period. If you die after the

period certain, your beneficiary doesn't receive

any payments from your annuity. Because the

"period certain" is an added benefit,each income

payment will be smaller than in a life-only

option.

Joint and Survivor

The company pays income as long as either you or your beneficiary lives.

You may choose to decrease the amount of the payments after the first

death. You may also be able to choose to have payments continue for a set

length of time. Because the survivor feature is an added benefit, each

income payment is smaller than in a life-only option.

DEATH BENEFIT

In some annuity contracts, the company may pay a death benefit to your

beneficiary if you die before the income payments start. The most common

death benefit is the contract value or the premiums paid, whichever is more.

Page 84 of Appendix 
CAN MY ANNUITY'S VALUE

BE DIFFERENT DEPENDING ON 

MY CHOICE OF BENEFIT?

While all deferred annuities offer a choice of benefits, some use different

accumulated values to pay different benefits. For example, an annuity may

use one value if annuity payments are for retirement benefits and a different

value if the annuity is surrendered . As another example, an annuity may use

one value for long-term care benefits and a different value if the annuity is

surrendered. You can't receive more than one benefit at the same time.

WHAT ABOUT THE

TAX TREATMENT OF ANNUITIES?

Below is a general discussion about taxes and annuities. You should consult

a professional tax advisor to discuss your individual tax situation. 

Under current federal law, annuities receive special tax treatment. Income tax

on annuities is deferred, which means you aren't taxed on the interest your

money earns while it stays in the annuity. Tax-deferred accumulation isn't

the same as tax-free accumulation. An advantage of tax deferral is that the

tax bracket you're in when you receive annuity income payments may be

lower than the one you're in during the accumulation period. You'll also be

earning interest on the amount you would have paid in taxes during the accumulation period. Most states' tax laws on annuities follow the federal law.

Part of the payments you receive from annuity will be considered as a return

of the premium you've paid. You won't have to pay taxes on that part.

Another part of the payments is considered interest you've earned. You must

pay taxes on the part that is considered interest when you withdraw the

money. You may also have to pay a 10% tax penalty if you draw the accumulation before age 59 1⁄2. The Internal Revenue Code also has rules about

distributions after the death of a contract holder.

Annuities used to fund certain employee pension benefit plans (those under

Internal Revenue Code Sections 401(a), 401(k), 403(b), 457 or 414) defer

taxes on plan contributions as well as on interest or investment income.

Within the limits set by the law, you can use pretax dollars to make payments

to the annuity. When you take money out, it will be taxed.

You can also use annuities to fund traditional and Roth IRAs under Internal

Revenue Code Section 408. If you buy an annuity to fund an IRA, you'll

receive a disclosure statement describing the tax treatment. 9

Page 85 of Appendix 
WHAT IS A

"FREE LOOK" PROVISION?

Many states have laws which give you a set number of days to look at the annuity contract after you buy it. If you decide during that time that you don't want

the annuity, you can return the contract and get all your money back. This is

often referred to as a free look or right to return period. The free look period

should be prominently stated in your contract. Be sure to read your contract

carefully during the free look period.

HOW DO I KNOW

IF A FIXED DEFERRED ANNUITY 

IS RIGHT FOR ME?

The questions listed below may help you decide which type of annuity, if any,

meets your retirement planning and financial needs. You should think about

what your goals are for the money you may put into the annuity. You need to

think about how much risk you're willing to take with the money. Ask yourself: 

OHow much retirement income will I need in addition to what I will get from Social Security and my

pension?

OWill I need that additional income only for myself

or for myself and someone else?

OHow long can I leave my money in the annuity?

OWhen will I need income payments?

ODoes the annuity let me get money when I need it?

ODo I want a fixed annuity with a guaranteed interest rate and little or no risk of losing the principal?

ODo I want a variable annuity with the potential for

higher earnings that aren't guaranteed and the possibility that I may risk losing principal?

OOr, am I somewhere in between and willing to

take some risks with an equity-indexed annuity?

10

Page 86 of Appendix 
WHAT QUESTIONS 

SHOULD I ASK MY AGENT 

OR THE COMPANY?

OIs this a single premium or multiple premium

contract?

OIs this an equity-indexed annuity?

OWhat is the initial interest rate and how long is

it guaranteed? 

ODoes the initial rate include a bonus rate and

how much is the bonus?

OWhat is the guaranteed minimum interest rate?

OWhat renewal rate is the company crediting on

annuity contracts of the same type that were

issued last year?

OAre there withdrawal or surrender charges or penalties if I want to end my

contract early and take out all of my money? How much are they?

OCan I get a partial withdrawal without paying surrender or other charges or

losing interest?

ODoes my annuity waive withdrawal charges for reasons such as death, confinement in a nursing home or terminal illness?

OIs there a market value adjustment (MVA) provision in my annuity?

OWhat other charges, if any, may be deducted from my premium or contract

value?

OIf I pick a shorter or longer payout period or surrender the annuity, will the

accumulated value or the way interest is credited change? Is there a death

benefit? How is it set? Can it change?

OWhat income payment options can I choose? Once I choose a payment

option, can I change it?

11

Page 87 of Appendix 
12

FINAL POINTS 

TO CONSIDER

Before you decide to buy an annuity, you should review the contract. Terms

and conditions of each annuity contract will vary.

Ask yourself if, depending on your needs or age, this annuity is right for

you. Taking money out of an annuity may mean you must pay taxes. Also,

while it's sometimes possible to transfer the value of an older annuity into a

new annuity, the new annuity may have a new schedule of charges that

could mean new expenses you must pay directly or indirectly.

You should understand the long-term nature of your purchase. Be sure you

plan to keep an annuity long enough so that the charges don't take too much

of the money you put in. Be sure you understand the effect of all charges. 

If you're buying an annuity to fund an IRA or other tax-deferred retirement

program, be sure that you're eligible. Also, ask if there are any restrictions

connected with the program.

Remember that the quality of service that you

can expect from the company and the agent is a

very important factor in your decision. 

When you receive you annuity contract, READ

IT CAREFULLY!! Ask the agent and company

for an explanation of anything you don't understand. Do this before any free look period

ends.

Compare information or similar contracts from

several companies. Comparing products may

help you make better decisions. 

If you have a specific question or can't get answers you need from the agent

or company, contact your state insurance department.

Page 88 of Appendix 
13

APPENDIX I

EQUITY-INDEXED ANNUITIES

This appendix to the Buyer's Guide for Fixed Deferred Annuities will

focus on equity-indexed annuities. Like other types of fixed deferred

annuities, equity-indexed annuities provide for annuity income payments,

death benefits and tax-deferred accumulation. You should read the

Buyer's Guide for general information about those features and about provisions such as withdrawal and surrender charges.

Page 89 of Appendix 
14

WHAT ARE

EQUITY-INDEXED ANNUITIES?

An equity-indexed annuity is a

fixed annuity, either immediate

or deferred, that earns interest

or provides benefits that are

linked to an external equity

reference or an equity index.

The value of the index might

be tied to a stock or other equity index. One of the most

commonly used indices is

Standard & Poor's 500

Composite Stock Price Index

(the S&P 500)1, which is an

equity index. The value of any

index varies from day to day

and is not predictable.

When you buy an equity-indexed annuity you own an insurance contract.

You are not buying shares of any stock or index. 

While immediate equity-indexed annuities may be available, this appendix

will focus on deferred equity-indexed annuities.

Page 90 of Appendix 
HOW ARE THEY DIFFERENT

FROM OTHER FIXED ANNUITIES?

An equity-indexed annuity is

different from other fixed annuities because of the way it credits interest to your annuity's

value. Some fixed annuities

only credit interest calculated at

a rate set in the contract. Other

fixed annuities also credit interest at rates set from time to time

by the insurance company.

Equity-indexed annuities credit

interest using a formula based

on changes in the index to which

the annuity is linked. The formula decides how the additional

interest you get and when you

get it depends on the features of

your particular annuity.

Your equity-indexed annuity, like other fixed annuities also promises to pay

a minimum interest rate. The rate that will be applied will not be less than

this minimum guaranteed rate even if the index-linked interest rate is lower.

The value of your annuity also will not drop below a guaranteed minimum.

For example, many single premium contracts guarantee the minimum value

will never be less that 90 percent of the premium paid, plus at least 3% in

annual interest (less any partial withdrawals). The guaranteed value is the

minimum amount available during a term for withdrawals, as well as for

some annuitizations (see "Annuity Income Payments") and death benefits.

The insurance company will adjust the value of the annuity at the end of

each term to reflect any index increases.

15

Page 91 of Appendix 
16

WHAT ARE SOME

EQUITY-INDEXED ANNUITY

CONTRACT FEATURES?

Two features that have the greatest effect on the amount of additional interest that may be credited to an equity-indexed annuity are the indexing

method and the participation rate. It is important to understand the features

and how they work together. The following describes some other equityindexed annuity features that affect the index-linked formula.

INDEXING METHOD

The indexing method means the approach used to measure the amount of

change, if any, in the index. Some of the most common indexing methods,

which are explained more fully later on, include annual reset (ratcheting),

high-water mark and point-to-point.

TERM

The index term is the period over which index-linked interest is calculated;

the interest is credited to your annuity at the end of a term. Terms are generally from one to ten years, with six or seven years being most common.

Some annuities offer single terms while others offer multiple, consecutive

terms. If your annuity has multiple terms, there will usually be a window at

the end of each term, typically 30 days, during which you may withdraw

your money without penalty. For installment premium annuities, the payment of each premium may begin a new term for that premium.

PARTICIPATION RATE

The participation rate decides how much of the increase in the index will be

used to calculated index-linked interest. For example, if the calculated

change in the index is 9% and the participation rate is 70%, the index linked

interest rate for your annuity will be 6.3% (9% x 70% = 6.3%). A company

may set a different participation rate for newly issued annuities as often as

each day. Therefore, the initial participation rate in your annuity will

depend on when it is issued by the company. The company usually guarantees the participation rate for a specific period (from one year to the entire

term). When that period is over, the company sets a new participation rate

for the next period. Some annuities guarantee that the participation rate will

never be set lower than a specified minimum or higher than a specified

maximum.

Page 92 of Appendix 
CAP RATE OR CAP

Some annuities may put an upper limit, or cap, on the index-linked interest

rate. This is the maximum rate of interest the annuity will earn. In the

example given above, if the contract has a 6% cap rate, 6%, and not 6.3%,

would be credited. Not all annuities have a cap rate.

FLOOR ON EQUITY INDEX-LINKED INTEREST

The floor is the minimum index-linked interest rate you will earn. The most

common floor is 0%. A 0% floor assures that even if the index decreases in

value, the index-linked interest that you earn will be zero and not negative.

As in the case of a cap, not all annuities have a stated floor on index-linked

interest rates. But in all cases, your fixed annuity will have a minimum

guaranteed value.

AVERAGING

In some annuities, the average of an

index's value is used rather than the actual value of the index on a specified date.

The index averaging may occur at the

beginning, the end, or throughout the

entire term of the annuity.

INTEREST COMPOUNDING

Some annuities pay simple interest during an index term. That means indexlinked interest is added to your original

premium amount but does not compound

during the term. Others pay compound

interest during a term, which means that

index-linked interest that has already

been credited also earns interest in the

future. In either case, however, the interest earned in one term is usually compounded in the next.

17

Page 93 of Appendix 
18

MARGIN/SPREAD/

ADMINISTRATIVE FEE

In some annuities, the index-linked interest

rate is computed by subtracting a specific

percentage from any calculated change in

the index. This percentage, sometimes

referred to as the "margin," "spread," or

"administrative fee," might be instead of, or

in addition to, a participation rate. For

example, if the calculated change in the

index is 10%, your annuity might specify

that 2.25% will be subtracted from the rate

to determine the interest rate credited. In

this example, the rate would be 7.75% (10%

- 2.25% = 7.75%). In this example, the

company subtracts the percentage only if

the change in the index produces a positive

interest rate.

VESTING

Some annuities credit none of the index-linked interest or only part of it, if

you take out all your money before the end of the term. The percentage that

is vested, or credited, generally increases as the term comes closer to its end

and is always 100% at the end of the term.

Page 94 of Appendix 
HOW DO THE

COMMON INDEXING

METHODS DIFFER?

ANNUAL RESET

Index-linked interest, if any, is determined each year by comparing the

index value at the end of the contract year with the index value at the start

of the contract year. Interest is added to your annuity each year during the

term.

HIGH-WATER MARK

The index-linked interest, if any, is decided by looking at the index value at

various points during the term, usually the annual anniversaries of the date

you bought the annuity. The interest is based on the difference between the

highest index value and the index value at the start of the term. Interest is

added to your annuity at the end of the term.

LOW-WATER MARK

The index-linked interest, if any, is

determined by looking at the index

value at various points during the term,

usually the annual anniversaries of the

date you bought the annuity. The interest is based on the difference between

the index value at the end of the term

and the lowest index value. Interest is

added to your annuity at the end of the

term.

POINT-TO-POINT

The index-linked interest, if any, is

based on the difference between the

index value at the end of the term and

the index value at the start of the term.

Interest is added to your annuity at the

end of the term.

19

Page 95 of Appendix 
20

WHAT ARE SOME OF THE

FEATURES AND TRADE-OFFS OF

DIFFERENT INDEXING METHODS?

ANNUAL RESET

Since the interest earned is "locked in" annually and the index value is

"reset" at the end of each year, future decreases in the index will not affect

the interest you have already earned. Therefore, your annuity using the

annual reset method may credit more interest than annuities using other

methods when the index fluctuates up and down often during the term. This

design is more likely than others to give you access to index-linked interest

before the term ends.

HIGH-WATER MARK

Since interest is calculated using the highest value of the index on a contract

anniversary during the term, this design may credit higher interest than

some other designs if the index reaches a high point early or in the middle

of the term, then drops off at the end of the term.

LOW-WATER MARK

Since interest is calculated using the lowest value of the index prior to the

end of the term, this design may credit higher interest than some other

designs if the index reaches a low point early or in the middle of the term

and then rises at the end of the term.

