[Federal Register Volume 89, Number 142 (Wednesday, July 24, 2024)]
[Rules and Regulations]
[Pages 59978-60162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14925]



[[Page 59977]]

Vol. 89

Wednesday,

No. 142

July 24, 2024

Part II





Securities and Exchange Commission





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17 CFR Parts 230, 232, 239, et al.





Registration for Index-Linked Annuities and Registered Market Value 
Adjustment Annuities; Amendments To Form N-4 for Index-Linked 
Annuities, Registered Market Value Adjustment Annuities, and Variable 
Annuities; Other Technical Amendments; Final Rule

  Federal Register / Vol. 89 , No. 142 / Wednesday, July 24, 2024 / 
Rules and Regulations  

[[Page 59978]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, 239, and 274

[Release No. 33-11294; 34-100450; IC-35273; File No. S7-16-23]
RIN 3235-AN30


Registration for Index-Linked Annuities and Registered Market 
Value Adjustment Annuities; Amendments To Form N-4 for Index-Linked 
Annuities, Registered Market Value Adjustment Annuities, and Variable 
Annuities; Other Technical Amendments

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
adopting rule and form amendments to provide a tailored form to 
register the offerings of registered index-linked annuities 
(``RILAs''). Specifically, the Commission is amending the form 
currently used by most variable annuity separate accounts, Form N-4, to 
require issuers of RILAs to register offerings on that form as well. To 
facilitate this amendment, the Commission is also amending certain 
filing rules and making other related amendments. These changes will 
implement the requirements relating to RILAs contained in the 
Consolidated Appropriations Act, 2023. The Commission is also extending 
the registration, filing, and disclosure requirements that the 
Commission is adopting for RILA offerings to the offerings of 
registered market value adjustment annuities. Further, the Commission 
is adopting other amendments to Form N-4 that will apply to all issuers 
that use that form. The Commission is applying to RILA and registered 
market value adjustment annuity advertisements and sales literature a 
current Commission rule that provides guidance as to when sales 
literature is materially misleading under the Federal securities laws. 
Finally, the Commission is adopting technical amendments to Forms N-6 
and N-3 to correct errors from prior Commission rulemakings.

DATES: 
    Effective date: This rule is effective September 23, 2024.
    Compliance dates: The applicable compliance dates are discussed in 
section II.J of this Release.

FOR FURTHER INFORMATION CONTACT: Pamela Ellis, Alexis Hassell, Rachael 
Hoffman, Michael Khalil, Amy Miller, or Gregory Scopino, Senior 
Counsels; Bradley Gude, Branch Chief; Amanda Hollander Wagner, Senior 
Special Counsel; or Brian McLaughlin Johnson, Assistant Director, 
Investment Company Regulation Office, at (202) 551-6792; Min Oh, Senior 
Counsel; or Elizabeth Bentzinger or Michael Kosoff, Senior Special 
Counsels, Disclosure Review and Accounting Office, at (202) 551-6921, 
Division of Investment Management, Securities and Exchange Commission, 
100 F Street NE, Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Commission is amending the following 
rules and forms:
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    \1\ 15 U.S.C. 77a et seq.

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                   Commission reference                                     CFR citation (17 CFR)
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Securities Act of 1933 (``Securities Act''): \1\
    Rule 156..............................................  Sec.   230.156.
    Rule 172..............................................  Sec.   230.172.
    Rule 405..............................................  Sec.   230.405.
    Rule 415..............................................  Sec.   230.415.
    Rule 424..............................................  Sec.   230.424.
    Rule 433..............................................  Sec.   230.433.
    Rule 456..............................................  Sec.   230.456.
    Rule 457..............................................  Sec.   230.457.
    Rule 485..............................................  Sec.   230.485.
    Rule 497..............................................  Sec.   230.497.
    Rule 498A.............................................  Sec.   230.498A.
Regulation S-T:
    Rule 313 of Regulation S-T............................  Sec.   232.313.
    Rule 405 of Regulation S-T............................  Sec.   232.405.
Forms:
    Form N-3..............................................  Sec.   239.17a and 274.11b.
    Form N-4..............................................  Sec.   239.17b and 274.11c.
    Form N-6..............................................  Sec.   239.17c and 274.11d.
    Form 24F-2............................................  Sec.   239.66 and Sec.   274.24.
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Table of Contents

I. Introduction and Background
    A. Overview of RILA Features
    B. Overview of Registered MVA Annuity Features
    C. Current Registration Requirements for RILAs and Registered 
MVA Annuities
    D. Developments and Analysis Informing Final Amendments
    1. Investor Testing Informing Final Amendments
    2. Analysis of Comments on Recurring Disclosure Topics Informing 
Final Amendments
    E. Overview of the Final Amendments
II. Discussion
    A. Use of Form N-4 for RILAs
    B. Use of Form N-4 for Registered MVA Annuities
    C. Contents of Form N-4
    1. Front and Back Cover Pages (Item 1)
    2. Overview of the Contract (Item 2)
    3. Key Information Table (Item 3)
    4. Principal Disclosure Regarding Index-Linked Options and MVA 
Options (Items 6 and 17)
    5. Principal Risks of Investing in the Contract (Item 5)
    6. Addition of Contract Adjustments and Other Amendments to Fee 
and Expense Disclosures (Items 4, 7, and 22)
    7. Information About Contracts With Index-Linked and/or MVA 
Options (Item 31A)
    8. Other Amendments and Provisions
    9. Remaining Form N-4 Items
    10. Inline XBRL
    D. Option To Use a Summary Prospectus
    1. Overview--Use of Summary Prospectus for Non-Variable 
Annuities
    2. Initial Summary Prospectus
    3. Updating Summary Prospectus

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    4. Online Accessibility of Contract Statutory Prospectus and 
Certain Other Documents Relating to the Contract
    5. Other Requirements for Summary Prospectus and Other Contract 
Documents
    E. Accounting (Items 16 and 26)
    F. Filing and Prospectus Delivery Rules
    1. Fee Payment Method and Amendments to Form 24F-2
    2. Post-Effective Amendments and Prospectus Supplements
    3. Prospectus Delivery
    G. Communication Rules Applicable to Non-Variable Annuities 
Sales Literature (Rule 156)
    2. Free Writing Prospectuses and Advertisements (Rules 433 and 
482)
    H. Existing Commission Letters
    I. Technical Amendments to Forms N-3 and N-6
    J. Effective and Compliance Dates
III. Other Matters
IV. Economic Analysis
    A. Introduction
    B. Baseline
    1. Affected Parties
    2. Current Regulatory Requirements
    3. Market Practice
    C. Benefits and Costs
    1. Benefits
    2. Costs
    D. Effects on Efficiency, Competition, and Capital Formation
    E. Reasonable Alternatives Considered
    1. Creating an Entirely New Registration Form for RILAs
    2. Alternatives to Specific Form N-4 Amendments
    3. Limiting Scope of Structured Data Requirements
V. Paperwork Reduction Act
    A. Rule 498A
    B. Form N-4
    C. Form 24F-2
    D. Investment Company Interactive Data
VI. Regulatory Flexibility Act Certification Statutory Authority

I. Introduction and Background

    The Commission is adopting rule and form amendments (``final 
amendments'') that are designed to help investors make informed 
decisions regarding RILAs. To modernize and enhance the registration 
and disclosure framework for RILAs, we are adopting amendments that 
will require offerings of RILAs to be registered on Form N-4, the 
registration form for most variable annuities, as well as adapt that 
form to accommodate RILAs. These amendments finalize rule and form 
amendments that the Commission proposed in September 2023.\2\
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    \2\ See Registration for Index-Linked Annuities; Amendments to 
Form N-4 for Index-Linked and Variable Annuities, Investment Company 
Act Release No. 35028 (Sept. 29, 2023) [88 FR 71088 (Oct. 13, 2023)] 
(``Proposing Release'' or ``proposal''). The Commission voted to 
issue the Proposing Release on September 29, 2023. The release was 
posted on the Commission website that day, and comment letters were 
received beginning the same day. The comment period closed on 
November 28, 2023. We have considered all public comment received 
through May 28, 2024. The comment letters on the Proposing Release 
are available at https://www.sec.gov/comments/s7-16-23/s71623.htm.
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    The amendments implement Congress' directive to the Commission in 
Division AA, Title I of the Consolidated Appropriations Act, 2023 
(``RILA Act'') to adopt a new registration form for RILAs within 18 
months of enactment.\3\ The RILA Act requires the Commission to design 
the form to ensure that a purchaser using the form receives the 
information necessary to make knowledgeable decisions, taking into 
account (1) the availability of information; (2) the knowledge and 
sophistication of that class of purchasers; (3) the complexity of the 
RILA; and (4) any other factor the Commission determines appropriate.
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    \3\ Publix Law 117-328; 136 Stat. 4459 (Dec. 29, 2022). The RILA 
Act provides that, if the Commission fails to adopt the form within 
18 months of enactment, RILA issuers can begin registering RILA 
offerings on existing Form N-4.
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    The Commission's amendments will result in disclosure requirements 
for RILAs that are tailored to the particular characteristics of RILAs 
and comparable to variable annuity disclosure. We are also adopting 
related amendments to various Commission rules to effectuate the new 
disclosure requirements for RILAs and for further consistency in the 
registration, filing, and disclosure framework for RILAs compared to 
other similar annuity products. These amendments include, among other 
things: amendments permitting RILA issuers to use summary prospectuses; 
amendments that will result in the same requirements for RILAs and 
variable annuities in terms of updating the issuer's prospectus each 
year; and amendments that address how RILAs will register and pay for 
new shares, as well as other aspects of the registration and offering 
process. Furthermore, we are adopting amendments to extend the 
registration, filing, and disclosure approach we are adopting for RILAs 
to annuity contracts that offer fixed investment options and apply 
market value adjustments (``MVAs'') to amounts withdrawn from a fixed 
option before the end of the fixed option's term, where the offering is 
required to be registered with the Commission because of the MVA 
(``registered MVA annuities'' and, collectively with RILAs, ``non-
variable annuities'').\4\ We are additionally adopting other amendments 
to Form N-4 that will apply to all issuers that use that form, which 
are informed by the staff's historical experience in administering the 
form and relevant investor testing.\5\ We are also adopting amendments 
that will apply a current Commission rule--which provides guidance as 
to when sales literature is materially misleading under the Federal 
securities laws--to RILA and registered MVA annuity advertisements and 
sales literature. Finally, we are adopting technical amendments to 
Forms N-6 and N-3 to update certain references used in those forms.
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    \4\ See facing page of final Form N-4 in final Form N-4; see 
also infra footnote 16 and accompanying text (discussing the 
operation of MVAs); Section II.B (discussing the final amendments' 
requirement for registered MVA annuities to register on Form N-4). 
The term ``non-variable annuities'' distinguishes these annuities 
from variable annuities whose offerings are registered on Form N-4, 
in which investors allocate their purchase payments to a range of 
investment options--typically mutual funds--and the investor's 
account value changes depending on the performance of the investment 
options selected. We understand that this term is understood in the 
industry to refer to annuities other than variable annuities.
    \5\ See infra section I.D.1.
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    The Commission received comments on the proposal from a variety of 
interested parties, including life insurance companies, professional 
and trade associations, a public interest advocacy organization, and 
individuals.\6\ Commenters broadly supported the proposal, including 
the proposed approach of requiring insurance companies to use Form N-4 
to register RILA offerings, the amendments that would permit the use of 
summary prospectuses, and the amendments to filing and fee-payment 
rules. Some commenters suggested modifications and additions to the 
proposed approach, including changes to some of the specific 
disclosures that Form N-4 would require for RILAs. Others suggested we 
include registered MVA annuities (which currently, like RILAs, register 
on Forms S-1 and S-3) and certain other insurance products among those 
required to register on Form N-4. Some commenters also urged the 
Commission to extend rule 482 under the Securities Act, which addresses 
investment company advertising, to RILAs.
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    \6\ Some commenters raised topics that relate to various 
insurance product issues but not to the proposed rulemaking. See, 
e.g., Comment Letter of the Committee of Annuity Insurers (Nov. 28, 
2023) (``CAI Comment Letter'') (suggesting the Commission adopt 
amendments for life insurance products that are similar to RILAs). 
Another commenter sought clarification on topics related to variable 
and non-variable annuities that are unrelated to the proposed 
amendments. VIP Working Group Comment Letter (e.g., seeking guidance 
on the application of Regulation D to certain offerings of variable 
and non-variable annuities). These comments are beyond the scope of 
this rulemaking.
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    After consideration of the comments received, we are adopting the 
proposed

[[Page 59980]]

amendments, with certain modifications. The final amendments retain 
each of the key elements of the proposed rules--the required 
registration of RILA offerings on Form N-4, the core aspects of the 
proposed disclosure requirements, the optional use of summary 
prospectuses by RILAs, the amendments to filing and fee-payment rules, 
and the amendments addressing materially misleading RILA sales 
literature. The resulting framework implements the RILA Act's mandate 
while making the RILA offering process similar to that for other 
insurance investment products, enhancing the information insurance 
companies disclose about RILAs, and extending certain antifraud 
guidance to RILA advertisements. However, we have modified certain 
proposed disclosure requirements and other aspects of the proposal to 
address the comments the Commission received. Additionally, the final 
amendments, in a change from the proposal and in response to comments 
received addressing the Commission's requests for comment about the 
registration of offerings of registered MVA annuities, will require 
these offerings to register on Form N-4. This, along with other 
amendments we are adopting extending the registration, filing, and 
disclosure framework we are adopting for RILAs to registered MVA 
annuities, and extending certain antifraud guidance to registered MVA 
annuity advertisements and sales literature, will result in greater 
uniformity in the regulation of non-variable annuities.

A. Overview of RILA Features

    A RILA is one of several types of annuity contracts that insurance 
companies offer.\7\ An investor in a RILA allocates purchase payments 
to one or more investment options under which the investor's returns 
(both gains and losses) are based at least in part on the performance 
of an index or other benchmark (collectively, ``indexes'') over a set 
period of time (``crediting period''). A RILA may be offered on a 
standalone basis with various index-linked investment options (``index-
linked options'') that investors may choose.\8\ Alternatively, an 
insurance company may offer ``combination'' annuity contracts that 
provide index-linked options together with other investment options, 
such as mutual funds (``portfolio companies'') offered as investment 
options under a variable annuity (``variable options'') or fixed 
investment options, including fixed options subject to an MVA (``MVA 
options'').\9\ The market for RILAs has grown significantly in recent 
years, with annual RILA sales of $47.4 billion in 2023 alone, 15% 
higher than in the prior year, and more than quintupling since 
2017.\10\
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    \7\ An annuity contract (``annuity'' or ``contract'') is a type 
of insurance product in which an investor makes a lump sum payment 
or a series of payments in return for future payments from the 
insurance company to meet retirement and other long-term financial 
goals.
    \8\ Depending on the context, this Release uses the term 
``RILA'' to refer collectively to stand-alone RILAs and the index-
linked options available in a combination contract. When referring 
to the entity registering the RILA, we use the term ``RILA issuer'' 
or ``insurance company.'' One commenter suggested that the 
Commission should use a term other than ``RILA,'' as the term 
``registered'' in ``RILA'' may serve to confuse investors because 
there are other investment products that are registered under both 
the Securities Act and the Investment Company Act of 1940 (the 
``Investment Company Act'') that do not include the term 
``registered'' (e.g., variable annuities, mutual funds, and 
exchange-traded funds). See Comment Letter of VIP Working Group 
(Nov. 10, 2023) (``VIP Working Group Comment Letter''). We continue 
to use the term ``RILA'' in the final amendments and in this Release 
for consistency with the RILA Act, as well as our understanding of 
common industry practice. See, e.g., The Design and Regulatory 
Framework of Registered Index-Linked Annuities, ALI CLE Conference 
on Life Insurance Products 2022.
    \9\ See Updated Disclosure Requirements and Summary Prospectus 
for Variable Annuity and Variable Life Insurance Contracts, 
Investment Company Act Release No. 33814 (Mar. 11, 2020) [85 FR 
25964 (May 1, 2020)] (``VASP Adopting Release'') at nn.4-5, 8, and 
accompanying text (describing the key features of variable annuity 
contracts and variable life insurance contracts (together, 
``variable contracts'')). An investor purchasing a combination 
contract, for example, may have the ability to allocate purchase 
payments under the contract to index-linked options; variable 
options that pass on the returns of mutual funds selected by the 
investor; and/or fixed account options for which the insurance 
company promises to pay a fixed and stated minimum rate of interest.
    \10\ See LIMRA, ``LIMRA: Record-High 2023 Annuity Sales Driven 
by Extraordinary Growth in Independent Distribution,'' news release 
(Mar. 12, 2024) (reporting 2023 RILA sales of $47.4 billion), 
available at https://www.limra.com/en/newsroom/news-releases/2024/limra-record-high-2023-annuity-sales-driven-by-extraordinary-growth-in-independent-distribution/ (stating that high annuity sales were 
``largely due to broader engagement with independent distribution'' 
and that ``[r]ising interest rates have made annuities very 
attractive to a larger group of investors''). The fourth quarter of 
2023 marked the first time RILA product sales surpassed variable 
annuity sales. See also LIMRA, ``LIMRA Secure Retirement Institute: 
Total Annuity Sales Continued to Decline in 2017,'' news release 
(Feb. 21, 2018) (reporting 2017 sales of structured annuity 
products, i.e., RILAs, of $9.2 billion), available at https://www.limra.com/en/newsroom/news-releases/2018/limra-secure-retirement-institute-total-annuity-sales-continued-to-decline-in-2017/.
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    RILAs are complex financial products that are sold to retail 
investors.\11\ The Proposing Release describes some of the most 
prevalent features that contribute to this complexity, and that might 
make it challenging for an investor to assess the features, risks, and 
possible return profile of a RILA.\12\ Under a RILA, the insurance 
company will credit positive or negative ``interest'' to the investor's 
contract value at the end of each crediting period. The amount credited 
is based, in part, on the performance of a specified index, rate, or 
benchmark (e.g., the S&P 500).\13\ One aspect of RILAs' complexity 
involves the various ways that interest may be credited, and how 
contract features that affect how interest is credited work together. 
The Proposing Release details RILAs' traditional bounded return 
structure, which typically limits investors' ability to participate in 
upside index performance (through features such as ``cap rates'' and/or 
``participation rates,'' collectively ``limits on gains''), and also 
limits investors' losses if the performance of the index goes down in 
value (through features such as ``buffers'' or ``floors,'' collectively 
``limits on losses'').\14\ For many RILAs, the investor pays no direct 
or explicit ongoing fees and expenses under the RILA, and this is 
sometimes a feature communicated in RILA marketing materials. However, 
the RILA's bounded return structure requires investors to agree to 
tradeoffs that come with their own economic costs. That is, RILAs limit 
or reduce downside risk, but also limit upside performance. In exchange 
for some protection against losses if the index goes down in value, 
investors must also agree to contractual provisions limiting the gains 
they will receive if the index goes up in value. RILAs allow investors 
some ability to customize a level of risk with which they are 
comfortable.\15\ But despite the bounded return structure, a RILA is 
not necessarily a low-risk investment product as the investor could 
lose a significant amount of money if the index performs poorly.
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    \11\ We understand that RILAs are predominantly sold by broker-
dealers.
    \12\ See Proposing Release at Section I.A. This paragraph and 
the paragraphs that follow summarize the RILA features that Section 
I.A of the Proposing Release discusses.
    \13\ Insurance companies typically choose indexes for the RILA 
contract where any gains in the value of the index do not include 
dividends paid on the securities that make up the index.
    \14\ See Proposing Release at paragraph accompanying n.10. A cap 
rate places an upper limit on an investor's ability to participate 
in the index's upside performance directly. A participation rate 
sets an investor's return to some specified percentage of the 
index's return. A buffer limits the investor's exposure to losses up 
to a fixed percentage. A floor places a lower limit on the 
investor's exposure to loss.
    \15\ See infra Section IV.B.3.
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    Charges and penalties for early withdrawals are another prevalent 
feature of RILAs. Investors can lose significant money if they withdraw 
their money early from an investment option or from the contract. This 
can arise in

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several circumstances: (1) ``surrender charges'' that apply when an 
investor withdraws money from the contract within a certain period 
following the investor's last premium payment; (2) ``interim value 
adjustments'' (or ``IVAs''), which adjust the investor's contract value 
if amounts are withdrawn (for instance, because of movements to a 
different investment option, movements out of the contract, or payment 
of certain benefits) from an index-linked option before the end of its 
crediting period; \16\ and (3) a positive or negative MVA (collectively 
with IVAs, a ``contract adjustment'') to the amount paid to the 
investor resulting from changes in interest rates if the investor 
partially or fully withdraws amounts from the contract or from certain 
fixed options.\17\ Contract adjustments can occur in response to a 
number of contract transactions, such as a surrender, withdrawal, 
payment of the death benefit, or the start of annuity payments, and an 
investor could experience a negative contract adjustment even when the 
investor takes an otherwise permissible withdrawal, such as under a 
guaranteed living benefit. These adjustments also can negatively affect 
other values under the contract, such as the surrender value and death 
benefit. Moreover, these fees and adjustments are not always mutually 
exclusive.\18\ As a result of these charges and penalties, the investor 
could lose a significant amount of money in a RILA investment, even if 
the index has a gain at the time of the withdrawal.
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    \16\ See id. at n.11 and accompanying paragraph. The IVA will 
adjust the contract value based, generally, on a complex formula 
where the IVA may change daily and can be positive or negative.
    \17\ MVAs can apply to RILAs, but, as discussed below, they also 
can apply to a fixed option available under an annuity contract. See 
infra Sections I.B and II.B.
    \18\ See Proposing Release at n.13 and accompanying paragraph. 
An investor may also be subject to income taxes and face a Federal 
income tax penalty if the investor withdraws money before a certain 
age.
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    In addition to the complexities that RILAs' bounded return 
structure and potential charges and penalties for early withdrawals 
entail, under virtually all RILA investments the insurance company may 
change or remove key features of index-linked options, such as the cap 
rates, floors, or even the index.\19\ Also, RILA contracts typically 
state that an investor will be automatically renewed at the end of a 
crediting period into the same or substantially similar index-linked 
option, often with a new limit on gains. Furthermore, special tax rules 
generally apply to RILAs and other annuities, with both tax advantages 
and potential adverse tax impacts in certain circumstances.\20\
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    \19\ See id. at paragraph following n.13.
    \20\ See id. at n.14 and accompanying paragraph.
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    For all of these reasons, providing investors with key information 
is particularly important in the context of RILAs, since their features 
are typically complex and their risks may not be apparent or easily 
understood by prospective investors absent clear disclosure.

B. Overview of Registered MVA Annuity Features

    Registered MVA annuities are annuity contracts that offer fixed 
investment options (where the insurance company promises to pay a fixed 
and stated minimum rate of interest) and apply MVAs to amounts 
withdrawn before the end of the fixed option's term.\21\ The insurance 
company might apply an MVA, for example, when an investor withdraws 
money from the contract, transfers money among investment options, or 
annuitizes the contract. For these annuities, fixed options are either 
offered on their own or in a combination contract with index-linked 
options and/or variable options.
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    \21\ See Proposing Release at Section II.H. The Proposing 
Release referred to registered MVA annuities as ``registered MVAs.'' 
For clarity and parallelism with the terms ``RILA'' and ``variable 
annuity'' (which also refer to different types of annuities), we 
refer to these products instead as ``registered MVA annuities'' in 
this Release.
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    As the Commission explained in the Proposing Release, RILAs and 
registered MVA annuities differ only with respect to the manner in 
which interest is calculated and credited.\22\ Interest in a RILA 
contract is calculated and credited at the end of the crediting period 
based at least in part on the performance of an index or other 
benchmark, whereas interest in a registered MVA annuity is guaranteed 
and typically credited daily at a fixed rate.\23\ Registered MVA 
annuities, however, like RILAs, apply contract adjustments upon 
withdrawals prior to term maturity. An investor in a RILA or registered 
MVA annuity therefore can lose money--and potentially a significant 
amount of money--due to a contract adjustment, and the way in which 
these adjustments are calculated may be complex.
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    \22\ See id. One commenter stated that it largely agrees with 
this characterization. See CAI Comment Letter. No commenters 
disagreed with this characterization. See also infra section II.B 
(discussing more broadly the comments received on the Commission's 
request for comment in the Proposing Release on whether to require 
insurance companies to register the offerings of registered MVA 
annuities on Form N-4).
    \23\ See id.; see also CAI Comment Letter (agreeing with the 
Commission's statement in the Proposing Release that RILAs and 
registered MVA annuities differ only with respect to the manner in 
which interest is calculated and credited).
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    Existing disclosure for registered MVA annuities has many 
similarities to disclosure for RILAs. Like RILA disclosure, registered 
MVA annuity disclosure describes the operation of contract adjustments 
and the risks associated with such contract adjustments.\24\ Disclosure 
for registered MVA annuities, like disclosure for RILAs and other 
annuity contracts, also describes basic annuity features (including, as 
for RILAs, information about surrender charges and applicable tax 
treatment) and the issuer's financial strength.\25\
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    \24\ See CAI Comment Letter.
    \25\ See id.
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C. Current Registration Requirements for RILAs and Registered MVA 
Annuities

    RILAs are securities for purposes of the Securities Act.\26\ Unlike 
variable annuity contracts for which the Commission has adopted a 
specific tailored registration form, insurance companies currently 
register offerings of RILAs on Securities Act registration Forms S-1 or 
S-3.\27\ As the Proposing Release describes in detail and this Release 
summarizes, the current requirements for issuers offering RILAs and 
variable annuities (that is, the requirements prior to the amendments

[[Page 59982]]

the Commission is adopting in this Release) differ in many respects, 
both in terms of the disclosure issuers must provide and the 
registration process.\28\
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    \26\ Under the final amendments, the final Form N-4 will not 
register the RILA or registered MVA annuity issuers themselves, only 
the offering of RILA or registered MVA annuity securities. Unlike 
separate accounts which register variable annuities, RILA and 
registered MVA annuity issuers are not investment companies, and 
thus need not register with the Commission as an investment company 
as separate accounts do. Index annuities that meet the requirements 
of section 989J of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203) or section 3(a)(8) of the 
Securities Act are treated as exempt securities for purposes of the 
Securities Act, but RILAs and registered MVA annuities do not fall 
within this exemption due, in large part, to the shifting of a 
significant level of investment risk from the issuer to the 
investor. RILAs and index-linked options, as used in this Release, 
refer only to those index annuities that are securities for the 
purposes of the Securities Act. See, e.g., sections 101(a)(5) and 
(6) of the RILA Act. Similarly, registered MVA annuities and MVA 
fixed account options, as used in this release, refer only to 
annuities that are securities for the purposes of the Securities 
Act. See infra footnote 29 and accompanying text.
    \27\ See, e.g., General Instruction I of Form S-1 (``This Form 
shall be used for the registration under the Securities Act of 1933 
(`Securities Act') of securities of all registrants for which no 
other form is authorized or prescribed''). The registration forms 
for variable annuity contracts are Form N-3 (for variable annuity 
separate accounts structured as management investment companies) and 
Form N-4 (for variable annuity separate accounts structured as unit 
investment trusts). See Proposing Release at n.6 and accompanying 
text. In this Release, we focus only on Form N-4 and not Form N-3, 
because Form N-4 is the registration form identified in the RILA Act 
and the form used to register most variable annuity contracts.
    \28\ See Proposing Release at Section I.B.
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    Registered MVA annuities also are securities for purposes of the 
Securities Act. They are securities because the MVA feature imposes 
certain investment risks on purchasers.\29\ Like RILA offerings, 
offerings of registered MVA annuities are currently registered on Forms 
S-1 or S-3. While this section of the Release discusses the 
registration requirements for RILAs, the current registration 
requirements for registered MVA annuities are the same as those for 
RILAs and present the same considerations.
---------------------------------------------------------------------------

    \29\ See section 3(a)(8) of the Securities Act and 17 CFR 
230.151; see also SEC v. Variable Annuity Life Insurance Co. of 
America, 359 U.S. 65, 77 (1959).
---------------------------------------------------------------------------

    In general, the disclosure requirements of Forms S-1 and S-3 are 
not specifically tailored to particular kinds of securities given the 
wide range of securities offerings that issuers can register on these 
forms.\30\ Forms S-1 and S-3 thus do not include specific line-item 
requirements addressing disclosures about RILAs and their complex 
features. These forms also require issuers to disclose information 
about the offering itself as well as extensive information about the 
registrant issuing the securities that a RILA investor may view as less 
important than information about the contract's features. Domestic 
registrants also must include financial statements prepared in 
accordance with U.S. generally accepted accounting principles 
(``GAAP'').\31\
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    \30\ See Proposing Release at nn.15-17 and accompanying 
paragraph.
    \31\ See 17 CFR 210.4-01(a)(1) (stating that financial 
statements filed with the Commission which are not prepared in 
accordance with GAAP will be presumed to be misleading or inaccurate 
unless the Commission has otherwise provided). See also Proposing 
Release at n.20.
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    The Form N-4 disclosure requirements for variable annuities, on the 
other hand, are tailored for variable annuities.\32\ Form N-4's 
disclosure requirements are designed to provide investors with key 
information relating to a variable contract's provisions, benefits, and 
risks, along with information about the insurance company and the 
offering. In addition, rule 498A and Form N-4 together implement a 
layered disclosure approach for variable annuities by permitting 
insurance companies and others to use a summary prospectus framework 
for variable annuities while making the more-detailed statutory 
prospectus, as well as the contract's statement of additional 
information (``SAI''), available online. Form N-4 also provides a 
limited exception for insurance companies to file financial statements 
prepared in accordance with statutory accounting principles (``SAP''), 
referred to as ``statutory requirements'' in the form instructions, 
rather than GAAP.\33\ Structured data requirements for RILA and 
variable annuity disclosure also differ.\34\
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    \32\ See Proposing Release at nn.18-20 and accompanying 
paragraph.
    \33\ Specifically, insurance companies, which act as the 
depositors of variable annuity separate accounts registered on Form 
N-4, may use SAP financials solely when the insurance company does 
not otherwise prepare GAAP financial statements or GAAP financial 
information for use by a parent in the parent's Securities Exchange 
Act of 1934 (``Exchange Act'') reports or the parent's registration 
statements filed under the Securities Act. See id. at n.20 and 
accompanying text.
    \34\ See Proposing Release at n.25 and accompanying text, and 
text following n.26.
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    The Proposing Release also details key differences in the current 
registration process for RILAs versus variable annuities.\35\ While 
insurance companies pay registration fees at the time they register the 
offer and sale of RILA securities, a separate account that registers 
under the Investment Company Act and offers variable annuity securities 
on Form N-4 pays registration fees based on the net issuance of 
securities, no later than 90 days after each fiscal year end.\36\ 
Updates to RILA offering registration statements occur by filing a 
post-effective amendment to a Form S-1 registration statement (which 
must be declared effective, typically by staff acting pursuant to 
delegated authority) or by the filing of the insurance company's annual 
report on Form 10-K containing audited financial statements, which 
operates as a post-effective amendment to a registration statement on 
Form S-3.\37\ In contrast, a variable annuity registration statement on 
Form N-4 may be updated by filing an immediately-effective post-
effective amendment under rule 485. This permits the efficient 
registration of continuous offerings of variable annuities.
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    \35\ See id. at paragraphs accompanying nn.21-26.
    \36\ See id. at nn.21 and 26 and accompanying text.
    \37\ See id. at nn.22-24 and accompanying text.
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D. Developments and Analysis Informing Final Amendments

