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.
In September 2023, the SEC proposed amendments to provide a tailored form to register RILAs. If passed as proposed, the rule would:
• Provide investors with disclosures tailored to RILAs;
• Highlight key information about these complex products; and
• Enhance the registration, disclosure, and advertising framework for RILAs.
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.
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 proposal aims to establish a consistent registration process for issuers on Form N-4. This would require RILA issuers to follow the same rules for updating their registration statements and prospectus filings as those that apply to variable annuities.
- The proposal would also require RILA issuers to pay fees in arrears on Form 24F-2 to accommodate RILA registrations on Form N-4.