POINT-TO-POINT

Since interest cannot be calculated before the end of the term, use of this

design may permit a higher participation rate than annuities using other

designs.

FEATURES

Page 96 of Appendix 
Generally, equity-indexed annuities offer preset combinations of features.

You m ay have to make trade-offs to get features you want in an annuity.

This means the annuity you chose may also have features you don’t want.

21

TRADE-OFFS

ANNUAL RESET

Your annuity's participation rate may change each year and generally will be

lower than that of other indexing methods. Also an annual reset design may

use a cap or averaging to limit the total amount of interest you might earn

each year.

HIGH-WATER MARK

Interest is not credited until the end of the term. In some annuities, if you

surrender your annuity before the end of the term, you may not get indexlinked interest for that term. In other annuities, you may receive indexlinked interest, based on the highest anniversary value to date and the annuity's vesting schedule. Also, contracts with this design may have a lower

participation rate than annuities using other designs or may use a cap to

limit the total amount of interest you might earn.

LOW-WATER MARK

Interest is not credited until the end of the term. With some annuities, if

you surrender your annuity before the end of the term, you may not get

index-linked interest for that term. In other annuities, you may receive

index-linked interest based on a comparison of the lowest anniversary value

to date with the index value at surrender and the annuity's vesting schedule.

Also, contracts with this design may have a lower participation rate than

annuities using other designs or may use a cap to limit the total amount of

interest you might earn.

POINT-TO-POINT

Since interest is not credited until the end of the term, typically six or seven

years, you may not be able to get the index-linked interest until the end of

the term.

Page 97 of Appendix 
22

WHAT IS THE

IMPACT OF SOME OTHER

EQUITY-INDEXED ANNUITY

PRODUCT FEATURES?

CAP ON INTEREST EARNED

While a cap limits the amount of interest you might earn each year, annuities with this feature may have other product features you want, such as

annual interest crediting or the ability to take partial withdrawals. Also,

annuities that have a cap may have a higher participation rate.

AVERAGING

Averaging at the beginning of a term protects you from buying your annuity

at a high point, which would reduce the amount of interest you might earn.

Averaging at the end of the term protects you against severe declines in the

index and losing index-linked interest as a result. On the other hand, averaging may reduce the amount of the index-linked interest you earn when the

index rises either near the start or at the end of the term.

PARTICIPATION RATE

The participation rate may vary greatly from one annuity to another and

from time to time within a particular annuity. Therefore, it is important for

you to know how your annuity's participation rate works with the indexing

method. A high participation rate may be offset by other features, such as

simple interest, averaging, or a point-to-point indexing method. On the

other hand, an insurance company may offset a lower participation rate by

also offering a feature such as an annual reset indexing method.

INTEREST COMPOUNDING

It is important for you to know whether your annuity pays compound or

simple interest during a term. While you may earn less from an annuity that

pays simple interest, it may have other features you want, such as a high

participation rate.

Page 98 of Appendix 
WHAT WILL IT

COST ME TO TAKE MY 

MONEY OUT BEFORE

THE END OF THE TERM?

In addition to the information discussed in this Buyer's Guide about surrender and withdrawal charges and free withdrawals, there are additional considerations for equity-indexed annuities. Some annuities credit none of the

index-linked interest or only part of it if you take out money before the end

of the term. The percentage that is vested, or credited, generally increases

as the term comes closer to its end and is always 100% at the end of the

term.

ARE DIVIDENDS INCLUDED

IN THE INDEX?

Depending on the index

used, stock dividends

may or may not be

included in the index's

value. For example, the

S&P 500 is a stock price

index and only considers

the prices of stocks. It

does not recognize any

dividends paid on those

stocks.

23

Page 99 of Appendix 
24

HOW DO I KNOW

IF AN EQUITY-INDEXED

ANNUITY IS RIGHT FOR ME?

The questions listed below

may help you decide which

type of annuity, if any,

meets your retirement

planning and financial

needs. You should consider what your goals are for

the money you may put

into the annuity. You need

to think about how much

risk you're willing to take

with the money. Ask yourself:

OAm I interested in a variable annuity with the

potential for higher earnings that are not guaranteed and willing to risk losing the principal?

OIs a guaranteed interest

rate more important to me,

with little or no risk of losing the principal? 

OOr, am I somewhere in

between these two

extremes and willing to

take some risks?

Page 100 of Appendix 
HOW DO I KNOW

WHICH EQUITY-INDEXED

ANNUITY IS BEST FOR ME?

As with any other insurance

product, you must carefully

consider your own personal

situation and how you feel

about the choices available.

No single annuity design

may have all the features

you want. It is important to

understand the features and

trade-offs available so you

can choose the annuity that

is right for you. Keep in

mind that it may be misleading to compare one annuity

to another unless you compare all the other features of

each annuity. You must

decide for yourself what

combination of features

makes the most sense for

you. Also remember that it

is not possible to predict the

future behavior of an index.

25

Page 101 of Appendix 
26

QUESTIONS YOU SHOULD ASK

YOUR AGENT OR THE COMPANY

You should ask the following questions about equity-indexed annuities in

addition to the questions in the Buyer's Guide to Fixed Deferred Annuities.

OHow long is the term?

OWhat is the guaranteed minimum interest rate?

OWhat is the participation rate? For how long is the participation rate guaranteed?

OIs there a minimum participation rate?

ODoes my contract have an interest rate cap? What is it?

ODoes my contract have an interest rate floor? What is it?

OIs interest rate averaging used? How does it work?

OIs interest compounded during

a term?

OIs there a margin, spread, or

administrative fee? Is that in

addition to or instead of a participation rate?

OWhat indexing method is used

in my contract?

OWhat are the surrender charges or penalties if I want to end my contract

early and take out all of my money?

OCan I get a partial withdrawal without paying charges or losing interest?

Does my contract have vesting? If so, what is the rate of vesting?

Page 102 of Appendix 
FINAL POINTS

TO CONSIDER

Remember to read your

annuity contract carefully when you receive

it. Ask your agent or

insurance company to

explain anything you

don't understand. If

you have a specific

complaint or can't get

answers you need from

the agent or company,

contact your state

insurance department. 

27

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( 5HJXODWLRQApplies to Variable Life Insurance and Variable Annuity 

Replacements

 7KHWHUPreplacementLVGHILQHGLQWKHUHJXODWLRQWRPHDQD

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Page 105 of Appendix 
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E &RQYHUWHGWRUHGXFHGSDLGXSLQVXUDQFHFRQWLQXHGDV

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Page 106 of Appendix 
GLUHFWVROLFLWDWLRQRILQGLYLGXDOVE\DQLQVXUDQFHSURGXFHU

F &UHGLWOLIHLQVXUDQFH

* 'XWLHVRI3URGXFHUVDQG,QVXUHUVLQ5HSODFHPHQW7UDQVDFWLRQV

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D 8QGHUWKHUHJXODWLRQHDFKLQVXUHUPXVW

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D Inform its producers of the requirements of 

the regulationDQGLQFRUSRUDWHWKH

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UHOHYDQWproducer training manuals

SUHSDUHGE\WKHLQVXUHU

E ProvideWRHDFKSURGXFHUa written 

statement of the company's position with 

respect to the acceptability of replacements

SURYLGLQJJXLGDQFHWRLWVSURGXFHUDVWRWKH

DSSURSULDWHQHVVRIWKHVHWUDQVDFWLRQV

F A system to review the appropriatenessRI

HDFKUHSODFHPHQWWUDQVDFWLRQthat the 

producer does not indicate is in accord with 

the regulation’s standards;

G 3URFHGXUHVWR confirm WKDWWKHrequirements 

RIWKLVUHJXODWLRQKDYHEHHQmetDQG

H 3URFHGXUHVWRdetect transactions that are 

replacements of existing policiesRU

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KDYHQRWEHHQLGHQWLILHGDVVXFKE\WKH

DSSOLFDQWRUSURGXFHU  

Have the capacity to produceXSRQUHTXHVWDQG

PDNHDYDLODEOHWRWKH,QVXUDQFH'HSDUWPHQW

records of each producer's

D ReplacementsLQFOXGLQJILQDQFHG

SXUFKDVHVDVDSHUFHQWDJHRIWKH

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VWRWDODQQXDOVDOHVIRUOLIH

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E Number of lapsesRISROLFLHVDQGFRQWUDFWV

Page 107 of Appendix 
E\WKHSURGXFHUDVDSHUFHQWDJHRIWKH

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F 1XPEHURIWUDQVDFWLRQVWKDWDUHunidentified 

replacements of existing policiesRU

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G Replacements, indexed by replacing 

producer and existing insurer

 5HTXLUHZLWKRUDVDSDUWRIHDFKDSSOLFDWLRQIRUOLIH

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 5HTXLUHZLWKHDFKDSSOLFDWLRQIRUOLIHLQVXUDQFHRU

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Page 108 of Appendix 
D :KHUHDUHSODFHPHQWLVLQYROYHGLQWKHWUDQVDFWLRQWKH

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LGHQWLILHGLIQRWLQGLFDWHGRQWKHDSSOLFDWLRQDQG

PDLODFRS\RIWKHDYDLODEOH illustration or policy 

summaryIRUWKHSURSRVHGSROLF\RUDYDLODEOH

GLVFORVXUHGRFXPHQWIRUWKHSURSRVHGFRQWUDFW

ZLWKLQILYHEXVLQHVVGD\VRIDUHTXHVWIURPDQ

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 %HDEOHWRSURGXFHFRSLHVRIWKHQRWLILFDWLRQ

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indexed by producer, in its home or regional office 

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VRUFRQWUDFW
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FRQWUDFW:LWKUHJDUGWRfinanced purchasesWKHFUHGLWPD\

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Page 109 of Appendix 
F ,IDQLQVXUHUprohibits the use of sales material other than 

that approvedE\WKHFRPSDQ\DVDQDOWHUQDWLYHWRWKH

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 5HTXLUHZLWKHDFKDSSOLFDWLRQDVWDWHPHQWsigned 

by the producerWKDW

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FRPSDQ\DSSURYHGVDOHVPDWHULDO

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GHVFULSWLYHODQJXDJHWKHsales material that 

was usedDQG

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D 1RWLI\WKHDSSOLFDQWE\VHQGLQJDOHWWHURUE\

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a person whose duties are separate from 

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WRFRQWDFWcompany personnel involved in 

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FDVHDQG

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retain copiesRIWKHQRWLILFDWLRQLQLWVKRPHRUUHJLRQDO

RIILFHindexed by replacing insurerQRWLI\LQJLWRIWKH

Page 110 of Appendix 
UHSODFHPHQWIRUDWOHDVWILYH\HDUVRUXQWLOWKHFRQFOXVLRQRI

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WKHQRQJXDUDQWHHGHOHPHQWVIDFHDPRXQWRUVXUUHQGHU

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FRQWUDFWRZQHU,QWKHFDVHRIconsecutive automatic 

premium loans or systematic withdrawalsIURPDFRQWUDFW

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VGXWLHVZLWKUHVSHFWWRUHSODFHPHQWDUH

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E ,IWKHDSSOLFDQWDQVZHUHG\HVWRWKHTXHVWLRQUHJDUGLQJ

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$WWDFKPHQWWRWKHUHJXODWLRQRURWKHUVXEVWDQWLDOO\VLPLODU

IRUPDSSURYHGE\WKHFRPPLVVLRQHUThe notice shall be 

signed by both the applicant and the producerDWWHVWLQJ

WKDWWKHQRWLFHKDVEHHQUHDGDORXGE\WKHSURGXFHURUWKDW

WKHDSSOLFDQWGLGQRWZLVKWKHQRWLFHWREHUHDGDORXGLQ

ZKLFKFDVHWKHSURGXFHUQHHGQRWKDYHUHDGWKHQRWLFH

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F 7KHQRWLFHVKDOOOLVWDOOOLIHLQVXUDQFHSROLFLHVRUDQQXLWLHV

Page 111 of Appendix 
SURSRVHGWREHUHSODFHGSURSHUO\LGHQWLILHGE\QDPHRI

LQVXUHUWKHLQVXUHGRUDQQXLWDQWDQGSROLF\RUFRQWUDFW

QXPEHULIDYDLODEOHDQGVKDOOLQFOXGHDVWDWHPHQWDVWR

ZKHWKHUHDFKSROLF\RUFRQWUDFWZLOOEHUHSODFHGRUZKHWKHU

DSROLF\ZLOOEHXVHGDVDVRXUFHRIILQDQFLQJIRUWKHQHZ

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VKDOOEHOLVWHG

G ,QFRQQHFWLRQZLWKDUHSODFHPHQWWUDQVDFWLRQthe producer 

shall leave with the applicant DWWKHWLPHDQDSSOLFDWLRQIRU

DQHZSROLF\RUFRQWUDFWLVFRPSOHWHGthe original or a copy 

of all sales material:LWKUHVSHFWWRHOHFWURQLFDOO\

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SROLF\KROGHULQSULQWHGIRUPQRODWHUWKDQDWWKHWLPHRI

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sales materialsLQFOXGLQJany illustrations XVHGLQWKH

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+ 6HOHFWHG'HILQLWLRQV

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YDOXHVRIDQH[LVWLQJSROLF\DUHXVHGWRSD\SUHPLXPVRQDQHZ

SROLF\RZQHGE\WKHVDPHSROLF\KROGHUwithin thirteen months 

before or after the effective date of the new policyDQGLVNQRZQE\

WKHUHSODFLQJLQVXUHURULIWKHZLWKGUDZDOVXUUHQGHURUERUURZLQJ

LVVKRZQRQDQ\LOOXVWUDWLRQRIWKHH[LVWLQJDQGQHZSROLFLHVPDGH

DYDLODEOHWRWKHSURVSHFWLYHSROLF\RZQHUE\WKHLQVXUHURULWV

SURGXFHUVLWZLOOEHdeemed prima facie evidence of a financed 

purchase.