1. Investor Testing Informing Final Amendments
    In addition to the RILA Act's requirements described above, the 
RILA Act also requires the Commission to engage in investor testing as 
part of its rulemaking process and to incorporate the results of the 
testing in the design of the new registration form for RILAs, with the 
goal of ensuring that key information is conveyed in terms that a 
purchaser can understand. Consistent with the RILA Act, the Commission 
received feedback on individuals' comprehension and views on RILA 
disclosure through investor testing. Specifically, the Commission's 
Office of the Investor Advocate (``OIAD'') conducted two rounds of 
qualitative interviews with a mix of investors across demographic 
characteristics, locations, and levels of financial literacy who either 
already owned annuities or had expressed interest in investing in an 
annuity product. The results of the two rounds of qualitative testing 
then helped inform a round of quantitative testing with approximately 
2,500 participants.
    This investor testing, which the Proposing Release and a report 
describing investor testing that OIAD conducted describe in detail, 
helped us to identify areas of Form N-4 that we proposed to amend to 
help ensure that a RILA purchaser receives key information that the 
purchaser is able to understand.\38\ Feedback from both rounds of 
qualitative interviews generally showed that the interview participants 
did not have much, if any, familiarity with RILAs. Furthermore, 
interviews in both rounds illustrated that many participants struggled 
to understand the details of the RILA contract presented in sample 
disclosure that could appear in select rows of the ``Key Information 
Table'' (or ``KIT'') in RILA registration statements. Participants 
indicated significant confusion about the features and fees associated 
with RILAs, and often cited certain specific terminology, such as 
``index option,'' ``interim value adjustment,'' ``buffer,'' and 
``investment term,'' as confusing to them. Although interview 
participants may not have been able to understand RILA features and 
economic tradeoffs fully after reviewing sample KIT disclosure, some 
were able to identify certain potential drawbacks and explain certain 
aspects of RILA contracts following their review of this sample 
disclosure.
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    \38\ Office of Investor Advocate Division, Investor Testing 
Report on Registered Index-Linked Annuities (OIAD Working Paper 
2023-01), (Sep. 2023) (``OIAD Investor Testing Report'') available 
at https://www.sec.gov/files/rila-report-092023.pdf; see also 
Proposing Release at Section I.C.
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    The investor testing successfully identified a range of barriers to 
investor understanding of RILAs and associated disclosure. However, 
with few exceptions, the variations in RILA disclosures presented to 
participants did not result in significant improvements in investor

[[Page 59983]]

comprehension.\39\ The Commission incorporated the investor testing 
results in its design of the proposed Form N-4 amendments, endeavoring 
to give particular attention to: (1) disclosure variations that 
resulted in statistically significant improvements in investor 
comprehension (specifically, the use of Q&A KIT format); and (2) areas 
of identified investor confusion while leveraging existing disclosure 
requirements.\40\ Because investor testing did not, for the most part, 
provide persuasive evidence of superior disclosures, the Commission 
proposed largely to utilize the existing Form N-4 disclosures that have 
been developed over time, and with which staff, investors, and RILA 
issuers are already familiar.
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    \39\ See Proposing Release at n.58 and accompanying text, and 
paragraphs following n.58.
    \40\ See id. (stating that the Q&A KIT format demonstrated a 
statistically significant, albeit quantitatively small, improvement 
over the non-Q&A KIT format, and stating that investor testing 
successfully identified a range of barriers to investor 
understanding of RILAs and associated disclosures).
---------------------------------------------------------------------------

    The Commission sought comment on this proposed approach, and it 
also sought comment throughout the Proposing Release on specific areas 
for improvement that would aid investor comprehension. Furthermore, the 
Commission requested specific input from the retail investor community 
through a short feedback flyer seeking input on their experiences with 
annuities generally and RILAs specifically (``Feedback Flyer'').\41\ 
Commenters did not generally address the investor testing that informed 
the proposed approach, and the Commission received no Feedback Flyer 
responses.\42\
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    \41\ See id. at n.59 and accompanying text; see also Feedback 
Flyer available at https://www.sec.gov/files/rules/proposed/2023/rila-feedback-flyer.pdf.
    \42\ One commenter, while not commenting on the investor testing 
substantively, discussed the RILA trends that the OIAD Investor 
Testing Report described, as discussed in more detail below. See 
infra footnote 305 and accompanying text.
---------------------------------------------------------------------------

    The Commission's Investor Advocate also provided comments 
discussing the investor testing process and supporting the proposed 
rules, stating the belief that the proposed RILA registration form 
would make it easier for investors to understand RILAs.\43\ The 
Investor Advocate stated that the proposed rule's registration form 
would be more helpful for investors than the forms currently used for 
RILA registration. The Investor Advocate also stated that modified Form 
N-4 ``is likely to improve investor comprehension related to the 
features, costs, and risks of RILAs.''
---------------------------------------------------------------------------

    \43\ See Comment Letter of Cristina Martin Firvida, SEC Investor 
Advocate (Dec. 22, 2023) (``Investor Advocate Comment Letter'').
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    In addition to these statements, the Investor Advocate suggested 
areas in which ``more work can be done to help investors make well-
informed decisions about RILAs and other complex financial products.'' 
The Investor Advocate stated that the proposed rule's registration form 
for RILAs, while informed by investor testing efforts, was not tested 
itself, and that this represents a missed opportunity in the 
Commission's rulemaking process. While the RILA Act directed the 
Commission to ``engage in investor testing'' when developing the 
registration form for RILAs, the Act did not require that the entirety 
of the form be investor tested, and doing so would have been 
impracticable under the circumstances due to the statutory rulemaking 
timeline, taking into account the time it takes to develop and execute 
well-designed and probative investor testing. As a result, investor 
testing efforts necessarily entailed strategic choices about topics on 
which to focus. These timing factors also required consideration of 
disclosure areas where maximizing comprehension could be particularly 
impactful.
    For these reasons, investor testing of RILA registration statement 
disclosure focused primarily on a sample of RILA-related disclosures 
that could appear in the KIT, if Form N-4 were amended to address RILA 
offerings.\44\ As discussed in the Proposing Release and below, the 
KIT--which provides summary disclosure in a specific sequence and in a 
standardized presentation--appears in variable annuity prospectuses, 
and the Commission proposed to include KIT disclosure in RILA 
prospectuses.\45\ The required ordering, contents, and standardization 
of KIT disclosure made the sample RILA-related disclosure especially 
amenable to investor testing, as these structural aspects made it 
possible to test variations on required disclosure elements easily. The 
summary disclosure in the KIT covers core features and risks of the 
annuity that the registration statement describes, with more detail 
elsewhere in the registration statement. For this reason, using the KIT 
to determine areas where investor comprehension could be enhanced was 
particularly impactful, as knowledge gained from this investor testing 
could be applied to disclosure in multiple other areas of the 
registration statement. The KIT is one of the first disclosure items 
that appears not only in the statutory prospectus, but also in the 
summary prospectus for issuers that choose to use summary prospectuses. 
It is also formatted in a manner that is designed to enhance 
readability. The investor testing therefore focused on disclosure that 
could have maximal impact in terms of investor attention.
---------------------------------------------------------------------------

    \44\ See OIAD Investor Testing Report.
    \45\ See Proposing Release at Section II.B.2; see also Item 2 of 
current Form N-4 (current KIT requirements); infra Section II.C.3 
(describing amendments to current KIT requirements).
---------------------------------------------------------------------------

    While the Investor Advocate states that there is no ``data to 
indicate whether the registration form effectively conveys the 
information necessary for investors to make well-informed investment 
decisions about RILAs,'' the sample KIT disclosure did include topics 
that comprise the primary features and risks of RILAs, and the investor 
testing did identify aspects of this disclosure that investors may find 
particularly challenging to understand. This in turn provided helpful 
input in identifying the disclosure areas where clear language, and 
enhanced focus in the registration statement, could help investors 
understand unique, and often complex, aspects of RILAs. We discuss 
these disclosure areas in more depth in Section II below.
    The Investor Advocate further stated that, although the Commission 
has ``made commendable efforts to improve the clarity and conciseness 
of disclosure provided to investors within the existing regulatory 
disclosure infrastructure,'' new and innovative approaches to 
disclosure are encouraged to significantly reduce investors' disclosure 
burden. The Investor Advocate encouraged the Commission ``to explore 
more significant departures from the status quo in the realm of 
disclosure related to RILAs and other complex products.'' We agree that 
exploring innovative disclosure approaches could enhance the investor 
experience for investors in complex products.\46\ A wholesale 
reimagining of disclosure for funds and other registered investment 
products, however, is outside of the scope of this rulemaking and 
impracticable in the context of this rulemaking given statutory time 
constraints. We also believe that requiring RILAs to use Form N-4, and 
adapting the current disclosure approach for variable annuities to 
RILAs, is consistent with the RILA Act's mandate as discussed 
below.\47\

[[Page 59984]]

Furthermore, we agree that continuing to test specific Commission-
mandated disclosures, including to assess how investors respond to 
these disclosures, as well as continuing to analyze the Commission's 
approach to its disclosure regime generally, are important complements 
to our regulatory program. We encourage Commission staff to incorporate 
these investor testing principles not only in the course of 
recommending new disclosure requirements, but also in continuing to 
develop its investor testing program outside of the confines of 
particular rulemaking actions.
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    \46\ The Commission is continually considering ways to enhance 
disclosure and the retail investor experience. See, e.g., Request 
for Comment on Fund Retail Investor Experience and Disclosure, 
Investment Company Act Release No. 33113 (June 5, 2018) [83 FR 26891 
(June 11, 2018)] (``Investor Experience RFC'').
    \47\ See infra Section II.A.
---------------------------------------------------------------------------

    In addition to investor testing focused specifically on sample RILA 
disclosure, our final amendments--and the current disclosure 
requirements in Form N-4 that we are building upon--also draw on the 
Commission's past investor testing efforts, outreach, and other 
empirical research concerning investors' preferences. This includes, 
for example, information about summary content and layered disclosure 
approaches.\48\ The Commission has historically received feedback 
showing that investors generally prefer concise, layered 
disclosure.\49\ Investors participating in certain past quantitative 
and qualitative investor testing initiatives on the Commission's behalf 
have also expressed preferences for, wherever possible, the use of a 
summary containing key information about an investment product or 
service written in clear, concise, and understandable language and 
presented in an accessible format.\50\ Each of these sources of 
evidence of investor preferences, understanding, and behaviors in 
response to disclosures specific to RILAs and other investment products 
more generally has provided important context and support for the final 
amendments' approach to RILA disclosure.
---------------------------------------------------------------------------

    \48\ See Updated Disclosure Requirements and Summary Prospectus 
for Variable Annuity and Variable Life Insurance Contracts, 
Investment Company Act Release No. 33286 (Oct. 30, 2018) [83 FR 
61730 (Nov. 30, 2018)] (``VASP Proposing Release'') at paragraphs 
accompanying nn.38-43.
    \49\ See, e.g., Investor Experience RFC; see also Proposing 
Release at n.61 (discussing feedback in comments on the Investor 
Experience RFC, generally showing that retail investors prefer 
concise, layered disclosure and feel overwhelmed by the volume of 
information they currently receive, and reflecting a preference for 
shorter summary disclosures, with additional information available 
online or upon request).
    \50\ See Proposing Release at n.62.
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2. Analysis of Comments on Recurring Disclosure Topics Informing Final 
Amendments
    The proposed amendments collectively were designed to provide 
investors with disclosures tailored to RILAs and to highlight key 
information about these complex products, building on the Commission's 
layered disclosure framework for variable annuities. The proposed 
requirements were developed with consideration for clear, concise, and 
understandable disclosure about RILA features and risks. Certain 
commenters expressed concern, however, that the proposed disclosure 
requirements included ``excessive repetition,'' especially with respect 
to certain topics.\51\ Commenters stated that excessive repetition adds 
to the length of the prospectus without commensurate value to 
investors, obscures new information that investors should be focusing 
on, and is not consistent with plain English principles. In addition to 
general concerns about repetition in the proposed requirements, 
commenters expressed concerns about specific disclosure areas where 
they viewed the proposed requirements as resulting in particularly 
repetitive disclosure.\52\
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    \51\ See CAI Comment Letter; see also Comment Letter of Ova 
Datop (Oct. 25, 2023) (``Datop Comment Letter'').
    \52\ See CAI Comment Letter (discussing proposed maximum 
potential loss disclosure requirements); Datop Comment Letter 
(discussing proposed risk warnings).
---------------------------------------------------------------------------

    We agree that no disclosure should be repeated simply for the sake 
of repetition, and we also agree that repetition in disclosure can have 
negative effects on investor understanding as commenters expressed. As 
discussed below, the final form amendments take commenters' concerns 
into account. There are certain areas where the final amendments reduce 
the discussion of the same or similar topics in multiple locations, 
where this reduction could appropriately be made while continuing to 
promote the goal of highlighting key information about RILAs and 
enhancing understanding of RILA features and risks.\53\
---------------------------------------------------------------------------

    \53\ See, e.g., discussion below about changes from the proposal 
to remove some of the numeric examples illustrating maximum 
potential loss that, as proposed, would have appeared in multiple 
locations throughout the prospectus (at infra Sections II.C.2 and 
II.C.4).
---------------------------------------------------------------------------

    The final amendments, like the proposal, continue to incorporate 
the principle of layered disclosure. Layered disclosure aims to provide 
investors with key information relating to an investment's features, 
benefits, and risks in a concise and reader-friendly presentation, with 
more-detailed or technical information available to those investors who 
find the information valuable. The use of layered disclosure means that 
the disclosure requirements we are adopting necessarily address 
particular topics in more than one location in the registration 
statement. Where this occurs, the disclosure requirements intentionally 
include summary disclosure in the first ``layer,'' and additional 
details building on the summary in the second ``layer.'' \54\ This 
approach is designed to help investors with different informational 
needs access the information that will be most useful to them.
---------------------------------------------------------------------------

    \54\ For example, the KIT will put investors on notice of the 
existence and general impact of a contract adjustment, while other 
disclosure later in the prospectus discusses contract adjustments in 
detail, including a brief discussion in simple terms of the manner 
in which contract adjustments are determined. See Items 3 and 7(e) 
of final Form N-4. If an investor wants more details about the 
specific formulas that are used to calculate contract adjustments, 
this information is available in the SAI. See Item 22(d) of final 
Form N-4.
---------------------------------------------------------------------------

    Additionally, and as discussed in more detail below, there are 
certain disclosure requirements in Form N-4 as amended that address 
similar topics as other disclosure requirements, where investors could 
benefit from considering these topics in several different contexts. 
This also reflects that, except with respect to certain disclosure 
items that are designed to be read in tandem, RILA investors may not 
necessarily read a prospectus from cover to cover, but instead may 
choose to read sections of the prospectus about topics where they are 
seeking particular information.\55\ For instance, in addition to the 
numeric examples illustrating maximum potential loss, the final 
disclosure requirements include narrative discussion of a RILA's 
maximum potential loss from poor index performance in several locations 
in the prospectus. This is intentional. RILAs are frequently marketed 
as a product that will protect against investment losses through loss-
limiting features. Information about maximum potential loss is relevant 
in the contexts of the contract overview and KIT, as well as in 
considering principal risks and more in-depth disclosure about the 
investment options a contract offers.\56\ Therefore, disclosure that is 
designed to enhance understanding of this aspect of a RILA contract, in 
varying contexts, will help investors make informed decisions that take 
into account this often-misunderstood aspect of investing in a 
RILA.\57\
---------------------------------------------------------------------------

    \55\ As discussed below, we anticipate that investors will read 
the Overview and KIT sections of the prospectus together. See infra 
Sections II.C.2 and II.C.3.
    \56\ See, e.g., infra Sections II.C.2, II.C.3, II.C.4, and 
II.C.5.
    \57\ See, e.g., Proposing Release at Section I.C.

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[[Page 59985]]

E. Overview of the Final Amendments

    We are adopting rule and form amendments that modernize and enhance 
the registration, filing, and disclosure framework for RILAs by 
adapting the existing framework that is familiar to investors and 
issuers for variable annuity separate accounts to accommodate RILAs. 
The final amendments implement the RILA Act's mandate.
     Use of Form N-4 to Register RILA Offerings. As proposed, 
we are amending Form N-4 so that issuers seeking to register the 
offering of RILAs must use that form. To accommodate this, we are also 
adopting amendments to Form N-4 that specifically address the features 
and risks of RILAs, with certain modifications from the proposal in 
consideration of comments received. These modifications address, among 
other things, disclosure relating to the potential for investment loss 
from an investment in a RILA, current limits on index gains, and 
guaranteed limits on index losses or gains. Further, because the 
insurance company will register the offering of a RILA on Form N-4 
under the final amendments, it will be subject to the requirements in 
the form related to financial statements. This includes, as proposed, 
the form instruction that currently permits variable annuity issuers to 
file insurance company SAP financial statements in certain 
circumstances. Generally as proposed, the final amendments require RILA 
issuers to tag certain information in Inline eXtensible Business 
Reporting Language (``Inline XBRL'') format.
     Use of Form N-4 for Registered MVA Annuities. In a change 
from the proposal, the final amendments extend the registration, 
filing, and disclosure requirements we are adopting for RILA offerings 
to offerings of registered MVA annuities on Form N-4.
     Form N-4 Amendments for Variable Annuity Offerings. We are 
adopting form amendments that are applicable to offerings of variable 
annuities. These amendments are informed by the staff's historical 
experience in administering the form and respond to observations from 
investor testing relevant to variable annuity offerings.\58\ We are 
adopting these amendments generally as proposed, with some 
modifications in consideration of comments received.
---------------------------------------------------------------------------

    \58\ See id. at n.63 and accompanying paragraph.
---------------------------------------------------------------------------

     Summary Prospectus. Consistent with the inclusion of RILAs 
on Form N-4 and generally as proposed, we are adopting amendments that 
permit RILA issuers to make use of the summary prospectus framework 
available to variable annuity registrants on Form N-4. In a 
modification from the proposal, issuers of registered MVA annuities 
also will be able to use the summary prospectus framework, consistent 
with the inclusion of registered MVA annuities on Form N-4.
     Updates to the Filing Rules. To accommodate RILA and 
registered MVA annuity offering registrations on Form N-4, we are 
adopting amendments that require issuers of these securities to pay 
fees in arrears on Form 24F-2, as well as amendments to address RILAs 
and registered MVA annuities in the rules that variable annuities use 
to file post-effective amendments and to update prospectuses. We are 
adopting these amendments as proposed with conforming amendments to 
address the inclusion of registered MVA annuities on Form N-4.
     Communications Rules Applicable to Non-Variable Annuities. 
The final amendments, as proposed, require RILA issuers to comply with 
rule 156, which provides guidance as to when sales literature is 
materially misleading under the Federal securities laws. We are 
adopting conforming amendments to rule 156 to address the inclusion of 
registered MVA annuities on Form N-4. Additionally, in a change from 
the proposal, we are also making a technical amendment to rule 433 to 
allow those non-variable annuity issuers that can meet 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.

II. Discussion

A. Use of Form N-4 for RILAs

    Most variable annuity issuers register variable annuity offerings 
on Form N-4, which the Commission designed to provide investors with 
product-specific information about annuity contracts, and which 
utilizes the summary prospectus layered disclosure framework the 
Commission adopted in 2020 for variable contracts.\59\ As proposed, we 
are requiring insurance companies to register RILA offerings on Form N-
4, leveraging the form's existing insurance-product specific 
disclosures and framework while incorporating revised disclosures 
informed by investor testing and staff experience to assist investors 
in making knowledgeable decisions about RILA offerings.\60\
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    \59\ Variable annuities register on Form N-3 if they are issued 
by separate accounts that are organized as management investment 
companies. However, most variable annuities are issued by separate 
accounts that are organized as unit investment trusts and therefore 
use Form N-4. See Proposing Release at n.20. The separate account 
established by the sponsoring insurance company is the legal entity 
that registers its securities. Separate accounts are typically 
registered as investment companies under the Investment Company Act. 
See section 2(a)(37) of the Investment Company Act. The Commission 
first adopted the registration form for variable annuities 
approximately 40 years ago. See Registration Forms for Insurance 
Company Separate Accounts that Offer Variable Annuity Contracts, 
Investment Company Act Release No. 14575 (June 14, 1985) [50 FR 
26145 (June 25, 1985)] (``Forms N-3 and N-4 Adopting Release'').
    \60\ See the facing page of final Form N-4 (Form N-4 is ``to be 
used by insurance companies to register the offerings of registered 
index-linked annuity contracts . . . under the Securities Act''). 
Accordingly, following the compliance date for the final amendments, 
insurance companies will no longer be permitted to register RILA 
offerings on Forms S-1 or S-3, as they do today.
---------------------------------------------------------------------------

    Commenters broadly supported registering RILA offerings on Form N-
4.\61\ A number of commenters agreed that proposed Form N-4 would 
provide RILA investors with more meaningful and helpful disclosures as 
compared to the disclosures required on the registration forms 
currently used by RILAs that are not tailored to RILA features.\62\ 
Some commenters emphasized that the proposed disclosures about the 
contract and its features and the incorporation of Form N-4's layered 
disclosure would be of particular benefit to investors.\63\ 
Additionally, one commenter suggested that requiring RILAs to register 
on forms that are not tailored for RILA offerings has impeded the 
ability of RILA investors to find and understand the information that 
is most relevant to their investment decisions, and has also slowed 
product development and impeded the entry of new issuers to the RILA 
marketplace.\64\ Commenters suggested that investors also would benefit 
from registering RILAs and variable annuity contracts on the same 
registration form because it would facilitate the ability of investors 
to

[[Page 59986]]

compare and contrast different RILA and variable annuity offerings.\65\ 
One of these commenters also stated that, by leveraging the experience 
of investors, registrants, and Commission staff with the existing Form 
N-4 framework, the proposal would help achieve greater regulatory 
uniformity, simplify the registration of RILA and variable annuity 
combination products, and reduce the burdens insurance companies face 
in preparing RILA registrations.\66\
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    \61\ See Comment Letter of the American Council of Life Insurers 
(Nov. 28, 2023) (``ACLI Comment Letter''); Comment Letter of Better 
Markets, Inc. (Nov. 28, 2023) (``Better Markets Comment Letter''); 
CAI Comment Letter; Comment Letter of Gainbridge Life Insurance 
Company and Delaware Life Insurance Company (Nov. 28, 2023) 
(``Gainbridge Comment Letter''); Investor Advocate Comment Letter; 
Comment Letter of the Insured Retirement Institute (Nov. 28, 2023) 
(``IRI Comment Letter''). No commenters disagreed with the proposed 
use of Form N-4 to register RILA offerings.
    \62\ See id. One of these commenters stated that it would object 
to the inclusion on Form N-4 of additional company-related 
disclosures applicable to registrations under Forms S-1 and S-3 
because those disclosures are less relevant to RILA offerings. See 
CAI Comment Letter.
    \63\ See Better Markets Comment Letter; CAI Comment Letter; 
Gainbridge Comment Letter; IRI Comment Letter; Investor Advocate 
Comment Letter.
    \64\ See IRI Comment Letter.
    \65\ See CAI Comment Letter; Gainbridge Comment Letter.
    \66\ See CAI Comment Letter.
---------------------------------------------------------------------------

    After considering these comments, we are adopting a registration 
framework that requires the registration of RILA offerings on Form N-4 
as proposed. Consistent with the views expressed by commenters, 
registering RILA offerings on final Form N-4 should benefit investors 
by requiring tailored disclosures relevant to RILA investors and 
facilitating the ability of investors to compare similar products. 
Registering RILA offerings on final Form N-4 also provides greater 
regulatory uniformity, reducing burdens for both RILA issuers in 
preparing RILA registration statements and Commission staff in 
reviewing them.
    Finally, one commenter requested the Commission provide guidance 
regarding the ability of certain RILA contracts currently registered on 
Form S-3 to rely on 17 CFR 240.12h-7 (``rule 12h-7'') following their 
transition to Form N-4.\67\ Rule 12h-7 provides an exemption from 
Exchange Act reporting applicable to insurance companies with respect 
to certain securities, including RILAs, that are registered under the 
Securities Act and regulated under State law. In order to be eligible 
for this exemption, among other conditions, the issuer of the 
securities must take steps reasonably designed to ensure that a trading 
market for the securities does not develop, including requiring written 
notice to, and acceptance by, the issuer prior to any assignment or 
other transfer of the securities and reserving the right to refuse 
assignments or other transfers at any time on a non-discriminatory 
basis (``anti-assignment clause'').\68\ One commenter suggested that 
there are a number of RILA contracts that do not have an anti-
assignment clause because the issuing insurance companies have chosen 
to register the offerings on Form S-3 and therefore have not relied on 
rule 12h-7 because Form S-3 is only available to issuers subject to 
Exchange Act reporting requirements. This commenter suggested that 
unilaterally adding an anti-assignment clause now to already-issued 
contracts previously registered on Form S-3 would violate State law. 
Now that RILA offerings will be registered on Form N-4, this commenter 
suggested that issuers of these RILA contracts would like to rely on 
rule 12h-7. As the Commission explained in rule 12h-7's adopting 
release, the anti-assignment clause requirement is an important 
condition of the exemption from Exchange Act reporting because it 
ensures that the issuer will take steps reasonably designed to preclude 
the development of a trading market in the contracts.\69\ Although all 
issuers relying on rule 12h-7 are required to take such reasonable 
steps, rule 12h-7 provides that an anti-assignment clause is not 
required where it is prohibited by State law.\70\ Under that rule, 
where an issuer of a RILA contract that is currently registered on Form 
S-3 is seeking now to rely on rule 12h-7, that issuer would not need to 
modify the contract to include an anti-assignment clause where 
including such a clause is prohibited by State law.\71\ Whether 
including an anti-assignment clause is prohibited under State law is 
based on the facts and circumstances and laws of each applicable State.
---------------------------------------------------------------------------

    \67\ See CAI Comment Letter. Under the final amendments, RILAs 
that have previously registered offerings of securities on Forms S-1 
or S-3 prior to the Compliance Date will need to file a post-
effective amendment to their registration statement pursuant to rule 
485(a) by May 1, 2026 using Form N-4. See infra Section II.J.
    \68\ See rule 12h-7(e).
    \69\ See Indexed Annuities and Certain Other Insurance 
Contracts, Exchange Act Release No. 34-59221 (Jan. 8, 2009) [74 FR 
3138 (Jan. 16, 2009)] (``12h-7 Adopting Release'') at Section 
III.B.2.
    \70\ See rule 12h-7(e). Consistent with rule 12h-7(e), by 
``State law'' we mean the law of any State or action of the 
insurance commissioner, bank commissioner, or any agency or officer 
performing like functions of any State.
    \71\ Of course, an issuer seeking to rely on rule 12h-7 would 
also need to comply with the rule's other requirements, including 
that it takes steps reasonably designed to ensure that a trading 
market for the securities does not develop. See rule 12h-7(e).
---------------------------------------------------------------------------

B. Use of Form N-4 for Registered MVA Annuities

    We are adopting amendments to require the offerings of registered 
MVA annuities to be registered on Form N-4 and, as a result, extend the 
registration and disclosure requirements we are adopting for RILAs to 
registered MVA annuities. Similar to the amendments we are adopting for 
RILAs, these amendments will benefit investors by providing a tailored 
disclosure regime with clear, relevant, and layered disclosure. 
Further, by including registered MVA annuities on Form N-4 along with 
RILAs and variable annuities, investors should benefit from being able 
to compare and contrast different types of annuity contracts. Both 
issuers and investors will also benefit by leveraging their existing 
familiarity with the form.
    In the Proposing Release, we solicited comment on whether to 
require insurance companies to register the offerings of registered MVA 
annuities on Form N-4, and we detailed the various changes to 
disclosure that would be necessary to accommodate this change.\72\ 
Commenters that spoke to this issue supported registering offerings of 
registered MVA annuities on Form N-4,\73\ suggesting that investors in 
registered MVA annuities would benefit from a comparable disclosure 
regime that provides clear, relevant, and layered disclosure.\74\ One 
of these commenters stated that registered MVA annuities are a 
significantly simpler product than RILAs and present a subset of 
identical risks to investors as RILAs.\75\ Commenters also stated that 
many of the disclosures that would be required for RILAs on Form N-4 
would also be appropriate for registered MVA annuities, such as 
disclosures on the operation of contract adjustments and the risks 
associated with such contract adjustments.\76\ One commenter stated 
that only minor modifications to the disclosures for RILAs would be 
required to reflect that an investor's return in a RILA is based on the 
performance of an index while the return of a registered MVA annuity is 
based on a stated rate of interest.\77\ Further, this commenter stated 
that registered MVA annuities

[[Page 59987]]

may be offered in combination products with variable annuities and/or 
RILAs that will be registered on Form N-4. Given that such products 
will have one prospectus, this commenter stated that investors, 
issuers, and the Commission would benefit from such products 
registering on Form N-4, rather than registering on both Form N-4 (for 
the variable annuity or RILA component) and Form S-1 or Form S-3 (for 
the registered MVA annuity component).
---------------------------------------------------------------------------

