Getting Clued In: How the SEC’s RILA Rulemaking Affects Variable Annuities

The recent rule and form amendments adopted by the SEC to facilitate the registration of registered index-linked annuities (RILAs) and market-value adjustment annuities (MVAs) on Form N-4 have been broadly welcomed by the insured investment products

industry. Some changes to Form N-4 brought by the RILA/MVA rulemaking, however, will also apply to issuers of variable annuities, even if those variable annuity insurers do not offer any RILAs or MVAs. Variable annuity issuers may now file their annual updates in compliance with the new rule and form amendments, but they must submit such compliant filings for these products that are effective no later than May 1, 2026.

One of the most, if not the most, challenging new disclosure issues for variable annuities arises from a preexisting Form N-4 instruction requiring the disclosure of “all material … intermediary-specific variations (e.g., variations resulting from different brokerage channels) to the offering.” These could include variations in underlying investment options as well as contract features.

Because registrants are not always aware of all changes a particular distributor may make, they have historically disclosed that such variations may exist and provided guidance on how investors could obtain specific details. Notwithstanding this practice, the SEC staff appears to have taken the position that this instruction requires a prospectus description of the contract features and investment options made available by each distributor.

For example, if an intermediary offers a version of a contract that excludes a material benefit described in the contract, the specifics of that version must be disclosed in the prospectus. This interpretation could present a considerable burden for many carriers, particularly given the relatively small benefit to investors, who are already given guidance on how to obtain more information. Bottom line: there will likely be more conversations between the industry and SEC staff on this issue.

Other Form N-4 disclosure changes for variable annuity registration filings are relatively straightforward. These consist primarily of additional risk disclosures for the prospectus cover page and principal risks section, with minor changes in the overview, key information table, and appendix sections.

In addition, there are new disclosure requirements affecting registration filings for variable annuities offered with unregistered fixed investment options. Among other things, the appendix must now include a table listing the name, term, and minimum guaranteed rate of each fixed option. These requirements extend to all fixed options, including unregistered fixed indexed options, which do not fit well with the prescribed table format. However, the instructions allow modifications and exclusions “as necessary to describe the material features” of a fixed option. Hopefully, staff will engage with registrants to clarify what modifications and exclusions should be made for these options.

Notwithstanding expected lengthy review periods for RILA and MVA registration filings, the SEC stated in the adopting release for the RILA/MVA rulemaking that filings to bring variable annuities without RILA or MVA options into compliance with amended Form N-4 can be submitted for immediate effectiveness, so long as there are no other material changes. SEC staff have also confirmed that this expedited filing process extends to filings for variable annuities offered with unregistered fixed options, including fixed indexed options.

Variable annuity issuers should keep in mind that, as registrants and SEC staff work through the complex process of compliance with the amendments adopted in the RILA/MVA rulemaking, questions and issues will inevitably arise (about some of which nobody now has even a clue). In the coming months, it is highly probable that SEC staff will take significant additional interpretive positions, some of which are likely to affect registration filings for variable annuities that do not offer RILA or MVA options.