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Page 112 of Appendix 
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Page 173 of Appendix 
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Page 180 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 181 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 182 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 183 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 184 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 185 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 186 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 187 of Appendix 
State

Investment Advisers Definition & Exceptions Restrictions on Consulting Fees and Insurance Commissions

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Page 201 of Appendix 
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Page 202 of Appendix 
ACLI LAW SURVEY

Free Look/Right To Return Requirements

What’s New?

Substantive changes in the survey are highlighted in bold and may reflect:

x Amendments to existing laws and regulations;x New laws, regulations and administrative material; orx Expansion of the scope of the survey or additional information on the topic.

This multi-state survey identifies statutes and regulations that require insurers to inform policyholders of their right to receive a refund of monies paid after

the return of first-issue or replacement life insurance policies, annuity contracts, long-term care insurance policies, and disability income insurance policies

during a free look period. Additionally, the compilation lists the required location of the free look provision and specifies the time limitation for return of a 

contract by a policyholder after the contract is delivered. The survey also summarizes provisions governing the refund amount due to policyholders on return 

of the policy within the free look period. Note that product exemptions to the replacement requirements are not listed herein but are summarized in the ACLI’s 

survey on Replacement of Life Insurance and Annuities. Like other Law Surveys, this survey does not address case law or unpublished positions of state insurance departments.ACLI hopes this compilation is helpful as a quick reference for your questions on free look provisions. This survey does not constitute a legal opinion or conclusion by ACLI, its staff, or its member companies and should not be used as the sole basis for making individual company decisions or conclusions. The Law Surveys are reviewed and updated annually. 

Note: No live web links are available in this survey.

January 2014

American Council of Life Insurers

202-624-2461

Page 203 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AL AL Code §27-19-105

(f)

Long-term care policies Prominently printed 

on 1st page or attached thereto

30 days Premium

AL Code §27-19-32 Individual disability 

insurance

Single premium nonrenewable 

policies or contracts

Notice printed on or attached to policy

10 days Premium

AL Admin. Code 482-1-113-.01

AL Admin. Code 482-1-113-.07 (3)

Accelerated benefit provisions of individual and group life insurance policies solicited by direct response

Any policy subject to long-term care 

insurance provisions

In a disclosure form provided when the policy is delivered

30 days Premium

AL Admin. Code 482-1-129-.03AL Admin. Code 482-1-129-.05

Individual and group annuities

Registered/nonregistered variable annuities or other registered products; immediate and deferred annuities containing no nonguaranteed elements; annuitiesused to fund certain pension plans; nonqualified deferred compensation arrangements; structured settlement annuities; charitable gift annuities; and funding agreements

15 days, when Buyer’s Guide and disclosure document are not provided at or before thetime of application

Applicant may return contract “without penalty”

AL Admin. Code 482-1-131-.03AL Admin. Code 482-1-131-.05

Life insurance Individual and group annuity 

contracts, credit life insurance, group life insurance, life insurance issued in connection with pension and welfare plans, or variable life insurance.

In policy 10 days, when 

the Buyer’s Guide is not delivered prior to acceptance of the applicant’s initial premium or premium deposit

“Unconditional refund”

Page 204 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AL Admin. Code 

482-1-133-.02AL Admin. Code 482-1-133-.06

Replacement of life insurance and annuities

See ACLI’s Replacement Law Survey

for list of exemptions. 

May be included in Appendix A or C 

30 days Premiums or 

considerations, including policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value provided under policy plus fees and other charges deducted from gross premiums or considerations or imposed under such 

policy

AK AK Stat. §21.45.020

AK Bulletin 2011-13

Life insurance and annuitiesdelivered or issued for delivery on or after July 1, 2011 

Group and pure endowments, single premium or term policies, annuity contracts or life insurance policies relating to health insurance benefits or additional benefits in the event of death by accident or accidental means

Prominently printed on 1st page orattached thereto

10 days (Note: Division encourages insurers to use a longer than the minimum 10-day free look period) 

Refund of all moneys paid, except refund for variable life insurance policy or annuity contract must equal the sum of the difference between premiums paid, including any policy or contract fees or other charges; and amounts allocated to any separate accounts under the 

policy or contract

AK Stat. §21.53.050(a)

Long-term care policies Prominently printed 

on 1st page or separately attached

30 days Premium

Page 205 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AK Admin. Code tit. 3 §26.805AK Bulletin 2011-13

Replacement of life insurance policies and annuities by insurers using producers

See ACLI’s Replacement Law Survey

for list of exemptions. 

In the policy or contract

30 days Premiums or 

considerations, including any fees or charges. For a variable or market value-adjusted life 

insurance policy or annuity contract, the cash surrender value plus the fees or other charges deducted fromthe gross premiums or considerations or otherwise imposed under the life insurance policy 

or annuity contract.

AZ AZ Rev. Stat. Ann. 

§20-1233

Annuity contracts Annuity contract supplemental to a 

settled annuity providing for payments in consideration of accumulations from the original contract and that is issued only to the original contract holders

Prominently printed on or attached to 1st page

10 days or 30 days if the contract holder is 65 or older on the date of the application

All monies paid; for variable annuities, sum of difference between premiums paid, including any policy or contract fees or other charges, and amounts allocated to separate accounts under policy or contract, and value of amounts allocated to separate accounts under policy or contract on date the returned policy is received by insurer or its producer

Page 206 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AZ Rev. Stat. Ann. §20-1242.01AZ Rev. Stat. Ann. §20-1242.02

Group and individual annuities 

Registered/nonregistered variable annuities or other registered products; immediate and deferred annuities containing no nonguaranteed elements; annuities used to fund certain pension plans; nonqualified deferred compensation arrangements; structured settlement annuities

15 days, when Buyer’s Guide and disclosure document are not provided at or before the time of application

Applicant may return contract “without penalty”

AZ Rev. Stat. Ann. §20-1691.07

Long-term care policies Prominently printed 

on or attached to 1st 

page

30 days Premium

AZ Admin. Code R20-6-501

Individual disability insurance

One where no provision for renewal is made

Printed on or attached to 1st page 

or endorsed in a notice in a prominent 

style 

10 days (or longer, at insurer’s option)

Premium, policy fees and other charges paid

AZ Admin. Code R20-6-209 (C)(1)

Life insurance Annuities, credit life insurance, group 

life insurance, life insurance policies issued in connection with a pension or welfare plan, or variable life insurance

In policy or policy summary

10 days, when the Buyer’s Guide and a Policy Summary are not delivered prior to acceptance of the applicant’s initial premium or premium deposit.

Unconditional refund

Page 207 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AZ Rev. Stat. Ann. §20-1241.01AZ Rev. Stat. Ann. §20-1241.03

AZ Rev. Stat. Ann. § 20-1241.05 (E)

Replacement of life insurance policies and annuity contracts

See ACLI’s Replacement Law Survey

for list of exemptions. 

May be included in notice required under AZ Rev. Stat. 

Ann. §20-1241.03, subsections C and DSee also AZ Admin. Code R20-6-212 for reference to applicable NAIC model replacement notice form.

30 days Premiums or 

consideration paid, including policy fees or charges or, in case of a variable or market value adjustment policy, payment of cash surrender value plus all fees and other charges deducted from gross premiums or considerations or imposed under policy

AR AR Code Ann. 

§23-79-112 (f)

Individual life, annuity, and accident & health policies or contract filings 

Variable life policies, variable annuities

Prominently printed on 1st page of policy or contract

At least 10 days unless policy or contract specifiesa greater period

Premium

AR Code Ann. §23-97-311

Long-term care policies Prominently printed

on or attached to 1st

page

30 days Premium

AR ADC 054.00.33-IV(Ark. Rule and Regulation 33, art. IV, Sec. 3(a)(5))

Variable life Captioned provision 

on the cover page or pages corresponding to the cover page

10 days To extent permitted by 

state law refund equals sum of (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts and (ii) the value of the amounts allocated to separate accounts on the date the return policy is received by insurer or its agent. Until state law authorizes this method, the amount of the refund shall be the total of all 

premium payments.

Page 208 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

AR ADC 054.00.60-8(Ark. Rule and Regulation 60, Sec. 8(C)(b))

Accelerated benefit provisions in individual life insurance policies solicited by direct response methods

Long-term care insurance In a disclosure form 

provided when the policy is delivered

10 days Premium

CA CA Ins. Code 

§10127.7

Individual life policies with a face value less than $10,000 and any renewal 

Individual life policies issued in connection with credit transactions or under contractual policy change or conversion privilege provision

Printed on or attached to policy

Not less than 10 nor more than 30 days 

Premium and policy feewithin 30 days from the date that the insurer is notified that insured has canceled the policy for all policies issued, amended, or delivered in this state on or after January 1, 2011, and applies to any renewal 

thereof. All policies subject to this section that are in effect on January 1, 2011, shall be construed to be in compliance with this 

section.

CA Ins. Code §10127.9

Individual life insurance Individual life policies subject to 

CA Ins. Code §10127.7 and those 

issued in connection with credit transactions or under contractual policy change or conversion privilege provision

Printed on or attached to policy

Not less than 10 nor more than 30 days

Premium and policy fee, but for variable annuities, variable life, and modified guaranteed contracts, the owner is entitled to a refund of account value and any policy fee paid. Refund must be made within 30 days from the date that the insurer is notified that the insured has canceled the policy.

Page 209 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

CA Ins. Code §10127.10

Individual life insurance policies or annuity contracts issued or delivered to senior citizen, 60 years or older

Individual life policies issued in connection with a credit transaction or under contractual policy change or conversion privilege provision, employer group annuity contracts and group term life insurance

On cover page or policy jacket in 12-point bold print with one-inch space on all sides or on sticker affixed to cover page or policy jacket

Not less than 30 days

Premium and policy fee for individual life and for variable contracts for which the owner did not direct that the premium be invested in mutual funds during the cancellation period. Account value refunded for variable annuities for which the owner directed the premium be invested in mutual funds during cancellation period. Refund must be within 30 days from the date that the insurer is notified that the insured has canceled the policy.

CA Ins. Code §10295

CA Ins. Code §10295.3CA Ins. Code §10295.8

Accelerated benefits policies, provision,endorsements or riders

added to life insurance policies

Health, accident, or long-term 

care insurance 

Prominently printed or attached to policy, certificate, rider or endorsement; for solicitation by direct response, disclosure form provided with 

application

30 days Premium; if purchased 

as endorsement or rider at same time as base life insurancepolicy, then endorsement or rider may be returned within 30 days and underlying life insurance policy is otherwise subject to code.

CA Ins. Code §10232.7

Long-term care policies or certificates

Group long-term care policies Prominently printed 

on or attached to 1st page of policy or certificate 

30 days Premium and policy fee 

must be refunded within 30 days of receipt of returned policy.

CA Ins. Code §10276 Individual accident and 

health policies or contracts

Single premium nonrenewable policies or contracts

Printed on or attached to policy or contract

Not less than 10 nor more than 30 days

Premium

Page 210 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

10 CCR §2522.8

(a)(3)(G)

Individual investment annuities

Printed on application

10 days All annuity purchase

contributions

CA Ins. Code §10509.6 (d)

Replacement of life insurance policies and annuity contracts by insurers using agents

See ACLI’s Replacement Law Survey

for list of exemptions. 

In policy or separate written notice delivered with policy

30 days Premium and policy fee,

but for variable annuities, variable life, and modified guaranteed contracts, the owner is entitled to a refund of account value and any policy fee paid. Refund must be made within 30 days from the date that the insurer is notified that the owner has canceled the policy.

CO CO Rev. Stat. Ann. 

§10-7-302 (1)(g) 

CO Rev. Stat. Ann. §10-7-307

Life insurance policies Reinsurance, group insurance, pure 

endowments, annuities or reversionary annuity contracts, certain term policies; policies which provide no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year exceeds 2-1/2% of the amount of insurance at the beginning of the same policy year; and policies shall delivered outside the state through an agent 

Prominently printed on or attached to 1st page 

15 days Premium, but for 

variable life insurance the policyholder is entitled to a refund of the account value plus any policy fee or charge deducted from the policy.

CO Rev. Stat. Ann. §10-19-111

Applicable to long-term care insurance applicants; notice requirements applicable to long-term care insurance 

policies and certificates

Prominently printed on or attached to 1st page 

30 days Premium

Page 211 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

3 CO ADC INS 4-1-4,

Sections 7(A)(4) and 3(B)

Replacement of life policies or annuity contracts by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C.

30 days Premiums or 

considerations paid, including any policy fees or charges, but for variable or market value adjustment policy the owner is entitled to payment of the cash surrender value plus the fees and other charges deducted from the gross 

premiums.

3 CO ADC INS 4-1-12,

Section 5

All group and individual annuity contracts and certificates, including certain annuities used to fund a plan or arrangement that is funded solely by contributions an employee elects to make whether or a 

pre-tax or after-tax basis

Registered or non-registered variable annuities or other registered products; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pension plans; structured settlement annuities, charitable gift annuities, and funding agreements

15 days where the Buyer’s Guide and disclosure document are not provided at or before the time of application

CT CT Gen. Stat. Ann. 

§38a-436

Individual life policies Printed on or 

attached to policy

10 days Premiums

CT ADC §38a-457-5(c)(6)

Accelerated benefits policy with a rider providing for additional premium payments with an effective date subsequent to the effective date of the life insurance policy

Long-term care policies Printed on or 

attached to policy

10 days Not specified. Rider shall 

be void ab initio. 

CT ADC §38a-501-11

(g)

Individual long-term care insurance, including that issued pursuant to direct response solicitation

Prominently printed on or attached to 1st page 

30 days Premium

Page 212 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

CT ADC §38a-433-4(c)(1)(E) CT ADC §38a-433-2(s)CT Bulletin PF-19(June 11, 1990)

Individual variable life insurance policies

Captioned provision on cover page or pages corresponding to cover page of policy

10 days To extent permitted by 

state law refund equals the sum of (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts and (ii) the value of the amounts allocated to separate accounts on date returned policy is received by insurer or its agent. Until state law authorizes this method, amount of refund shall be total of all premium 

payments.