    \72\ Proposing Release at Section II.H.
    \73\ No commenters opposed using Form N-4 to register MVA 
annuity offerings, although one commenter urged that using Form N-4 
should be optional in certain circumstances discussed below. See 
infra footnote 79. One commenter stated that contingent deferred 
annuities (``CDAs'') could be considered covered by the RILA Act and 
insurers should be permitted to use Form N-4 for these annuities 
under the provision in that Act allowing insurers to use Form N-4 
for RILAs if the Commission does not provide a new registration form 
for RILAs by the statutory deadline. See VIP Working Group Comment 
Letter. We disagree. The RILA Act covers annuities that, among other 
things, have returns based on the performance of a benchmark index 
and may be subject to a market value adjustment if amounts are 
withdrawn before the end of the period during which that market 
value adjustment applies. CDA lifetime payment guarantees are not 
based on a benchmark or index and are not subject to such market 
value adjustments. Additionally, because CDAs are substantially 
different products than RILAs, significant modifications to Form N-4 
would be required to accommodate offerings of CDAs.
    \74\ See CAI Comment Letter; IRI Comment Letter; VIP Working 
Group Comment Letter.
    \75\ CAI Comment Letter.
    \76\ See IRI Comment Letter; CAI Comment Letter.
    \77\ CAI Comment Letter.
---------------------------------------------------------------------------

    At the same time, some commenters generally stated that registered 
MVA annuities should be permitted, but not required, to register on 
Form N-4.\78\ Specifically, one commenter stated that, in particular, 
registration on Form N-4 should be optional for ``closed blocks,'' or 
registered MVA annuity offerings that no longer involve the issuance of 
new contracts.\79\
---------------------------------------------------------------------------

    \78\ CAI Comment Letter; IRI Comment Letter.
    \79\ CAI Comment Letter. This commenter urged that if such 
closed blocks were required to register on Form N-4, the compliance 
period be extended from 12 months to 24 months to provide the 
necessary time to convert an additional class of contract to the new 
registration form. See infra Section II.J. for a discussion of 
effective and compliance dates for all rules and forms associated 
with the final amendments.
---------------------------------------------------------------------------

    After considering comments, we have determined to require insurance 
companies to register offerings of registered MVA annuities on Form N-4 
to provide investors with the tailored information necessary to make an 
investment decision, as discussed above.\80\ Further, given the 
parallels outlined above between RILAs and registered MVA annuities and 
the use of combination contracts that can offer RILAs, registered MVA 
annuities, and variable annuities, registering offerings of registered 
MVA annuities on Form N-4 will be efficient for investors, insurance 
companies, and the Commission. As a result, we are requiring, not just 
permitting, the use of Form N-4 for registered MVA annuities. 
Permitting insurance companies to register offerings of closed block 
registered MVA annuities on Forms S-1 or S-3 would not provide these 
investor benefits or efficiencies. It also would hamper comparability 
if different registered MVA annuities provided materially different 
disclosure. However, the Commission administers the requirements for 
prospectuses included in registration statements on Form N-4 in a way 
that allows variances in disclosure or presentation--including now 
those relating to closed blocks of registered MVA annuities--if 
appropriate for the circumstances involved while remaining consistent 
with the objectives of the form.\81\
---------------------------------------------------------------------------

    \80\ See supra Sections I.B. and I.C.
    \81\ See final Form N-4, General Instruction C.1.(d). This 
rulemaking does not affect the Commission position on existing 
variable contracts whose issuers provide alternative disclosures to 
investors as stated in the VASP Adopting Release at Section II.E.3.
---------------------------------------------------------------------------

    As a result of this change, registered MVA annuities must make the 
disclosures required in Form N-4 to the extent applicable. For example, 
they must meet the requirements of the front and back cover pages to 
the extent the disclosures apply to the offering of registered MVA 
annuities being registered.\82\ As outlined in the Proposing Release, 
we also are adopting a number of specific disclosure requirements for 
registered MVA annuities designed to accommodate their inclusion on the 
form and provide investors disclosures tailored to registered MVA 
annuity products and highlight key information about these 
products.\83\
---------------------------------------------------------------------------

    \82\ See, e.g., infra Section II.C.1.
    \83\ See Proposing Release at Section II.H.
---------------------------------------------------------------------------

    Table 1 outlines the key amendments, including certain conforming 
amendments, we are adopting to Form N-4 to accommodate offerings of 
registered MVA annuities:

                           Table 1--Overview of Form N-4 for Registered MVA Annuities
----------------------------------------------------------------------------------------------------------------
                                                               Substantive changes from
                Item                       Description             the current form             Discussion
----------------------------------------------------------------------------------------------------------------
                                               Prospectus (Part A)
----------------------------------------------------------------------------------------------------------------
N/A................................  Facing Page and         Added registered MVA         Section II.C.8(a),
                                      General Instructions.   annuity contracts to list    Section II.C.8(b).
                                                              of permissible uses.
N/A................................  General Instructions..  Added definition of          Section II.C.8(b).
                                                              ``Contract Adjustment'' to
                                                              account for MVA fixed
                                                              account options.
6..................................  Description of the      New contract adjustment      Section II.C.4(a).
                                      Insurance Company,      disclosures for MVA fixed
                                      Registered Separate     account options.
                                      Account, and
                                      Investment Options.
7..................................  Charges and             New contract adjustment      Section II.C.6(b).
                                      Adjustments.            disclosures applicable to
                                                              MVA fixed account options.
17.................................  Investment Options      New contract adjustment      Section II.C.4(b).
                                      Available Under the     disclosures for MVA fixed
                                      Contract.               account options.
----------------------------------------------------------------------------------------------------------------
                                  Statement of Additional Information (Part B)
----------------------------------------------------------------------------------------------------------------
26.................................  Financial Statements..  Providing that insurance     Section II.E.
                                                              companies can use the
                                                              relevant instructions with
                                                              regard to offerings of
                                                              registered MVA annuities
                                                              and adding requirements
                                                              relating to changes in and
                                                              disagreements with
                                                              accountants for registered
                                                              MVA annuities.
----------------------------------------------------------------------------------------------------------------
                                           Other Information (Part C)
----------------------------------------------------------------------------------------------------------------
31A................................  Information about       New disclosure of            Section II.C.7.
                                      contracts with Index-   registered MVA annuity
                                      Linked Options and      specific information.
                                      Fixed Options Subject
                                      to a Contract
                                      Adjustment.
----------------------------------------------------------------------------------------------------------------


[[Page 59988]]

    In addition to these changes to Form N-4, we are providing to 
registered MVA annuities the same offering and filing framework we are 
extending to RILAs for the same reason as we are making these changes 
for RILAs as discussed in more detail below.\84\ This includes, for 
example, amendments permitting registered MVA annuities to use a 
summary prospectus, pay securities fees annually based on net sales, 
and use the same process to update their registration statements that 
will apply to RILAs. To implement the inclusion of registered MVA 
annuities in the amendments to the rules under the Securities Act, we 
also are adding a defined term ``registered market value adjustment 
annuity'' to rule 405 that is consistent with the amendments to Form N-
4.\85\ We are also extending the same requirements as to the use of 
Inline XBRL to registered MVA annuities for the same reasons we are 
extending these requirements to RILAs.\86\
---------------------------------------------------------------------------

    \84\ See infra Sections II.C, D, E, and F.
    \85\ ``Registered market value adjustment annuity'' is defined 
as an annuity or an option available under an annuity, that is not a 
registered index-linked annuity, and (1) that is deemed a security; 
(2) that is offered or sold in a registered offering; (3) that is 
issued by an insurance company that is subject to the supervision of 
either the insurance commissioner or bank commissioner of any State 
or any agency or officer performing like functions as such 
commissioner; (4) that is not issued by an investment company; and 
(5) whose contract value may reflect a positive or negative 
adjustment (based on calculations using a predetermined formula, a 
change in interest rates, or some other factor or benchmark) if 
amounts are withdrawn before the end of a specified period. This 
definition mirrors that of ``registered index-linked annuity'' we 
are adding to rule 405 for RILAs, other than the last provision 
which is based on the definition of ``contract adjustment'' we are 
adding to Form N-4.
    \86\ See infra Section II.C.10.
---------------------------------------------------------------------------

C. Contents of Form N-4

    Consistent with the proposal, many items of current Form N-4 will 
apply to RILAs in final Form N-4. These existing items of current Form 
N-4 will also apply to registered MVA annuities. We are also adopting 
amendments to Form N-4 to require disclosures specific to RILAs as well 
as amendments that also will apply to offerings of variable annuities. 
Some of these disclosures will also apply to registered MVA annuities. 
Table 2 outlines the substantive amendments we are adopting to Form N-
4.\87\
---------------------------------------------------------------------------

    \87\ Some of the final amendments entail a non-substantive 
change such as a change to a defined term or specifying that the 
provision would continue to be applicable only to a registered 
separate account or variable option. These are not discussed in the 
following table but are instead discussed in Sections II.C.8 and 
II.C.9 infra.

                                          Table 2--Overview of Form N-4
----------------------------------------------------------------------------------------------------------------
                                                               Substantive changes from
                Item                       Description             the current form             Discussion
----------------------------------------------------------------------------------------------------------------
                                               Prospectus (Part A)
----------------------------------------------------------------------------------------------------------------
1..................................  Front and Back Cover    Adding new legends and       Section II.C.1.
                                      Pages.                  other standardized
                                                              disclosures.
2..................................  Overview of the         New non-variable annuity-    Section II.C.2.
                                      Contract.               specific disclosures;
                                                              moving order of appearance
                                                              up.
3..................................  Key Information.......  New non-variable annuity-    Section II.C.3.
                                                              specific disclosures;
                                                              changing to a question-and-
                                                              answer format; moving
                                                              order of appearance down;
                                                              change discussion of
                                                              restrictions on optional
                                                              benefits to cover all
                                                              benefits.
4..................................  Fee Table.............  New contract adjustment      Section II.C.6(a).
                                                              disclosure.
5..................................  Principal Risks of      Providing more detailed      Section II.C.5.
                                      Investing in the        disclosures applicable to
                                      Contract.               all issuers.
6..................................  Description of the      New non-variable annuity-    Section II.C.4(a).
                                      Insurance Company,      specific disclosures and
                                      Registered Separate     one new item regarding
                                      Account, and            variable options.
                                      Investment Options.
7..................................  Charges and             New disclosures related to   Section II.C.6(b).
                                      Adjustments.            contract adjustments;
                                                              renamed item.
8..................................  General Description of  No substantive change......  Section II.C.9(b).
                                      Contracts.
9..................................  Annuity Period........  No substantive change......  Section II.C.9(b).
10.................................  Benefits Available      No substantive change......  Section II.C.9(b).
                                      Under the Contract.
11.................................  Purchases and Contract  No substantive change......  Section II.C.9(b).
                                      Value.
12.................................  Surrenders and          No substantive change......  Section II.C.9(b).
                                      Withdrawals.
13.................................  Loans.................  No substantive change......  Section II.C.9(b).
14.................................  Taxes.................  No substantive change......  Section II.C.9(b).
15.................................  Legal Proceedings.....  No substantive change......  Section II.C.9(c).
16.................................  Financial Statements..  No substantive change (but   Section II.E.
                                                              see Item 26).
17.................................  Investment Options      New non-variable annuity-    Section II.C.4(b).
                                      Available Under the     specific disclosures.
                                      Contract.
----------------------------------------------------------------------------------------------------------------
                                  Statement of Additional Information (Part B)
----------------------------------------------------------------------------------------------------------------
18.................................  Cover Page and Table    No substantive change......  Section II.C.9(b).
                                      of Contents.
19.................................  General Information     No substantive change......  Section II.C.9(c).
                                      and History.
20.................................  Non-Principal Risks of  No substantive change......  Section II.C.9(b).
                                      Investing in the
                                      Contract.
21.................................  Services..............  No substantive change......  Section II.C.9(b).
22.................................  Purchase of Securities  New disclosure of specific   Section II.C.6(c).
                                      Being Offered.          contract adjustment
                                                              information.

[[Page 59989]]

 
23.................................  Underwriters..........  No substantive change......  Section II.C.8(c).
24.................................  Calculation of          Clarifying only applies to   Section II.C.8.
                                      Performance Data.       variable options.
25.................................  Annuity Payments......  No substantive change......  Section II.C.9(b).
26.................................  Financial Statements..  Providing that insurance     Section II.E.
                                                              companies can use the
                                                              relevant instructions
                                                              relating to financial
                                                              statements and adding
                                                              requirements relating to
                                                              changes in and
                                                              disagreements with
                                                              accountants for non-
                                                              variable annuities.
----------------------------------------------------------------------------------------------------------------
                                           Other Information (Part C)
----------------------------------------------------------------------------------------------------------------
27.................................  Exhibits..............  Adding power of attorney     Section II.C.8(d).
                                                              for all issuers and
                                                              accountant letters for non-
                                                              variable annuity issuers
                                                              as exhibits.
28.................................  Directors and Officers  No substantive change......  Section II.C.9(c).
                                      of the Insurance
                                      Company.
29.................................  Persons Controlled or   No substantive change......  Section II.C.9(c).
                                      Under Common Control
                                      with the Insurance
                                      Company or the
                                      Registrant.
30.................................  Indemnification.......  No substantive change......  Section II.C.9(c).
31.................................  Principal Underwriters  No substantive change......  Section II.C.9(c).
31A................................  Information about       New disclosure of non-       Section II.C.7.
                                      contracts with Index-   variable annuity specific
                                      Linked Options and      information.
                                      Fixed Options Subject
                                      to a Contract
                                      Adjustment.
32.................................  Location of Accounts    No substantive change......  Section II.C.8.
                                      and Records.
33.................................  Management Services...  No substantive change......  Section II.C.9(b).
34.................................  Fee Representation and  Adding new non-variable      Section II.C.8(d).
                                      Undertakings.           annuity undertakings.
----------------------------------------------------------------------------------------------------------------

1. Front and Back Cover Pages (Item 1)
    Currently, issuers using Form N-4 are required to include on the 
front and back cover pages basic identifying information about the 
issuer and the contract, information on how to review the document 
(e.g., what the SAI is and where to find it), as well as certain 
legends, for example, one relating to the ability for an investor to 
cancel the contract within 10 days.\88\ We are adopting amendments to 
require insurance companies registering offerings of non-variable 
annuities to include this general information on the front and back 
cover pages of the prospectus, as well as non-variable annuity--
specific disclosures on the front cover page. We are adopting these 
amendments substantially as proposed, with modifications in response to 
comments. The following table summarizes the cover page requirements, 
as amended:
---------------------------------------------------------------------------

    \88\ See current Form N-4, Item 1.

                         Table 3--Information Required by Item 1 of Form N-4 As Amended
----------------------------------------------------------------------------------------------------------------
            Item No.                      Disclosure                     Cover            Changed from proposal?
----------------------------------------------------------------------------------------------------------------
                                             Identifying Information
----------------------------------------------------------------------------------------------------------------
Item 1(a)(1)...................  Registered separate           Front....................  No.
                                  account's name.
Item 1(a)(2)...................  Insurance company's name....  Front....................  No.
Item 1(a)(3)...................  Types of contracts offered    Front....................  No.
                                  (e.g., group, individual,
                                  etc.).
Item 1(a)(4)...................  Name and class of contract..  Front....................  No.
Item 1(a)(5)...................  List of types of investment   Front....................  No.
                                  options offered under the
                                  contract with cross
                                  references to the appendix
                                  with further information
                                  about those options.
Item 1(a)(9)...................  Date of prospectus..........  Front....................  No.
Item 1(b)(4)...................  EDGAR identifier number.....  Back.....................  No.
----------------------------------------------------------------------------------------------------------------
                                                     Legends
----------------------------------------------------------------------------------------------------------------
Item 1(a)(6)...................  Statement that the contract   Front....................  Yes. Revised
                                  is a complex investment and                              statements about
                                  involves risks, including                                potential for
                                  potential loss of principal.                             investment loss,
                                 For contracts that include                                manner in which the
                                  an index-linked option:.                                 insurance company
                                 A prominent statement, as a                               determines the
                                  percentage, of the maximum                               maximum loss due to
                                  amount of loss that an                                   negative index
                                  investor could experience                                performance, and
                                  from negative index                                      minimum limits on
                                  performance after taking                                 index gains and
                                  into account the current                                 losses.
                                  limits on index loss, which
                                  may include a range of the
                                  maximum amount of loss if
                                  the contract offers
                                  different limits on index
                                  loss.

[[Page 59990]]

 
                                 Prominent disclosure of any
                                  minimum limits on index
                                  losses that will always be
                                  available under the
                                  contract or, alternatively,
                                  a prominent statement that
                                  the insurance company does
                                  not guarantee that the
                                  contract will always offer
                                  index-linked options that
                                  limit index losses, which
                                  would mean risk of loss of
                                  the entire amount invested.
                                 A prominent statement that
                                  the insurance company
                                  limits the amount an
                                  investor can earn on an
                                  index-linked option. A
                                  prominent statement, for
                                  each type of limit offered
                                  (e.g., cap, participation
                                  rate, etc.), of the lowest
                                  limit on index gains that
                                  may be established under
                                  the contract.
Item 1(a)(7)...................  Statement that the contract   Front....................  No.
                                  is not a short-term
                                  investment and is not
                                  appropriate for an investor
                                  who needs ready access to
                                  cash. Statement that
                                  withdrawals could result
                                  in, among other things,
                                  surrender charges and
                                  negative contract
                                  adjustments, including a
                                  prominent disclosure
                                  stating, as a percentage,
                                  the maximum potential loss
                                  resulting from a negative
                                  contract adjustment, if
                                  applicable.
Item 1(a)(8)...................  Statement that the insurance  Front....................  No.
                                  company's obligations under
                                  the contract are subject to
                                  its financial strength and
                                  claims-paying ability.
Item 1(a)(10)..................  Statement that the            Front....................  No.
                                  Commission has not approved
                                  or disapproved of the
                                  securities or passed upon
                                  the accuracy or adequacy of
                                  the disclosure in the
                                  prospectus and that any
                                  contrary representation is
                                  a criminal offense (as
                                  required in 17 CFR
                                  230.481(b)(1)).
Item 1(a)(11)..................  Statement that additional     Front....................  No.
                                  information about the
                                  contract is available on
                                  Investor.gov.
Item 1(a)(12)..................  A legend that states that if  Front....................  No.
                                  you are a new investor, you
                                  may cancel your contract
                                  within 10 days of receiving
                                  it without paying fees or
                                  penalties with some details
                                  about the operation of this
                                  process including whether a
                                  contract adjustment will be
                                  applied to the returned
                                  amount.
----------------------------------------------------------------------------------------------------------------
                                                Other Information
----------------------------------------------------------------------------------------------------------------
Item 1(b)(1)...................  Statement that the SAI        Back.....................  No.
                                  contains additional
                                  information, that it is
                                  available to investors, and
                                  how investors may obtain
                                  the SAI or make inquiries
                                  about their contracts.
Item 1(b)(2)...................  Statement about whether and   Back.....................  No.
                                  from where information is
                                  incorporated by reference.
Item 1(b)(3)...................  Statement that reports and    Back.....................  Yes. Applied this
                                  other information about the                              requirement to
                                  registered separate                                      insurance companies
                                  accounts and, if                                         in addition to
                                  applicable, the insurance                                separate accounts.
                                  company, are available on
                                  the Commission's website
                                  and that copies of this
                                  information may be obtained.
----------------------------------------------------------------------------------------------------------------

    We proposed to make several changes to the front cover page, 
including four additional disclosures in Item 1(a).\89\ Certain 
proposed changes received no comments and we are adopting them as 
proposed:
---------------------------------------------------------------------------

    \89\ See Proposing Release at Section II.B.1.
---------------------------------------------------------------------------

    (1) Changes to Item 1(a)(1) to require disclosure of ``the 
registered separate account's name'' whereas this item previously asked 
for ``the registrant's name.''
    (2) Changes to Item 1(a)(2) to require disclosure of ``the 
insurance company's name'' instead of the current requirement for ``the 
depositor's name.''
    (3) Changes to Item 1(a)(3) to require disclosure of the types of 
contracts offered by the prospectus (e.g., group, individual, single 
premium immediate, flexible premium deferred), as opposed to the 
current form, which requires disclosure of the types of variable 
annuity contracts offered by the prospectus.
    (4) New Item 1(a)(5), which requires disclosure of the types of 
investment options under the contract and a cross reference to the 
prospectus appendix providing additional information about each option.
    (5) We also are moving certain items to different locations on the 
front cover page without changing the content of the required 
disclosure.\90\
---------------------------------------------------------------------------

    \90\ Specifically, on Form N-4, current Item 1(a)(5), which 
requires disclosure of the date of the prospectus, is moving to 
final Item 1(a)(9); current Item 1(a)(6), which requires a statement 
required by rule 481(b)(1) under the Securities Act, is moving to 
final Item 1(a)(10); current Item 1(a)(7), which requires a 
statement that additional information about certain investment 
products, including variable and non-variable annuities, has been 
prepared by Commission staff and is available at investor.gov, is 
moving to final Item 1(a)(11); and current Item 1(a)(8), which 
requires a legend stating that new investors to the contract may be 
able to cancel the contract within 10 days without paying fees or 
penalties, is moving to final Item 1(a)(12).
---------------------------------------------------------------------------

    We are adding new Items 1(a)(6) and (7) to the front cover page of 
final Form N-4, which we are adopting with modifications from the 
proposal, as discussed below. The four items on the back cover page--
Item 1(b)--are largely unchanged with the exception of extending the 
disclosure requirements (suggested by a commenter) of Item 1(b)(3) to 
include the insurance company, if applicable.\91\
---------------------------------------------------------------------------

    \91\ See CAI Comment Letter. The modification to Item 1(b)(3) is 
discussed in further detail below. Current Item 1(b)(3) indicates 
that reports and information about the registered separate account 
are available on the Commission's website. That language has been 
retained in final Form N-4. The statement would address available 
reports about the insurance company only if applicable.
---------------------------------------------------------------------------

    In addition, and as proposed, the additional disclosures on the 
front cover page also will be required for

[[Page 59991]]

registration statements relating to offerings of variable annuities 
filed on that form to the extent relevant.\92\ Specifically, these are 
disclosures relating to the complexity of the investment and potential 
loss of principal, that the contract is not a short-term investment and 
the appropriateness of that investment, and that an insurance company's 
obligations under the contract are subject to its financial strength 
and claims paying abilities.\93\ While these disclosures are important 
for investors in non-variable annuities, they also are relevant in many 
cases to investors in variable annuities.
---------------------------------------------------------------------------

    \92\ See Proposing Release at Section II.B.1. Commenters did not 
specifically address the inclusion of these disclosures for variable 
annuity offerings.
    \93\ See final Form N-4, Item 1(a)(6), (7), and (8).
---------------------------------------------------------------------------

    The comments that we received on the proposed cover page 
requirements were mixed. One commenter generally supported these 
disclosures, stating that the proposal ensured that the most important 
disclosures about RILAs appear on the cover page.\94\ Another commenter 
suggested that, other than the disclosures related to maximum loss, the 
proposed cover page disclosures were, for the most part, designed to 
result in short, concise, and sensible cover page disclosures.\95\ 
Other commenters, however, raised concerns.\96\
---------------------------------------------------------------------------

    \94\ See Better Markets Comment Letter.
    \95\ See CAI Comment Letter.
    \96\ Commenters suggested that, should the Commission extend the 
use of Form N-4 to registered MVA annuities, their comments would 
also apply to disclosures related to those securities. See, e.g., 
CAI Comment Letter (supporting some aspects of the proposal but 
criticizing the maximum loss disclosure on the cover page); VIP 
Working Group Comment Letter.
---------------------------------------------------------------------------

    First, some commenters raised concerns about the volume of 
disclosures proposed to be included on the cover pages, particularly 
those related to the maximum losses.\97\ One such commenter suggested 
that the inclusion of all of these disclosures could cut against the 
form's layered disclosure approach.\98\ These cover page disclosures 
are generalized statements designed to put an investor on notice of key 
considerations to help an investor make informed decisions. In 
particular, they are designed to highlight the complexities and certain 
associated risks of non-variable annuities for investors, and including 
this key information on the cover page helps ensure that an investor 
has information about these key aspects of a non-variable annuity at 
the outset. The number of specific features and risks highlighted on 
the cover page is driven by the complex nature of the non-variable 
annuity being registered. Further, because these points are generalized 
on the cover page but discussed in more detail later in the prospectus, 
they are consistent with the concept of layered disclosure. These 
disclosures also should help investors better understand the nature of 
the various investment options available under the contract.
---------------------------------------------------------------------------

    \97\ See CAI Commenter Letter; VIP Working Group Comment Letter.
    \98\ See CAI Comment Letter.
---------------------------------------------------------------------------

    Second, commenters addressed certain specific items the Commission 
proposed to include on the front cover page. Commenters raised 
particular concerns with the proposed requirement to disclose as a 
percentage the maximum amount of loss from negative index performance 
that an investor could experience after taking into account the minimum 
guaranteed limit on index loss provided under the contract.\99\ 
Commenters objected to this disclosure because, in their view: (1) 
requiring RILA issuers to disclose this percentage was unnecessary 
because the chance of investors experiencing this maximum loss was 
extremely remote,\100\ (2) the cover page lacks appropriate context for 
this percentage and instead RILA issuers should include a narrative 
(not numeric) disclosure stating that an investor could lose a 
significant amount of money by investing in an index-linked 
option,\101\ and (3) such maximum potential loss disclosure was 
unwarranted because other issuers of securities are not required to 
include this information on the cover pages of their prospectuses.\102\ 
Separately, some commenters similarly opposed the proposed requirement 
to disclose, as a percentage, the maximum potential loss resulting from 
a negative contract adjustment as such a maximum loss would also be 
unlikely.\103\
---------------------------------------------------------------------------

    \99\ Proposed Form N-4, Item 1(a)(6).
    \100\ VIP Working Group Comment Letter (stating that the 
analysis done by OIAD in the OIAD Investor Testing Report suggested 
that losses on these products over the long term have historically 
been remote); Comment Letter of Benji Johnson (Oct. 31, 2023) 
(``Johnson Comment Letter''); CAI Comment Letter; Datop Comment 
Letter; see also ACLI Comment Letter.
    \101\ CAI Comment Letter.
    \102\ VIP Working Group Comment Letter; Johnson Comment Letter; 
Datop Comment Letter.
    \103\ Proposed Form N-4, Item 1(a)(7). See CAI Comment Letter; 
VIP Working Group Comment Letter. Several commenters also suggested 
that these two maximum potential loss disclosures, one from index 
performance and the other from contract adjustments, could cause 
investors to mistakenly believe that such losses are likely. CAI 
Comment Letter; VIP Working Group Comment Letter; Johnson Comment 
Letter.
---------------------------------------------------------------------------

    In response to comments opposing the proposed requirement to 
disclose as a percentage the maximum amount of loss from negative index 
performance or from a contract adjustment that an investor could 
experience, the final disclosure requirements are designed to reflect 
that the risk that an investor could lose a substantial amount of money 
due to negative index performance is a key risk of a RILA.\104\ 
Similarly, loss related to negative contract adjustments is a key risk 
of all non-variable annuities. Providing the maximum possible loss in 
these circumstances on the front cover page will alert investors to 
these risks in concrete terms. Moreover, disclosure of a maximum 
``potential'' loss is not intended to suggest the maximum loss is 
likely to occur. The form does not prevent the insurance company from 
providing additional appropriate context.
---------------------------------------------------------------------------

    \104\ VIP Working Group Comment Letter; Johnson Comment Letter; 
CAI Comment Letter; Datop Comment Letter; see also ACLI Commenter 
Letter.
---------------------------------------------------------------------------

    Although issuers of other securities like mutual funds and ETFs do 
not disclose the maximum potential loss associated with those 
securities, such products also are not generally structured to provide 
loss protection. For RILAs, in contrast, loss protection is a central 
feature of the product and an emphasis in RILA marketing.\105\ Numeric 
disclosure of the potential maximum loss helps an investor understand 
the extent to which a given RILA provides loss protection in simple 
terms. This is particularly important because investor testing has 
shown that investors struggled with the mechanics of loss protection 
and the consequences of withdrawals.\106\ Placing this disclosure on 
the front cover page is designed to put investors on notice that those 
loss protections can, in the context of RILAs, have limitations and 
highlight, in the context of all non-variable annuities, a potential 
consequence of withdrawals. A numeric example is well suited for the 
cover page because it communicates the extent of loss protection 
briefly and

[[Page 59992]]

concretely, and additional context will be available elsewhere in the 
prospectus.
---------------------------------------------------------------------------

    \105\ One commenter raising concern with this disclosure's 
placement in the cover page ``acknowledge[d] that the risk of loss 
associated with RILAs is an important concept to convey [and that] 
[u]nlike most other investments, RILAs provide a level of downside 
protection, and an investor should therefore understand the limits 
of that protection.'' CAI Comment Letter.
    \106\ OIAD Investor Testing Report at Section 5, Qualitative 
Testing, Results from Round 1. See Proposing Release at n.75 and 
accompanying text (investor testing participants struggled to 
understand loss limiting features, such as buffers), and at n.33 and 
accompanying text (investor testing participants often did not 
understand that there are multiple aspects of a typical RILA 
contract that could negatively affect an investor's contract value 
or the amount that the investor could withdraw from the contract 
(e.g., surrender charges, interim value adjustments, and tax 
penalties)).
---------------------------------------------------------------------------

    Commenters also raised concerns with various proposed disclosure 
requirements' reference to ``minimum guaranteed'' limits on index loss 
(or gain), including raising this concern with respect to the cover 
page.\107\ Another commenter sought clarification regarding whether a 
similar disclosure requirement referring to guaranteed minimums for the 
life of the contract was intended to require insurance companies to 
establish such minimums.\108\
---------------------------------------------------------------------------

    \107\ See VIP Working Group Comment Letter (stating that 
contracts do not include a minimum guaranteed limit on losses); CAI 
Comment Letter.
    \108\ CAI Comment Letter. See Proposing Release at Section 
II.B.1. for a discussion of the proposed disclosure requirement.
---------------------------------------------------------------------------

