The question was: What are group variable annuities and how do I decide when to recommend those products rather than individual variable annuities?

The answer is: Most [general characteristics that] describe individual variable annuities also apply to group variable annuities, more often called group annuities with separate accounts.

The biggest use of group annuities is in qualified retirement plans where, generally, securities registration is not required because the annuities are not marketed to individuals and because the characteristics and restrictions of qualified plans offer much of the consumer protection that registration provides.

The buyers of group annuities are the plan sponsors, employers, or associations. Individual participants deal with their plan sponsors and are issued certificates of participation.

The pricing of group annuities may include more variations in loads and charges, as well as in available compensation arrangements [than found in individual annuities].

A question that always arises is whether to use group annuities with separate accounts or individual variable annuities when either can be used, such as in qualified plans. A rule of thumb many use is that the breakpoint is at about 15 participants. With fewer people covered, individual products may be thy correct approach; with more people, group annuities may be preferable. Of course, factors other than number of participants may need to be taken into consideration.

Source: This is an excerpt from The Variable Annuity Handbook, 2nd Edition, by Gary H. Snouffer, J.D., CLU, published by The National Underwriter Company, Cincinnati, Ohio, p. 154. Click here to learn more about this book