CT ADC §38a-505-10

(A)(7)

Individual accident and sickness policies

Single premium non-renewable policies

Prominently printed on or attached to 1st

page 

10 days Premium

CT Bulletin PF-19(June 11, 1990)

Individual fixed annuities and individual modified 

guaranteed life insurance

10 days Premiums

CT Bulletin PF-19

(June 11, 1990)

Individual variable annuities and individual modified guaranteed annuities

10 days A) Total premiums if 

cancellation is made prior to actual delivery of contract; or B) An amount equal to the sum of (a) difference betweenpremiums paid including any policy fees or other charges and amounts allocated to any separate accounts and (b) value of amounts allocated to any separate accounts, on the date the returned policy is received by the insurer or its agent

Page 213 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

CT ADC §38a-435-5(a)(4)

Replacement of life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law 

Survey for list of exemptions.

May be included in notice described in Appendix A or C 

10 days Premium/

consideration, including any policy fees/charges or, in the case of a variable or market value adjustment policy or contract, cash surrender value plus fees and charges 

DE DE ST TI 18 s7105 (f) Long-term care policies Prominently printed 

on or attached to 1st page 

30 days Premium

18 DE ADC 1203 Life insurance Annuities, credit life, group life, life 

insurance policies issued in conjunction with certain pension and welfare, variable life insurance under which death benefits and cash values vary in accordance with unit values of investments held in separate accounts

In policy or policy summary

10 days (If no unconditional refund provision/offer, Buyer’s Guide and Policy Summary must be provided.)

Not specified 

18 DE ADC 1204-7.0(7.4)

Replacement of life insurance and annuities by insurers that use agents or brokers

See ACLI’s Replacement Law Surveyfor list of exemptions.

In policy or separate written notice delivered with policy

20 days Premium

Page 214 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

DC DC Mun. Regs. 

tit. 26-A §2712 (a)(5)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page of policy

Either within 45 days of date of execution of the application or within 10 days of receipt of policy by policyholder, whichever is later

Premium

DC Code Ann. §31-3605 (d)(2)

Long-term care policies Prominently printed 

on or attached to 1st page

30 days Premium

FL FL Stat. Ann §626.99

(4)(a)

Life insurance policies Annuities, credit life, group life, life 

insurance policies issued in conjunction with certain pension and welfare plans, variable life insurance under which death benefits and cash values vary in accordance with unit values of investments held in 

separate accounts

In policy or policysummary

14 days (If no 

unconditional refund provision/offer, Buyer’s Guide and a Policy Summary must 

be provided.)

“Unconditional refund”

FL Stat. Ann §626.99(4)(b) and (c)

Fixed and variable annuities Cover page of 

contract

21 days “Unconditional refund” 

Fixed annuitiesPremiums, contract fees and charges;Variable annuities -

cash surrender value, plus fees and charges

or premiums paid

FL Stat. Ann §627.9407 (8)69 FL Admin. Code Ann. 69O-157.018

Repealed. Effective

Jan. 28, 2013.

Individual long-term care policies

Prominently printed on or attached to 1st page 

30 days Premium

Page 215 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

69 FL Admin. Code Ann. 69O-154.003

Individual disability insurance policies

Single premium non-renewable policies or contracts or travel accident policies or contracts

Notice in a prominent place printed or stamped on or attached to 

policy

10 days Premium

69 FL Admin. Code Ann. 69O-151.00369 FL Admin. Code Ann. 69O-151.00469 FL Admin. Code Ann. 69O-151.007

(3)(d)

Replacement of life insurance and annuities, including tax sheltered annuities and life insurance that qualifies as tax sheltered annuity

See ACLI’s Replacement Law Surveyfor list of exemptions.

10 days (If no unconditional refund provision/offer, Buyer’s Guide and a Policy Summary must be provided.)

“Unconditional refund”

GA GA Code Ann. 

§33-25-8

Individual life policies Individual life policies issued in 

connection with a credit transaction

Printed on or attached to contract

10 days Premium

GA Code Ann. §33-26-4

Industrial life policies Printed on or 

attached to contract

10 days Premium

GA Code Ann. §33-28-6 (a)

Annuities, reversionary annuities, pure endowment contracts

Group annuity contracts Printed on or 

attached to contract

10 days Premium

GA Code Ann. §33-42-6 (f)

Individual long-term care policies, including direct response solicitation

Prominently printed on or attached to 1st 

page 

30 days Premium

GA Code Ann. §33-29-11

Individual accident and sickness policies

Single premium nonrenewable policies or contracts

Printed on or attached to policy or contract

10 days Premium

Page 216 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

GA Comp. R. & Regs. 120-2-73-.02GA Comp. R. & Regs. 120-2-73-.05

Individual deferred annuities and group annuities and deposit funds (i.e. arrangements under which amounts to accumulate at interest are paid in addition to life insurance premiums or annuity considerations under provisions of individual life insurance policies or annuity contracts)

1. Individual deferred annuities and group annuities which are: (i) 

variable annuities; (ii) registered with the Federal SEC; (iii) contracts with variable annuity features available at option of contract owner; 2. group annuity contracts whose cost is borne in whole or in part by the annuitant's employer or association; 3. immediate annuity contracts; 4. policies issued in connection with certain pension plans; 5. individual retirement accounts and Sec. 408 individual retirement annuities; 6. a single advance payment of specific premiums equal to the discounted value of such premiums; and 7. 

certain policyholder deposit accounts.

In policy or contract or in contract summary

10 days (If no unconditional refund provision/offer, Buyer’s Guide and a Policy Summary must be provided prior 

to accepting initial annuity consideration.)

“Unconditional refund”

GA Comp. R. & Regs. 120-2-24-.08 Exhibit A; GA Comp. R. & Regs. 120-2-24-.04,

GA Comp. R. & Regs. 120-2-24-.07

Replacement of life insurance

See ACLI’s Replacement Law Surveyfor list of exemptions.

In Replacement Notice (Exhibit A)

Not specified Not specified

HI HI Rev. Stat. Ann.

§431:10-214

Individual life policies, individual accident and health or sickness policies

Single premium nonrenewable policies or travel accident policies

Printed on or attached to policy in 10-point bold type

10 days Premium, but insurer 

may be reimbursed for actual medical examination expenses incurred in processing policy, provided notice includes such statement.

Page 217 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

HI Rev. Stat. Ann. §431:10D-603

Annuities Solicitation for an annuity contract 

provided in other than a personal meeting

15 days, when Buyer’s Guide and disclosure document are not provided at or before the time of application

Applicant may return contract without penalty

HI Rev. Stat. Ann. §431:10D-603 (b)

Solicitation for an annuity contract provided in other than a personal meeting

Solicitation must include statement that prospective applicant may contact the insurance division for a free buyer's guide

Not specified Not specified

HI Rev. Stat. Ann. §431:10H-111

Long-term care policies Group long-term care policies issued 

to employer or labor organization

Prominently printed on or attached to 1st 

page 

30 days Premium

HI Rev. Stat. Ann. §431:10D-501HI Rev. Stat. Ann. §431:10D-505 (a)(4)

Replacement of life insurance and annuities by insurers that use producers 

See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or contract owner notice

30 days Premium/consideration, 

including policy fees/charges, or, in case of variable or market value adjustment policy, 

cash surrender value plus all fees and charges deducted from the gross premiums or considerations; provided that such notice may be included in forms approved by the 

commissioner

Page 218 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

ID ID Code §41-1935 (1)

ID Code §41-1901

Life insurance policies and annuity contracts 

Group life insurance; group annuities; reinsurance

In policy or contract under appropriate caption and if not so printed on face page of policy, printed or stamped conspicuously on face page

20 days Premium

ID Code §41-4605 (6)

ID Code §41-4603

(4)(a)

Long-term care policies, including those issued pursuant to direct response solicitation

Long-term care certificate issued to specified employer groups defined in § 41-4603(4)(a)

Prominently printed on or attached to 1st page 

30 days Premium

ID Code §41-2138

Individual health insurance policies

Nonrenewable accident policies and individual credit health insurance policies

Captioned in policy or separate rider attached to policy when delivered, or notice of provision printed or stamped on face page

10 days Premium

ID Admin. Code 18.01.41.014

Replacement of life and annuities by insurers that use agents or brokers

See ACLI’s Replacement Law Surveyfor list of exemptions.

In policy or in separate written notice delivered with 

policy

20 days Premium

IL 215 ILCS 5/224

(1)(n)

Individual life insurance Director may by rule exempt specific 

types of policies

Provision or notice attached to policy

10 days Premium and policy fees

215 ILCS 5/229

(1)(m)

Industrial life insurance Director may by rule exempt specific 

types of policies

Provision or notice attached to policy

10 days Premium and policy fees

215 ILCS 5/351A-7 Individual long-term care 

policies, including direct response 

Prominently printed on or attached to 1st 

page

30 days Premium

Page 219 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

215 ILCS 5/226(1)(h)

Annuities and pure endowment contracts

Reversionary annuities, survivorship annuities, or annuities contracted by employer on behalf of his employees

Provision or notice attached to contract

10 days Premium, including 

contract fees or charges. For a variable annuity, a refund equal to sum of (i) difference between premiums paid including contract fees or other services and amounts allocated to separate accounts and (ii) cash value or, if contract does not have cash value, the reserve for contract, on date return contract is received by insurer or agent

215 ILCS 5/355a(5)(a)

Individual accident and health insurance policies

Single premium nonrenewal policies Notice prominently 

printed on first page or attached to policy

10 days Premium

215 ILCS 5/224 (2) Replacement of life 

insurance

Industrial life, group life, annuities, pure endowments, reinsurance

In policy or separate notice delivered with 

policy

20 days Premium

IN IN Code Ann. 

§27-1-12-43

Individual life insurance and individual variable life insurance 

Credit life insurance Prominently printed 

on 1st page

10 days All money paid by the 

policyholder

IN Code Ann. §27-1-12.6-5

Annuity contracts Contracts issued in connection with a 

pension, annuity, or qualifying profitsharing plan, if participation is a condition of employment

Conspicuously placed on face page of the contract

10 days Value of variable annuity 

account or the monies paid by the purchaser to a fixed account in connection with the issuance of the contract

IN Code Ann. §27-8-12-12

Individual long-term care 

policies

Prominently printed on or attached to 1st 

page

30 days Premium

Page 220 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

IN Code Ann. §27-8-12-13

Long-term care policy or certificate issued pursuant to direct response solicitation

Printed on or attached to 1st page

30 days Premium

IN Code Ann. §27-8-5-20 (a)

Individual accident and health insurance policies

Direct response policies Prominently printed 

on 1st page

10 days Premium

IN Code Ann. §27-8-5-20 (b)

Direct response accident and health insurance policies 

Prominently printed on 1st page

30 days Premium

760 IN Admin. Code 1-16.1-4

760 IN Admin Code 1-16.1-6

Replacement policies See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or separate written notice delivered with policy

20 days Premium

IA IA Code Ann. 

§514G.105 (4)

Individual long-term care policies

Prominently printed on or attached to 1st page 

30 days Premium

IA Code Ann. §514A.3 (1)(m)

Individual sickness and accident insurance policies

Prominently printed on or attached to 1st

page 

10 days Premium

IA Admin. Code 191-15.9 (507B)

Individual life insurance or annuity

10 days Premium but if 

transaction involved a variable product, amount to be refunded shall be determined according to 

policy language.

IA Admin. Code 191-15.62 (507B)IA Admin. Code 191-15.64 (507B) (3) 

Group and individual annuities

Registered or nonregistered variable annuities or other registered products; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pension plans; structured settlement annuities; and charitable gift annuities

15 days, when Buyers Guide and disclosure document are not provided at or before time of application

Annuity can be returned “without penalty.”

Page 221 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

IA Admin. Code 191-33.4(508A)(3)(a)(5)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page of policy

10 days Refund equal to the sum 

of: 1) difference between premiums paid including any policy fees or other charges and amounts allocated to separate accounts; and 2) value of amounts allocated to separate accounts, on the date returned policy is received by insurer or agent

IA Admin. Code 191-16.26(507B)(1)(d) 

Replacement life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Survey

for list of exemptions.

May be included in Appendix A or C

30 days Premium/consideration, 

including policy fees or charges or, in the case of a variable or market value adjustment policy, payment of the cash surrender value provided plus the fees and charges deducted from the gross premiums or considerations or imposed under such policy or contract

Page 222 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

KS KS Admin. Regs. 

40-2-15

Individual life policies and annuity contracts

Printed on or attached to 1st page of policy in not less than 10-point bold 

print or in some distinguishable manner from other policy print

10 days Premium, but for 

variable life insurance and annuities, a refund equal to sum of: (i) difference between premiums paid, including policy fees or other charges and amounts allocated to separate accounts; and (ii) value of amounts allocated toseparate accounts on date returned policy is received by insurer or its agent

KS Admin. Regs. 40-4-22

Individual accident and health insurance

Travel accident policies Notice shall be 

printed on or attached to 1st page 

of policy in not less than 10 point type and in bold face type or in some other manner that distinguishes it from the print otherwise appearing in the 

policy

10 days Premium

KS Admin. Regs. 40-4-37f (b)

Long-term care policies or certificates

Notice printed on or attached to 1st page in bold face type or other manner distinguishing it from other print

30 days Premium refunded within 

10 business days following receipt of returned policy by insurer or its agent

Page 223 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

KS Admin. Regs. 40-2-12 (f)(4)(A)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or separate written notice

20 days Premium, except as 

provided in KS Admin. Regs. 40-2-15 with 

respect to adjustments necessary to reflect investment risk on variable annuity contracts and variable life insurance polices

KY KY Rev. Stat. Ann.