    We understand that not all RILAs provide minimum guaranteed limits 
on index loss for the life of the contract that could be used to 
calculate the proposed maximum possible loss due to negative index 
performance. After considering comments, we are modifying the language 
of this disclosure requirement to reflect this fact. Under the final 
amendments, the insurance company must prominently state as a 
percentage the maximum amount of loss from negative index performance 
that an investor could experience after taking into account the current 
limits on index loss provided by the index-linked options under the 
contract.\109\ The insurance company may provide a range of the maximum 
amount of loss if the contract offers different limits on index loss. 
Basing this disclosure on the contract's actual current limits on index 
losses is designed to address commenters' concerns about RILAs without 
guaranteed limits, and permitting the insurance company to provide a 
range of losses allows the insurance company to reflect the range of 
loss protection offered under the contract.
---------------------------------------------------------------------------

    \109\ We understand that, unlike the current limits on index 
gain, current limits on index loss do not change often, if at all, 
during the life of the contract. See infra Sections II.C.2 and 
II.C.3.a (discussing concerns raised by commenters relating to the 
disclosure of current limits on index gain).
---------------------------------------------------------------------------

    We are modifying the proposed language of this disclosure 
requirement to specify that an insurance company that does not disclose 
a minimum limit on index loss that will always be available under the 
contract must prominently state that it does not guarantee that the 
contract will always offer index-linked options that limit index loss, 
which would mean risk of loss of the entire amount invested. We are 
requiring this disclosure because RILAs are long-term investments, with 
an investor's returns determined by the economic terms available both 
at the time of investment and during future crediting periods. The 
guaranteed minimum limits on index losses that always will be 
available--or the fact that the insurance company makes no guarantee at 
all--are key considerations for an investor considering a RILA that 
should be disclosed on the cover page. The final amendments' approach 
therefore incorporates the proposed requirement to disclose on the 
front cover page the maximum loss from negative index performance 
taking into account guaranteed minimum limits on index losses but, in 
response to comments, provides information on any guaranteed minimum 
limits without assuming that each RILA offers them.\110\
---------------------------------------------------------------------------

    \110\ These changes, which are contained in Item 1(a)(6)(a), are 
mirrored in Instruction 3(a) to Item 3 and Item 5(a). See, e.g., 
infra at footnote 386.
---------------------------------------------------------------------------

    One commenter stated that it found confusing the proposed 
requirement to state that the potential for investment loss could be 
significantly greater than the potential for investment gain.\111\ 
After considering comments we have determined not to require the 
proposed disclosure because an investor's potential inability to recoup 
prior losses due to limits on gains is a nuanced concept that is 
challenging to articulate in concise cover page disclosure. We are 
instead requiring the insurance company to disclose information about 
the contract's limits on participation in positive index performance, 
not only because these limits are central features of a RILA, but also 
because they can limit an investor's ability to recoup losses (which 
the proposed disclosure item was designed to convey). We therefore are 
requiring the insurance company to prominently state, for each type of 
limit offered (e.g., cap, participation rate, etc.), the lowest limit 
on index gains that may be established under the contract.\112\ This 
information is particularly important for an investor considering a 
RILA because RILAs are long-term investments and the investor's returns 
are driven not just by the economic terms available at the time of 
investment, but also in future crediting periods. In another change 
from the proposal, we are not adopting the proposed Item 1(a)(6) 
requirement to state that an investor could lose a significant amount 
of money if the index declines in value. We are doing so because the 
required disclosure in this item, and elsewhere on the form, of the 
maximum possible loss due to declines in index performance make clear 
that investors face the potential for losses in these 
circumstances.\113\
---------------------------------------------------------------------------

    \111\ See Johnson Comment Letter; see also proposed Form N-4, 
Item 1(a)(6).
    \112\ See final Form N-4, Item 1(a)(6)(b).
    \113\ See also, e.g., final Form N-4, Instruction 3(a) to Item 
3.
---------------------------------------------------------------------------

    Finally, one commenter suggested that we amend a current back cover 
page disclosure requirement regarding the availability of additional 
information to apply to RILAs.\114\ This sub-item currently requires 
variable annuity prospectuses to state that reports and other 
information about a registered separate account may be found on the 
Commission's website.\115\ The commenter suggested applying this 
requirement to insurance companies that issue RILAs to the extent that 
they provide reports and other information to the Commission through 
their regular reporting under the Exchange Act. We agree that some 
investors might find the information and reports about the insurance 
companies useful when making investment decisions and have adjusted 
this requirement in the final form accordingly.\116\
---------------------------------------------------------------------------

    \114\ CAI Comment Letter.
    \115\ Current Form N-4, Item 1(b)(3).
    \116\ See final Form N-4, Item 1(b)(3). Because registered MVA 
annuities are also issued by an insurance company, not a registered 
separate account, this change will also apply to registration 
statements relating to offerings of those securities.
---------------------------------------------------------------------------

2. Overview of the Contract (Item 2)
    We are, largely as proposed, amending the requirements for the 
Overview of the Contract (``Overview'') to include RILAs generally, 
require disclosure about certain key elements of any index-linked 
option offered under the contract, and highlight any contract 
adjustments. Consistent with the inclusion of registered MVA annuities 
on Form N-4, the Overview also will discuss these annuities, as 
applicable. As discussed below, this section will precede the KIT.\117\
---------------------------------------------------------------------------

    \117\ Because we are requiring the Overview to appear before the 
KIT, current Item 3 (Overview of the Contract) will be renumbered as 
Item 2. See infra Section II.C.3.
---------------------------------------------------------------------------

    Under the final amendments, insurance companies that are 
registering non-variable annuities must provide the same Overview 
disclosures that are currently required for variable annuities, 
modified to include certain RILA-specific disclosures. All contracts 
registered on the form must provide an Overview with a concise 
description of the contract, including information about: (1) the 
contract's purpose; (2) the phases of the contract, including a 
discussion of the available investment options; (3) the primary 
features of the contract; and (4) contract

[[Page 59993]]

adjustments.\118\ We are adopting these amendments as proposed. Because 
offerings of registered MVA annuities will be registered on Form N-4, 
these requirements also will apply to offerings of registered MVA 
annuities, as applicable. No substantive changes from the proposed 
approach, however, were necessary to address registered MVA annuities.
---------------------------------------------------------------------------

    \118\ Final Form N-4, Item 2(a)-(d).
---------------------------------------------------------------------------

    In addition to information about the purpose of the contract, under 
the final amendments, a prospectus that offers index-linked options 
must include in the Overview (as part of the discussion of the phases 
of the contract): (1) a statement that the insurance company will 
credit positive or negative interest at the end of a crediting period 
to amounts allocated to an index-linked option based, in part, on the 
performance of the index; (2) a statement that an investor could lose a 
significant amount of money if the index declines in value; (3) an 
explanation that the insurance company limits the negative or positive 
index returns used in calculating interest credited to an index-linked 
option at the end of its crediting period, accompanied by a brief 
description and an example of the manner in which such returns may be 
limited; and (4) disclosure of guaranteed minimum limits on index 
losses or gains.\119\ We are adopting the amendments described in (1)-
(3) generally as proposed. We are adopting changes to the language of 
the proposed disclosure requirements addressing minimum limits on index 
losses and gains, which will be parallel to changes we are adopting to 
this language throughout Form N-4, as discussed in more detail 
below.\120\ Specifically, we are changing the language of the proposed 
disclosure requirement addressing minimum limits on index losses to 
specify that an insurer that does not offer a minimum guaranteed limit 
on index losses must disclose that fact. We are adopting changes to the 
proposed language of the requirement for disclosing minimum limits on 
index gains to specify that insurers must prominently state, for each 
type of limit offered (e.g., cap, participation rate, etc.), the lowest 
limit on index gains that may be established under the contract.\121\
---------------------------------------------------------------------------

    \119\ Final Form N-4, Items 2(b)(2)(i)-(iv).
    \120\ Final Form N-4, Item 2(b)(2)(iii).
    \121\ Final Form N-4, Items 2(b)(2)(iii) and (iv).
---------------------------------------------------------------------------

    As proposed, the Overview also will provide, if applicable, a 
discussion of contract adjustments that must include a statement that 
an investor could lose a significant amount of money due to the 
contract adjustment if amounts are removed from an investment option or 
from the contract prior to the end of a specified period, accompanied 
by a brief description of the transactions subject to a contract 
adjustment.\122\ In a change from the proposal, we are not adopting the 
proposed requirement to include in the Overview numeric risk of loss 
disclosures associated with negative index performance or contract 
adjustments, as discussed further below.
---------------------------------------------------------------------------

    \122\ Final Form N-4, Item 2(d). Although one commenter 
suggested that we relocate the proposed disclosure item for contract 
adjustments under the sub-item for index-linked option disclosures, 
we are not making this change because contract adjustments are not 
specific to index-linked options; they apply to MVA annuity options 
as well. In a change from the proposal, we are replacing ``index-
linked option'' with ``investment option'' to convey contract 
adjustments are associated with other types of investment options in 
addition to index-linked options.
---------------------------------------------------------------------------

    As proposed, the Overview will precede the KIT. We are reordering 
these sections based on investor testing results indicating that 
investors reviewing sample KIT disclosure had difficulty understanding 
the basic features and concepts of RILA contracts, for example, 
``index,'' ``investment term,'' ``interim value adjustment,'' and 
``buffer.'' \123\ The Overview provides general information about the 
contract and important context about the information summarized in the 
KIT. In particular, the Overview will, as discussed below, require 
descriptions and examples to help investors understand these RILA 
features, including contract adjustments, which we anticipate will 
provide a basis for better understanding the issues that the KIT 
disclosures address. Based on our observations of investor testing, 
investors may generally benefit from having more context in order to 
understand the KIT disclosures. Placing the Overview first may 
similarly provide context for the issues flagged in variable annuity 
KITs.
---------------------------------------------------------------------------

    \123\ See, e.g., OIAD Investor Testing Report at Section 5, 
Qualitative Testing, Results from Round 1, Summary of Qualitative 
Testing, Section 6, Quantitative Testing, Summary of Quantitative 
Testing.
---------------------------------------------------------------------------

    We received one comment on this proposed reordering in Form N-4. 
The commenter stated that the repetition of certain information in both 
the Overview and the KIT undermines our rationale for proposing to 
reorder the two sections.\124\ We disagree that covering some of the 
same topics in the Overview and the KIT is inconsistent with changing 
the order of these disclosures. The KIT is designed to identify, in a 
consolidated location, key risks and features of the contract it 
describes.\125\ Certain of this information is also included in the 
high-level contract summary provided in the Overview. The disclosure is 
included in both locations to allow the reader to understand the 
contract at a high level (in the Overview of the Contract), as well as 
key features and risks of the annuity whose offering is being 
registered (in the KIT). Further, KIT requirements that address the 
same topic in different contexts may aid investor understanding of 
complex disclosure, and this approach is consistent with a layered 
disclosure approach.
---------------------------------------------------------------------------

    \124\ See CAI Comment Letter.
    \125\ See VASP Adopting Release at paragraph following n.106.
---------------------------------------------------------------------------

    In terms of the proposed content requirements for the Overview 
section, one commenter generally supported the proposed 
amendments.\126\ This commenter not only stated that the proposed 
amendments to the Overview were generally appropriate (including 
requirements applicable to RILAs and variable annuities), but also that 
the proposed disclosure requirements regarding the index-linked options 
``cover most of the key aspects that investors should be aware of to 
understand the cyclical nature of the index-linked options,'' and 
``strike the right balance by providing investors with the proper level 
of summary disclosure, with additional information appearing later in 
the prospectus.'' While no commenter generally opposed our proposed 
changes, several requested modifications to some of the specific 
proposed disclosures.
---------------------------------------------------------------------------

    \126\ CAI Comment Letter.
---------------------------------------------------------------------------

    As discussed above, some commenters raised general concerns about 
disclosure that appears in both the Overview and the KIT and suggested 
that we reduce or eliminate perceived duplicative disclosure in those 
two sections to simplify and streamline the prospectus.\127\ Such 
comments largely concerned the proposed narrative and numeric risk of 
loss disclosures for index-linked options and contract adjustments. One 
commenter stated it did not oppose the inclusion of narrative and 
numeric risk of loss disclosure in the Overview for end-of-term index 
declines and negative contract adjustments because ``the generally 
free-writing nature of the Overview allows the registrant to provide 
appropriate context for the reader.'' \128\ Conversely, two commenters 
generally opposed the proposed risk of loss disclosures for negative 
index performance and

[[Page 59994]]

contract adjustments on the grounds that RILA issuers should not be 
required to make disclosures that are not required of variable 
annuities, and cited concerns that such disclosures incorrectly portray 
such products as high-risk investments.\129\
---------------------------------------------------------------------------

    \127\ CAI Comment Letter; ACLI Comment Letter.
    \128\ CAI Comment Letter.
    \129\ ACLI Comment Letter; Gainbridge Comment Letter.
---------------------------------------------------------------------------

    One of these commenters stated that the proposal to require RILA 
issuers to disclose that an investor could lose a ``significant amount 
of money'' is inconsistent with existing disclosure for variable 
annuity products, which requires a statement that ``an investor can 
lose money by investing in the Contract.'' \130\ This commenter stated 
that a RILA investor is at no greater risk of losing a more substantial 
amount of money than a variable annuity investor, and that if all 
performance variables were equal, a RILA investor has reduced risk of 
loss compared to a variable annuity investor because RILAs have the 
added benefit of downside protection. This commenter also objected to 
the proposed requirement to disclose in the Overview that an investor 
could lose a ``significant'' amount of money due to an index decline or 
a contract adjustment, viewing that term as subjective. Another 
commenter asked that we modify the proposed narrative risk of loss 
disclosure for negative contract adjustments to state that losses could 
be significant under ``extreme market conditions.'' \131\ This 
commenter also opposed requiring numeric risk of loss disclosure 
associated with a negative contract adjustment on the grounds that the 
narrative disclosure ``is sufficient without including a numeric 
figure.'' One commenter asked that we clarify that the proposed numeric 
risk of loss disclosure for contract adjustments could be modified to 
avoid any implication that the risk of loss is greater than 100%.\132\
---------------------------------------------------------------------------

    \130\ ACLI Comment Letter.
    \131\ VIP Working Group Comment Letter.
    \132\ CAI Comment Letter.
---------------------------------------------------------------------------

    We are adopting the Overview's narrative risk of loss disclosures 
largely as proposed.\133\ These disclosures, each of which is a single 
sentence, are appropriate in light of the fact that RILAs, unlike 
variable annuities and other investment companies, are structured 
products that have unique features and risks despite contract 
similarities to variable annuities. Unlike variable annuities, index-
linked options offer downside protection from market declines--and are 
marketed on that basis. The disclosures we are adopting will alert RILA 
investors that there are limits to those protections. Moreover, we are 
retaining the proposed requirement to state that an investor could lose 
money, with the ``significant'' descriptor designed to put investors on 
notice of losses they might not anticipate, given that investor testing 
revealed that investors tend to overestimate loss protection.\134\ 
Significant losses associated with index-linked options may be 
infrequent, but they can and do happen, and investors should be aware 
of the possibility. We also are not modifying the proposed disclosure 
requirement to state that significant losses associated with contract 
adjustments may only occur under ``extreme market conditions'' because 
an investor who withdraws from a contract before the end of the 
crediting period may suffer significant losses relative to the value of 
the initial investment, regardless of market conditions. Nevertheless, 
the form does not prohibit an insurer from accompanying the required 
statement with contextual disclosure that explains when significant 
losses associated with contract adjustments might occur.
---------------------------------------------------------------------------

    \133\ Final Form N-4, Items 2(b)(2)(ii) and 2(d). The only 
change we are adopting to the narrative risk of loss disclosure 
requirements is a revision to Item 2(d), replacing ``Index-Linked 
Option'' with ``Investment Option,'' to clarify that contract 
adjustments may apply to options other than index-linked options.
    \134\ See OIAD Investor Testing Report at Section 5, Qualitative 
Testing (qualitative interviews suggested confusion with RILA terms 
and concepts relating to, for example, loss limiting features such 
as buffers).
---------------------------------------------------------------------------

    While we are adopting the narrative risk of loss disclosures as 
proposed, in a change from the proposal and in response to comments 
raising concerns about duplicative disclosure, we are not adopting the 
proposed numeric risk of loss disclosures associated with index 
declines or contract adjustments in the Overview. This change 
recognizes that the proposed numeric disclosures appear on the cover 
page, as well as the KIT, and, as one commenter observed, the Overview 
and the KIT are designed to be read together.\135\ Requiring narrative-
only risk of loss disclosure in the Overview is sufficient to flag this 
potential risk for investors because it will be immediately followed by 
the KIT, which will require the numeric risk of loss disclosure.\136\ 
Although one commenter suggested we require numeric disclosure in the 
Overview rather than the KIT, as discussed further below, the brevity 
of the numeric disclosure is well suited to the KIT.\137\
---------------------------------------------------------------------------

    \135\ CAI Comment Letter.
    \136\ Final Form N-4, Instructions 2(a) and 3(a) to Item 3.
    \137\ CAI Comment Letter. See also infra footnote 174 and 
accompanying paragraph for related discussion.
---------------------------------------------------------------------------

    Some commenters sought clarification regarding whether our proposal 
to require insurers to disclose guaranteed minimum limits on index 
losses or gains effectively seeks to impose a substantive requirement 
for insurance companies to offer minimum limits.\138\ One commenter 
asked whether a prospectus for a contract that does not offer minimum 
limits may omit the proposed disclosure.\139\ The proposal--and the 
final amendments we are adopting--are designed to result in clear 
disclosure of minimum limits that are an inherent feature of the 
contract, not to dictate contract terms or prescribe specific minimum 
limits.
---------------------------------------------------------------------------

    \138\ CAI Comment Letter; VIP Working Group Comment Letter; 
Gainbridge Comment Letter.
    \139\ VIP Working Group Comment Letter; Gainbridge Comment 
Letter.
---------------------------------------------------------------------------

    For downside protection, we understand some RILA issuers may not 
offer index-linked options with minimum limits on index losses that 
will always be available under the contract. Because downside 
protection is one of the chief selling points for index-linked options, 
a particular RILA not offering minimums on index losses that will 
always be available under the contract is material information that 
must be prominently disclosed in the prospectus. Without downside 
protection, investors are at risk of losing their entire investment due 
to poor index performance. And without a minimum rate of downside 
protection that will always be available under the contract, an 
investor is considering making a long-term investment without certainty 
as to the amount of downside protection that will apply to future 
crediting periods. Likewise, without disclosing a minimum limit on 
index gains that will always be available under the contract, an 
investor would not know the extent to which investments in future 
index-linked options would result in credited interest when there is 
positive index return. To help ensure that investors have this 
information while also responding to comments requesting clarification, 
we are modifying the proposed requirement to disclose guaranteed 
minimums on index losses. Instead, the final amendments require the 
insurer to prominently disclose any minimum limits on index losses that 
will always be available under the contract, or, alternatively, 
prominently state that the insurer does not guarantee that the contract 
will always offer index-linked

[[Page 59995]]

options that limit index losses.\140\ In addition, largely as proposed, 
we are adopting a requirement for insurers to disclose the minimum 
limits on index gains guaranteed for the life of the contract, with 
some changes to the proposed language to address commenters' requests 
for clarification.\141\
---------------------------------------------------------------------------

    \140\ Final Form N-4, Item 2(b)(2)(iii).
    \141\ Proposed Form N-4, Item 2(b)(2)(iv) would have required 
insurers to ``[d]isclose the minimum limit on Index gains guaranteed 
for the life of the Contract for any Index-Linked Option,'' whereas 
final Form N-4, Item 2(b)(2)(iv) will require insurers to 
``[p]rominently state, for each type of limit offered (e.g., cap, 
participation rate, etc.), the lowest limit on Index gains that may 
be established under the Contract.''
---------------------------------------------------------------------------

    These changes from the proposal are intended to clarify that this 
requirement is designed to seek disclosure on the minimum limit on 
index gains that will always be available under the contract for each 
type of limit offered. The final amendments also conform this 
disclosure requirement with our understanding of current practices and 
the nature of RILA investments--that is, while an insurance company may 
not offer loss protection, a RILA inherently involves some degree of 
participation in index gains. The insurance company therefore must 
disclose the minimum extent to which investors can participate in index 
gains under the contract. Specifically, the final rule will require the 
insurer to prominently state, for each type of upside limit being 
offered (e.g., cap, participation rate, etc.), the lowest limit on 
index gains that may be established under the contract.\142\
---------------------------------------------------------------------------

    \142\ Final Form N-4, Item 2(B)(2)(iv). We are requiring 
parallel disclosure in other Items of final Form N-4 relating to 
disclosure of minimum limits on index losses and/or gains that will 
always be available under the contract. See also final Form N-4, 
Item 1(a)(6); Item 5(a); Item 6(d)(2)(i)(B); and Item 17(b).
---------------------------------------------------------------------------

3. Key Information Table (Item 3)
    The KIT requirements in Form N-4 currently require a brief 
description of key facts about a variable annuity to appear in the 
prospectus, in a specific sequence and in a standardized 
presentation.\143\ The KIT functions as an integral part of the layered 
disclosure in Form N-4 by identifying key considerations upfront, with 
more detail to follow later in the prospectus. We are adopting the 
final amendments generally as proposed with modifications to address 
comments we received. As proposed, we are requiring that insurance 
companies provide a KIT in registration statements relating to RILA 
offerings, as is currently done with variable annuities, and in a 
modification from the proposal are extending this requirement to 
offerings of registered MVA annuities.\144\ We are adopting amendments 
to the current KIT requirements to highlight key features of non-
variable annuities, with some modifications from the proposal in 
response to comments. These amendments are informed by investor testing 
and are designed to build on the existing KIT disclosure framework and 
highlight important considerations related to non-variable annuities, 
including certain aspects of RILAs that our investor testing observed 
are difficult for investors to understand and thus require clear 
disclosure in order to help investors make informed investment 
decisions.\145\ In addition, as proposed, we are adopting amendments to 
the KIT that will apply to both non-variable and variable annuities 
that are designed to provide investors with a better understanding of 
these products.
---------------------------------------------------------------------------

    \143\ For variable annuity issuers who rely on rule 498A to 
provide summary prospectuses to investors, the KIT currently appears 
as a disclosure item in the summary prospectus.
    \144\ See final Form N-4, General Instruction B.1 and 
Instruction 1(a)-1(c) to Item 3.
    \145\ See, e.g., OIAD Investor Testing Report at Section 5, 
Qualitative Testing (following two rounds of in-depth interviews to 
assess potential RILA KIT disclosure for areas of confusion or 
misunderstanding, qualitative interviews suggested confusion with 
RILA terms and concepts relating to, for example, contract 
adjustments such as interim value adjustments and loss limiting 
features such as buffers); OIAD Investor Testing Report at Section 
6, Quantitative Testing, Results, Subgroup Analysis (noting 5.7 
percentage point effect of the Q&A KIT structure on overall 
comprehension for ``non-investors'' during quantitative testing).
---------------------------------------------------------------------------

    Commenters generally supported the proposed requirement that 
insurance companies provide a KIT in RILA registration statements.\146\ 
Comments on the proposed amendments affecting the KIT's specific format 
and disclosure requirements, however, were mixed.\147\ One commenter 
supported the proposed amendments to the KIT.\148\ This commenter 
stated that the disclosure required to appear in the KIT provides 
investors with a complete picture of RILA risks in a prominent place. 
In contrast, other commenters supported a portion of the proposed 
amendments to the KIT but also opposed certain of the proposed 
amendments, as discussed further below.\149\ Commenters suggested that, 
should the Commission extend the use of Form N-4 to registered MVA 
annuities, their comments would also apply to disclosures related to 
those securities, to the extent applicable.\150\
---------------------------------------------------------------------------

    \146\ See, e.g., Gainbridge Comment Letter (stating that the KIT 
requirement for RILA issuers will allow investors to readily compare 
RILAs to each other and to variable annuities); Better Markets 
Comment Letter (stating that a RILA-tailored KIT is key to helping 
investors understand the RILA-specific risks presented to them).
    \147\ See, e.g., Better Markets Comment Letter; CAI Comment 
Letter.
    \148\ See Better Markets Comment Letter.
    \149\ See CAI Comment Letter (stating that the SEC has generally 
struck the correct balance in the KIT, with some exceptions); ACLI 
Comment Letter (stating that it supports CAI's comments and opposing 
the KIT amendments requiring a Q&A format and repetition of Overview 
disclosure).
    \150\ See, e.g., CAI Comment Letter.
---------------------------------------------------------------------------

    The overall format of the final KIT is depicted below:

                Table 4--Key Information Table as Adopted
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Fees, Expenses, and Adjustments:
------------------------------------------------------------------------
Are There Charges or Adjustments for
 Early Withdrawals?
Are There Transaction Charges?
Are There Ongoing Fees and Expenses?
------------------------------------------------------------------------
Risks:
------------------------------------------------------------------------
Is There a Risk of Loss from Poor
 Performance?
Is this a Short-Term Investment?
What Are the Risks Associated with the
 Investment Options?
What are the Risks Related to the
 Insurance Company?
------------------------------------------------------------------------
Restrictions:
------------------------------------------------------------------------
Are There Restrictions on the
 Investment Options?

[[Page 59996]]

 
Are There any Restrictions on Contract
 Benefits?
------------------------------------------------------------------------
Taxes:
------------------------------------------------------------------------
What Are the Contract's Tax
 Implications?
------------------------------------------------------------------------
Conflicts of Interest:
------------------------------------------------------------------------
How Are Investment Professionals
 Compensated?
Should I Exchange My Contract?
------------------------------------------------------------------------

a. Formatting of the KIT
    Form N-4 currently prescribes format requirements for the KIT to 
enhance the readability and comparability of the disclosure.\151\ As 
proposed, we are adopting amendments to Form N-4 to require these 
current format requirements to apply to all offerings registered on 
Form N-4, including non-variable annuity offerings.\152\ Specifically, 
the final amendments will require insurance companies to disclose 
required KIT information in the tabular presentation reflected in the 
instructions, in the order specified, without any modification or 
substitution with alternate terminology of the title, headings, and 
sub-headings for the tabular presentation, unless the instructions 
otherwise provide. Insurance companies will be permitted to exclude any 
disclosures (other than the title, headings, and sub-headings for this 
tabular presentation) in the KIT that are not applicable or modify any 
of the statements required to be included, so long as the modified 
statement contains comparable information. Insurance companies also 
will be required to provide cross-references to the location in the 
statutory prospectus where the subject matter is described in greater 
detail, and in the case of electronic versions of the prospectus, to 
make those references accessible either by direct electronic link or 
through equivalent methods or technologies, as required for variable 
annuity KIT disclosure. Insurance companies will include these cross-
references adjacent to the relevant disclosure, either within the table 
row, or presented in an additional table column. All disclosures in the 
KIT should be short and succinct, consistent with the limitations of a 
tabular presentation.
---------------------------------------------------------------------------

    \151\ See current Form N-4, Instruction 1 to Item 2.
    \152\ See final Form N-4, Instruction 1(a)-(c) to Item 3.
---------------------------------------------------------------------------

    Commenters generally supported the application of the current KIT 
format requirements to RILA offerings.\153\ In response to one of the 
Proposing Release's requests for comment, one commenter stated that the 
KIT should continue to permit insurance companies to cross-reference 
relevant sections of the prospectus either within the applicable row of 
the KIT or as an additional column rather than requiring issuers to add 
a new column in the KIT labeled ``Location in the Prospectus.'' \154\ 
We agree and are maintaining the current requirements for cross-
reference location because staff, investors, and RILA issuers are 
familiar with these requirements, and investor testing did not identify 
any concerns with this aspect of the KIT.\155\
---------------------------------------------------------------------------

    \153\ See Better Markets Comment Letter (expressing that the 
proposed KIT requirements present RILA risks in a format that 
investors will easily understand); CAI Comment Letter (stating that 
the proposed KIT presentation is similar to the presentation 
currently used by insurance companies for combination RILA/variable 
annuity offerings and that this presentation will work equally well 
for combination and standalone RILAs registered on Form N-4).
    \154\ See CAI Comment Letter.
    \155\ See generally Proposing Release at Section 1.C.
---------------------------------------------------------------------------

    We are adopting, as proposed, three amendments to the KIT 
formatting and presentation requirements in Form N-4 that will apply to 
registration statements both for non-variable and variable annuities. 
These changes are designed to provide investors with a better 
understanding of these products and are informed in part by the results 
of investor testing. First, we are adopting, generally as proposed, a 
requirement that issuers present information in the KIT in a question-
and-answer (``Q&A'') format.\156\ As a result of this change, the 
various line items of the KIT will be rephrased as questions (e.g., 
``Are There Charges or Adjustments for Early Withdrawals?'' instead of 
``Charges for Early Withdrawals or Adjustments''). The instructions 
will further require that, unless the context otherwise requires, 
issuers must begin the response with a ``Yes'' or ``No'' in bold text 
when answering a question presented in a given row of the KIT.
---------------------------------------------------------------------------

    \156\ See final Form N-4, Instruction 1(d) to Item 3.
---------------------------------------------------------------------------

    Comments on the Q&A format were mixed.\157\ One commenter expressed 
that the Q&A format may be helpful and more accessible to some 
investors but may also result in a less concise and simple KIT.\158\ 
Another commenter opposed the Q&A format on the grounds that it would 
result in more narrative responses, which would make comparisons 
between products more difficult for investors.\159\ This commenter 
favored retaining the current wording.
---------------------------------------------------------------------------

    \157\ See ACLI Comment Letter; CAI Comment Letter.
    \158\ See CAI Comment Letter.
    \159\ See ACLI Comment Letter.
---------------------------------------------------------------------------

    After considering comments received, we are adopting the Q&A format 
generally as proposed, except for the Charges or Adjustments for Early 
Withdrawals and the Risks Related to the Insurance Company line items, 
each of which we discuss in further detail below. Rephrasing the 
current line items in a Q&A format should more effectively convey the 
KIT information to investors and will therefore help non-variable and 
variable annuity investors make informed investment decisions. As 
stated in the Proposing Release, the Q&A format should improve investor 
comprehension of non-variable annuity-specific topics based on the 
results of our quantitative investor testing.\160\ Because our investor 
testing showed that the Q&A format impacted overall comprehension more 
for non-investors than independent investors, the Q&A format should 
particularly improve comprehension for less-experienced investors.\161\ 
Because the KIT disclosures as amended continue to be brief by their 
nature, we anticipate that any negative impact the Q&A format

