On July 1, 2024, the SEC adopted tailored disclosure requirements and offering processes for non-variable annuity contracts—specifically, for registered index-linked annuities (RILAs) and annuity contracts that offer fixed investment options and apply market value adjustments (MVAs) to amounts withdrawn before the end of the fixed option’s term. The final rule will require issuers of RILAs and MVAs to register offerings on an amended Form N-4, the form currently used to register most variable annuities.

Unlike variable annuities, for which the SEC previously adopted specific tailored registration statement forms (i.e., Forms N-3 and N-4), non-variable annuities do not currently have a dedicated form of registration statement, resulting in insurance companies’ use of Securities Act registration Form S-1, the “default” form for general registration, or Form S-3, the simplified form available only to issuers subject to Exchange Act reporting requirements, to register offerings of non-variable annuities. Forms S-1 and S-3, however, are designed for a wide range of securities offerings and require extensive information about the registrant that an RILA or MVA investor may view as less important than particularized information about the contract’s features. Moreover, as SEC Chair Gary Gensler noted in a statement on the final rule’s adoption, the market for RILAs has grown significantly in recent years, as reflected in approximately $47.4 billion of RILA sales in 2023 alone. The growth in these retirement products spurred the industry to advocate for registration and disclosure changes; the Registration for Index-Linked Annuities Act (RILA Act), enacted by Congress in 2022, directed the SEC to adopt a registration form specific to RILAs.

In implementing the RILA Act’s mandate, the SEC has continued to incorporate the principle of layered disclosure, which generally seeks to provide investors with key information relating to an investment’s features, benefits and risks in summary form in the first “layer,” and more detailed or technical information in the second “layer” of disclosure.

Highlights of the rule and form amendments are as follows:

• Use of Amended Form N-4 to Register Non-Variable Annuity Offerings; SAP Financials; More Efficient Registration and Update Process. The SEC is adopting amendments to Form N-4 to accommodate the registration of RILA and MVA offerings on that form. Notably, by using Form N-4, insurance companies will be permitted to file financial statements prepared in accordance with statutory accounting principles (SAP) rather than pursuant to generally accepted accounting principles (GAAP), in certain circumstances, and will have greater flexibility to update their registration statements during certain times of year without the need to update their financial statements. Other amendments to the registration process will enable issuers to pay registration fees annually based on net sales. With regard to disclosures, the amendments to Form N-4 to accommodate non-variable annuities include disclosure requirements related to: (i) information about non-variable annuities generally and an overview of certain key elements of any index-linked option offered under the contract; (ii) a more in-depth description of any index-linked investment options available under the contract; (iii) the inclusion of an appendix that consolidates certain summary information related to any index-linked options and fixed options available under the contract; and (iv) certain principal risks relating to investing in the non-variable annuity contract that the prospectus describes.
• Form N-4 Amendments for Variable Annuity Offerings. In addition to form amendments to accommodate non-variable annuities, the SEC is adopting amendments that are applicable to offerings of variable annuities. For Form N-4 issuers generally, the amendments require registrants to disclose market risk, early withdrawal risk, contract benefits risk, insurance company risk and the risk of contract changes.
• Summary Prospectus. The amendments will permit non-variable annuity issuers to make use of the summary prospectus framework available to variable annuity registrants on Form N-4.
• Communications Rules Applicable to Non-Variable Annuities. The amendments require non-variable annuity issuers to comply with Rule 156 under the Securities Act of 1933, which provides guidance as to when sales literature is materially misleading under the federal securities laws. The SEC is also making a technical amendment to Rule 433 under the Securities Act to allow those non-variable annuity issuers that can satisfy the rule’s conditions to continue to use a free writing prospectus without it needing to be preceded or accompanied by a prospectus that satisfies the requirements of Section 10 of the Securities Act.

“Traces of Anti-RILA Bias”

While the insurance and retirement product industry presumably will welcome the efficiencies offered by using an amended Form N-4 and a registration process that parallels the offering of variable annuities, Commissioner Hester M. Peirce stated that the rule’s positive aspects are tempered by “traces of anti-RILA bias,” citing, as an example, the requirement that RILA issuers disclose on the front cover page the maximum potential loss that an investor could experience in connection with a negative contract adjustment. “[A]bsent necessary context,” Commissioner Peirce suggested, “[such] disclosure seems designed to dissuade investors from purchasing RILAs” and pointed to commenters who asserted that “no other securities offerings are burdened by the same disclosure.”

Compliance and Effective Dates

The amendments will take effect 60 days after publication in the Federal Register, with compliance required by May 1, 2026 for most of the final amendments to Form N-4 and related rule changes, except with respect to Rule 156. Compliance with amended Rule 156 will be required on the effective date.

A fact sheet regarding the final rule is available here and a related SEC press release is available here.