§304.15-010KY Rev. Stat. Ann.§304.15-040

KY Rev. Stat. Ann. §304.15-050 (2)

Life insurance and annuity contracts

Reinsurance, group life insurance, group annuities, credit life, and policies issued under tax qualified pension plans

In policy 10 days Premium

KY Rev. Stat. Ann. §304.14-615 (6)

Long-term care policies Group long-term care policies as 

defined in KY Rev. Stat. Ann 

§304.14-600 (5)(a)

Prominently printed on or attached to 1st page

30 days Premium

KY Rev. Stat. Ann. §304.17-170

Individual health insurance policies

Nonrenewable accident policies Printed on face page 

or filing back of policy or in separate rider attached to policy when delivered; or notice of provision printed or stamped on face 

page or filing back

10 days Premium

Page 224 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

806 KY Admin. Regs.15:030, Section 3(3)(a)(5)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page of each policy

10 days To the extent permitted 

by state law, refund equals sum of (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts; and (ii) the value of the amounts allocated to separate accounts, on the date the returned policy is received by the insurer or its agent. Until state law authorizes this method, the amount of the refund is the 

premium.

KY Rev. Stat. Ann. §304.12-030806 KY Admin. Regs. 12:080, Section 5(1)(d)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Survey

for list of exemptions.

Replacing insurer must agree in writing with insured. 

30 days Premiums or 

considerations paid, including any policy fees or charges, or in the case of a variable or market adjustment policy or contract, a payment of cash surrender value plus fees and other charges deducted from gross premiums or considerations or imposed under policy or contract

LA LA Rev. Stat. Ann. 

§22:931 (A)(10) 

and (C) 

Individual life insurance policies

Trip travel insurance policies which by their terms are not renewable, industrial life policies, group life policies, service insurance

Prominently printed on or attached to life policies 

10 days Premium

Page 225 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

LA Rev. Stat. Ann. §22:951 (A)(8)(a)

Annuities or pure endowment contracts

Survivorship annuities, or group annuity contracts, charitable gift annuities

Prominently printed on or attached thereto

10 days Premium

LA Rev. Stat. Ann. §22:973 (7)(a)

Individual health insurance if such policy was solicited by deceptive advertising or negotiated by deceptive, misleading, or untrue statements of insurer or any agent on behalf of insurer

Travel insurance policies Prominently printed 

on or attached to policy

10 days Premium

LA Rev. Stat. Ann. §22:1186 (F)

Long-term care policies Prominently printed 

on or attached to 1st page

30 days Premium

LA Admin. Code 37:XIII.8305(A)(3)(a)(i)(e)

Variable life insurance Captioned provision 10 days To extent permitted by 

state law, refund equals sum of: (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts; and (ii) value of amounts allocated to separate accounts, on date the returned policy is received by insurer or its agent. Until state law authorizes this method, the amount of refund is the premium.

Page 226 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

LA Admin. Code 37:XIII.8905, LA Admin. Code 37:XIII.8911 A(5)

Replacement of life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C.

30 days Premiums or 

considerations, including policy fees or charges, or for variable or market adjustment policy a payment of: (i) the cash surrender value; and (ii) the fees and charges deducted from the gross premiums or considerations or imposed under the 

policy.

ME ME Rev. Stat. Ann. 

tit. 24-A §2515-A

Individual life insurance policies 

In policy or in separate rider attached thereto; provision set forth in policy under appropriate caption and, if not printed on face of policy, adequate notice stamped or printed conspicuously on face page

10 days Premium

ME Rev. Stat. Ann. tit. 24-A §2717

Individual health insurance policies

Nonrenewable accident policies and individual credit health insurance policies

In policy or in separate rider attached thereto; provision set forth in policy under appropriate caption and, if not printed on face of policy, adequate notice stamped or printed conspicuously on face page

10 days Premium

ME Rev. Stat. Ann.tit. 24-A §5075 (4)

Long-term care policies Prominently printed 

on or attached to 1st 

page 

30 days Premium

Page 227 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

Code ME R. 02-031 Ch. 915 §3Code ME R. 02-031 Ch. 915 §5 (A)(3)

Individual and group annuities

Registered or non-registered variable annuities or other registered products; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pension plans; structured settlement annuities; and funding agreements.

A prominent notice of the free look period shall be provided to the applicant.

15 days, whenBuyer’s Guide and disclosure document are not provided at or before time of application

Return of annuity contract “without penalty”

Code ME R. 02-031 Ch. 919 §1 (C)

Code ME R. 02-031 Ch. 919 §5 (A)(4)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C.

30 days Premiums or 

considerations paid, including policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value plus fees and other charges deducted from gross premiums or considerations or imposed under policy or contract

MD MD Code Ann. 

Insurance §16-101MD Code Ann. Insurance §16-105

(b)

Life insurance policies and annuity contracts 

Reinsurance, group life insurance, group annuities, contracts issued to an employee in connection with the funding of a pension annuity, certain 

retirement plans or profit-sharing 

plan if participation is a condition or employment

Attached to or prominently printed on face of policy or contract

10 days Pro rata premium for the 

unexpired term of the policy or annuity contract

MD Code Ann. Insurance §15-201

(h)

Individual health insurance policies

Prominently printed on or attached to face of policy

10 days Pro rata premium for 

unexpired term

Page 228 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MD Code Ann. Insurance §18-119

Long-term care policies Plans under § 125 of the Internal 

Revenue Code (cafeteria plans)

In policy 30 days Premiums paid, all 

moneys to be refunded within 30 business days after receipt of notice of surrender

MD Regs. Code 31.09.02.04 (D)(1)(e)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page

45 days on date of execution of application; or within 10 days of receipt by policyholder, whichever is later

Premium

MD Regs. Code 31.14.01.04 (J)

Long-term care policies Employer-employee group policies, 

cafeteria plan issued under § 125 of the Internal Revenue Code

Prominently printed on 1st page of policy

30 days Premium

MD Regs. Code 31.15.04.03MD Regs. Code 31.15.04.05

Individual deferred annuities or deposit funds accepted in 

conjunction with individual life insurance policies or with annuity contracts that are subject to chapter

Certain employer-paid group annuity contracts; variable annuities, investment annuities; Immediate annuity contracts; a single advance payment of specific premiums equal to the discounted value of these premiums; a policyholder's deposit account established primarily to facilitate payment of regular premiums 

In contract or policy or in contract summary

10 days, when contract summary is not provided before accepting applicant's initial consideration for annuity contract

“Unconditional refund”

Page 229 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MD Regs. Code 31.09.05.02 (B) 

MD Regs. Code 31.09.05.06 (A)(5)

Replacement of life insurance and annuities by insurers using producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

In notice to owner of policy or contract 

30 days Premiums or 

considerations, including policy fees or charges, but for variable life insurance policy or variable annuity contract, a payment of: (i) cash surrender value; and (ii) fees and charges deducted from gross premiums or considerations or imposed under the variable life insurance policy or variable annuity contract, including surrender charges

MA MA Gen. Laws Ann. 

ch. 175 §187H

Individual life policies with face amount less than $25,000

Printed on or attached to policy

10 days Premium

211 CMR 42.05 (1)(e) Individual accident and 

sickness policies

Not specified 10 days Not specified

211 CMR 95.08 (1)(g) Variable life insurance 

policies

Captioned on cover 

page

10 days Premium

211 CMR 34.06 (1)(d) Replacement of life 

insurance and annuities by insurers using agents or brokers

See ACLI’s Replacement Law Surveyfor list of exemptions.

In policy or in separate written notice delivered with 

policy

20 days Premium

MI MI Comp. Laws Ann. 

§500.4000(1) and (2) MI Comp. Laws Ann. §500.4015

Individual life insurance Group insurance, reinsurance, 

industrial life policies, annuities

Contained in policy on front page, printed or stamped and made a permanent part of 

policy

10 days Premium, including 

policy fees or charges

Page 230 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MI Comp. Laws Ann. §500.4073

Annuity contracts Policies or contracts issued to an 

employee in connection with the funding of a pension, annuity, or qualified profit-sharing plan if participation is condition of employment

Contained in policy on front page, printed or stamped and made a permanent part of 

policy

10 days Premium, including 

policy fees or charges

MI Comp. Laws Ann. §500.3409 (1)

Disability insurance Group and blanket Contained in policy 

on front page, printed or stamped and made a permanent part of 

policy

10 days Premium, including 

policy fees or charges but if cancelled after the 10-day period, a pro rata share of the premium is refunded

MI Comp. Laws Ann. §500.3409 (2) MI Bulletin 92-01

Individual and group disability insurance for people eligible for Medicare

 Printed or stamped 

on front page and made a permanent part of policy

30 days Premium, including 

policy fees or charges but if cancelled after the 30-day period, a pro rata share of the premium is refunded

MI Comp. Laws Ann. §500.3943

Long-term care insurance, including direct response 

Prominently printed on 1st page and in summary of coverage

30 days Premium

MI Admin. Code 500.850 (a)(iv)

Variable life insurance Captioned provision 

on the cover page or pages corresponding to the cover page

Within 45 days of the execution of the application or within 10 days of receipt, whichever is later

Premium

Page 231 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MN MN Stat. Ann. 

§60A.06 (4)

MN Stat. Ann. §72A.51(Subdivision 3)MN Stat. Ann. §72A.52

Life and endowmentinsurance; annuities; and, in such contracts, or in contracts supplemental thereto, additional benefits in event of death of the insured by accidental means, total permanent disability of the insured, or specific dismemberment or disablement suffered by the insured, or acceleration of life or endowment or annuity benefits in advance of the time they would otherwise be payable

Include a notice,clearly and conspicuously in minimum 10-point bold face type in contract and it must include certain elements listed in MN Stat. Ann. §72A.52

A minimum of 10 days; a minimum of 30 days if the policy is a replacementpolicy. 

(See MN Bulletin 2007-2 for explanation of inconsistencies between replacement policy provisions in MN Stat. Ann. §72A.52 and 

MN Stat. Ann. §61A.57.)

Premium, but for variable annuity, a refund equal to sum of (i) difference between premiums including contract fees or other charges and amounts allocated to separate accounts and (ii) cash value, or, if no cash value, reserve for the contract, on date returned contract is received by insurer or its agent.

MN Stat. Ann. §62A.50

(Subdivision 2)

Long-term care policies on nongroup basis, including direct response 

Prominently printed on 1st page

30 days Premium

Minn. R. 2750.1300(A)(5)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page

10 days Refund as required by 

state law (see MN Stat. Ann. §72A.51) 

MN Stat. Ann. §61A.53MN Stat. Ann. §61A.54

MN Stat. Ann. §61A.57 (d)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or contract or in a separate written notice delivered with policy or contract

30 days Premium

Page 232 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MS MS Code Ann. 

§83-7-51

Individual life insurance[Note that the classification of a life insurance company in MS Code Ann. §83-19-1

includes the definition of an insurance contract as one 

for the “payment of 

endowments or annuities.”]

Printed on or attached to policy

10 days Premium

MS Code Ann. §83-9-25

Individual accident and health policy or service contract

Travel and nonrenewable accident policies

Printed on or attached to policy

10 days Premium

MS ADC INS 84-101Rule 5.05 (C)(1)(e)

Variable life insurance Captioned provision 

on cover page or pages corresponding to cover page of policy

10 days To the extent permitted 

by state law, the refund equals the sum of (i) the difference between premiums paid including policy fees or other charges and theamounts allocated to separate accounts; and (ii) the value of the amounts allocated to separate accounts, on the date the returned policy is received by the insurer or its agent. Until state law authorizes this method, the amount of the refund is the 

premium.

MS ADC INS LA&H 90-102

Rule 8.06 (D)

Long-term care Prominently printed 

on or attached to 1st 

page

30 days Premium

Page 233 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MS ADC INS 99-2Rule 14.01 and 14.05 (A)(4)

Replacement of life insurance and annuities that use producers, including those issued pursuant to direct response solicitation

See ACLI’s Replacement Law Survey

for list of exemptions.

May be included in Appendix A. 

30 days Premium/consideration, 

including any policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value plus fees and other charges deducted from gross premiums or considerations or imposed under policy

MO MO Ann. Stat. 

§376.706 (1) 

MO Ann. Stat. §376.702

Life insurance Annuities, credit life insurance, group 

life insurance policies issued in connection with pension and welfare plans as defined by and subject to ERISA, variable life insurance where death benefits and cash values vary in accordance with unit values of investments held in a separate account

In policy or policy summary

At least 10 days (If no unconditional refund provision/offer the insurer shall provide to all prospective purchasers a Buyer's Guide and a Policy Summary prior to acceptingapplicant's premium or premium deposit.)

Premium

MO Ann. Stat. §376.1109 (11)

Long-term care policies Certain employer group long-term 

care policies as defined in MO Ann. 

Stat. §376.1100 (2)(4)(a)

Prominently printed on or attached to 1st page

30 days Premium

20 MO Code Regs. 400-1.010(1)(D)

Individual life insurance and annuities and all mass marketed or individually solicited group life insurance or annuity certificates for which the insured pays the entire premium

Group policies; life policies issued to college students; single premium short duration travel coverage; certain graded benefit life policies

In policy 10 days Premium

Page 234 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

20 MO Code Regs. 400-1.030(3)(C)(1)(E)

Variable life insurance Captioned on cover 

page

10 days To the extent permitted 

by state law, the refund equals the sum of (i) the difference between premiums paid including policy fees or othercharges and the amounts allocated to separate accounts; and (ii) the value of the amounts allocated to separate accounts, on the date the returned policy is received by the insurer or its agent. Until state law authorizes this method, the amount of the refund is the 

premium.

20 MO Code Regs. 400-2.010

Individual accident and sickness policies and group accident and sickness certificates that are mass marketed or marketed on individual basis

Single premium short-duration trip or travel type coverage

Conspicuously and clearly captioned on face page of policy or contract

10 days Premium

20 MO Code Regs. 400-5.400

(4) and (7)(D)

Replacement of life insurance or annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

In policy or in separate written notice delivered with 

policy

20 days Premium

MT MT Code Ann. 