[[Page 59997]]

may have on comparability or conciseness will be justified by the 
benefit that investors will gain from understanding complex non-
variable annuity-specific information.
---------------------------------------------------------------------------

    \160\ See Proposing Release at Section II.B.2.
    \161\ See Proposing Release at n.78 and accompanying text. For 
purposes of investor testing, participants were classified into 
three groups: those with no investments in stocks, bonds, mutual 
funds, or other securities (non-investors); those with investments 
exclusively in retirement savings accounts (retirement only); and 
those with investments outside of retirement accounts (independent 
investors). See OIAD Investor Testing Report at Section 6, 
Quantitative Testing, Subgroup Analysis, Investor Status.
---------------------------------------------------------------------------

    Second, we are adopting, as proposed, amendments changing the order 
in which the KIT (Item 2 of current Form N-4) appears relative to the 
Overview of the Contract (Item 3 of current Form N-4), as discussed 
above.\162\
---------------------------------------------------------------------------

    \162\ See supra Section II.C.2. The current instructions to Form 
N-4 require that, notwithstanding 17 CFR 230.421(a), the KIT, 
Overview of the Contract, and Fee Table must be disclosed in the 
numerical order in which they appear in Form N-4. The final form 
changes this instruction to reflect the change in order. See final 
Form N-4, General Instruction C.3(a). The change in order will also 
apply to summary prospectus disclosure location under the final 
amendments to rule 498A.
---------------------------------------------------------------------------

    Third, as proposed, we are deleting Form N-4's general instruction 
stating that where the discussion of information required by the 
Overview of the Contract or KIT also responds to the disclosure 
requirements in other items of the prospectus, registrants need not 
include additional disclosure in the prospectus that repeats the 
information disclosed in the Overview of the Contract or the KIT.\163\ 
Comments on the deletion were mixed.\164\ One commenter stated that 
there is value in ``strategically locating certain disclosures in 
multiple places to help investors.'' \165\ Another commenter opposed 
this deletion because it would lead to certain information appearing 
more than once in the prospectus.\166\
---------------------------------------------------------------------------

    \163\ See final Form N-4, General Instruction C.3(a).
    \164\ See ACLI Comment Letter; CAI Comment Letter.
    \165\ See CAI Comment Letter.
    \166\ See ACLI Comment Letter.
---------------------------------------------------------------------------

    In administering Form N-4, we have observed that this instruction 
has led to confusion on the part of registrants. Moreover, as discussed 
above, the layered disclosure framework requires certain disclosure 
topics to be discussed in multiple locations.\167\ This framework is 
designed to help ensure both that the KIT contains key disclosures and 
that the more-detailed sections to which investors are directed contain 
all of the key information about the given topic.\168\ This approach is 
particularly important for RILAs in light of the challenges our 
investor testing showed investors have in understanding these products, 
in that investors will see key disclosures in one place--the KIT--
regardless of whether they review targeted sections of the prospectus.
---------------------------------------------------------------------------

    \167\ See supra Section I.D.2.
    \168\ For example, while both the KIT and Item 5 require 
disclosures about principal risks, the KIT currently expressly 
contemplates that more detailed information will be repeated later 
in the prospectus, specifically requiring registrants to provide 
cross-references to the more detailed prospectus discussion. See 
current Form N-4, Instruction 1(b) to Item 2. This instruction 
remains unchanged in the KIT of the final Form N-4. See final Form 
N-4, Instruction 1(b) to Item 3. Item 5 requires registrants to 
summarize the principal risks of the contract in one place, and was 
not intended to permit an insurance company to omit principal risks 
from that section if those risks were also disclosed in the KIT. See 
Proposing Release at n.86 and accompanying text (``The principal 
risks section is designed to provide a consolidated presentation of 
principal risks which can be cross-referenced by registrants to 
reduce repetition that might otherwise occur if the same principal 
risks are repeated in different sections of the prospectus.'').
---------------------------------------------------------------------------

b. Fees, Expenses, and Adjustments
    Non-variable annuities typically have implicit fees, expenses, 
charges, and adjustments for early or mid-term withdrawals that can be 
confusing or surprising to investors. This was observed in our investor 
testing regarding RILAs.\169\ We anticipate that investors will benefit 
from tailored disclosure about certain unique features of a non-
variable annuity's fee and expense structure as described below to help 
them make informed decisions.
---------------------------------------------------------------------------

    \169\ See supra Section I.D.1.
---------------------------------------------------------------------------

    Early Withdrawal Charges and Adjustments. The first line item in 
the ``Fees, Expenses, and Adjustments'' section of the amended KIT, 
``Are There Charges or Adjustments for Early Withdrawals?,'' addresses 
surrender charges and contract adjustments. Because non-variable 
annuities may have surrender charges, we are adopting, as proposed, a 
requirement that insurance companies provide the existing KIT surrender 
charge disclosure in this first line item so that investors understand 
how surrender charges are assessed (e.g., that if they make a 
withdrawal within a specified period after their last premium payment, 
they may pay a significant surrender charge that will reduce the value 
of their investment).\170\ This disclosure must include the maximum 
surrender charge, the maximum number of years that a surrender charge 
may be assessed, and an example of the maximum surrender charge an 
investor could pay in dollars based on a $100,000 investment. In a 
change to the current form requirements, we also are requiring, as 
proposed, that insurance companies disclose that this loss will be 
greater if there is a negative contract adjustment, taxes, or tax 
penalties, to make clear that an investor may lose more than just the 
surrender charge upon an early withdrawal.
---------------------------------------------------------------------------

    \170\ Final Form N-4, Instruction 2(a) to Item 3.
---------------------------------------------------------------------------

    We also are requiring specific disclosure on contract adjustments, 
which can result in investor losses if the investor withdraws money 
from an investment option, or withdraws money from the non-variable 
annuity entirely, before the end of a specified period.\171\ We are 
adopting these requirements as proposed except that they will apply to 
contract adjustments applicable to registered MVA annuities as well as 
RILAs. Specifically, if the contract includes contract adjustments, the 
insurance company will be required to include a statement that if all 
or a portion of contract value is removed from an investment option or 
from the contract before the expiration of a specified period, the 
insurance company will apply a contract adjustment, which may be 
negative. This statement will include the maximum potential loss (as a 
percentage of the investment) resulting from a negative adjustment. The 
insurance company also will be required to provide an example of the 
maximum negative adjustment that could be applied (in dollars) assuming 
a $100,000 investment. We are also adopting, as proposed, a requirement 
that the insurance company provide a brief narrative description of the 
contract transactions subject to a contract adjustment (e.g., 
withdrawals, surrender, annuitization, etc.) as part of the response to 
this item to make clear to investors the range of transactions that 
could result in a contract adjustment.
---------------------------------------------------------------------------

    \171\ Contract adjustments include adjustments made when amounts 
are removed prematurely from an index-linked option, often referred 
to as interim value adjustments, as well as adjustments made when 
amounts are removed prematurely from the contract, often referred to 
as market value adjustments. Thus, a specified period would include 
index-linked option crediting periods (which again, are typically 
referred to by insurance companies as ``investment terms'' or 
``terms''), as well as any specified period relating to a market 
value adjustment.
---------------------------------------------------------------------------

    Commenters generally opposed one or more of the amendments to the 
early withdrawal charges line. One commenter specifically opposed the 
inclusion in the KIT of numeric maximum potential loss disclosure (as a 
percentage of an investment) due to a negative contract adjustment on 
the grounds that the KIT's design would not provide adequate context 
for the disclosure and could therefore lead investors to believe that 
such losses are likely, even when the risk of loss is remote.\172\ This 
commenter suggested instead that the KIT should contain only narrative 
statements regarding the risk of loss. The commenter also opposed the 
inclusion in the KIT of this numeric loss disclosure because it is 
included in other parts of the prospectus. While we

[[Page 59998]]

are adopting changes to this proposed disclosure elsewhere in the 
prospectus, we are adopting amendments to this first line item of the 
KIT as proposed.\173\ While we appreciate that this disclosure appears 
elsewhere in the prospectus, including the numeric maximum potential 
loss disclosure in the KIT in particular is appropriate because the 
brevity of numeric disclosure and its effectiveness in communicating 
this key risk of loss is well suited for the KIT. In this regard, the 
KIT was designed to ``provide a brief description of key facts'' and be 
``easy to read and navigate.'' \174\ Further, additional context for 
the numeric disclosure will be provided by cross-references to other 
parts of the prospectus.\175\ As discussed above,\176\ the inclusion of 
numeric loss disclosure in both the KIT and elsewhere in the prospectus 
is consistent with a layered disclosure approach and is designed to 
help investors make more informed investment decisions. Also, as 
discussed above, the form does not prevent the insurance company from 
providing additional appropriate context.\177\
---------------------------------------------------------------------------

    \172\ See CAI Comment Letter.
    \173\ See supra Section II.C.2.
    \174\ See VASP Adopting Release at paragraph following n.106.
    \175\ See final Form N-4, Instruction 1(b) to Item 3.
    \176\ See supra Sections III.A.2, II.C.1, and II.C.2 (discussing 
numeric loss disclosure in the context of the prospectus's layered 
disclosure approach, cover page, and Overview, respectively).
    \177\ See supra Sections II.C.1, and II.C.2.
---------------------------------------------------------------------------

    One commenter suggested that the example of the maximum negative 
adjustment that could be applied (in dollars) assuming a $100,000 
investment should not be required if the maximum potential loss (as a 
percentage of an investment) due to a negative adjustment is 
retained.\178\ This commenter expressed that, where the percentage 
maximum potential loss is 100% under a RILA, a typical investor would 
understand the dollar amount associated with that loss and would not 
need the example. We are retaining this example because it illustrates 
how an investment can be impacted by a negative contract adjustment in 
dollar figures, which may be more salient to some investors than a 
percentage.
---------------------------------------------------------------------------

    \178\ See CAI Comment Letter. The instructions to this line item 
provide an example of this disclosure that includes the statement 
that the loss ``will be greater if you also have to pay a surrender 
charge, taxes, and penalties.'' One commenter recommended that, if 
the Commission does require an example of maximum negative 
adjustments, the Commission should ensure that the form instructions 
do not require insurance companies to state or imply that the loss 
could be greater than 100% due to other factors, such as surrender 
charges. See CAI Comment Letter. The language in the form relating 
to greater losses due to these other factors is an example provided 
in a specific context, and insurance companies will not be required 
to make this disclosure where it is not correct.
---------------------------------------------------------------------------

    One commenter stated that requiring disclosure relating to interim 
value adjustments under the ``Fees and Expenses'' heading is 
inappropriate because interim value adjustments are not fees but are 
instead the approximate fair market value of the investments 
underpinning the RILA.\179\ We are retaining negative contract 
adjustment disclosure under the heading of the KIT that addresses fees 
and expenses. Interim value adjustments operate like an implicit fee in 
that they have a similar impact on an investor as an explicit fee or 
expense by decreasing the amount of an investor's investment. Further, 
including information about interim value adjustments under this 
heading may aid investors' understanding of their potential effects 
since investor testing showed that investors struggled to understand 
the concept of interim value adjustments in general.\180\ To address 
the commenter's concern that the disclosure could imply that a contract 
adjustment is a conventional fee or expense, we have renamed this 
section of the KIT ``Fees, Expenses, and Adjustments'' and changed the 
question in the left-hand column of the early withdrawal charges and 
adjustments line item to read ``Are There Charges or Adjustments for 
Early Withdrawals?'' (italics indicating text in final Form N-4 that 
has been added to the proposed text).\181\
---------------------------------------------------------------------------

    \179\ See VIP Working Group Comment Letter.
    \180\ See OIAD Investor Testing Report at Section 5, Qualitative 
Testing.
    \181\ See also infra Section II.C.6.a (regarding similar changes 
relating to the transaction expense table).
---------------------------------------------------------------------------

    Transaction Charges. The second line item in the ``Fees, Expenses, 
and Adjustments'' section of the amended KIT, ``Are There Transaction 
Charges?,'' will require registrants to disclose that the investor may 
also be charged for other transactions in addition to surrender charges 
(and now contract adjustments), along with a brief narrative 
description of the types of such charges (e.g., front-end loads, 
charges for transferring cash value between investment options, 
etc.).\182\ This line item is designed to provide a simple narrative 
description to alert investors that surrender charges and contract 
adjustments are not the only charges they could pay when they engage in 
certain contract transactions. We did not receive comments on this line 
item, and we are adopting these requirements as proposed.
---------------------------------------------------------------------------

    \182\ Final Form N-4, Instruction 2(b) to Item 3.
---------------------------------------------------------------------------

    Ongoing Fees and Expenses. The third line item in the ``Fees, 
Expenses, and Adjustments'' section, ``Are There Ongoing Fees and 
Expenses?,'' is designed to alert investors that they will bear 
recurring fees on an annual basis. This item currently requires the 
insurance company to disclose (1) a minimum and maximum annual fee 
table and (2) a lowest and highest annual cost table, both along with 
applicable legends.\183\ We are adopting amendments requiring insurance 
companies to provide this disclosure with respect to RILAs, as 
proposed, and registered MVA annuities, in a change from the 
proposal.\184\
---------------------------------------------------------------------------

    \183\ See current Form N-4, Instruction 2(c) to Item 2. The 
minimum and maximum annual fee table requires a tabular description 
of the fees and expenses that an investor may pay each year, 
depending on the investment options chosen. This includes minimum 
and maximum percentages for: base contract fees; portfolio company 
fees and expenses; and optional benefits available for an additional 
charge. The lowest and highest annual cost table requires a tabular 
description of the lowest and highest cost an investor could pay 
each year, based on current charges and a set of standardized 
assumptions (e.g., $100,000 investment and 5% annual appreciation).
    \184\ See final Form N-4, Instruction 2(c) to Item 3.
---------------------------------------------------------------------------

    We also are adopting, largely as proposed, amendments requiring 
that, where a contract imposes limits on gains on the amount an 
investor can earn on an index-linked option, insurance companies must 
disclose that they impose these limits on gains and that they can act 
as an implicit ongoing fee.\185\
---------------------------------------------------------------------------

    \185\ See final Form N-4, Instruction 2(c)(i)(G) to Item 3.
---------------------------------------------------------------------------

    Specifically, insurance companies must disclose that: (1) there is 
an implicit ongoing fee on index-linked options to the extent that an 
investor's participation in index gains is limited by the insurance 
company through the use of a cap, participation rate, or some other 
rate or measure; (2) this means that the investor's returns may be 
lower than the index's returns; (3) in return for accepting this limit 
on index gains, an investor will receive some protection from index 
losses; and (4) this implicit ongoing fee is not reflected in the 
tables below. In a change from the proposal, we are modifying the first 
statement to provide that there is an implicit ongoing fee on index-
linked options to the extent that an investor's participation in index 
gains is limited by the insurance company through the use of a cap, 
participation rate, or some other rate or measure.\186\ In another 
change from the proposal, insurance companies will be required to 
provide both a statement to the effect that this implicit fee means 
that the investor's returns may be lower

[[Page 59999]]

than the index's returns and also a statement that the implicit fee is 
not reflected in the fee and cost tables. This disclosure replaces the 
proposed statement that the limit on index gains helps the insurance 
company generate a profit on the index-linked option, as we discuss in 
more detail later in this section of the release. As proposed, the 
disclosure will be required to precede the minimum and maximum fee 
table if the contract offers index-linked options and imposes ongoing 
fees and expenses.
---------------------------------------------------------------------------

    \186\ See final Form N-4, Instruction 2(c)(i)(G) to Item 3 
(emphasis added); see proposed Form N-4, Instruction 2(c)(i)(G) to 
Item 3.
---------------------------------------------------------------------------

    Also as proposed, in the case of a contract that offers an index-
linked option subject to limits on gains but does not impose any 
explicit ongoing fees or expenses under the contract, the insurance 
company will include the disclosure in lieu of such tables.\187\ That 
is, the disclosure will take the place of the fee and cost tables 
rather than precede them. Where there are no explicit ongoing fees, 
minimum and maximum annual fee and cost tables showing zero fees would 
tend to mislead investors because an index-linked option imposing 
limits on gains has implicit fees inherent in limiting upside index 
participation. The substance of the required disclosure will be largely 
the same as the disclosure discussed above but will not include the 
statement that the ``implicit ongoing fee is not reflected in the 
tables below'' since no tables will follow this disclosure.\188\
---------------------------------------------------------------------------

    \187\ See final Form N-4, Instruction 2(c)(iii) to Item 3; see 
proposed Form N-4, Instruction 2(c)(iii) to Item 3.
    \188\ See final Form N-4, Instruction 2(c)(iii) to Item 3. The 
proposed disclosure in lieu of the tables was identical to the 
proposed disclosure preceding the tables. See proposed Form N-4, 
Instruction 2(c)(iii) to Item 3.
---------------------------------------------------------------------------

    Lastly in this line item, we are adopting, as proposed, amendments 
revising the last sentence in the required legend in the lowest and 
highest annual cost table to include the italicized language: ``This 
estimate assumes that you do not take withdrawals from the Contract, 
which could add surrender charges and negative Contract Adjustments 
that substantially increase costs.'' \189\ This will further alert 
investors to the cost impact of a contract adjustment if they withdraw 
money early.
---------------------------------------------------------------------------

    \189\ See final Form N-4, Instruction 2(c)(ii)(A) to Item 3. 
Currently, this legend only refers to surrender charges, not 
negative contract adjustments.
---------------------------------------------------------------------------

    Commenters generally opposed one or more of the amendments to the 
Ongoing Fees and Expenses line item. One commenter expressed concerns 
that excluding disclosures of any ongoing fees that may be implicit to 
index-linked options in the KIT, but requiring variable options to 
disclose ongoing fees, could result in disparate treatment of these two 
types of annuities. Specifically, the commenter stated that this will 
produce unequal disclosure between the two products, which would not be 
appropriate in light of the similar profit margins to insurance 
companies generated by the fees.\190\ The commenter did not suggest a 
specific alternative approach to quantify and disclose these implicit 
costs. We requested comment on whether it would be appropriate to 
develop a standardized methodology or calculation for accurately 
determining these costs.\191\ Two commenters raised challenges with 
accurately determining these types of costs.\192\ After considering 
comments regarding the challenges, we are not requiring numeric 
disclosure of implicit ongoing index-linked fees, but continue to 
welcome feedback from market participants and others on the feasibility 
of establishing a standardized approach to disclose these implicit 
fees.
---------------------------------------------------------------------------

    \190\ See VIP Working Group Comment Letter.
    \191\ See, e.g., Proposing Release at request for comment number 
48.
    \192\ See ACLI Comment Letter; CAI Comment Letter.
---------------------------------------------------------------------------

    One commenter assumed the Commission intended that the lowest and 
highest annual cost table would only be disclosed in registration 
statements relating to variable options because the table's 
instructions reference ``portfolio company fees and expenses,'' which 
are relevant only to variable options.\193\ The commenter therefore 
suggested that we amend the instructions to clarify that the table 
should be omitted if a prospectus is not offering variable options, and 
suggested that we not include references to ``negative Contract 
Adjustments'' in the legend preceding the table because variable 
options are not subject to contract adjustments. This table is not 
intended to be limited to variable options but rather applies to all 
investment options where ongoing fees are charged. While non-variable 
options sometimes do not have explicit ongoing fees, where ongoing fees 
are charged in connection with a non-variable option, they must be 
disclosed in this table. In addition, if the contract does not have a 
contract adjustment, insurance companies should revise the legend 
accordingly. Similarly, insurance companies would not include 
references to portfolio company fees and expenses in the minimum and 
maximum annual fee table and the assumptions in the lowest and highest 
annual cost table if the contract does not offer variable options.
---------------------------------------------------------------------------

    \193\ See CAI Comment Letter.
---------------------------------------------------------------------------

    Some commenters opposed one or more of the required statements 
describing implicit fees.\194\ Some of these commenters believed 
describing insurance company limits on the amount an investor can earn 
in a RILA as an ``implicit ongoing fee'' is inaccurate.\195\ One 
commenter viewed such limits as factors that contribute to the pricing 
of RILA contracts.\196\ Other commenters stated that these limits may 
not be triggered to actually limit an investor's credited 
interest.\197\ These commenters expressed that, for index-linked 
options with caps, if index returns are positive and less than the cap, 
there is no limitation on an investor's credited interest, and for 
index-linked options with participation rates, there is often no upper 
limit on the credited interest even though the investor may receive 
only a percentage of the index return as credited interest.
---------------------------------------------------------------------------

    \194\ See ACLI Comment Letter; CAI Comment Letter; Gainbridge 
Comment Letter.
    \195\ See ACLI Comment Letter; CAI Comment Letter.
    \196\ See Gainbridge Comment Letter.
    \197\ See ACLI Comment Letter; CAI Comment Letter.
---------------------------------------------------------------------------

    We also received comments that characterizing limits on credited 
interest as fees could confuse investors about how RILAs operate 
because investors understand fees as money collected from them, but a 
limit on credited interest is not money collected from investors.\198\ 
One commenter stated that these limits are not like fees as they are 
not applied in all circumstances, such as when an index's returns are 
below these limits, and thus act more like an opportunity cost rather 
than like a fee.\199\
---------------------------------------------------------------------------

    \198\ See ACLI Comment Letter; Gainbridge Comment Letter.
    \199\ See CAI Comment Letter.
---------------------------------------------------------------------------

    While contractual limits placed on an investor's gains, such as a 
cap rate or participation rate, are not fees or charges in a 
conventional sense, these limits can have the effect of reducing 
investment returns (e.g., where the index outperforms a cap or a 
participation rate is less than 100%).\200\ As a result, it is 
appropriate to characterize these contractual limits as ongoing 
implicit fees given they have the same impact on investors. We 
recognize, however, that these contractual limits may not act to reduce 
an investor's credited interest in any given case. Accordingly, after 
considering comments, we are modifying the proposed statement that the 
imposition of limits on gains will act as an implicit ongoing fee. 
Instead, we

[[Page 60000]]

are requiring disclosure that there is an implicit ongoing fee on 
index-linked options to the extent that an investor's participation in 
index gains is limited by the insurance company through the use of a 
cap, participation rate, or some other rate or measure. The addition of 
the qualifying language ``to the extent'' is designed to communicate to 
investors that a contractual limit acts as an implicit fee once it is 
triggered, but not before. After considering comments, we have 
determined that describing these limits as involving an implicit 
``fee'' communicates the concept of reducing an investor's credited 
interest more effectively than ``potential opportunity cost,'' as 
suggested by a commenter, which is a less concrete concept and 
therefore potentially more confusing for investors. Moreover, the 
modification discussed above regarding when these limits on gains will 
reduce an investor's credited interest, together with the 
characterization of the effect of these limits on gains as acting as an 
``implicit'' ongoing fee, also will make clear these limits can have an 
effect akin to that of a fee.
---------------------------------------------------------------------------

    \200\ Dodie C. Kent and Ronal Coenen, Jr., Variable Annuities 
and Other Insurance Investment Products (Third Edition), Registered 
Index-Linked Annuity Contracts (``Kent and Coenen'') at sec. 29:2.2.
---------------------------------------------------------------------------

    Some commenters opposed requiring insurance companies to disclose 
that limiting the amount an investor can earn on an index-linked option 
helps the insurance company make a profit on the option.\201\ These 
commenters stated that they believe the statement is misleading because 
insurance companies generate profit in other ways (or in other ways in 
addition to the limits), including through the use of derivative 
instruments. One commenter indicated that, even though other registered 
securities products generate revenue, not every form requires 
information about how revenue and profit is generated.\202\ After 
further consideration, we are not adopting the profit statement because 
the two replacement statements discussed above in this section more 
clearly explain to investors how limits on index gains may decrease the 
amount earned on a contract. Specifically, the final disclosure alerts 
investors to opportunity costs associated with a contract by 
illustrating that limits can result in lower returns for investors as 
compared to the contract's underlying index. Further, alerting 
investors that the implicit fee is not reflected in the cost and fee 
tables is designed to help investors understand that the explicit 
ongoing fees that are reflected in these tables do not fully capture 
the complete costs that investors may incur under the contract.
---------------------------------------------------------------------------

    \201\ See ACLI Comment Letter; CAI Comment Letter; Gainbridge 
Comment Letter.
    \202\ See ACLI Comment Letter.
---------------------------------------------------------------------------

    One commenter opposed the amendments requiring insurance companies 
to disclose that in return for accepting a limit on index gains, an 
investor will receive some protection from index losses.\203\ This 
commenter expressed that limits on gains sometimes do not actually 
limit an investor's credited interest, but an investor nevertheless 
receives protection from losses and, in such scenarios, characterizing 
the protection from index loss as received in exchange for accepting a 
limit on gains is inaccurate. We are including the ``in return for'' 
statement in the disclosure as proposed. An investor that accepts a 
limit on index gains in the form of a crediting rate (e.g., a cap) and 
also receives some downside protection from index losses (e.g., a 
buffer) is receiving the protection in exchange for accepting the 
limit, even if the limit is never triggered and therefore does not 
decrease the investor's credited interest. RILA industry experts have 
made similar statements.\204\
---------------------------------------------------------------------------

    \203\ See id.
    \204\ See Dodie C. Kent and Ronald Coenen Jr., The Design and 
Regulatory Framework of Registered Index-Linked Annuities, ALI CLE 
Conference on Life Insurance Products 2022 (stating that the 
potential limit on upside performance is the trade-off that 
investors make for potential downside protection).
---------------------------------------------------------------------------

c. Risks
    Risk of Loss. We are adopting amendments to the instructions to the 
line item entitled ``Is There a Risk of Loss from Poor Performance?'' 
with some modifications from the proposal. Form N-4 currently requires 
disclosure on risk of loss in connection with variable options, and we 
proposed to extend this risk of loss requirement to index-linked 
options. As proposed, insurance companies will be required to state, in 
the context of both index-linked or variable options, that an investor 
can lose money by investing in the contract. Index-linked options, like 
variable options, are subject to the risk of investment loss from poor 
performance.\205\ In a change from the proposal, we are adopting 
amendments to provide that, if an annuity contract offers an index-
linked option, the insurance company must disclose, as a percentage, 
the maximum amount of loss an investor could experience from negative 
index performance after taking into account the current limits on index 
loss provided under the contract.\206\ The proposal required disclosure 
of maximum loss from negative index performance after taking into 
account the minimum guaranteed limit on index loss. In another change 
from the proposal, the instructions will specify that an insurance 
company may give a range of the maximum amount of loss if the contract 
offers different limits on index loss. Also in a change from the 
proposal, an insurance company will be required to either prominently 
disclose the minimum limit on index loss that will always be available 
under the contract or, alternatively, prominently state that the 
insurance company does not guarantee that the contract will always 
offer index-linked options that limit index loss, which would mean risk 
of loss of the entire amount invested. These amendments are designed to 
make clear to investors that they can still lose money even though 
index-linked options typically include features designed to limit 
investment loss, and that the level of downside protections currently 
offered may change in the future.
---------------------------------------------------------------------------

    \205\ MVA options, which provide a fixed rate of interest 
(subject to an MVA), are not subject to the risk of loss from poor 
performance, and therefore would not be required to provide this 
disclosure.
    \206\ See final Form N-4, Instruction 3(a) to Item 3.
---------------------------------------------------------------------------

    One commenter raised concerns about the inclusion of the numeric 
maximum amount of loss an investor could experience from negative index 
performance as part of this line item.\207\ Our views on the utility 
and efficacy of including numeric risk of loss disclosure in the 
prospectus generally are discussed above.\208\ We continue to believe 
that this disclosure is appropriate for the KIT and are specifically 
retaining the numeric maximum amount of loss an investor could 
experience from negative index performance under the Risks heading 
because the maximum loss that an investor may experience due to 
negative index performance is a key risk associated with index-linked 
options. Flagging this risk in the KIT under this heading is consistent 
with the KIT's mandate to ``provide a brief description of key facts'' 
to investors in a way that is ``easy to read and navigate.'' \209\
---------------------------------------------------------------------------

    \207\ See CAI Comment Letter.
    \208\ See supra footnotes 105-106 and accompanying paragraph.
    \209\ See VASP Adopting Release at paragraph following n.106.
---------------------------------------------------------------------------

    We are adopting amendments to the instruction to this line item to 
specify that an insurance company may provide a range of the maximum 
amount of loss.\210\ Permitting the insurance company to provide a 
range of losses allows the insurance company to reflect the range of 
loss protection offered

[[Page 60001]]

under the contract.\211\ We also are adopting amendments requiring that 
an insurance company either disclose the minimum limit on index loss 
that will always be available under the contract or state that the 
insurance company does not guarantee that the contract will always 
offer index-linked options that limit index loss. As discussed above, 
this disclosure is designed to inform investors as to how the downside 
protections that are currently offered may change in the future, 
including disclosure of any minimum guaranteed limits that will always 
be available under the contract. Permitting the insurance company to 
provide a range of losses allows the insurance company to reflect the 
range of loss protection offered under the contract, and basing the 
disclosure on current limits address commenter concerns that not all 
RILAs guarantee a particular level of downside protection that will 
always be available under the contract, as discussed above.\212\
---------------------------------------------------------------------------

    \210\ See final Form N-4, Instruction 3(a) to Item 3.
    \211\ See supra Section II.C.1.
    \212\ See supra Section II.C.1; see also CAI Comment Letter; VIP 
Comment Letter (discussing proposed minimum guaranteed rate 
disclosure in Items 6 and 1, respectively).
---------------------------------------------------------------------------

