What is a RILA?
A RILA is a type of annuity contract that provides investors a return based on the performance of a market index. RILAs are retirement investment products geared towards retail investors and tend to offer higher growth potential than fixed-income instruments, combined with a degree of risk protection.
Unlike variable annuity contracts which file under Form N-4, RILAs currently register offerings and file with the SEC on Form S-1 or S-3.
On July 1, 2024, the SEC adopted amendments to provide a tailored form to register the offerings of registered index-linked annuities (RILA) and registered market value adjustment annuities (MVA). The rule and form amendments regarding non-variable annuities will:
- Require offerings of RILAs and registered MVA annuities to be registered on Form N-4 beginning May 1, 2026;
- Allow RILAs to begin using Form N-4 as early as September 23, 2024 as long as certain conditions are met;
- Provide investors with tailored disclosures and key information about these products;
- Modernize the registration, filing, and disclosure framework for non-variable annuities;
- Make RILA sales material subject to Rule 156 disclosure and prospectus delivery requirements, which is a break in parity with variable annuities;
- Update the form for all offerings, including those of variable annuities, and make technical amendments to other insurance product registration forms.
Background
Since 1985, insurance companies offering variable annuities have provided their disclosures using Form N-4. Today’s proposal would require RILAs to use an amended Form N-4, reflecting RILAs’ particular characteristics. These changes would streamline the registration process for issuers already using N-4 for other investment products. Furthermore, this would make disclosures among similar investment products more consistent.
Use of Form N-4 and Summary Prospectus for Non-Variable Annuity Offerings
The amendments require Form N-4 to be used when registering non-variable annuities. The SEC adopted amendments to the form to specifically address the features and risks of non-variable annuities. Because the amendments require the registration of offerings of non-variable annuities on Form N-4, these products are subject to the requirements related to financial statements, including permission for variable annuity issuers to file financial statements prepared following Statutory Accounting Principles (SAP) in certain circumstances.
The amendments also permit non-variable annuity issuers to use the summary prospectus framework available to variable annuity registrants on Form N-4. The amendments further require insurance companies to tag certain information in the form.
Proposed Amendments
Use of Form N-4 and Summary Prospectus for RILAs
- The proposal would require insurance companies to register RILA offerings on Form N-4. It would also amend Form N-4 to specifically address the features and risks of RILAs.
- For example, the proposal would amend the form’s “Key Information Table” (KIT) to highlight key features of RILAs that should be disclosed, enabling investors to determine if a RILA is an appropriate investment for them.
- The proposal would also permit RILA issuers to use the summary prospectus framework applicable to variable annuities.
Updates to the Filing Rules
- The amendments provide a consistent registration process for issuers on Form N-4 by requiring non-variable annuity issuers to follow the same rules to update their registration statements and to file prospectuses that currently apply to issuers of variable annuities.
The amendments also require non-variable annuity issuers to pay securities registration fees in arrears on Form 24F-2.