§33-15-415

Individual life or disability 

policies

Single premium nonrenewable disability policies

In policy 10 days Premium

MT Code Ann. §33-22-1119

Individual long-term care policies, including direct response 

Prominently printed on or attached to 1st page

30 days Premium

Page 235 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

MT Admin. R. 6.6.803MT Admin. R. 6.6.805(1)(b)

Annuities Registered or non-registered variable 

annuities or other registered contracts; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pension plans; structured settlement annuities; charitable gift annuities; and funding agreements

15 days, when a buyer's guide and disclosure document are not provided at or before the time of application

Return of contract “without penalty”

MT Admin. R. 6.6.304MT Admin. R. 6.6.306(1)(d)

Replacement of life insurance policies andannuities

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included inAppendix A or C 

30 days Premium/consideration, 

including policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value or contract plus fees and other charges deducted from gross premiums or considerations or imposed under policy

NE NE Rev. St. 

§44-502.05

Individual life insurance and annuities 

Credit life policies In policy or printed 

on face

10 days Premium

NE Rev. St. §44-4515

Long-term care policies Prominently printed 

on or attached to 1st 

page 

30 days Premium

NE Rev. St. §44-710.18

Individual sickness and accident insurance policies

Single-premium nonrenewable 

policies

Printed on face or attached to policy

10 days Premium

Page 236 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

210 NE ADC Ch. 19 §003210 NE ADC Ch. 19 §009 009.01D

Replacement of lifeinsurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in Appendix A or C

30 days Premiums or 

considerations paid, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed 

NV NV ST §688A.010

NV ST §688A.165

Life insurance, pure endowment contracts and annuities

Reinsurance, group life insurance, group annuities, and industrial life insurance

In contract or policy, or notice attached to contract or policy

10 days Premium, including 

contract or policy fees or charges

NV Admin. Code 686A.415NV Admin. Code 686A.430

Life insurance Annuities; credit life insurance; group 

life insurance; life insurance policies issued in connection with certain pension and welfare plans; variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account

In policy or policy summary

12 days, when a 

buyer’s guide and summary are not delivered before accepting applicants initial premium or premium deposit

Unconditional refund

NV ST §689A.170 Individual health insurance 

policies

Nonrenewable accident policies and individual credit health insurance policies

In policy or in separate rider attached to policy when delivered, captioned and printed on face page or notice of provision printed or stamped on face page

10 days Premium

Page 237 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NV Admin. Code 687B.060

Individual long-term care insurance contracts or certificates

Prominently printed on or attached to 1st 

page 

30 days Premium

NV Admin. Code 688A.115NV Admin. Code 688A.120

Annuities; deposit funds accepted in conjunction with individual life insurance policies or with annuity contracts which are subject to NV Admin. Code 688A.110 to NV Admin. Code 688A.180; individual deferred annuities other than variable annuities, investment annuities and contracts registered with the SEC; and certain deposit 

fund arrangements

Employer-paid group annuities; immediate annuities; policies or contracts issued in connection with certain pension plans; a single advance payment of specific premiums equal to the discounted value of the premiums; or a policyholder's deposit account established certain conditions 

In policy, contract, or contract summary

10 days, when no contract summary is provided before accepting the applicant's initial consideration

“Unconditional refund”

NV ST §688A.165NV Admin. Code 686A.540

NV Admin. Code 686A.563

Replacement of annuity contract, pure endowment contract or policy of life insurance

See ACLI’s Replacement Law Surveyfor list of exemptions.

In contract or policy, or notice attached to contract or policy

30 days Premium, including 

contract or policy fees or charges

NH NH Rev. Stat. Ann. 

§415-D:2

NH Rev. Stat. Ann. §415-D:7

Individual long-term care policies or group certificates 

Prominently printed on or attached to 1st page 

30 days Premium

NH Code Admin. R. Ins 401.04 (f)

Individual life policies and individual annuity contracts

In conspicuous place on face page of 

policy

10 days Premium

Page 238 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NH Code Admin. R. Ins 306.03NH Code Admin. R. Ins 306.06

Annuities and deposit funds accepted in conjunction with individual life insurance policies or with annuity contracts

Individual deferred annuities and group annuities which are: variable annuities; investment annuities; contracts registered with the Federal Securities and Exchange Commission; or contracts which have variable annuity features available at the option of the contract owner; certain employer-paid group annuities; immediate annuities; policies or contracts issued in connection with certain pension plans; a single advance payment of specific premiums equal to the discounted value of such premiums; or a policyholder's deposit account established under certain circumstances.

In contract, policy, or policy summary

10 days, when no contract summary is provided before accepting the applicant's initial consideration

“Unconditional refund”

NH Code Admin. R. Ins 1901.02

NH Code Admin. R. Ins 1901.07 (a)(11)

Individual accident and health insurance policies and group supplemental health insurance policies

Single premium nonrenewable policies, long-term care insurance, Medicare supplemental insurance

Printed on first page of policy or certificate or attached to it

30 days Premium

NH Code Admin. R. Ins 302.02NH Code Admin. R. Ins 302.06 (a)(4)

Replacement of life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in Appendix A or C.

30 days Premium/consideration, 

including policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such 

policy or contract

NJ NJ Stat. Ann. 

§17B:25-2.1

Individual life insurance Group insurance In policy or notice 

attached to policy

10 days Premium, including 

policy fees or charges

Page 239 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NJ Admin. Code §11:4-21.3 (g)

Limited death benefit policies

In policy 30 days Premium

NJ Admin. Code §11:4-34 Appendix C

Long-term care insurance In Appendix C 30 days Premium

NJ Stat. Ann. §17B:26-3.1

Individual health insurance Group and blanket health insurance Notice in or attached 

to policy

10 days Premium, policy fees and 

other charges

NJ Admin. Code §11:4-2.1NJ Admin. Code §11:4-2.4 (a)(5)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Survey

for list of exemptions.

Notice may be included in Appendix A or C.

30 days Premium, including 

policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value provided under policy or contract plus fees and other charges deducted from the gross premiums or considerations or imposed under policy or contract

NJ Stat. Ann. §17B:25-38NJ Stat. Ann. §17B:25-39NJ Bulletin 2009-6

NJ Bulletin 2009-12

Individual fixed deferred and immediate annuity contracts solicited directly to consumers

In contract or in an attached notice

10 days Account value including

contract fees or other charges

NM NM Stat. Ann.

§59A-23A-6 (E)

Long-term care policies, certificates, or riders

Employer group policies, certificates or riders

Prominently printed on or attached to 1st 

page

30 days Premium, within 30 days 

of return of policy, certificate or rider

Page 240 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NM Admin. Code 13.9.12 Sections 13.9.12.2 and 13.9.12.8 (C)

Group and individual annuities 

Registered or non-registered variable annuities or other registered products; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pension plans; structured settlement annuities

15 days, when a buyer's guide and disclosure document are not provided at or before the time of application

Return of contract without penalty

NM Admin. Code 13.9.5 Sections 13.9.5.2 and 13.9.5.9

Life insurance Annuities, credit life insurance, group 

life insurance, life insurance policies issued in connections with pension and welfare plans, or variable life insurance

In policy 10 days, when 

the Buyer’s Guide is not delivered prior to acceptance of the applicant’s initial premium or premium deposit

“Unconditional refund”

NM Admin. Code 13.9.6 Sections 13.9.6.2 and 13.9.6.10 (A)(4)

Replacement of life insurance or annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C

30 days Premium/consideration, 

including policy fees or charges or, in case of variable or market value adjustment policy, payment of cash surrender value or contract plus fees and other charges deducted from gross premiums or considerations or imposed under policy

Page 241 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NY NY Ins. §3203 (a)(11) Individual life insurance 

policies

Mail order policies In policy or notice 

attached to policy

Not less than 10 days nor more than 30 days

Either (i) premium, including policy fees or other charges or (ii) if policy provides for adjustment of cash surrender benefit in accordance with a market-value adjustment formula and if policy or notice attached to it so provides, amount of cash surrender benefit as adjusted assuming no surrender charge plus amount of fees and other charges deducted premium paid or from 

policy value 

NY Ins. §3203 (a)(11) Individual life insurance 

policies sold by mail order

In policy or notice attached to policy

30 days See above.

NY Ins. §3209(a) and (d)(7)

Life insurance, annuities, and funding agreements 

Credit life insurance; group life insurance; life insurance, annuities and funding agreements issued in connection with certain pension and welfare plans; funding agreements issued to other than individuals subject to NY Ins. §3222(b); any 

group annuity unless at least one certificate is subject to NY Ins. 

§4223(b)(2)

10 days Premium

NY Ins. §3209 (b)(1) Direct mail life insurance See above In policy 30 days (if no 

unconditional refund provision, insurer must include Buyer's Guide in each initial solicitation)

Premium

Page 242 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

NY Ins. §3219 (a)(9) Certain annuities and pure 

endowments (except as provided in NY Ins. §4240,

every annuity or pure endowment contract except a group annuity contract, and every group annuity certificate to which NY Ins. §4223 applies by reason of subsection (b) thereof, or to which § 4223 would apply if such certificate were not a variable annuity)

See parenthetical text in “applies to” column.

In contract or certificate or attached notice 

Not less than 10 nor more than 30 days; 30 days for direct response contract or certificate

Either (i) consideration, including fees or other charges or, if contract or certificate, or notice attached so provides, and contract or certificate is subject to provisions of NY Ins. §4223 and provides for 

determination of cash surrender benefits in accordance with marketvalue adjustment formula, (ii) cash surrender benefits provided plus fees and other charges deducted from gross considerations or imposed under contract 

or certificate

NY Ins. §3216 (c)(10) Individual accident and 

health insurance policies

Single premium nonrenewable policies insuring against accidents only or accidental bodily injuries only

Prominently printed on or attached to 1st

page 

Not less than 10 days or more than 20 days; 30 days for mail order, long-term care insurance,or Medicare supplemental contract or certificate

Premium, including policy fees and other charges

11 NYCRR 54.6

(b)(1)(v)

Variable life policies Captioned provision 

on cover page 

10 days Premium

11 NYCRR 53-2.1(a)(9)

Policies subject to NY Ins. Code §4232 (b) (individuallife policies)

Preliminary written statement

10 days Premium paid or 

adjusted amount if such policy provides for a market-value adjustment

Page 243 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

11 NYCRR 51.311 NYCRR 51.6 (d)

Replacement of life insurance policies and annuity contracts

See ACLI’s Replacement Law Surveyfor list of exemptions.

Appendix 10C contains free look statement

60 days Premium/consideration, 

or in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender benefits plus the amount of fees and other charges deducted from gross considerations or imposed under the policy or contract; payment within 10 days of receipt of policy or contract for cancellation

NC NC Gen. Stat. 

§58-55-30

(f) and (g)

Individual long-term care policies, including direct response

Prominently printed on 1st page or attached

30 days Premium

NC Gen. Stat. §58-60-5

NC Gen. Stat. §58-60-15

Life insurance Individual and group annuities; credit 

life insurance; group life insurance (except for disclosures relating to preneed funeral contracts or prearrangements; these disclosure requirements shall extend to the issuance or delivery of certificates as well as to the master policy); life insurance policies issued in connection with certain pension and welfare plans; variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account.

In policy or policy summary

10 days, when no Buyer's Guide and a Policy Summary are provided prior to accepting initial premium deposit

Premium

11 NCAC 12.0447 Individual life insurance or 

annuity, also applies to any group life or annuity policy that contains free look 

provision

Sticker or printed on face of policy

10 days Premium

Page 244 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

11 NCAC 12.0436(1)(c) and (3)(a)(v)

Variable life insurance Variable policies issued in connection 

with qualifying pension, profitsharing, and retirement plans

Captioned on cover page of policy

Within 45 days from execution of application or within 10 days ofreceipt of policy by policyholder, whichever is later

Premium

11 NCAC 12.060111 NCAC 12.060411 NCAC 12.0612(a)(4) 

Replacement of existing life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in the notice required by 11 NCAC 12.0611(reference to NAIC Model Notice)

30 days Premium/consideration, 

or in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender benefits plus the amount of fees and other charges deducted from gross considerations or imposed under the policy or contract

ND ND Cent. Code 

§26.1-33-02.1

Life insurance policies and certificates

Prominently printed on or attached to 1st 

page 

20 days Premium

ND Cent. Code §26.1-34-01.1

Annuity policies and certificates

Prominently printed on or attached to 1st page 

20 days Premium, except 

variable annuities where purchaser is entitled to value of annuity plus all expense charges

Page 245 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

ND Cent. Code §26.1-36-01

ND Cent. Code §26.1-36-02.1

Individual accident and health insurance policies and certificates

Any policy of workforce safety and insurance or any policy of liability insurance with or without supplementary expense coverage; reinsurance; blanket or group insurance; life insurance, endowment or annuity contracts, or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as provide additional benefits in case of death or dismemberment or loss of sight by accident, or as operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity in the event that the insured or annuitant shall become totally and permanently disabled, as defined by the contract or supplemental contract

Prominently printed on or attached to 1st page 

10 days Premium

ND Cent. Code §26.1-45-09 (1)

Long-term care policies Group long-term care certificate 

issued to a group defined in subdivision (a) of subsection 3 of ND Cent. Code §26.1-45-01 (certain 

employer/labor groups)

Prominently printed on or attached to 1st page 

Within 30 days of date of delivery or 30 days of effective date, whichever occurs later

Premium

Page 246 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

ND Admin. Code 

§45-04-04-03

(3)(a)(5)

Variable life insurance policies

Captioned provision on cover page of policy 

10 days To extent permitted by 

state law, refund equals sum of: (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts; and (ii) value of amounts allocated to separate accounts, on date the returned policy is received by insurer or its agent. Until state law authorizes this method, amount of refund is 

premium.

OH OH Rev. Code Ann. 