    Short-Term Investment. The second line item under the Risks 
heading, which under the final amendments to Form N-4 will be titled 
``Is this a Short-Term Investment?,'' currently requires a statement 
that the contract is not a short-term investment and is not appropriate 
for an investor who needs ready access to cash, along with a brief 
explanation. This statement and an accompanying brief explanation is 
equally applicable to non-variable annuities. We therefore are 
requiring insurance companies to provide this disclosure as proposed 
for RILAs and, in a change from the proposal, for registered MVA 
annuities.\213\ We also are amending this item, as proposed, to require 
insurance companies to state that (1) amounts withdrawn from the 
contract may result in surrender charges, taxes, and tax penalties; and 
(2) if applicable, that amounts removed from an investment option or 
the contract before a specified period may also result in a negative 
contract adjustment and loss of positive index performance.\214\ These 
disclosures are designed to make clear to investors some of the key 
reasons why these investments are not short-term investments. They are 
particularly important for an investor considering an annuity in light 
of the potential negative consequences if the investor withdraws money 
early from a particular investment option or the contract. We are not 
limiting these disclosures to contracts with index-linked options, 
because these disclosures may be equally material for other investment 
options. We also are adopting, as proposed, new risk disclosure for 
investment options that mature at the end of a specific period that 
will require issuers offering such options to state that contract value 
will be reallocated at the end of the crediting period according to the 
investor's instructions, and to disclose the default reallocation in 
the absence of such instructions.\215\
---------------------------------------------------------------------------

    \213\ See final Form N-4, Instruction 3(b) to Item 3.
    \214\ In a change from the proposal, we are replacing ``index-
linked option'' with ``investment option'' to convey contract 
adjustments are associated with other types of investment options in 
addition to index-linked options.
    \215\ In a change from the proposal, the form now states that 
the risk disclosure is required for ``investment options that mature 
at the end of a specified period. We proposed risk disclosure for 
``index-linked'' options. We made this change to ensure that this 
requirement is applicable to MVA options in addition to index-linked 
options, in light of the addition of offerings of registered MVA 
annuities to the form.
---------------------------------------------------------------------------

    We received one comment on this portion of the proposal. The 
commenter opposed the amendments requiring issuers to state that the 
contract value will be reallocated at the end of the crediting period 
according to the investor's instructions, and to disclose the default 
reallocation in the absence of such instructions.\216\ This commenter 
expressed that the required disclosure is not related to the risks of 
short-term investing. The commenter suggested that this disclosure be 
moved to the Overview of the Contract and that any restrictions on 
transfers not covered by the Overview of the Contract be moved to the 
KIT line item ``Are There Restrictions on the Investment Options?''. 
After considering comments on this amendment, we are adopting this 
amendment as proposed. This disclosure illustrates that even though 
investment options under the contract may mature at the expiration of a 
specified period, the annuity contract itself is not a short-term 
investment and amounts invested in such short-term options will be 
automatically reallocated to new investment options under the contract. 
The disclosure also illustrates liquidity risk by making the investor 
aware that the contract value in an index-linked option (or fixed 
investment option that matures at the expiration of a specified period) 
is not automatically disbursed to the investor or ``liquid'' at the end 
of a crediting period. This disclosure is particularly important in 
illustrating that RILAs are not short-term investments in light of the 
difficulty investors participating in investor testing had in 
understanding crediting periods.\217\
---------------------------------------------------------------------------

    \216\ See CAI Comment Letter.
    \217\ See OIAD Investor Testing Report at Section 5, Qualitative 
Testing, Results from Round 1.
---------------------------------------------------------------------------

    Risks Associated with Investment Options. The third line item under 
the Risk heading, ``What are the Risks Associated with the Investment 
Options?'', is intended to focus on the general risk of poor investment 
performance. Currently, the KIT requires the insurance company to state 
that: (1) an investment in the contract is subject to the risk of poor 
investment performance and can vary depending on the performance of the 
investment options available under the contract; (2) each investment 
option will have unique risks; and (3) the investor should review these 
investment options before making an investment decision. We are 
adopting, as proposed, conforming changes to the required statement to 
refer to index-linked options now that RILAs are included on Form N-
4.\218\
---------------------------------------------------------------------------

    \218\ See proposed Form N-4, Instruction 3(c) to Item 3.
---------------------------------------------------------------------------

    Largely as proposed, but with some modifications in response to 
comments, we are adopting amendments requiring insurance companies to 
provide additional information about any index-linked options offered 
under the contract to highlight how the insurance company limits the 
investor's participation in gains and losses of the index.\219\ For the 
risk of limited upside, as proposed, the insurance company will be 
required to (1) state that the cap, participation rate, or some other 
rate or measure, as applicable, will limit positive index returns 
(e.g., limited upside), (2) provide an example for each type of limit 
imposed under the contract (e.g., ``if the Index return is 12% and the 
cap rate is 4%, we will credit 4% in interest at the end of the 
Crediting Period''), and (3) prominently state that this may result in 
the investor earning less than the index's return. For the risk of 
limited protection in the case of market decline, largely as proposed, 
the insurance company will be required to: (1) state that the floor, 
buffer, or some other rate or measure, as applicable, will limit 
negative index returns (e.g., limited protection in the case of market 
decline); and (2) provide an example for each type of limit imposed 
under the contract (e.g., ``if the Index return is -25% and the buffer 
rate is -10%, we will credit -15% (the amount that exceeds the buffer 
rate) at the end of the crediting period''). In a change from the 
proposal, and in response to comments as discussed below, we are not 
requiring

[[Page 60002]]

the inclusion of a statement that, even after limiting a negative index 
return, investors could still lose up to XX% of their investment. 
However, in a change from the proposal and in response to comments as 
discussed below, we are adding a requirement that insurance companies 
disclose, if applicable, that an index is a ``price index,'' not a 
``total return index,'' and therefore does not reflect dividends paid 
on the securities composing the index, or the index deducts fees and 
costs when calculating index performance, either of which will reduce 
the index return and will cause the index to underperform direct 
investment in the securities composing the index.
---------------------------------------------------------------------------

    \219\ See generally final Form N-4, Instruction 3(c) to Item 3.
---------------------------------------------------------------------------

    Comments on the proposed amendments to this line item were mixed. 
One commenter opposed the requirement that insurance companies disclose 
examples of each type of limit imposed on an investor's participation 
in gains and losses of the index.\220\ This commenter stated that this 
information unnecessarily repeated similar disclosure required in the 
Overview of the Contract. We are retaining these numeric examples 
because, regardless of this disclosure's appearance elsewhere in the 
prospectus, the KIT is designed to flag key considerations for the 
investor in one location in a concise and succinct manner. In this 
regard, numeric disclosure is particularly effective at conveying risks 
in a concise and succinct manner and thus is particularly effective in 
the KIT. The numeric examples are designed to highlight that each 
index-linked option will have unique risks. The examples highlight one 
of the central economic tradeoffs of index-linked options: that an 
investor will sacrifice the potential for returns if the index goes up 
in exchange for some protection from loss if the index goes down. 
Illustrating economic consequences of limits in a numeric example is a 
concrete and thus effective way of communicating certain key 
considerations about index-linked options that investor testing 
specifically showed were difficult for investors to understand.\221\ 
However, in consideration of comments received, we are adopting a 
change from the proposal to reduce the discussion of the same or 
similar topics in multiple locations, where this reduction could be 
made appropriately while continuing to promote the goal of highlighting 
key information about RILAs and enhancing understanding of RILA 
features and risks. Specifically, we are not including the proposed 
requirement that a RILA issuer would have to prominently state that 
``even after limiting a negative index return, the investor could still 
lose up to XX% of their investment,'' as this disclosure is already 
required under the Risks heading in the context of the ``Is There a 
Risk of Loss from Poor Performance?'' line item.\222\
---------------------------------------------------------------------------

    \220\ See CAI Comment Letter.
    \221\ Investors had difficulty understanding buffers, among 
other things. See supra paragraph accompanying footnote 38.
    \222\ See proposed Form N-4, Instruction 3(a) to Item 3 and 
final Form N-4, Instruction 3(c)(B) to Item 3.
---------------------------------------------------------------------------

    We received comments suggesting that the difference between a 
``price return index'' and a ``total return index'' is not currently 
adequately disclosed to RILA investors.\223\ The performance of a RILA 
is based on the performance of an index (such as the S&P 500) or 
another benchmark. The performance of a ``price return index'' is 
typically lower than that of a ``total return'' index because a price 
return index does not reflect dividends.\224\ Two commenters expressed 
that RILA investors may be misled by index-linked options that use a 
``price return index'' instead of a ``total return index.'' 
Specifically, one commenter stated that the ``biggest drag'' on the 
performance of RILAs and all indexed annuities is the use of a price 
return index rather than a total return index and that current 
disclosures do not adequately explain the differences between the index 
types.\225\ This commenter expressed that disclosure explaining the 
differences between the two types of indexes is particularly important 
for index-linked options without upside or downside limits since 
investors may believe their upside potential is unlimited when, in 
fact, there is a limit in the form of a lower price return. The 
commenter also noted that with no apparent fees, index-linked options 
may appear to be a better choice than an index fund, which has fees, 
without the investor understanding that an index fund will provide 
better upside potential in the form of a total return rather than a 
price return. Another commenter indicated that disclosure indicating 
that there are no ongoing fees associated with an index-linked option 
that uses a price return index inaccurately suggests that the option is 
free except for surrender charges.\226\
---------------------------------------------------------------------------

    \223\ See Comment Letter of Jason Lee (Oct. 30, 2023) (``Lee 
Comment Letter''); Johnson Comment Letter.
    \224\ An index-linked option's index is used to measure the 
amount the insurance company increases or decreases the value of the 
investment, but contract value allocated to an index-linked option 
is not invested directly in the index components. The indices 
associated with index-linked options are often ``price return'' 
indices, and their performance is the difference in index value from 
the beginning of the term and the end of the term. For example, if 
the index had a price of $1,200 on the first day of the term and a 
price of $1,260 on the last day of the term, the price return would 
be 5% ((1,260-1,200)/1,200). Price return indices do not reflect 
dividends. This contrasts with an investor investing in an index 
through an index fund (or investing directly in the components of an 
index), where such an investment's return would include dividends. 
Thus, the ``price return'' of an index is typically lower than the 
``total return'' of an index and the performance of a ``price return 
index'' is typically lower than that of a ``total return index.''
    \225\ See Johnson Comment Letter.
    \226\ See Lee Comment Letter.
---------------------------------------------------------------------------

    After considering these comments, we agree that this disclosure is 
appropriate. Investors should be alerted to the fact that a price 
return index does not assume the reinvestment of dividends and thus 
will underperform a total return index and direct investment in 
securities underlying the index. Accordingly, in a change from the 
proposal, we are adding a requirement in the KIT that insurance 
companies disclose, if applicable, that an index is a ``price return 
index,'' not a ``total return index,'' and therefore does not reflect 
dividends paid on the securities composing the index, or the index 
deducts fees and costs when calculating index performance, either of 
which will reduce the index return and will cause the index to 
underperform direct investment in the securities composing the 
index.\227\
---------------------------------------------------------------------------

    \227\ See final Form N-4, Instruction 3(c)(C) to Item 3.
---------------------------------------------------------------------------

    Insurance Company Risks. We are adopting the fourth line item under 
the Risk heading largely as proposed, with modifications to allow 
insurance companies to provide a narrative description of insurance-
company related risks. Under the proposal, this line item would have 
been required to be preceded by the question, ``Is There any Chance the 
Insurance Company Won't Pay Amounts Due to Me Under the Contract?'' The 
proposal would have required the insurance company to answer this 
question with a ``yes'' or ``no'' answer. As under current Form N-4, 
the proposed disclosure also would have required a statement to the 
effect that any obligations, guarantees, or benefits under the contract 
that may be subject to the claims-paying ability of the insurance 
company will depend on the financial solvency of the insurance company. 
In a change from the proposal, we are modifying the line item to state 
``What Are the Risks Related to the Insurance Company?'' so that 
insurance companies may provide a narrative description of insurance-
company related risks. As proposed, and under current Form N-4, 
insurance companies will be required to include a

[[Page 60003]]

statement to the effect that any obligations, guarantees, or benefits 
under the contract that may be subject to the claims-paying ability of 
the insurance company will depend on the financial solvency of the 
insurance company.\228\ Further, as proposed and under current Form N-
4, the insurance company will also be required either to provide its 
financial strength ratings or state, if applicable, that they are 
available upon request, and indicate how such requests can be made.
---------------------------------------------------------------------------

    \228\ This disclosure requirement included conforming changes to 
current Form N-4 to address RILAs. See Proposing Release at n.105 
and accompanying text.
---------------------------------------------------------------------------

    We received one comment on this portion of the proposal.\229\ The 
commenter opposed the wording, ``Is There any Chance the Insurance 
Company Won't Pay Amounts Due to Me Under the Contract?,'' expressing 
concerns that it will inflate the risks related to insolvency when 
paired with the required bolded ``yes'' response as compared to the 
actual risk of insolvency. This commenter expressed that it is rare for 
an insurer to fail to fulfill its contractual guarantees due to 
financial insolvency. Instead, the commenter suggested that the row 
question be changed to ``What are the Risks Related to the Insurance 
Company?'' to avoid the implication of high credit or counterparty 
risk.
---------------------------------------------------------------------------

    \229\ See CAI Comment Letter.
---------------------------------------------------------------------------

    After considering this comment, we are retitling this line item in 
the KIT as described above and permitting a narrative response. 
Specifically, insurance companies will be directed, consistent with the 
current form and the proposal,\230\ to state in response to this line 
item that an investment in the contract is subject to the risks related 
to the insurance company, including that any obligations (including 
under any fixed options and index-linked options), guarantees, or 
benefits are subject to the claims-paying ability of the insurance 
company and that more information about the insurance company, 
including if applicable its financial strength ratings, is available 
upon request with an indication of how such requests can be made.\231\ 
In a modification from the proposal, we are changing the title of this 
line item so that the disclosure is not required to begin with a 
``yes'' or ``no'' to avoid investors misunderstanding the possibility 
that amounts due will not be paid to investors due to insurance company 
insolvency. A narrative response that need not begin with a simple 
``yes'' addresses the actual risk of insolvency of a given insurance 
company, while avoiding investors misunderstanding the likelihood of an 
insurer becoming insolvent.
---------------------------------------------------------------------------

    \230\ While the current form refers to depositor, the substance 
of the required disclosure is the same as what is being adopted.
    \231\ See Final Form N-4, Instruction 3(d) to Item 3.
---------------------------------------------------------------------------

d. Restrictions
    Investments. We are adopting, substantially as proposed, amendments 
requiring insurance companies to include the disclosure required by the 
first line item under the heading ``Restrictions,'' ``Are There Limits 
on the Investment Options?'' We are modifying the current item to 
require the insurance company to state whether there are any 
restrictions that may limit the investment options that an investor may 
choose, as well as any limitations on the transfer of contract value 
among investment options.\232\ As these limitations can exist for non-
variable annuities as well as variable annuities, we are adopting this 
requirement as proposed. The disclosure requirement, which addresses 
restrictions relating to investment options generally, will apply to 
variable annuities, RILAs and registered MVA annuities (each of which 
will provide disclosure relevant to applicable investment options).
---------------------------------------------------------------------------

    \232\ See final Form N-4, Instruction 4(a) to Item 3. The 
current item requires the insurance company to state whether there 
are any restrictions that may limit the investments that an investor 
may choose, as well as any limitations on the transfer of contract 
value among portfolio companies. Consistent with the corresponding 
changes made to defined terms, we are also specifying that this item 
applies to any investment option, not just the portfolio companies 
available as investment options under a variable option. See infra 
Section II.B.8.b.
---------------------------------------------------------------------------

    Currently, the form also generally requires the insurance company 
to state that it reserves the right to remove or substitute portfolio 
companies as investment options, if applicable. Insurance companies 
typically reserve the right to change the index-linked options that are 
available under a contract as well as key features of available index-
linked options. To alert investors that the available index-linked 
options and key terms of those index-linked options may change in the 
future, we are adopting, as proposed, amendments to require the 
insurance company to state any reservation of its rights under the 
contract, including, if applicable, the right to (1) add or remove 
index-linked options; (2) change the features of an index-linked option 
from one crediting period to the next, including the changes to the 
index and the current limits on gains and limits on index losses 
(subject to any contractual minimum guarantees); and (3) substitute the 
index of an index-linked option during its crediting period. We are 
also adopting, as proposed, amendments to require that insurance 
companies disclose any right to stop accepting additional purchase 
payments, which may be significant to investors given the impact this 
reservation can have on investors' ability to accumulate contract value 
for retirement, grow the death benefit, and increase optional benefit 
values. We did not receive comments on any of these amendments.
    Contract Benefits. The second line item under ``Restrictions,'' 
``Are There any Restrictions on Contract Benefits?'' requires a 
statement about whether there are any restrictions or limitations 
relating to benefits offered under the contract, and/or whether a 
benefit may be modified or terminated by the insurance company. It also 
requires a statement that withdrawals that exceed limits specified by 
the terms of a contract benefit may affect the availability of the 
benefit by reducing the benefit by an amount greater than the value 
withdrawn and/or could terminate the benefit. As proposed, we are 
broadening this item to include disclosure on restrictions or 
limitations relating to any benefit under the contract, not just 
optional benefits (as currently required). While a benefit under the 
contract might be characterized as standard (i.e., not ``optional''), 
it could have restrictions that should be disclosed in the KIT because 
of the benefit's importance to the investor's rights under the 
contract, such as a proportionate withdrawal calculation under a 
standard death benefit.\233\ We are requiring insurance companies to 
include this disclosure for RILAs, as proposed, and also registered MVA 
annuities in a modification from the proposal, because the disclosure 
is equally applicable to those annuities as it is to variable 
annuities. We did not receive comments on proposed amendments to this 
line item.
---------------------------------------------------------------------------

    \233\ See final Form N-4, Instruction 4(b) to Item 3. Similarly, 
we are adopting, as proposed, a change to the discussion in the 
Overview about contract features that will broaden that discussion 
to cover both optional and standard contract benefits. See final 
Form N-4, Item 2(c).
---------------------------------------------------------------------------

e. Taxes
    We also are adopting, as proposed, amendments requiring insurance 
companies to include the line item under the heading ``Taxes,'' ``What 
are the Contract's Tax Implications?'' \234\ This line item is designed 
to alert investors to the tax implications of variable contracts and as 
amended, of non-variable annuities. This line item currently requires a 
statement that an

[[Page 60004]]

investor should consult with a tax professional to determine the tax 
implications of an investment in, and purchase payments received under, 
the contract. The insurance company must also state that there is no 
additional tax benefit to the investor if the contract is purchased 
through a tax-qualified plan or individual retirement account 
(``IRA''), and that withdrawals will be subject to ordinary income tax 
and may be subject to tax penalties. We are applying this requirement 
to non-variable annuities because the same tax considerations apply. We 
did not receive comments on the proposed amendments to this line item.
---------------------------------------------------------------------------

    \234\ See final Form N-4, Instruction 5 to Item 3.
---------------------------------------------------------------------------

f. Conflicts of Interest
    Investment Professional Compensation. We are requiring, as 
proposed, insurance companies to include the first line item under the 
heading ``Conflicts of Interest,'' ``How are Investment Professionals 
Compensated?'' \235\ This current line item for variable contracts is 
designed to alert investors to the existence of compensation 
arrangements for investment professionals and the potential conflicts 
of interest arising from these arrangements. It requires issuers to 
disclose that an investment professional may be paid for selling the 
contract to investors. An issuer must describe the basis upon which 
such compensation is typically paid (e.g., commissions, revenue 
sharing, compensation from affiliates and third parties). An issuer 
also must state that investment professionals may have a financial 
incentive to offer or recommend the contract over another investment. 
The same compensation arrangements and potential conflicts are relevant 
for non-variable annuities, and we therefore are requiring an insurance 
company registering a non-variable annuity to provide the same 
disclosure. We did not receive comments on these amendments.
---------------------------------------------------------------------------

    \235\ See final Form N-4, Instruction 6(a) to Item 3.
---------------------------------------------------------------------------

    Exchanges. We are requiring, as proposed, insurance companies to 
include the second line item under the heading ``Conflicts of 
Interest,'' ``Should I Exchange My Contract?'' \236\ This current line 
item for variable contracts is designed to alert investors to potential 
conflicts of interest that may arise from contract sales that stem from 
exchanges. It requires issuers to state that some investment 
professionals may have a financial incentive to offer a new contract in 
place of the one owned by the investor. An issuer must further state 
that investors should only exchange their contract if they determine, 
after comparing the features, fees, and risks of both contracts, that 
it is preferable to purchase the new contract rather than continue to 
own the existing contract. These same considerations apply to an 
investor considering an exchange involving a non-variable annuity. In a 
change that will apply to variable and non-variable annuities, and to 
put investors on notice that there may also be costs or charges 
associated with terminating an existing contract, we are also 
requiring, as proposed, that issuers disclose in this legend that 
investors should consider any fees or penalties to terminate the 
existing contract in considering whether to exchange a contract. We did 
not receive comments on these amendments.
---------------------------------------------------------------------------

    \236\ See final Form N-4, Instruction 6(b) to Item 3.
---------------------------------------------------------------------------

4. Principal Disclosure Regarding Index-Linked Options and MVA Options 
(Items 6 and 17)
    We are adopting amendments to Form N-4 to provide investors with 
the principal disclosures regarding index-linked options, largely as 
proposed, and MVA options, in a modification from the proposal, 
available under the contract, as required in two items of the form. 
First, investors will be provided with detailed information about the 
index-linked options and MVA options available under the contract in 
Item 6 (Description of the Insurance Company, Registered Separate 
Account, and Investment Options). In addition, investors will be 
provided with a summary information table, with legends highlighting 
risks, that outlines the available index-linked options and MVA options 
in Item 17 (Investment Options Available Under the Contract). These 
amendments build on the existing disclosure requirements in each form 
item to help ensure that investors have key information about the 
annuity contract and available investment options, regardless of 
whether the contract is a variable annuity, a RILA, a registered MVA 
annuity, or combination contract offering a variety of these options.
a. Description of Insurance Company, Registered Separate Account, and 
Investment Options (Item 6)
    We are adopting amendments to Item 6 of Form N-4 that will, largely 
as proposed, modify certain existing disclosure requirements concerning 
the insurance company, registered separate account, and variable 
options, and expand the item to include new disclosures for any index-
linked and fixed options offered under the contract. To address the 
inclusion of registered MVA annuities on Form N-4, we are adopting 
changes to the proposed requirements to address fixed options subject 
to a contract adjustment. Items 6(a)-(c) will continue to require a 
concise discussion about the insurance company, registered separate 
account, and variable options. The amendments in Item 6(d) will require 
new disclosures about key aspects of any index-linked option offered 
under the contract, while Item 6(e) will add disclosures for fixed 
options generally, including MVA options.
Insurance Company, Registered Separate Account, and Variable Options
    We are adopting the amendments to Items 6(a)-(c) as proposed. As 
discussed in the Proposing Release, these provisions largely retain the 
current requirement to provide a concise discussion about the insurance 
company, registered separate account, and variable options, slightly 
modified to implement certain definitional changes and minor 
restructuring to accommodate the addition of RILAs to the form.\237\
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    \237\ See final Form N-4, Item 6(a)-(c). For example, because 
the insurance company is obligated to pay all amounts promised to 
investors under the contracts subject to its financial strength and 
claims-paying ability, disclosure about this topic must be framed in 
terms of the insurance company, not the registered separate account, 
as the requirement is currently worded.
---------------------------------------------------------------------------

    One commenter addressed proposed Item 6(a), which would, if 
applicable, require a filer to indicate that the insurance company is 
relying on the exemption provided by rule 12h-7 under the Exchange 
Act.\238\ This commenter asked that these rule 12h-7 representation 
requirements be revised to make clear that they only apply to an 
insurance company registrant (not a separate account) and only to an 
insurance company as an issuer of a RILA (not an insurance company in 
its role as depositor of a registered separate account).\239\ The 
instruction to Item 6(a), however, serves as a reminder to registrants 
that rely on a rule 12h-7 exemption to include the prospectus 
disclosure that the rule requires.\240\ If a registrant is relying on 
rule 12h-7, it must provide the disclosure required by

[[Page 60005]]

that rule--independent of any form requirement--and in providing the 
disclosure can provide the additional details the commenter identified 
in its comment letter. We therefore are not making the suggested 
change.\241\ This commenter similarly asked that we revise the proposed 
instruction to allow insurers to add clarifying disclosure that 
identifies generally the types of securities that support an insurer's 
reliance on rule 12h-7 (for example, a general statement that the 
insurer relies on rule 12h-7 with respect to registered stand-alone 
RILA contracts, registered index-linked options, or other registered 
non-variable insurance contracts the insurer issues).\242\ The proposed 
instruction does not preclude a registrant from disclosing this 
information.
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    \238\ CAI Comment Letter.
    \239\ CAI Comment Letter.
    \240\ See rule 12h-7(f) under the Exchange Act (requiring that 
the prospectus for the securities contain a statement indicating 
that the issuer is relying on the exemption provided by the rule). 
Pursuant to section 30(d) of the Investment Company Act, a separate 
account must comply with the Investment Company Act's reporting 
requirements in lieu of the Exchange Act's reporting requirements 
that apply to other kinds of issuers and therefore does not need to 
rely on rule 12h-7.
    \241\ In addition to requiring rule 12h-7 prospectus disclosure 
in Item 6, we are adding a related check box on the facing page. See 
infra Section II.C.8.a.
    \242\ CAI Comment Letter.
---------------------------------------------------------------------------

    We received no comments on the proposed amendments to Item 6(b) 
(Registered Separate Account) or 6(c) (Variable Options), and we are 
adopting those sub-items as proposed.
Index-Linked Options
    We are adopting amendments to Item 6(d) that will require an 
insurance company to disclose information about the key features of the 
index-linked options currently offered under the contract.\243\ These 
amendments are substantially as proposed, but with some modifications 
in response to comments. Under the final amendments, the prospectus 
must include a description of each index-linked option currently 
offered under the contract, including information about: (1) limits on 
index losses; (2) limits on index gains; (3) crediting period; (4) 
crediting methodology and examples; (5) relevant indexes; (6) maturity; 
and (7) other material features of the index-linked option. As 
discussed in the Proposing Release, these disclosures are designed to 
complement more general disclosures about index-linked options located 
elsewhere in the prospectus by providing investors specific information 
about each index-linked option's features and risks.\244\ In 
particular, the new disclosures are designed to address points that 
investor testing participants suggested might be confusing and/or for 
which they indicated that they would prefer more information.\245\
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    \243\ Final Form N-4, Item 6(d).
    \244\ In the context of variable annuities, this type of detail 
about variable options is not required by Item 6 because each 
portfolio company issues its own prospectus that contains more 
detailed information about the portfolio company. See current and 
final Form N-4, Item 6(c); see also infra footnote 245.
    \245\ Proposing Release at nn.125-126 and accompanying text.
---------------------------------------------------------------------------

    One commenter expressly supported our proposal to require detailed 
disclosure about index-linked options in the prospectus, stating that 
``the disclosure items and instructions under proposed new Item 6(d) 
are helpful and appropriate,'' and ``would generally provide investors 
with the information they need to understand how the index-linked 
options operate, while also providing enough flexibility in the 
instructions to describe RILAs in the market today and to allow for 
future innovation.'' \246\ No commenters opposed the proposed inclusion 
of disclosure about index-linked options in the prospectus as a general 
topic. Accordingly, we are requiring detailed disclosure about index-
linked options in the prospectus, subject to modifications to certain 
of the proposed aspects of this disclosure, as discussed below.
---------------------------------------------------------------------------

    \246\ CAI Comment Letter.
---------------------------------------------------------------------------

Description of the Index-Linked Options Currently Offered
    Under the final amendments, the prospectus must describe the index-
linked options currently offered under the contract. As proposed, the 
description must state that the insurance company will credit positive 
or negative interest at the end of a crediting period to amounts 
allocated to an index-linked option based, in part, on the performance 
of the index and--to dispel potential investor confusion relating to 
the reference to an index--that an investment in an index-linked option 
is not an investment in the index or in any index fund.\247\
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    \247\ Final Form N-4, Item 6(d)(1)(i).
---------------------------------------------------------------------------

    We are adopting, as proposed, the requirement to state that an 
investor could lose a significant amount of money if the index declines 
in value.\248\ In a change from the proposal, we are not requiring the 
prospectus to state that the potential for investment loss could be 
significantly greater over time than the potential for investment 
gain.\249\ As discussed above, we are not adopting a parallel cover 
page disclosure because a separate requirement that addresses limits on 
index losses covers this risk in a more direct way than the proposed 
statements.\250\ We are not adopting this aspect of the proposed Item 6 
requirement for the same reasons.
---------------------------------------------------------------------------

    \248\ Final Form N-4, Item 6(d)(1)(ii). This disclosure mirrors 
a parallel requirement in Item 2(b)(2)(ii). See supra section 
II.C.2.
    \249\ Proposed Form N-4, Item 6(d)(1)(ii).
    \250\ Proposed Form N-4, Item 1(a)(6); see supra Section II.C.1.
---------------------------------------------------------------------------

    As proposed, to emphasize the risks associated with an early 
withdrawal from an index-linked option, the prospectus must state that 
an investor could lose a significant amount of money due to the 
contract adjustment if amounts are removed from an index-linked option 
prior to the end of its crediting period.\251\ In a change from the 
proposal, and as discussed below, we are not adopting the proposed 
requirement to accompany either this risk of loss statement or the risk 
of loss statement regarding negative index performance with numeric 
disclosure of the maximum amount of loss an investor could experience 
from contract adjustments or negative index performance.\252\
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    \251\ Final Form N-4, Item 6(d)(1)(iii).
    \252\ See proposed Form N-4, Instructions to Item 6(d)(1)(ii) 
and (iii); see also supra Section II.C.2.
---------------------------------------------------------------------------

    Substantially as proposed, to inform investors of the possibility 
that their investment options could be unilaterally changed without 
action on their part, the insurance company will be required to state, 
if applicable, that it can add or remove index-linked options and 
change the features of an index-linked option from one crediting period 
to the next, including the index and current limits on gains and limits 
on index losses, subject to any contractual minimum guarantees.\253\
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    \253\ Final Form N-4, Item 6(d)(1)(iv).
---------------------------------------------------------------------------

    Lastly, similar to the current requirement for variable options, 
and substantially as proposed, a prospectus that offers index-linked 
options must state that certain information regarding the features of 
each currently offered index-linked option is available in an appendix 
to the prospectus, with a cross-reference to that appendix.\254\
---------------------------------------------------------------------------

