Sometimes it might seem like Congress doesn’t do anything other than pass meaningless “National Oyster Appreciation Day” bills and argue in public, but sometimes they get together to focus on some real legislation that could impact the lives of everyday Americans.
Case in point: The U.S. House of Representatives recently took up a new bill that seeks to require the Securities and Exchange Commission (SEC) to revise its rules on the issuance of certain annuity products.
Into the weeds: Introduced by U.S. Reps. Alma Adams (D-NC), Dean Phillips (D-MN), and Anthony Gonzalez (R-OH), The Registration for Index Linked Annuities Act (H.R. 4865) would call on the SEC to come up with a new form do annuity issuers to use when filing registered index-linked annuities.
Wait, a form? This is about paperwork?
Yes and no. Index-linked annuities are those accounts that can rise and fall in value based on the public markets, like a stock account. They’re designed to limit exposure to downside risk while offering growth potential based on the performance of an index or indexes.
As it stands, these types of annuities are registered with the SEC using legacy forms — again, that’s just part of this — that were intended primarily for equity offerings. As a result, they go into great detail and require financial disclosures that are not relevant for annuity buyers. This bill would streamline this part of the process in order to make annuity shopping easier for customers.
Quote: “The current rules and processes to register RILAs stymies innovation, creates a barrier to entry into this growing market for insurers that do not produce GAAP financials, and impedes consumer comprehension and choice with excessive and confusing information. A new registration form more closely tailored to the particular products being offered would ensure that consumers have access to the pertinent information they need to make an informed investment decision.” — Wayne Chopus, president and CEO of the Insured Retirement Institute
Why does this matter to you?
On the surface, this is 100% a procedural change. A regulatory effort to fix an outdated process that was probably taking insurers forever to comply with.
But the impact on annuity buyers could be dramatic. With a more modern and streamlined approach to this SEC hurdle, annuity issues could more easily create and offer innovative new products. This could lead to a more diversified set of equity-backed and other unique annuities for customers to choose from, and that benefits everyone.