§3923.44 (H)

Individual long-term care policies

Printed prominently on or attached to 1st 

page 

30 days Premium

OH Admin. Code §3901-6-03

(C) and (E)(1)(b)

Life insurance Annuities, credit life insurance, group 

life insurance, life insurance policies issued in connection with pension and welfare plans, or variable life insurance

In policy or policy summary

10 days, when the Buyer’s Guide and Policy Summary are not delivered prior to acceptance of the applicant’s initial premium or premium deposit

“Unconditional refund”

Page 247 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

OH Admin. Code §3901-6-08

(E)(3)(a)(v)

Variable life insurance Captioned provision 

on cover page 

10 days To extent permitted by 

state law, refund equals sum of (i) difference between premiums paid including policy fees or other charges and amounts allocated to separate accounts; and (ii) value of amounts allocated to separate accounts, on date the returned policy is received by insurer or its agent. Until state law authorizes this method, amount of refund is 

premium.

OH Admin. Code §3901-6-14

(C) and (E)

Group and individual annuities

Variable annuities or other registered products, immediate and deferred annuities that contain no nonguaranteed elements, annuities used to fund certain pension plans and nonqualified deferred compensation arrangements, structured settlement annuities, and funding agreements.

15 days, if buyer's guide and disclosure document are not provided at or before the time of application

Annuity contract can be returned “without penalty”

Page 248 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

OH Admin. Code §3901-6-05

(F)(1)(d)

Replacement of life insurance and annuities by insurers that use agents

See ACLI’s Replacement Law Survey

for list of exemptions.

May be included in Appendix A or C

30 days Premium or 

considerations paid, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such 

policy or contract

OK 36 OK Stat. Ann. 

§4003.1

Individual life insurance or annuities

Life insurance policies issued in connection with credit transaction or issued under contractual policy change or conversion privilege contained in policy

Printed on or attached to policy

10 days Premium or monies paid 

will be refunded by insurer within 30 days of cancellation, or insurer shall pay interest which shall be the same rate of interest as the average U.S. Treasury Bill rate ofthe preceding calendar year plus two percentage points, which shall accrue from date of cancellation until premiums or moneys are returned.

36 OK Stat. Ann. §4426 (E)

Long-term care policies Prominently printed 

on 1st page or attached

30 days Premium

Page 249 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

OK Admin. Code §365:10-5-6 (a)(7)

Individual accident and health insurance policies

Single premium nonrenewable policies

Prominently printed on or attached to 1st page 

10 days, or 30 days for direct response policies to persons eligible for Medicare

Premium or monies paid will be refunded by insurer within 30 days of cancellation, or insurer shall pay interest which shall be the same rate of interest as the average U.S. Treasury Bill rate of the preceding calendar year plus two percentage points, which shall accrue from date of cancellation until premiums or moneys are returned.

36 OK Stat. Ann. §4034 (G)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Surveyfor list of exemptions.

Prominent written notice attached to or as part of 1st page of policy

20 days Premium

OR OR Rev. Stat. 

§743.655 (6)

Individual long-term care insurance policies and certificates

Prominently printed on or attached to 1st 

page 

30 days. Premium

OR Rev. Stat. §743.492

Individual health insurance 

policies

Single premium nonrenewable 

policies

Printed on face or attached to policy

10 days Premium

OR Admin. R. 836-051-0005OR Admin. R. 836-051-0015

Individual life insurance policies[Note that the definition of insurance in OR Rev. St. 731.170 includes annuities with exceptions.]

Annuities; credit life insurance; group life insurance; life insurance policies issued in connection with certain employee benefit plans; and life insurance policies that comply with OR Admin. R. 836-051-0500 to 

OR Admin. R. 836-051-0600(illustrations requirements).

In policy or policy summary

10 days, when Buyer's Guide and a Policy Summary are not provided prior to accepting the applicant's initial premium or 

premium deposit

“Unconditional refund”

Page 250 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

OR Admin. R. 836-080-0001 (4) 

OR Admin. R. 836-080-0029 (1)(d)

Replacement of life insurance and annuities by insurers that use agents, policies used to fund pension plans

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in Appendix A or C.

30 days Premium/consideration, 

including policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value or contract plus fees and other charges deducted from gross premiums or considerations or imposed under such 

policy or contract

PA 40 PA Cons. Stat. 

Ann. §510c (a)(1) 

Individual fixed dollar life insurance or endowment 

polices

Prominently printed on or attached to 1st 

page

10 days Premium

40 PA Cons. Stat. Ann. §510c(a)(2) and (b)(2)

Replacements of existing life insurance policy or annuity contracts with individual variable life insurance policies, individual fixed dollar life insurance or endowment policies by the same insurer or insurer group

Prominently printed on or attached to 1st page 

45 days Premium, but for 

variable life, an amount equal to any of the following: (i) the stipulated payment/ premium; (ii) the difference between: (A) premiums, including policy fees or other charges and the amounts allocated to separate accounts; and (B) the cash value or, if the policy does not have a cash value, the reserve on the date of surrender attributable to the amounts so allocated; or (iii) the greater of subparagraph (i) or (ii)

Page 251 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

40 PA Cons. Stat. Ann. §510c(a)(3) and (b)(3)

Replacements of existing life 

insurance policy or annuity contract with individual variable life insurance policies, individual fixed dollar life insurance or endowment insurance policies by an insurer or insurer group other than the one which issued the original policy or contract

Prominently printedon or attached to 1st page 

At least 20 days An amount equal to any 

of the following: (i) the stipulated payment/ premium; (ii) the difference between: (A) premiums, including policy fees or other charges and the amounts allocated to separate accounts; and (B) the cash value or, if the policy does not have a cash value, the reserve on the date of surrender attributable to the amounts so allocated; or (iii) the greater of subparagraph (i) or (ii)

40 PA Cons. Stat. Ann. §510c (b)(1)

Individual variable life policies

Prominently printed on or attached to 1st page 

At least 10 days An amount equal to any 

of the following: (i) the stipulated payment/ premium; (ii) the difference between: (A) premiums, including policy fees or other charges and the amounts allocated to separate accounts; and (B) the cash value or, if the policy does not have a cash value, the reserve on the date of surrender attributable to the amounts so allocated; or (iii) the greater of subparagraph (i) or (ii)

40 PA Cons. Stat. Ann. §510d (a)(1)

Individual fixed dollar annuities or pure endowment contracts, individual variable annuities

Prominently printed on or attached to 1st page 

10 days Stipulated payment or 

premium

Page 252 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

40 PA Cons. Stat. Ann. §510d (a)(2)

Replacement of annuity or life insurance policy withindividual fixed dollar annuities by the same insurer or insurer group

Prominently printed on or attached to 1st page 

45 days Premium

40 PA Cons. Stat. Ann. §510d (a)(3)

Replacement of annuity or life insurance policy with individual fixed dollar annuities by insurer or insurer group other than one issuing policy or contract

Prominently printed on or attached to first page

20 days Premium

40 PA Cons. Stat. Ann. §510d (b)(1)

Individual variable annuities Prominently printed 

on or attached to 1st page 

10 days Amount equal to any of 

the following: (i) stipulated payment or premium; (ii) the difference between: (A) premiums paid, including any contract fees or other charges and amounts allocated to any separate accounts under the contract: and (B) cash value of contract or, if contract does not have a cash value, the reserve for contract on date of surrender attributable to amounts so allocated; or (iii) the greater of subparagraphs (i) or (ii).

40 PA Stat. Ann. §752 (A)(10)

Accident and health insurance 

Single premium renewable policy Notice prominently 

printed on policy

10 days Premium

Page 253 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

31 PA Code §89.73 Individual accident and 

health contracts

Printed on face of policy or on booklettype policies provision shall appear on outside cover portion of 

policy

10 days “Full refund”

40 PA Cons. Stat. Ann. §510d (b)(2)

Replacements of an existing annuity contract or life insurance policy with individual variable annuity contracts by the same insurer or insurer group

Prominently printed on or attached to 1st page 

45 days Amount equal to any of 

the following: (i) stipulated payment or premium; (ii) the difference between: (A) premiums paid, including any contract fees or other charges and amounts allocated to any separate accounts under the contract: and (B) cash value of contract or, if contract does not have a cash value, the reserve for contract on date of surrender attributable to amounts so allocated; or (iii) the greater of subparagraphs (i) or (ii).

Page 254 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

40 PA Cons. Stat. Ann. §510d (b)(3)

Replacements of an existing annuity contract or life insurance policy with individual variable annuity contracts by an insurer or insurer group other than the one which issued the original contract or policy

Prominently printed on or attached to 1st page 

20 days Amount equal to any of 

the following: (i) stipulated payment or premium; (ii) the difference between: (A) premiums paid, including any contract fees or other charges and amounts allocated to any separate accounts under the contract: and (B) cash value of contract or, if contract does not have a cash value, the reserve for contract on date of surrender attributable to amounts so allocated; or (iii) the greater of subparagraphs (i) or (ii).

40 PA Cons. Stat. Ann. §576

Industrial life or industrial endowment insurance

Prominently printed on or attached to 1st 

page 

10 days Premium

31 PA Code §81.6 (d) Replacement of life policies 

or annuities that use agents or brokers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Prominently printed on or attached to 1st page 

20 days Premium

31 PA Code §82.24(1)(v)

Variable life policies Captioned provision 

prominently printed on 1st page

10 days Premium

PR 26 L.P.R.A. §1338 Individual life policies and 

individual annuities 

Reinsurance, group or collective life and annuities

A clause re: the right of the insured to examine the policy shall appear on the cover of the policy or in any area that is visible without opening the policy

Not specified

Page 255 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

RI RI Gen. Laws 

§27-4-6.1

Individual life policies and individual annuities delivered after January 1, 2008

Captioned on face page of policy or notice of provision stamped or printed conspicuously on face page or contained in attached rider

20 days Premium

RI Gen. Laws §27-34.2-6 (g)

Long-term care policies and certificates

Prominently printed on 1st page or 

attached to policy or 

certificate

30 days Premium

RI ADC 02 030 029, Section 6(A)(4)

Replacement life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Survey

for list of exemptions.

May be included in Appendix A or C 

30 days Premiums or 

considerations paid, including any policy fees or charges, or, in case of variable or market value adjustment policy, a payment of cash surrender value provided under policy plus fees 

and other charges deducted from gross premiums or considerations or 

imposed under policy

SC SC Code Ann. 

§38-63-220 (b)

Individual life policies Clear, 

understandable, and conspicuous provision on 1st 

page 

10 days Premium

SC Code Ann. §38-63-220 (b)

Individual life policy solicited by direct response insurer

Clear, understandable, and conspicuous provision on 1st 

page 

31 days Premium

Page 256 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

SC Code Ann. §38-69-120 (2)

Fixed dollar annuities; pure endowment contracts; reversionary annuities; and variable annuities

Group annuities Clear, 

understandable, and conspicuous provision on 1st 

page

10 days Premium

SC Code Ann. §38-69-120 (2)

Fixed dollar annuities; pure endowment contracts; reversionary annuities; and variable annuities solicited by direct response

Group annuities Clear, 

understandable, and conspicuous provision on 1st 

page 

31 days Premium

SC Code Ann. §38-72-60 (F)

Long-term care policies and certificates

Prominently printed on or attached to 1st 

page 

30 days Premium

SC Code of Regulations R. 69-12

Part B, art. IV, Section 3(a)(5)

Variable life policy Captioned provision 

on the cover page or pages corresponding to the cover page

10 days To the extent permitted 

by state law, the refund equals total premiums paid or the sum of (i) the difference between premiums paid including policy fees or other charges and the amounts allocated to separate accounts; and (ii) the value of the amounts allocated to separate accounts, on the date the returned policy is received by the insurer or its agent. 

SC Code of Regulations R. 69-39

Sections 2 and 4 

Group and individual annuities

Registered or non-registered variable annuities; immediate and deferred annuities that contain no nonguaranteed elements; annuities used to fund certain pensions and retirement funds; structured settlement annuities; charitable annuities; funding agreements

15 days, when a buyer’s guide and disclosure document are not provided at or before the time of application

Return contract “without penalty”

Page 257 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

SC Code of Regulations R. 69-34 Section 

(H)(1)(g)

Individual accident and health insurance policies

Trip or travel ticket policies Prominently printed 

on or attached to 1st

page 

10 days, but if direct response, 30 days

Premium

SC Code Ann. §38-63-220 (b)

Individual life policies Clear, 

understandable, and conspicuous provision on 1st page

10 days; 20 days if replacement of life insurance involved; 31 days if direct response

Premium

SC Code Ann. §38-69-120 (2)

Fixed dollar annuities; pure endowment contracts; reversionary annuities; and variable annuities 

Group annuities Clear, 

understandable, and conspicuous provision on 1st 

page 

10 days; 20 days if replacement of annuity involved; 31 days if direct response

Premium

SC Code of Regulations R. 69-12.1

Replacement of life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in Appendix A or C

30 days[Note that this is for replacement of policies that use producers]

An unconditional full refund of all premiums or considerations paid on it, including any policy fees or charges or, in the case of variable or market value adjustment policy or contract, a payment of the cash surrender value plus the fees and other charges deducted from the gross premiums or considerations or imposed under such 

policy or contract

SD SD Codified Laws 

§58-15-8.1

Individual life policies Printed on or 

attached to the face 

page 

10 days Premium

SD Codified Laws §58-15-59.1

Individual annuity contracts Variable annuity contracts Printed on or 

attached to the annuity contract

10 days Premium

Page 258 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

SD Codified Laws §58-17B-9

Long-term care policies Prominently printed 

on or attached to 1st 

page 

30 days Premium

SD Codified Laws §58-28-24.1

Individual variable annuity contracts issued on or after July 1, 1978

In contract or notice attached to contract

10 days The refund equals sum 

of (i) difference between premiums paid and amounts allocated to any separate accounts, and (ii) cash value of contract on date of surrender attributable to amounts so allocated 

SD Codified Laws §58-17-11

Individual health insurance policies or contracts

Single premium nonrenewable policies or contracts

Printed on or attached to policy or contract

10 days Premium

TN TN Code Ann. 