    \254\ Final Form N-4, Item 6(d)(1)(v); see also final Form N-4, 
Item 17(b) (Appendix). In a change from the proposal, we are adding 
``current'' before ``limit on index loss'' and removing 
``guaranteed'' before ``minimum limit on index gain'' to conform to 
the revised headings in the Item 17(b) table for index-linked 
options. See infra Section II.C.4.b.
---------------------------------------------------------------------------

    One commenter addressed the proposed description of index-linked 
options currently offered under the contract with concerns regarding 
the narrative and numeric risk of loss disclosures.\255\ This commenter 
opposed including any disclosures addressing the maximum loss an 
investor could experience--narrative or numerical--in the description 
of index-linked options. This commenter asserted that disclosure on 
index-linked options in this section of the prospectus should focus on 
describing the mechanics of the index-linked options and contract

[[Page 60006]]

adjustments, not investment risks, and suggested that investors likely 
will have already read the maximum risk of loss disclosures in earlier 
sections of the prospectus, so including similar disclosure along with 
descriptions of index-linked options would not be helpful.
---------------------------------------------------------------------------

    \255\ CAI Comment Letter.
---------------------------------------------------------------------------

    Including risk of loss statements along with descriptions of the 
index-linked options that are offered under the contract (in the 
location in the prospectus that requires the greatest amount of detail 
about index-linked options) will result in a more complete 
understanding of the options the contract offers. The potential risk of 
loss associated with an index option is a key piece of information for 
investors to consider alongside other index-option-specific details 
disclosed in response to this item of Form N-4. Accordingly, the final 
amendments will require statements regarding the risk of loss 
associated with index declines, subject to conforming modifications as 
discussed above in the context of similar cover page disclosure. We are 
also adopting the requirement to include a statement about risk of loss 
associated with negative contract adjustments, as proposed, for the 
same reasons.\256\ In a change from the proposal, however, we are not 
adopting the proposed instructions that would have required numeric 
disclosure of the potential scope of loss due to negative index 
performance or a negative contract adjustment in Item 6. After 
considering comments, we agree that numeric examples are appropriately 
located in other parts of the prospectus, namely the KIT and the Item 5 
principal risk disclosure (for the reasons discussed in the release 
sections describing those disclosures), and need not be repeated 
here.\257\ For this reason, we are adopting an approach that does not 
require numeric disclosure showing risk of loss in the discussion of 
index-linked options, but that retains related narrative statements 
about risk of loss, to ensure that all material aspects of each index-
linked option are disclosed in one place.\258\
---------------------------------------------------------------------------

    \256\ Final Form N-4, Item 6(d)(1)(ii).
    \257\ See supra Section II.C.3 and infra Section II.C.5.
    \258\ See proposed Form N-4, Instructions to Item 6(d)(1)(ii) 
and (iii).
---------------------------------------------------------------------------

Limits on Index Losses and Gains
    Description of limits on index losses and gains: Under the final 
amendments, the insurance company must describe the limits on index 
losses and gains for each index-linked option.\259\ In each case, and 
as applicable, the insurance company will be required to state that 
such limits apply and describe how index losses and gains would be 
limited (for example, through the use of a floor or buffer to limit 
losses, or a cap or participation rate to limit gains).\260\ We are 
also requiring the insurance company to provide examples to help 
investors understand how these limits work in practice. To illustrate 
the limits on index losses, the prospectus must include an example 
showing how the limit on index losses could operate to limit a negative 
return (e.g., if the index return is -25% and the buffer is -10%, the 
insurance company will credit -15% (the amount that exceeds the buffer) 
at the end of the term, meaning the investor's contract value will 
decrease by 15%).\261\ The prospectus similarly must include an example 
of how the limit on gains could operate to limit a positive return 
(e.g., if the index return is 12% and the cap rate is 4%, the insurance 
company will credit 4% at the end of the term, meaning the investor's 
contract value will increase by 4%).\262\ We received no comments on 
this aspect of the release, and are adopting as proposed.
---------------------------------------------------------------------------

    \259\ Final Form N-4, Items 6(d)(2)(i) and (ii).
    \260\ Final Form N-4, Items 6(d)(2)(i)(A) and 6(d)(2)(ii)(A).
    \261\ Final Form N-4, Item 6(d)(2)(i)(A).
    \262\ Final Form N-4, Item 6(d)(2)(ii)(A).
---------------------------------------------------------------------------

    Current limits on index losses and gains: The final amendments to 
Item 6 also will require insurers to disclose, for each index-linked 
option, current limits on index losses and gains (along with a 
statement that the current limit will not change during an index-linked 
option's crediting period).\263\ In a change from the proposal and in 
response to comments, insurers will be permitted to comply with the 
requirement to provide current limits on index gains by posting the 
information to a website that is publicly accessible, free of charge, 
and specifically incorporating this information by reference into the 
prospectus.\264\ An insurer relying on this incorporation by reference 
approach must: (1) state in the prospectus at the place where current 
upside rates would normally appear that the information about current 
limits on index gains is incorporated by reference; and (2) provide the 
website address where such rates can be found, with an active hyperlink 
to the website for electronic versions of the prospectus.\265\ In 
addition, the website must: (1) be specific enough to lead investors 
directly to the current limits on index gains, rather than to the home 
page or other section of the website on which the limits are posted; 
(2) reflect current limits that are available for all contract 
investors, including variations in limits (e.g., due to distribution 
channel, State requirements, optional benefits, date of contract 
purchase, etc.); and (3) only include limits on index gains that are 
currently available for the index-linked options offered under the 
contract.\266\ These requirements are meant to provide the same 
information the investor would have received through the proposed 
approach where current upside rates would appear directly in the 
prospectus.
---------------------------------------------------------------------------

    \263\ Final Form N-4, Items 6(d)(2)(i)(B) and 6(d)(2)(ii)(B).
    \264\ Final Form N-4, Instruction 1 to Item 6(d)(2)(ii)(B); see 
also final Form N-4, General Instruction D and Item 17(b). The 
website address required by Item 6 is the same website that is 
required to be included in the Item 17(b) legend, and must conform 
to Item 17(b)'s website posting requirements.
    \265\ Final Form N-4, Instruction 1 to Item 6(d)(2)(ii)(B); 
Final Form N-4, General Instruction C.3.(i).
    \266\ Final Form N-4, Instruction 2 to Item 6(d)(2)(ii)(B).
---------------------------------------------------------------------------

    We received mixed comments about the proposed requirement to 
disclose current limits on index gains (or ``current [upside] rates'') 
in the prospectus.\267\ One commenter supported disclosing current 
rates, observing that the current rate is one of the most important 
terms of the offering.\268\ Conversely, several commenters opposed our 
proposal to require current upside rates in the prospectus.\269\ These 
commenters asserted that because current upside rates for new crediting 
periods change so frequently--daily, or in most cases, weekly or 
monthly--a prospectus that includes these current rates would quickly 
become stale, necessitating frequent updates to the prospectus. One of 
the commenters stated that RILA issuers routinely change current upside 
rates for new crediting periods in response to market conditions to 
help them manage their risks and provide competitive upside exposure to 
investors on an ongoing basis.\270\ The other commenter observed that 
not only do current upside rates for RILAs change frequently, but rates 
can also differ depending on when the contract was purchased, the 
distribution channel

[[Page 60007]]

through which the contract was sold, the contract class, and the 
optional benefits available.\271\ This commenter also raised questions 
regarding the timing of when current upside rates must be 
provided.\272\
---------------------------------------------------------------------------

    \267\ See, e.g., CAI Comment Letter; VIP Working Group Comment 
Letter. We did not receive comments opposing the proposed 
requirement to disclose current limits on index losses in the 
prospectus. We understand that current limits on index losses do not 
change as frequently as current limits on index gains. See infra 
footnote 754 and accompanying text.
    \268\ Johnson Comment Letter.
    \269\ CAI Comment Letter; VIP Working Group Comment Letter; 
Comment Letter of Ronald Coenen, Jr. (Apr. 5, 2024) (``Coenen 
Comment Letter'').
    \270\ CAI Comment Letter.
    \271\ VIP Working Group Comment Letter.
    \272\ Id. (asking how far in advance must the rates be filed, 
whether investors get the rates at the time the application is 
signed or the date the insurance company received the money or 
transfer request; also noting that today, some products do not 
disclose current rates in advance and instead use thresholds or 
bail-out features, and asking if this approach would no longer be 
permissible, and can existing products continue to operate with 
these features).
---------------------------------------------------------------------------

    The proposal was designed to address concerns about frequently 
changing upside rates by contemplating that insurance companies could 
update upside rate information using a prospectus supplement filed 
pursuant to rule 497 under the Securities Act, rather than being 
required to update the registration statement to reflect each 
change.\273\ The two commenters opposing the proposed requirement to 
disclose current upside rates in the prospectus raised concerns about 
this approach, however, stating that it would be a significant change 
to current practice, and would require RILA issuers to file rule 497 
prospectus supplements frequently to update current rate 
information.\274\ They also stated that disclosing new rates by filing 
a rule 497 prospectus supplement frequently (e.g., every few days) 
would be confusing to investors. One of the commenters observed that 
insurance companies could change current rates less frequently to avoid 
the need for frequent prospectus supplements, but this would mean that 
to offset the risks associated with more constant rates, insurance 
companies would offer less favorable rates to investors.\275\
---------------------------------------------------------------------------

    \273\ Proposing Release at nn.134.
    \274\ CAI Comment Letter (stating that ``one member estimated 
that if they change each upside rate at the start of each crediting 
period for each share class of each RILA contract they offer . . . 
it would need to file 432 supplements each year, covering 25,680 
rates''); VIP Working Group Comment Letter.
    \275\ VIP Working Group Comment Letter.
---------------------------------------------------------------------------

    Commenters urged the Commission to permit insurance companies to 
follow their current practice of disclosing current upside rates on a 
dedicated web page on the insurer's website.\276\ One of these 
commenters asserted that the current approach provides the investor 
with the same information in the same timeframe as the proposed rule 
497 process ``without any of the significant costs, human resource 
burdens, and investor confusion'' that would arise from an 
``overwhelming'' number of rule 497 filings.\277\ The commenter stated 
that RILAs have been offered for more than a decade absent the 
inclusion of current rates in the prospectus, and the RILA rate-setting 
and communication process is well-established and functions without any 
apparent investor confusion or complaint. This commenter also noted 
that we proposed to require a website address with current upside rates 
in the index-linked option appendix and asked that rather than having 
to file numerous rule 497 prospectus supplements and post those 
supplements online pursuant to rule 498A, RILA issuers be allowed to 
incorporate by reference the web page that would already include the 
same information.\278\
---------------------------------------------------------------------------

    \276\ CAI Comment Letter; VIP Working Group Comment Letter.
    \277\ CAI Comment Letter.
    \278\ Id. (citing to proposed Form N-4, Item 17(b)).
---------------------------------------------------------------------------

    Commenters who suggested that current upside rates should be posted 
online instead of included directly in the prospectus recommended 
additional measures to effectuate the suggested approach. One commenter 
suggested that as a condition to allowing insurers to post current 
upside rates to the insurer's website, we could impose a recordkeeping 
requirement and require the issuer to consent to subjecting the posted 
rate information to prospectus or registration statement 
liability.\279\ Another commenter similarly asked that we permit RILA 
issuers to include the current upside rates in the prospectus by 
expressly incorporating by reference into the prospectus the website 
page where current rates would be posted, asserting this would have the 
same legal significance as a rule 497 prospectus supplement with 
respect to disclosure liability.\280\ This commenter further stated 
that allowing information to be incorporated by reference into the 
prospectus would be consistent with the Commission's prior approach to 
the treatment of websites that are identified or incorporated by 
reference into the registration statement.\281\ The commenter also 
suggested that if we were to adopt the website approach for posting 
current upside rates as an alternative to the rule 497 approach, it 
would be willing either to support a requirement to include historical 
upside rates as part of the website that is incorporated by reference 
into the prospectus, or to file an annual report disclosing the upside 
rates offered during the previous one-year period.\282\
---------------------------------------------------------------------------

    \279\ VIP Working Group Comment Letter.
    \280\ CAI Comment Letter.
    \281\ Id. (citing to proposed Form N-4, Item 17(b); also stating 
that by expressly incorporating by reference the web page with the 
current upside rates, the information on that web page would be 
legally part of the prospectus, and prospectus disclosure liability 
would attach).
    \282\ Coenen Comment Letter.
---------------------------------------------------------------------------

    After considering comments, we have determined to permit insurance 
companies to disclose current upside rates in the prospectus either by 
disclosing the information directly in the prospectus, as proposed, or 
by including a website address where the current rates can be found and 
incorporating by reference the information on the website into the 
prospectus.\283\ Investors likely will find it more efficient to obtain 
current upside rates on the insurer's website identified in the 
prospectus than to review a potentially high number of prospectus 
supplements. It also will be familiar to many investors because this is 
the approach that many RILA investors currently use to obtain 
information about current upside rates. Moreover, allowing insurance 
companies to disclose current upside rates on a website and to 
incorporate this information by reference into the prospectus also will 
retain prospectus and registration statement liability, and ready 
accessibility of information that is a core aspect of the RILA 
offering. It will also accommodate RILA issuers' practice of changing 
current upside rates in response to market conditions. Because the 
approach we are adopting is consistent with current practice, we 
anticipate that the vast majority of RILA issuers will choose to use 
the website posting approach to disclose current upside rates instead 
of disclosing them directly in the prospectus.
---------------------------------------------------------------------------

    \283\ Final Form N-4, Instruction 1 to Item 6(d)(2)(ii)(B). With 
respect to the timing questions raised by one commenter, see supra 
footnote 272, we understand that it is common practice for insurance 
companies to disclose current rates in advance of the start of the 
crediting period of an index-linked option (with the specific timing 
for disclosing these current rates ahead of the start of the 
crediting period varying by product), although in limited historical 
cases insurance companies have not disclosed current rates in 
advance and instead used thresholds or bail-out features. The 
amended form requirements do not prescribe how far in advance of the 
start of the crediting period of an index-linked options current 
rates must be set. We understand that there are variations in 
practice within the industry on when rates are set before the start 
of the crediting period, based on market conditions and other 
factors, and our disclosure approach does not necessitate 
standardizing these practices.
---------------------------------------------------------------------------

    In addition, in response to comments and to provide a longer and 
lasting historical record of recent upside rate information, which 
investors may wish to consider, and which Commission staff, third-party 
market participants, and others could use to analyze RILA offerings 
individually and the RILA market as a whole, all upside rate 
information for the prior calendar year

[[Page 60008]]

must be filed annually with the Commission in a structured data format 
in response to Item 31A of Form N-4, as described below in Section 
II.C.7.\284\ Including this information together with the other census-
type information RILAs will be required to provide in response to Item 
31A is preferable to the recordkeeping requirement one commenter 
suggested because it avoids the need for the Commission to access 
insurance company records in order to obtain the historical information 
while also relieving insurers of an additional recordkeeping 
obligation. Moreover, requiring an annual filing on EDGAR not only 
creates a historical record of the information, as would have been the 
case if insurers filed a rule 497 prospectus supplement to disclose 
each upside rate change, but also has the benefit of being a single 
filing, instead of the potentially overwhelming number of rule 497 
filings to which commenters objected. This requirement also supports 
commenters' recommendation to allow insurance companies to incorporate 
by reference current upside rates from a website because, absent some 
filing with the Commission, it would be difficult to determine what 
information had been incorporated. We are adopting the annual filing 
approach instead of the alternative approach of requiring historical 
rate information to be posted on insurers' websites, as one commenter 
suggested, because a single annual filing (1) would create a permanent 
historical record of past rates, unlike website disclosure that is 
continually updated, and (2) would be more efficient for interested 
parties to review and analyze than continually-updated website 
information.
---------------------------------------------------------------------------

    \284\ Final Form N-4, Item 31A; see also Coenen Comment Letter.
---------------------------------------------------------------------------

    Minimum limits on index losses and gains: In addition, insurers 
will have to include prominent statements regarding minimum limits on 
index losses and gains that will always be available under the 
contract, subject to certain modifications from the proposal.\285\ As 
discussed above, we have modified the wording of the requirement on 
minimum limits on losses to require an insurer to prominently disclose 
any minimum limits on index losses that will always be available under 
the contract, or alternatively, to prominently state that it does not 
guarantee that the contract will always offer index-linked options that 
limit index losses.\286\ Similarly, we have modified the wording of the 
proposal, as discussed above, to require an insurer to prominently 
state, for each type of upside limit offered (e.g., cap, participation 
rate, etc.), the lowest limit on index gains that may be established 
under the contract.\287\ We are requiring similar disclosure on the 
cover page, in the Overview, and in the KIT, and we discuss the 
comments received concerning the proposed requirement to disclose 
information about guaranteed minimums, and our corresponding 
modifications, above.\288\ We are also retaining this disclosure 
requirement in Item 6, in the context of other disclosure regarding 
index-linked options, because it should be included in the section of 
the prospectus that provides the greatest amount of detail about such 
options. An investor reviewing the detailed disclosure about each 
index-linked option required by Item 6 will therefore have information 
about the key terms of each index-linked option and information about 
limits on gains and losses that may be available in future crediting 
periods.
---------------------------------------------------------------------------

    \285\ Final Form N-4, Items 6(d)(2)(i)(B) and 6(d)(2)(ii)(B).
    \286\ Final Form N-4, Item 6(d)(2)(i)(B); see supra Section 
II.C.1.
    \287\ Final Form N-4, Item 6(d)(2)(ii)(B).
    \288\ See supra Sections II.C.1, 2, and 3.
---------------------------------------------------------------------------

    Factors considered in determining current limits on index losses 
and gains: Substantially as proposed, we are requiring the insurance 
company to describe the factors it considers in determining the current 
limits on losses and gains for an index-linked option and how that 
choice may impact other features of the option set by the insurance 
company, along with an explanation of the factors an investor should 
consider regarding limits on index losses or gains before selecting an 
index-linked option for investment.\289\
---------------------------------------------------------------------------

    \289\ Final Form N-4, Items 6(d)(2)(i)(C) and 6(d)(2)(ii)(C). 
Such factors could include, for example, long-term interest rates, 
market volatility, or the cost of option contracts supporting the 
index-linked option guarantees. Similar disclosure is required in 
other contexts. See, e.g., final Form N-4, Item 9(a) (requiring 
disclosure of material factors that determine the level of annuity 
benefits); see also Form N-6, Instruction 2 to Item 7(a) (requiring 
the identification of factors that determine the applicable cost of 
insurance rate).
---------------------------------------------------------------------------

    As discussed in the Proposing Release, we are requiring the 
insurance company to explain how it selects rates for limiting index 
losses and gains to help investors understand how the features of a 
particular index-linked option will impact that option's risk/return 
profile. Giving investors information about the factors the insurance 
company considers in determining current limits--which are key features 
of an index-linked option--may help manage their expectations regarding 
how the product operates.\290\ The disclosure about how the current 
limits on index gains or losses may impact other aspects of the index-
linked option is designed to explain the inverse relationship between 
various features of the index-linked option.\291\ The requirement to 
provide an explanation of the factors an investor should consider 
regarding limits on index losses or gains before selecting an index-
linked option is designed to assist an investor in choosing among the 
index-linked options available under the contract, such as by 
explaining the difference between a floor and a buffer, or by 
highlighting index-linked options with features that assume more risk 
in return for higher potential return, or vice versa. We received no 
comments on this aspect of the proposal and are adopting as proposed.
---------------------------------------------------------------------------

    \290\ For example, an insurer might disclose that caps and 
participation rates may vary depending on factors such as market 
volatility, hedging strategies and investment performance, the 
investor's index effective date, or interest rates, among others. If 
an insurer discloses that it takes various specified factors into 
consideration, but ultimately sets rates at its own discretion, the 
investor should know that as well.
    \291\ For example, the insurance company could include an 
explanation regarding how the limit on index losses for an index-
linked option could impact the current limit on index gains. This 
could help an investor understand, for example, that if the 
insurance company determines to increase the extent to which the 
index-linked option will protect against loss, the insurance company 
may then reduce the amount of upside index participation the 
investor could receive.
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Crediting Period
    As proposed, we are requiring insurers to generally describe the 
crediting periods of the index-linked options available under the 
contract (e.g., 1, 3, and 6 years), along with the factors an investor 
should consider regarding different crediting period lengths before 
selecting an index-linked option.\292\ The final amendments, 
substantially as proposed, will require the insurance company to 
prominently state that amounts must remain in an index-linked option 
until the end of its crediting period to be credited with all

[[Page 60009]]

or partial interest, as applicable, and to avoid a possible contract 
adjustment in addition to potential surrender charges and tax 
consequences.\293\ This discussion must also include a description of 
the transactions subject to a contract adjustment (e.g., partial 
withdrawals), with appropriate cross-references to related disclosures 
in the prospectus.\294\ These disclosures collectively are designed to 
help an investor make an informed investment decision when selecting an 
index-linked option, taking into account that withdrawing money before 
the end of the applicable crediting period can have adverse 
consequences. We received no comments on this aspect of the proposal 
and are adopting it as proposed.
---------------------------------------------------------------------------

    \292\ See final Form N-4, Item 6(d)(2)(iii)(A). An example of 
one such factor could be that crediting periods introduce timing 
risk that forces investors to take losses at the end of a crediting 
period, and shorter crediting periods might increase this risk. See 
OIAD Investor Testing Report at Section 2, RILAs: Structure of 
Contracts and Investment Options, Investment Terms (``The role of 
[crediting periods] also creates a situation that may be unique for 
RILA purchasers relative to other investments they hold. In 
particular, RILA investors periodically realize gains or losses at 
the end of each [crediting period]. In contrast, a mutual fund 
investor (for example) could wait to sell the fund during down 
markets, avoiding realizing those losses. Thus, the [crediting 
period] feature adds a `timing risk' for RILA investors relative to 
certain other investments.'').
    \293\ Final Form N-4, Item 6(d)(2)(iii)(B).
    \294\ Final Form N-4, Item 6(d)(2)(iii)(B).
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Methodology and Examples
    Each index-linked option has an ``index crediting methodology'' 
that explains how interest is calculated and credited to the contract. 
The final amendments will, as proposed, require insurance companies to 
explain the index crediting methodologies used for index-linked options 
and provide numeric examples reflecting how these methodologies 
work.\295\ The final amendments also will require insurance companies 
to provide a bar chart that illustrates the annual return of each index 
along with hypothetical examples of index return after applying 
standardized limitations on index gains and losses, subject to minor 
modifications from the proposal, discussed below.\296\
---------------------------------------------------------------------------

    \295\ Final Form N-4, Item 6(d)(2)(iv)(A) and (C).
    \296\ Final Form N-4, Item 6(d)(2)(iv)(B).
---------------------------------------------------------------------------

    Specifically, we are requiring insurance companies to describe, for 
each index crediting methodology, how interest is calculated and 
credited at the end of a crediting period based on the interest 
crediting formula or performance measure (e.g., point-to-point, step-up 
calculations, and enhanced performance).\297\ We received no comments 
on this aspect of the proposal and are adopting it as proposed.
---------------------------------------------------------------------------

    \297\ Final Form N-4, Item 6(d)(2)(iv)(A). We understand that 
many index-linked options use the same crediting methodology. If all 
index-linked options offered by a RILA contract use the same 
crediting methodology, the prospectus will only include one example 
of that crediting methodology. If, however, the index-linked options 
in a RILA contract offer more than one crediting method, or if 
different index-linked options in a RILA contract offer different 
crediting methods, this would affect the number of examples to be 
provided. The number of examples to be provided depends on the 
number of crediting methodologies, not the number of index-linked 
options. A point-to-point crediting methodology compares the index's 
performance at two points in time (such as at the beginning and end 
of the crediting period). Step-up calculations guarantee a given 
rate if the index's returns are positive, regardless of the index's 
actual performance, subject to certain conditions. ``Enhanced 
performance'' increases a positive index return, such as by offering 
a participation rate of more than 100%.
---------------------------------------------------------------------------

    We are also requiring, as proposed, the prospectus for contracts 
that offer index-linked options to include a bar chart for each index 
showing the index's annual return for each of the last 10 calendar 
years (or for the life of the index, if less than 10 years), with the 
corresponding numeric performance adjacent to each bar.\298\ 
Specifically, insurance companies must provide a hypothetical example 
alongside each index return that reflects the return after applying a 
5% cap and a -10% buffer. If there are no caps or buffers offered under 
the contract (if, for example, the contract includes a floor rather 
than a buffer), insurance companies may reflect a rate or measure used 
to limit index gains or losses under the contract that is 
comparable.\299\ Insurance companies will not be permitted to include 
additional index performance presentations, or historical index 
performance that precedes the inception of the index.\300\ Further, 
similar to the proposal but with modifications to address comments as 
discussed below, insurance companies will be required to provide two 
footnotes to this table, if applicable, that disclose (1) that the 
index is a price return index, not a total return index, and therefore 
does not reflect dividends paid on the assets in the index, which will 
reduce the index return and cause the index to underperform a direct 
investment in the securities composing the index, and (2) that the 
index provider deducts fees and costs when calculating index return, 
which will reduce the index return and will cause the index to 
underperform a direct investment in the securities composing the 
index.\301\
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    \298\ Final Form N-4, Item 6(d)(2)(iv)(B).
    \299\ Final Form N-4, Instruction 3 to Item 6(d)(2)(iv)(B).
    \300\ Final Form N-4, Instruction 6 to Item 6(d)(2)(iv)(B).
    \301\ Final Form N-4, Instructions 4-5 to Item 6(d)(2)(iv)(B). 
We are making conforming changes in final Form N-4, Instruction 1(d) 
to Item 17(b).
---------------------------------------------------------------------------

    As proposed, these bar charts must also be accompanied by the 
following legend in the format specified in the form:

    The bar chart shown below provides the Index's annual returns 
for the last 10 calendar years (or for the life of the Index if less 
than 10 years), as well as the Index returns after applying a 
hypothetical 5% cap and a hypothetical -10% buffer. The chart 
illustrates the variability of the returns from year to year and 
shows how hypothetical limits on Index gains and losses may affect 
these returns. Past performance is not necessarily an indication of 
future performance.
    The performance below is NOT the performance of any Index-Linked 
Option. Your performance under the Contract will differ, perhaps 
significantly. The performance below may reflect a different return 
calculation, time period, and limit on Index gains and losses than 
the Index-Linked Options, and does not reflect Contract fees and 
charges, including surrender charges and the Contract Adjustment, 
which reduce performance.

