Members of the U.S. House voted 217-197 last week for H.R. 7617, a spending bill package that comes with a warm note of support for annuity issuers.
The provision could, possibly, push the U.S. Securities and Exchange Commission to simplify the process life insurers use to register variable indexed annuities.
- The Congress.gov page for H.R. 7668 is available here.
- An article about the popularity of RILA contracts is available here.
The Insured Retirement Institute (IRI) has been making support for registered index-linked annuity (RILA) filing changes a priority for months.
Life insurers sell many indexed annuities that are classified as non-variable insurance contracts. Those products are filed with state insurance regulators, not with the SEC. The non-variable contracts must protect the contract holder’s account value.
Life insurers are also selling “buffer annuities,” “structured annuities” and other RILAs that resemble the non-variable indexed annuities but are registered with the SEC.
Because a RILA issuer has registered a RILA with the SEC, as a security, the issuer can expose the holders to the possibility of loss of account value. That means the issuer can limit its own risk by agreeing to protect a consumer against some loss of account value, rather than against any loss of account value.
IRI says the SEC now requires life insurers registering RILAs to provide financial information prepared according to the U.S. Generally Accepted Accounting Principles (GAAP) rules, rather than the state regulators’ Statutory Accounting Principles that life insurers usually use.
The SEC also requires the life insurers to provide information that would be relevant to corporate stock offerings but are irrelevant to RILA purchasers, according to IRI.
IRI has been working with other industry groups, including the American Council of Life Insurers, the Committee of Annuity Insurers and the National Association of Insurance and Financial Advisors, to support H.R. 6994, a bill that would require the SEC to revamp the RILA registration process.
The coalition persuaded the House Appropriations Committee to put a word of support for RILAs into the official committee report for H.R. 7668, an SEC, financial services and general government spending bill.
Here’s what the committee says in the committee report:
Registered Index Linked Annuities.—The Committee is concerned that the current registration process for registered index linked annuities (RILAs) is cumbersome and requires significant information not needed for other registered insurance products. The Committee encourages the SEC to create a tailored filing form for RILAs
House leaders folded H.R. 7668 into H.R. 7617.
House Democrats voted for the whole package 197-12.
House Republicans voted 0-184 against the package. A House independent also voted against the package.
The package must be approved by the Senate before it can go to the president’s desk and become law.
The Senate could pass H.R. 7617, but it and the House could end up keeping the government going with another spending bill.
Even if the package becomes law, the Appropriations Committee note would not require the SEC to change the RILA registration process.
But, even if H.R. 7617 dies, members of Congress could still pass a stand-alone RILA registration process bill, or attach the provision to another piece of legislation that does pass. The SEC may also be able to revamp the RILA registration process on its own, without Congress passing a RILA registration process bill.
Bills and Transportation Metaphors
Members of Congress often call federal packages of spending legislation “omnibus bills,” because the bills help drive many different types of spending provisions through Congress.
“COBRA” health benefits continuation coverage, for example, was created by one part of the Consolidated Omnibus Budget Reconciliation Act of 1985.
This summer, members of Congress are calling H.R. 7617 a “minibus bill,” to convey the idea that the package is conveying a relatively small number of spending provisions through Congress.
— Read Bill Would Require SEC to Create New Annuities Form, on ThinkAdvisor.