§56-7-702 (a)(17) 

Industrial life policies Clear, 

understandable, and conspicuous 

provision in policy

10 days Premium

TN Code Ann. §56-42-105 (f)(1)

Individual long-term care policies

Prominently printed on or attached to 1st 

page 

30 days Premium

TN Code Ann. §56-42-105 (f)(2)

Long-term care policies issued pursuant to direct response solicitation

Prominently printed on or attached to 1st 

page 

30 days Premium

TN Code Ann. §56-26-129

Individual accident and health insurance policies or contracts

Printed thereon or attached thereto” 

10 days Premium

Page 259 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

TN Admin. Code 0780-01-40-.02

TN Admin. Code 0780-01-40-.04

Life insurance[Note that the definition of life insurance under TN Code Ann. §56-2-201(4) states 

that “for the purposes of this title, the transacting of life insurance includes the granting of annuities.”]

Annuities, credit life, group life, life insurance issued in connection with certain pension and welfare plans; variable life where death benefits and cash values vary in accordance with unit values of investments held in a separate account

In policy or Policy Summary

10 days, when no Buyer's Guide and Policy Summary are provided prior to accepting the applicant's initial premium or 

premium deposit

Unconditional refund

TN Admin. Code 0780-01-24-.04

TN Admin. Code 0780-01-24-.07 (4)

Replacement of life insurance policies and annuities by insurers that use agents

See ACLI’s Replacement Law Surveyfor list of exemptions.

In policy or in separate written notice

20 days Premium

TX TX Ins. Code Ann. 

§1651.054

Long-term care policies Prominently printed 

on 1st page or attached to benefit 

plan document

30 days Premium

TX Ins. Code Ann. §1201.058

Individual accident and health insurance policy

Single premium nonrenewable policies

Printed or attached to policy

10 days Premium

28 TX Admin. Code §3.804 (3)(A)(v)

Variable life contract Captioned provision 

on cover page or pages corresponding to cover page

10 days Premium

28 TX Admin. Code §3.3829 (a)(5)

Long-term care insurance Prominently printed 

on or attached to 1st 

page 

30 days Premium

Page 260 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

TX Ins. Code Ann. §1116.002

Annuity contracts Annuity contract whose prospective 

owner is an accredited investor

20 days Unconditional refund of 

premium, including contract fees or charges; For variable or modified guaranteed annuity contracts, unconditional refund equal to the cash surrender value plus any fees or charges 

TX Ins. Code Ann. §1114.004TX Ins. Code Ann. §1114.053 (e)

Replacement of life insurance and annuities by insurers using agents

See ACLI’s Replacement Law Survey

for list of exemptions.

Notice may be combined with other notices required by Chapter 1114 (Replacement)

30 days Premium, including 

policy fees and charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under the policy or contract.

UT UT Code Ann. 

§31A-22-423

Life insurance and annuities policies, certificates and 

contracts including replacements 

Employee group term life; group master policy; noncontributory certificate; credit life insurancecertificate; and other classes of life insurance policies that the commissioner specifies by rule

Prominently printed on or attached to cover or front page

10 days; 30 days if replacement policy or certificate

Premium

UT Code Ann. §31A-22-1408

Individual long-term care 

policies and certificates

Employee and labor union long-term care insurance certificates

Prominently printed on or attached to 1st 

page 

30 days Premium

UT Code Ann. §31A-22-605 (9)

Limited accident and health policies or certificates issued to persons eligible for Medicare

Prominently printed on or attached to front page of policy

30 days Premium

Page 261 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

UT Code Ann. §31A-22-606

Accident and health policies Group policies; policies issued to 

persons entitled to a 30-day examination period under UT Code Ann. §31A-22-605 (9); single 

premium nonrenewable policies issued for terms not longer than 60 days; policies covering accidents only or accidental bodily injury only; and other classes of policies which the commissioner by rule specifies after a finding that a right to return those policies would be impracticable or unnecessary to protect the 

policyholder's interests

Prominently printed on or attached to front page of policy

10 days Premium

UT Admin. Code R590-93, Sections 

590-93-2 and 590-

93-6

Replacement of life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C

30 days Premium/consideration

VT VT Stat. Ann. tit. 8 

§8089

Individual long-term care policies and certificates including direct response policies direct response solicitation

Prominently printed on 1st page 

30 days Premium

VT Stat. Ann. tit. 8 §4063 (8)

Individual health insurance Single premium nonrenewable 

policies insuring against accident only or medical costs or accidental bodily injury only

Prominently printed on or attached to 1st

page 

10 days, or 30 days for persons eligible for Medicare by reason of age

Premium, including policy fees and other charges

VT Admin. Code 4-3-4:3 (B) and VT Admin. Code 4-3-4:5(A)

Individual life insurance Annuities; credit life; group life; life 

insurance issued in connection with certain pension and welfare plans; variable life where death benefits and cash values vary in accordance with unit values of investments held in separate account

In policy or policy summary

10 days, when Buyer's Guide and Policy Summary are not provided prior to accepting the applicant's initial premium or 

premium deposit

“Unconditional refund”

Page 262 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

VT Admin. Code 4-3-13:IV,

Section 3(A)(5)

Variable life insurance Captioned provision 

on cover page or pages corresponding to the cover page

10 days Premium

VT Admin. Code 4-3-43:1(B) and VT Admin. Code 4-3-43:5(A)(4)

Replacement of life policies and annuities by insurers using producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C 

30 days Premium/consideration 

including policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such 

policy or contract

VA VA Code Ann. 

§38.2-3300

VA Code Ann. §38.2-3301

Individual life insurance[Note that definition of life insurance in VA Code Ann. §38.2-102 includes 

insurance that also provides “a special benefit or an annuity” in the event of a disability and includes additional benefits providing specified disease coverage or limited benefit health 

coverage]

Group life, industrial life, annuities, 

credit life, and pure endowments, with or without return of premiums or of premiums and interest; reinsurance; policies issued or granted in exchange for lapsed or surrendered policies

Printed on policy 10 days Premium

VA Code Ann. §38.2-5208

Long-term care insurance Prominently printed 

on or attached to 1st 

page 

30 days Premium

VA Code Ann. §38.2-3342

Industrial life Printed on policy 10 days Premium

VA Code Ann. §38.2-3502

Individual accident and sickness policy

Printed on policy 10 days Premium

Page 263 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

14 VA Admin. Code 

5-80-300 (1)

Variable life insurance In a notice 

describing free-look provisions of VA Code Ann. §38.2-3301

10 days Premium

14 VA Admin. Code 5-30-30

14 VA Admin. Code 5-30-51(A)(4)

Replacement of life insurance and annuities

See ACLI’s Replacement Law Surveyfor list of exemptions.

May be included in Form 30-A or 30-C 

10 days Premiums or 

considerations, including policy fees or charges or, in the case of a variable or market value adjustment contract, a payment of the cash surrender value plus the fees and other charges deducted from the gross premiums or considerations or imposed under the contract

WA WA ST §48.23.380 Individual life insurance Individual life policies issued in 

connection with credit transactions or under a contractual change or conversion privilege provision

Printed on face or attached to policy

10 days Premium, but a 10 

percent penalty shall be added to premium refund not paid within 30 days of return of policy to insurer or insurance

producer

WA ST §48.20.013 Individual disability policy Single premium nonrenewable 

policies

Printed on face or attached to policy

10 days Premium, but a 10 

percent penalty shall be added to premium refund not paid within 30 days of return of policy to insurer or insurance 

producer

Page 264 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

WA ST §48.18A.035 Individual variable life and 

annuity contracts

Printed on face or attached to contract

10 days Market value of the 

assets purchased by its premium, less taxes and investment brokerage commissions, but a 10 percent penalty shall be added to premium refund not paid within 30 days of return of policy to insurer or insurance 

producer

WA ST §48.84.050(2)

Long-term care insurance Prominently 

displayed on 1st page of policy or contract

30 days Premium, but a 10 

percent penalty shall be added to premium refund not paid within 30 days of return of policy to insurer or insurance 

producer

WA ST §48.84.050(2)

Long-term care policies solicited and sold by mail

Prominently displayed on 1st page of policy or contract

60 days Premium, but a 10 

percent penalty shall be added to premium refund not paid within 30 days of return of policy to insurer or insurance 

producer

WA Admin. Code §284-23-320WA Admin. Code §284-23-350

Individual deferred annuities other than: (i) variable annuities, (ii) investment 

annuities, and (iii) contracts 

registered with the Federal Securities and Exchange Commission; and deposit funds 

Employer paid group annuity contracts; immediate annuity contracts; policies or contracts issued in connection with certain employee benefit plans; a single advance payment of specific premiums equal to the discounted value of such premiums; and a policyholder's deposit account in certain circumstances

In annuity contract or associated life insurance policy

10 days, when a Contract Summary is not provided prior to accepting the applicant's initial consideration

“Unconditional refund”

Page 265 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

WA Admin. Code §284-23-455 (4) 

WA Admin. Code §284-23-430

Replacement of life insurance and annuities by insurers that use agents or brokers

See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or in separate written notice delivered with policy

20 days Premium

WV WV Code 

§33-6-11b

Life, sickness, and accident insurance policies, certificates, or contracts[Note that under WV Code §33-1-10, the definition of 

life insurance includes “insurance on human lives including endowment benefits,” and scope of Article 13, “Life Insurance,” 

includes annuities.]

Group annuity policies, contracts, or certificates issued in connection with qualified or exempt pension or profitsharing plan

Prominently printed on 1st page

10 days Premium

WV Code §33-15A-6 (f)(1)

Long-term care policies Certain employer groups listed in 

WV Code §33-15A-4(e)(1)

Prominently printed on or attached to 1st

page

30 days Premium

WV C.S.R. 114-11E-2WV C.S.R. 114-11E-4(4.1.c)

Group and individual annuities

See exemptions listed in WV C.S.R. 114-11E-2

15 days, when Buyer’s Guide and disclosure document are not provided at or before the time of application 

Applicant may return contract “without penalty”

WV C.S.R. 114-32-12(12.4)

Replacement for accident and sickness policies or long-term care policies solicited by direct response 

In a written notice as specified in 

WV C.S.R. 114-32-12 (12.4)

30 days

WV C.S.R. 114-32-12(12.3)

Replacement for accident and sickness policies and long-term care policies other than those solicited by direct response

In a written notice as specified in WV C.S.R. 114-32-12 (12.3)

30 days

Page 266 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

WV C.S.R. 114-12-6(6.8)

Individual accident and sickness insurance

Single-premium nonrenewable 

policies (also see WV C.S.R. 114-12-1 (1.1) for 

exemptions from scope of chapter)

Prominently printed on or attached to 1st

page

10 days Premium

WV C.S.R. 114-8-3WV C.S.R. 114-8-6

(6.1.d.)

Replacement life insurance and annuities by insurers that use producers

See ACLI’s Replacement Law Surveyfor list of exemptions.

Notice may be included in Appendix A or C

30 days Premiums or 

considerations, including any policy fees or charges or, in case of variable or market value adjustment policy or contract, payment of cash surrender value provided plus fees and other charges deducted from gross premiums or considerations or imposed under policy or contract

WI WI Stat. Ann. 

§632.73

Individual or franchise disability

Single premium nonrenewable policies issued for six months or less or covering accidents only or accidental bodily injuries only, and other policies exempted by rule of commissioner, or to Medicare supplement policies, Medicare replacement policies or long-term 

care insurance policies subject to 

WI Stat. Ann. §632.73 (2m).

Conspicuously printed on or attached to 1st page 

10 days All payments made

WI Stat. Ann. §632.73 (2m)

Long-term care insurance Single premium nonrenewable 

policies issued for terms not greater than 6 months or covering accidents only or accidental bodily injuries only and other policies exempted by rule of commissioner

Prominently printed on or attached to 1st page 

30 days Premium

Page 267 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

WI ADC Ins. 2.15(3) and (8)(a)

Annuities and deposit fund arrangements not marketed through intermediary

Variable annuities; contracts registered with the SEC; certain employer group annuity and pure endowment contracts; certain immediate annuity contracts; policies or contracts issued in connection with certain employee benefit plans; individual retirement accounts and individual retirement annuities; a single advance payment of specified premiums equal to the discounted value of such premiums; a policyholder's deposit accountestablished for certain purposes; and settlement options under life insurance or annuity contracts

Guarantee to the contractholder

30 days, when the insurer does not use an intermediary and provides the Contract Summary and Buyer’s Guide to Annuities at the point of contract delivery

Premium

WI ADC Ins. 2.14(2)(b) and (4)(c)

Life insurance not marketed through intermediary

Annuities, credit life, group life, life insurance issued in connection with certain pension and welfare plans, variable life where death benefits and cash values vary in accordance with unit values of investments held in separate accounts

Guarantee to the policyholder

30 days, when no Buyer’s Guide is provided at time application is taken

Premium

WI ADC Ins. 2.07(6)(a)(4)

Replacement of life policies or annuity contracts

See ACLI’s Replacement Law Survey

for list of exemptions.

Notice may be included in Appendix I or III

30 days Premiums or 

considerations paid, including any policy fees or charges or, in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value plus fees and other charges deducted from the gross premiums or considerations or imposed under the policy or contract

Page 268 of Appendix 
State Citation Applies to Does Not Apply to Provision Location Days Refund Amount

WY WY Stat. Ann. 

§26-38-105 (j)

Long-term care insurance Prominently printed 

on or attached to 1st page

30 days Premium shall be 

refunded within 10 days, excluding Saturdays, Sundays and legal holidays, from date the policy or certificate is returned, or it shall draw interest at the maximum rate allowed for a credit service charge under

WY Stat. Ann. §40-14-212 (b)

WY Admin. Code Ins Gen Ch 12 §4WY Admin. Code Ins Gen Ch 12 §7 (d) 

WY Admin. Code Ins Gen Ch 12 §8 (c )(iv)

Replacement life insurance and annuities by insurers that use producers;

replacement of direct response life insurance and annuities 

See ACLI’s Replacement Law Survey

for list of exemptions.

In policy or separate written notice delivered with policy

30 days Premium; 

For variable policy or contract, cash surrender plus fees

Page 269 of Appendix