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Life Health > Annuities

AAA Reacts To ACLI Illustration Proposal

By Staff Writer

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An American Academy of Actuaries panel says insurers should make sure annuity performance projections include warnings of the possible tax consequences of early withdrawals.

The Annuity Disclosures Working Group, an arm of the National Association of Insurance Commissioners, Kansas City, Mo., has posted a comment letter from Linda Rodway, chair of the Annuity Illustrations Work Group at the AAA, Washington, on its website.

The AAA work group was reacting to an Annuities Illustration model proposed by the American Council of Life Insurers, Washington.

The AAA work group would like to see “warnings about potential tax penalties related to withdrawals,” Rodway writes.

The work group also would like to see more clarifications, especially with respect to market value adjusted annuities, Rodway writes.

In the sample illustration provided, “we moved the annuitization section to precede the cash value section, since the purpose of an annuity is to provide income,” Rodway writes.

The work group stated in the column headings, rather than in footnotes, whether values were calculated before or after any MVAs.

In addition, the work group added a column to the cash value section to show the minimum guaranteed cash surrender value after any maximum MVA, in an effort to provide additional information about the possible downside effect of the MVA provision, Rodway writes.

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