    This requirement is designed to provide context for the index-
linked options that the RILA contract offers to help inform an investor 
deciding whether to invest in a RILA.\302\ As discussed in the 
Proposing Release, presenting historical index information alone, 
without the addition of hypothetical caps and buffers, could mislead 
investors into thinking that these historical rates of index 
performance are what they would have received under the contract had 
they invested in a particular index-linked option.\303\ Providing 
historical index information with an overlay of hypothetical caps and 
buffers will help investors understand better how those limits can 
cause RILA performance to differ from that of the index, while the 
legends will put investors on notice that the presented performance is 
not the RILA's performance.
---------------------------------------------------------------------------

    \302\ For example, if an index-linked option provides that the 
investor will experience at least 5% of the upside performance of an 
index, investors may view the tradeoffs of this investment 
differently if the index historically has returned, for example, 10% 
per year (thus capping gains at 5% during those past periods) or 1% 
per year. Similarly, if an index-linked option offers a -10% buffer, 
the investor could compare that against the index performance in the 
bar chart and assess the extent to which the buffer would have 
provided downside protection against market losses in negative 
return years.
    \303\ See Proposing Release at n.144 and accompanying paragraph.
---------------------------------------------------------------------------

    Commenters generally supported, or did not oppose, the proposed 
inclusion of bar charts showing annual index returns. One commenter 
stated that the proposed bar chart ``is a helpful disclosure that will 
provide information about historical index performance, while also 
providing another tool to help investors understand bounded return 
structures.'' \304\ Several other commenters, though not opposed to the 
inclusion of a bar chart showing index returns, objected to the 
proposed 5% cap rate on the grounds that ``caps have never been that 
low,'' with one commenter suggesting that using these

[[Page 60010]]

rates would be ``misleading.'' \305\ One of these commenters suggested 
that instead of using the proposed standardized cap and buffer rates, 
we should require bar charts with an overlay of actual rates.\306\ 
Another commenter suggested that Commission staff be authorized to 
consider requests on a case-by-case basis to use a different overlay 
than would be generally prescribed, offering as an example a case where 
an insurance company only offers -20% buffers and suggesting the 
company should be permitted to use a -20% buffer overlay.\307\
---------------------------------------------------------------------------

    \304\ CAI Comment Letter.
    \305\ VIP Working Group Comment Letter (suggesting that, based 
upon OIAD's analysis in the OIAD Investor Testing Report, an 18% cap 
rate with a one-year crediting period and 10% buffer was more 
common); Datop Comment Letter; Johnson Comment Letter.
    \306\ VIP Working Group Comment Letter.
    \307\ CAI Comment Letter.
---------------------------------------------------------------------------

    We are not modifying the standardized rates as commenters suggest. 
As discussed in the Proposing Release, we proposed the hypothetical 5% 
cap rate and -10% buffer rate, which are higher than typical minimum 
levels of caps and floors that will always be available under a 
contract, but lower than typical currently-offered levels, to help 
investors understand how caps and buffers affect the index return. The 
bar chart with the overlay of standardized rates is merely an example 
designed to convey to investors that by selecting a product with caps 
and buffers, their returns will differ from that of the index. As 
emphasized in the accompanying legend, the performance reflected in the 
bar chart is not the performance of any index-linked option, and an 
investor's returns will differ from that of the index, perhaps 
significantly. Its purpose is to help investors understand how the 
product's limit features operate; it is not designed to convey an 
index-linked option's actual returns.
    In addition, while a standardized 5% cap may be lower than many 
current caps, on balance it is better to select a standardized cap that 
is too low than too high, as an illustration with a standardized cap 
that is higher than the cap that the index-linked option actually 
offers (or may offer in the future) could suggest that the index-linked 
option may credit more interest than the option actually does. Based on 
staff experience, the standardized 5% cap also is higher than most 
guaranteed minimum caps insurance companies currently disclosed in RILA 
prospectuses. Moreover, using current upside rates, which change 
frequently, or considering requests on a case-by-case basis to use a 
different overlay, would undermine comparability across products and 
require insurers to frequently update the prospectus. The same concerns 
about frequent updates to the registration statements that commenters 
identified in connection with the proposal to include current upside 
rates in the prospectus also would apply to the bar chart presentation 
if it were based on current upside rates. Accordingly, we are adopting, 
as proposed, the hypothetical 5% cap rate and -10% buffer rate to 
provide for a consistent presentation across products designed to help 
investors understand a RILA's bounded return structure.\308\ For the 
same reason, the amendments we are adopting do not permit the inclusion 
of additional bar charts in addition to the required examples, as one 
commenter suggested.
---------------------------------------------------------------------------

    \308\ In contrast to the bar chart, which requires fixed 
hypothetical cap and buffer rates, the index methodology examples 
required by Item 6(d)(2)(iv)(C) allow insurers to use rates that are 
based on current and anticipated market conditions. See infra 
footnote 315 and accompanying text.
---------------------------------------------------------------------------

    Two commenters suggested that the proposed bar chart disclosures 
should more clearly convey to investors that a RILA tracks a price 
return index and not a total return index, and the resulting effects on 
performance.\309\ We agree, for the reasons described in conjunction 
with a parallel disclosure requirement in the KIT, that disclosure 
should alert investors to the fact that a price return index does not 
assume the reinvestment of dividends and thus will underperform a total 
return index and direct investment in securities underlying the 
index.\310\ Accordingly, and in a conforming change, we are modifying 
the footnotes to provide, if applicable, that the index in the bar 
chart is a ``price return index,'' not a ``total return index'' and 
therefore does not reflect the dividends paid on the assets composing 
the index, which will reduce the index return and cause the index to 
underperform a direct investment in the securities composing the 
index.\311\
---------------------------------------------------------------------------

    \309\ Johnson Comment Letter; Lee Comment Letter; see supra 
discussion at Section II.C.5.(b) (stating that the performance of a 
RILA is based on the performance of an index (such as the S&P 500) 
or another benchmark, in contrast to the performance of a ``price 
return index,'' which is typically lower than that of a ``total 
return'' index because a price return index does not reflect 
dividends).
    \310\ See supra footnote 227 and accompanying paragraph; see 
final Form N-4, Instruction 3(c)(C) to Item 3.
    \311\ Final Form N-4, Instruction 4 to Item 6(d)(2)(iv)(B). For 
consistency, we are making a similar change in final Form N-4, 
Instruction 5 to Item 6(d)(2)(iv)(B) and Instruction 1(d) to Item 
17(b).
---------------------------------------------------------------------------

    To help investors understand how these crediting methods work, we 
are also requiring, as proposed, an insurance company to include a 
numeric example to illustrate the mechanics of each index crediting 
methodology.\312\ The examples will be required to show, in a clear, 
concise, and understandable manner, how each crediting method functions 
when the index has positive as well as negative returns. Specifically, 
we will require for each index methodology numeric examples that 
reflect a positive return above the limit on index gains, and a 
negative return below the limit on index losses.\313\ The examples also 
will be required to assume hypothetical returns and limits that are 
reasonable based on current and anticipated market conditions and sales 
of the contract, and to reflect any charges subtracted from interest 
credited to or deducted from contract value in the index-linked option 
to allow investors to understand the impact of these charges on their 
return.\314\ Additional examples, charts, graphs, or other 
presentations will be permitted if they are clear, concise, and 
understandable.\315\ We are also requiring insurance companies to 
include a legend stating that: (1) these examples illustrate how the 
insurance company calculates and credits interest under each index 
crediting methodology assuming hypothetical index returns and 
hypothetical limits on index gains and losses; and (2) the examples 
assume no withdrawals.
---------------------------------------------------------------------------

    \312\ Final Form N-4, Item 6(d)(2)(iv)(C).
    \313\ Final Form N-4, Instruction 2 to Item 6(d)(2)(iv)(C).
    \314\ Final Form N-4, Instructions 1 and 3 to Item 
6(d)(2)(iv)(C).
    \315\ Final Form N-4, Instruction 4 to Item 6(d)(2)(iv)(C). As 
with the required numeric examples, any additional presentations 
that assume hypothetical returns and limits also should assume 
hypothetical returns and limits that are reasonable based on current 
and anticipated market conditions and sales of the contract.
---------------------------------------------------------------------------

    We received one comment on this aspect of the proposal that sought 
clarification regarding what assumptions, such as fees, product 
features elected, the age of the contract, and/or interim value 
adjustments should be made when calculating the examples.\316\ The 
instructions state that any charges that are subtracted from interest 
credited or that are deducted from contract value in an index option 
should be reflected in the example.\317\ Because the legend states that 
the example assumes no withdrawals, insurers need not take into account 
the age of the contract, surrender charges, or any interim value 
adjustments. The instructions provide flexibility in terms of other 
assumptions that form the basis

[[Page 60011]]

of the examples. Like all other registration statement disclosure, the 
examples may not be inaccurate or misleading, and we anticipate that 
insurers offering index-linked options (and that also offer variable 
options) will draw on prior experience developing performance examples 
for variable options in developing appropriate examples for index-
linked options. We received no comments on our proposal to require a 
numeric example for each index crediting methodology and are adopting 
it as proposed.
---------------------------------------------------------------------------

    \316\ VIP Working Group Comment Letter.
    \317\ Final Form N-4, Instruction 3 to Item 6(d)(2)(iv)(C).
---------------------------------------------------------------------------

Indexes
    The index underlying an index-linked option is a central feature of 
the investment, as the investor's return will be based on the index's 
performance, subject to applicable limits on gains and losses. We 
therefore are requiring the insurance company to provide for each index 
a brief description of the types of investments that compose the index 
and where the investor can find additional information about the 
index.\318\ We received no comments on these aspects of the proposal 
and are adopting them as proposed, subject to a conforming change to 
one of the proposed instructions related to differences between a price 
return index and a total return index.\319\
---------------------------------------------------------------------------

    \318\ Final Form N-4, Item 6(d)(2)(v)(A).
    \319\ Final Form N-4, Instruction 3 to Item 6(d)(2)(v)(A) 
(modified to clarify differences between a price return index and a 
total return index, similar to clarifying changes to Instruction 5 
to Item 6(d)(2)(iv)(B), discussed above).
---------------------------------------------------------------------------

    The form includes three instructions to this general requirement 
under the final amendments.\320\ First, where there is more than one 
version of an index (for example a total return version and a price 
return version), the disclosure must clearly state which version of the 
index relates to the index-linked option.
---------------------------------------------------------------------------

    \320\ Final Form N-4, Instructions 1-3 to Item 6(d)(v)(A).
---------------------------------------------------------------------------

    Second, if the index is an exchange-traded fund (``ETF''), the 
disclosure must clarify whether the index's performance (for purposes 
of determining the amounts credited in the index-linked option) is 
based on the ETF's net asset value or closing value. If the performance 
is based on the ETF's share price, the disclosure must clarify the 
impact of using the share price as opposed to total return.
    Third, the disclosure must also state, if applicable, that the 
index is a price return index, not a total return index, and therefore 
does not reflect dividends paid on the index's underlying securities. 
The disclosure also must state, if applicable, that the index deducts 
fees and costs when calculating index performance. In these cases, the 
disclosure must explain that this will reduce index return and cause 
the index to underperform a direct investment in the securities 
composing the index. This is important disclosure because an index that 
does not reflect dividends paid on underlying securities, or that 
deducts fees and costs, will have a lower return, all else equal, than 
an index that includes dividends and does not deduct fees and costs.
    The insurance company also must state that it reserves the right to 
substitute an index prior to the end of the crediting period.\321\ This 
will put investors on notice that the index associated with a 
particular index-linked option--which is a key driver of the investor's 
return--could change in the middle of a crediting period. In addition, 
the insurance company will be required to disclose: all circumstances 
that could necessitate a substitution; how the insurance company would 
choose a replacement index; when and how investors would be notified of 
any such change; how index return will be calculated at the end of the 
crediting period; and what would happen if a suitable replacement index 
were not found, including whether the index-linked option will be 
discontinued prior to the end of the crediting period. This information 
will allow an investor to better understand the likelihood of the 
insurance company making a substitution and its potential effects.
---------------------------------------------------------------------------

    \321\ Final Form N-4, Item 6(d)(2)(v)(B). Insurers generally 
reserve the right to change the index in the middle of the crediting 
period if the index is discontinued or there is a substantial change 
in the calculation of the index. Based on staff experience, such 
changes are exceedingly rare.
---------------------------------------------------------------------------

Maturity and Other Material Features
    To help investors anticipate what may happen at the end of an 
index-linked option's crediting period, the final amendments will 
require the insurance company to state whether an investor will receive 
advanced notice of a maturing index-linked option, how an investor may 
provide instructions on reallocating contract value at the end of the 
crediting period, and any automatic default allocation in the absence 
of such instructions.\322\ In describing these matters, the prospectus 
must also explain how investors will be informed of the index-linked 
option available for allocation at the end of a crediting period, 
including any changes to the currently-offered index-linked options and 
the discontinuance or addition of index-linked options.\323\ We 
received no comments on this aspect of the proposal and are adopting it 
as proposed.
---------------------------------------------------------------------------

    \322\ Final Form N-4, Item 6(d)(2)(vi).
    \323\ Final Form N-4, Instruction 3 to Item 6(d)(2)(vi).
---------------------------------------------------------------------------

    Finally, we are requiring the insurance company to describe any 
other material aspects of the index-linked option to ensure that any 
other item not discussed above that could inform an investment decision 
is disclosed.\324\ This will include disclosure related to limitations 
on transfers to or from index-linked options, rate holds, ``bail-out'' 
provisions, start dates, and holding accounts.\325\ We are also 
requiring a brief description of how charges may impact the index-
linked option's value, if applicable, as part of this discussion. We 
received no comments regarding the proposed disclosures regarding other 
material features and are adopting it as proposed.
---------------------------------------------------------------------------

    \324\ Final Form N-4, Item 6(d)(2)(vii).
    \325\ A ``rate hold'' locks in interest at the current cap (or 
other rate limiting index gains) for the period between which the 
insurance company receives the investor's annuity application and 
the time the investor's premium payment is allocated to the index-
linked option. A bail-out provision is a contract provision that 
provides if a current cap (or other rate limiting index gains) is 
set below a specified value, the investor may withdraw value from 
that index-linked option or RILA without a contract adjustment (and 
in some cases without a surrender charge) during a specified period 
after the start of the crediting period. See additional discussion 
of bail-out provisions at supra footnote 283. A holding account is 
typically a conservative investment option (typically a money market 
fund or a fixed option) where amounts allocated to the index-linked 
option are held until the next index-linked option start date. This 
is used for index-linked options that start on a particular day each 
month (e.g., the 15th of the month).
---------------------------------------------------------------------------

Fixed Options, Including MVA Options
    In addition to variable options and index-linked options, annuity 
contracts commonly include fixed investment options, such as 
traditional, unregistered fixed options, unregistered index options, 
and MVA options.\326\ In the variable annuity context, a fixed option 
provides an alternative for investors who wish to avoid the market risk 
of investing in a variable option. A fixed option can also serve as the 
holding account for amounts that are pending allocation to a particular 
investment option. In addition, a fixed option may be the default 
allocation vehicle at the end of an index-linked option's crediting 
period. As discussed above, annuity contracts also may offer fixed 
options standing alone (without also including variable options or 
index-

[[Page 60012]]

linked options), including MVA options.
---------------------------------------------------------------------------

    \326\ See Final Form N-4, Item 6(e). Interests in fixed account 
options that are not subject to a contract adjustment are generally 
exempt securities under section 3(a)(8) of the Securities Act and 
rule 151 under the Securities Act.
---------------------------------------------------------------------------

    Form N-4 generally requires registrants to describe the fundamental 
features and risks of an annuity contract, including those, like fixed 
options, that are distinct from the variable options offered through 
the registered separate account.\327\ The current form also requires 
specific disclosure about fixed options in the KIT and the 
Overview.\328\ Because we are requiring insurers to include disclosures 
relating to index-linked options in Item 6, we are also, as proposed, 
requiring disclosures about fixed options so annuity contract investors 
have a complete understanding of all the investment options in which 
they may invest through that contract, either actively, or by default. 
This approach is designed to increase investor comprehension by 
ensuring that substantive information about all available investment 
options is presented in the same location in the prospectus and 
reflects the inclusion of registered MVA annuities on Form N-4.
---------------------------------------------------------------------------

    \327\ Current Form N-4, General Instruction C.1.(a) (stating 
that ``[a] Registrant's prospectus should clearly disclose the 
fundamental features and risks of the [Contracts], using concise, 
straightforward, and easy to understand language.'').
    \328\ Current Form N-4, Items 2 and 3.
---------------------------------------------------------------------------

    The final amendments will, with modifications from the proposal, 
require insurance companies to disclose basic information about fixed 
options, generally covering the same areas as for index-linked options 
but tailored for the specifics of a fixed option. Specifically, as 
proposed, registrants will be required to describe the fixed options 
currently offered under the contract and state that information 
regarding the features of each currently-offered fixed option, 
including its name, term, and minimum guaranteed interest rate is 
available in an appendix with cross-references.\329\ Further, as 
proposed, registrants will be required to describe how interest is 
calculated and when it is credited for each fixed option as well as the 
length of the term and minimum guaranteed interest rate (stated as a 
numeric rate, rather than referring to any minimums permitted under 
State law).
---------------------------------------------------------------------------

    \329\ As discussed below, we are also requiring disclosure 
relating to any fixed options currently offered under the contract 
in the Item 17 (Appendix).
---------------------------------------------------------------------------

    In a change from the proposal and to address the inclusion of 
registered MVA annuities on Form N-4, under the final amendments the 
prospectus must state, if applicable, that an investor could lose a 
significant amount of money due to a contract adjustment if amounts are 
removed from a fixed option prior to the end of its term, describe the 
transactions subject to a contract adjustment, and provide cross 
references to related disclosure in the prospectus.\330\ The investment 
risk created by an MVA is a material consideration for an investor 
considering a registered MVA annuity. As with index-linked options and 
as proposed, the registrant also will be required to state whether an 
investor will receive advance notice of a maturing fixed option, 
including what steps an investor may take to provide instructions 
regarding the reallocation of contract value at the end of the term, 
and any automatic default allocation in the absence of such 
instructions. In describing these matters, as proposed, the registrant 
must also explain how investors will be informed of the fixed options 
available for allocation at the end of a term, including any changes to 
the currently-offered fixed options and the discontinuance or addition 
of fixed options.\331\ In a modification from the proposal, this 
disclosure must also include an explanation of how current fixed rates 
may be obtained. This could include, for example, a phone number, 
website address, and/or instruction to contact the investor's financial 
professional to obtain current fixed rates. This aspect of the required 
explanation represents an addition to the proposed requirements to 
explain how investors will be informed of available fixed options and 
disclose changes to currently offered fixed options to provide 
additional context so that investors can better understand those 
disclosures.\332\ Also as with index-linked options, we are requiring 
disclosure of any other material aspect of the fixed options, including 
limitations on transfers to or from the fixed options, rate holds, 
start dates and holding accounts.
---------------------------------------------------------------------------

    \330\ Final Form N-4, Item 6(e)(2)(i); see also Proposing 
Release at Section II.H (discussing changes to Form N-4 that would 
be necessary to accommodate MVAs).
    \331\ Final Form N-4, Instruction to Item 6(e)(2)(ii).
    \332\ Id.
---------------------------------------------------------------------------

    One commenter opposed requiring insurers to provide specific 
disclosures about fixed options in the prospectus on the grounds that 
the Commission lacks the authority pursuant to section 10(a) of the 
Securities Act to prescribe the specific content, format, and location 
of any prospectus disclosures about unregistered fixed options.\333\ 
Although the commenter acknowledged that most issuers choose to provide 
information about fixed options in the prospectus--and that any 
statements made in a prospectus about unregistered fixed options are 
subject to the Securities Act's provisions concerning liability for the 
accuracy and completeness of statements made in a prospectus--it 
asserted that such disclosures should not be required by the 
Commission. Instead, the commenter stated that a variable annuity or 
RILA issuer should be able to choose whether to provide information 
about fixed options in the prospectus or instead in a separate document 
used with the prospectus and/or in marketing material or on its 
website. The commenter also stated that, to the extent it does include 
such information in the prospectus, the issuer should have the 
flexibility to determine the location, format, and specific content of 
any fixed option disclosures in the prospectus, so long as the 
disclosures are accurate in all material respects and do not obscure or 
impede the disclosures about the security being registered. 
Accordingly, the commenter recommended that the Commission make 
optional the proposed disclosures about fixed options and clarify that 
issuers can instead make disclosures about unregistered fixed options 
or accounts in any location and manner that does not obscure the 
disclosures about the registered options. No other commenter addressed 
the proposed disclosures for fixed options.
---------------------------------------------------------------------------

    \333\ CAI Comment Letter.
---------------------------------------------------------------------------

    All material aspects of the contract should be described in the 
prospectus, and a fixed option is a material aspect of a RILA or 
variable contract. Therefore including this information in a 
registration statement for the offering of these contract securities is 
necessary and appropriate in the public interest or for the protection 
of investors.\334\ Consistent with this view, Form N-4 currently 
requires insurance companies to disclose certain basic information 
about fixed options when they are investment options in a variable 
contract.\335\ We are therefore adopting the disclosure requirements 
for fixed options, to be provided in the broader context of detailed 
disclosure regarding the investment options available under the 
contract, largely as proposed with modifications to reflect the 
inclusion of registered MVA annuities on Form N-4.\336\ The required 
disclosure about fixed options includes substantively the same 
information that insurers currently disclose about other investment 
options, such as variable annuities, and encompasses core information 
about fixed options. This basic information

[[Page 60013]]

about fixed options available under a RILA or variable annuity is 
necessary to provide investors material information about the 
securities offering registered on Form N-4.
---------------------------------------------------------------------------

    \334\ See, e.g., Investment Company Act section 8; Securities 
Act section 10(c).
    \335\ See current Form N-4, Item 3(b)(1) and Instruction 3(c)-
(d) to Item 2.
    \336\ We are likewise requiring fixed option disclosures in the 
appendix. See infra footnote 374 and accompanying text.
---------------------------------------------------------------------------

    We therefore do not agree, as a commenter suggests, that the 
provision of such information should be voluntary. This approach would 
deprive investors of material information regarding an investment 
decision in an annuity contract. In addition, requiring this basic 
information about fixed options will provide increased efficiencies now 
that we also are requiring registered MVA annuities to register on Form 
N-4 (since this information is a necessary component of registered MVA 
annuity disclosure).\337\ Under Form N-4 as amended, an insurance 
company will provide the same information about all fixed options in 
this part of the prospectus, with additional disclosure about contract 
adjustments in connection with registered MVA annuities.
---------------------------------------------------------------------------

    \337\ The commenter that opposed requiring insurers to provide 
specific disclosures about fixed options in the prospectus supported 
the inclusion of registered MVA annuities on Form N-4. See CAI 
Comment Letter.
---------------------------------------------------------------------------

    We received one comment regarding the proposed instruction that 
would require insurers to disclose the minimum guaranteed interest rate 
as a numeric rate, rather than referring to any minimums permitted 
under State law.\338\ This commenter objected, stating that minimum 
rates for contracts are determined by the standard nonforfeiture laws 
of each State in which the contract is offered, which are not uniform 
across all jurisdictions, and can change, sometimes frequently, due to 
changes in prevailing interest rates. This commenter suggested that 
instead of requiring insurers to provide numeric rates, they should be 
allowed to state, if applicable, that the minimum guaranteed rate is a 
rate required to comply with standard nonforfeiture law in the State in 
which the contract is issued, with a reference in the prospectus 
directing investors to the policy form, website, or other material 
where the specific minimum guaranteed rate applicable at the time the 
contract is issued may be found.
---------------------------------------------------------------------------

    \338\ CAI Comment Letter; see also proposed Form N-4, 
Instruction to Item 6(e)(2).
---------------------------------------------------------------------------

    After considering this comment, we are adopting the proposed 
approach--requiring disclosure of the minimum guaranteed interest rate 
as a numeric rate--in the final amendments.\339\ We are not departing 
from the proposed approach given that the standard nonforfeiture laws 
of most states follow the National Association of Insurance 
(``NAIC'')'s model Nonforfeiture Law for Individual Deferred Annuities, 
which specifies the range of numeric minimum interest rates from which 
insurers may choose for inclusion in the contract.\340\ As a result, 
insurers have the flexibility to select a numeric minimum interest rate 
that will comply with minimum requirements in most states. Further, it 
is our understanding that while current interest rates may frequently 
change, that is not the case with minimum interest rates, which must be 
within NAIC's specified range of numeric interest rates. Accordingly, 
including the guaranteed minimum interest rate in the prospectus should 
not necessitate frequent updates to the prospectus. In addition, based 
on staff experience, we understand that some insurers already disclose 
the minimum guaranteed interest rate as a numeric rate in their 
prospectuses. Because providing such information in the prospectus is 
consistent with industry practice (at least for some insurers) and 
avoids the need for the investor to refer to another source for 
information about a material term of the offering, we are requiring 
minimum guaranteed interest rates to be stated as numeric rates, as 
proposed.
---------------------------------------------------------------------------

    \339\ Final Form N-4, Instruction to Item 6(e)(2); Instruction 3 
to Item 17(c).
    \340\ See NAIC Standard Nonforfeiture Law for Individual 
Deferred Annuities (Model 805-4) at Sec. 4.B (describing requirement 
to disclose minimum rate under nonforfeiture law), available at 
https://content.naic.org/sites/default/files/model-law-805.pdf.
---------------------------------------------------------------------------

b. Appendix: Investment Options Available Under the Contract (Item 17)
    We are amending the requirements for the required appendix of 
investment options available under the contract, largely as proposed, 
to include a discussion of the index-linked options and fixed options 
available under the contract. This item currently requires a variable 
annuity issuer to include in an appendix to the prospectus a table that 
consolidates certain summary information about each portfolio company 
offered under the contract. The current appendix is designed to provide 
investors with an overview of variable options available under the 
contract in a uniform, tabular presentation that promotes comparison, 
because the investment experience of an investor in a variable annuity 
will largely depend on the underlying investments available under the 
contract.\341\ Similarly, we anticipate that an overview of available 
index-linked options, as well as available fixed options, will help 
investors in all annuities whose offerings will be registered on Form 
N-4 to understand and compare the various investment options offered 
under the contract. Consolidating this summary information about the 
contract's investment options--equivalent to what is currently provided 
for variable options--into a concise, easy to read tabular presentation 
will enhance the ability of investors to understand, evaluate, and 
compare all the investment options available under the contract.
---------------------------------------------------------------------------

    \341\ VASP Adopting Release at n.267 and accompanying text.
---------------------------------------------------------------------------

    To reflect the expanded scope of the appendix, and as proposed, we 
are amending the current heading to ``Investment Options Available 
Under the Contract.'' \342\ We are adopting a new instruction that 
explains that issuers may modify this new heading as appropriate under 
the contract. For example, if there are only variable options offered 
under the contract, an issuer could change the heading to ``Portfolio 
Companies Available Under the Contract,'' consistent with the current 
requirements of the form.
---------------------------------------------------------------------------

    \342\ ``Investment options'' are defined as any variable option, 
index-linked option, or fixed option available under the contract. 
See infra Section II.C.8.b.
---------------------------------------------------------------------------

    The current appendix requires a separate table indicating what 
portfolio companies are available or restricted under the benefits 
offered under a variable contract. Because fixed options and index-
linked options--like variable options--can vary by benefit offered 
under the contract, we are adopting amendments, as proposed, that would 
require this table for all investment options (not only variable 
options), with no other changes.\343\ We received no comments regarding 
these aspects of the proposal and are adopting as proposed.
---------------------------------------------------------------------------

    \343\ Final Form N-4, Item 17(d).
---------------------------------------------------------------------------

    We received one comment regarding the disclosures for variable 
options in the required appendix.\344\ This commenter stated that the 
instructions to the table for variable options should permit variable 
annuity issuers to include additional rows that visually separate and 
group underlying funds belonging to the same fund complex, provided 
that the presentation does not obscure or impede understanding of the 
information that is required to be included, or substantially otherwise 
alter the required format of the table. The commenter asserted this 
approach would improve the organization and readability of the 
appendix, while also maintaining standardization and comparability. We 
agree. In a change from the proposal, we are therefore adding a new 
instruction that will provide flexibility to permit the

[[Page 60014]]

presentation of information the commenter suggested, subject to 
existing requirements (by virtue of the table template in the form) to 
provide a standardized tabular presentation.\345\ The current tabular 
presentation was designed to promote ease of comparison between 
products, and we do not anticipate that the new instruction we are 
adopting will detract from this goal.\346\
---------------------------------------------------------------------------

    \344\ CAI Comment Letter.
    \345\ Final Form N-4, Instruction 1(f) to Item 17(a).
    \346\ See Proposing Release at n.156 and accompanying text.
---------------------------------------------------------------------------

Index-Linked Options
    To accommodate the inclusion of index-linked options in the 
appendix, we are adding a new table titled ``Index-Linked Options,'' as 
proposed.\347\ As part of our layered disclosure approach, the 
information to be supplied in the table for index-linked options will 
summarize certain prospectus disclosures required elsewhere in the 
prospectus.\348\ The one commenter to address this aspect of the 
proposal broadly supported the proposed expansion of the required 
appendix to include a table for index-linked options, as well as the 
table's general design, stating that the proposed Index-Linked Options 
Table ``will aggregate all index-linked options currently available 
under the contract in one location to facilitate investor understanding 
and comparison of investment options and contracts.'' \349\ We are 
adopting the table for index-linked options largely as proposed, with 
certain additions and modifications as discussed below.
---------------------------------------------------------------------------

    \347\ Final Form N-4, Item 17(b).
    \348\ See, e.g., final Form N-4, Item 6(d).
    \349\ CAI Comment Letter.
---------------------------------------------------------------------------

Legends
    Similar to the requirements for variable annuities, the table for 
index-linked options will be prefaced with a legend, largely as 
proposed. Specifically, the legend will state that the table lists 
index-linked options currently available under the contract. Further, 
because insurance companies typically change the index-linked options 
available over time, the legend will specify that the insurance company 
may change the features of the index-linked options listed in the 
table, offer new index-linked options, or terminate existing index-
linked options, and that the insurance company will provide the 
investor with written notice before making any changes, other than 
changes to current limits on index gains.\350\ We received no comments 
on the legend, and are adopting it largely as proposed, with conforming 
changes corresponding to other changes we are adopting to the index-
linked options table and other modifications designed to clarify the 
legend language.\351\
---------------------------------------------------------------------------

    \350\ Final Form N-4, Item 17(b)(1).
    \351\ In a change from the proposal, we are revising the legend 
to clarify that written notice will not be provided before changes 
to current limits on index gains.
---------------------------------------------------------------------------

    In addition, to help ensure that investors have convenient access 
to current upside rates, the legend will require insurance companies to 
state that information about current limits on index gains are 
available at a specified website address, if such information is 
incorporated by reference into the prospectus from a website, as 
described above.\352\ We are adopting this requirement substantially as 
proposed, with a change to the related instructions to specify that the 
website address must be provided only if the current upside rates do 
not appear directly in the prospectus.\353\ This is a conforming change 
to address the final amendments' permissible incorporation by reference 
of current rates on index gains into the prospectus, under Item 6 of 
final Form N-4.\354\
---------------------------------------------------------------------------

    \352\ See final Form N-4, Item 17(b)(1), and final Form N-4, 
Instruction 1(e) to Item 17(b). Consistent with the current 
instructions to the form, any website address, including this one, 
that is included in an electronic version of the statutory 
prospectus will be required to include an active hyperlink or other 
means of facilitating access that leads directly to the relevant 
website address. However, this requirement will not apply to an 
electronic summary prospectus that is filed on EDGAR. See final Form 
N-4, General Instruction C.3.i.
    \353\ Final Form N-4, Instruction 1(e) to Item 17(b).
    \354\ See supra Section II.C.4.a.
---------------------------------------------------------------------------

    We are also adopting, in a modification from the proposal, 
instructions to specify that the website included in the legend must be 
the same website that includes information about current rates on index 
gains that an insurance company may choose to incorporate by reference 
into the prospectus under Item 6.\355\ This ensures that where an 
insurance company provides this information via a website, investors 
receive the same information and in the same format, whether they are 
directed to a website in disclosure required by Item 6 or this legend. 
As proposed, this website address must be specific enough to lead 
investors directly to current upside rates, rather than to the home 
page or other section of the website on which such rates are 
posted.\356\ Requiring RILA issuers to include information about 
current limits on index gains on their websites will benefit investors 
by making this information easier to find and understand. Furthermore, 
because websites may be updated quickly, website disclosure will be 
efficient for compiling index-linked options' current limits on gains, 
given our understanding that current upside rates can change often and 
that insurance companies currently disclose this information on their 
websites.
---------------------------------------------------------------------------

    \355\ See final Form N-4, Instruction 1(e) to Item 17(b).
    \356\ Final Form N-4, Instruction 2 to Item 6(d)(2)(ii)(B). We 
originally proposed this requirement as proposed Form N-4, 
Instruction 1(e) to Item 17(b), but in final Form N-4 this 
requirement will be included with the other requirements for current 
rates that are incorporated by reference from a website, 
collectively set forth in Item 6.
---------------------------------------------------------------------------

    We anticipate that insurance companies generally will rely on the 
incorporation by reference approach because insurers generally disclose 
current limits on index gains on their websites today and based on 
commenter feedback about the challenges in providing this information 
directly in the prospectus. We therefore assume that all insurance 
companies will include a website address with current limits on index 
gains in this legend. However, to accommodate the possibility that an 
insurance company may not choose to incorporate by reference current 
upside rate information from a website, we are, in a change from the 
proposal, adding an instruction directing such an insurer to provide in 
(in lieu of the website address) a cross-reference to the current 
limits on index gains disclosed elsewhere in the prospectus.\357\
---------------------------------------------------------------------------

    \357\ Final Form N-4, Instruction 1(f) to Item 17(b).
---------------------------------------------------------------------------

    Lastly, set off from the rest of the legend and with emphasis, we 
are, largely as proposed, adopting the requirement to include a 
statement that if amounts are removed from an index-linked option 
before the end of its crediting period, the insurance company may apply 
a contract adjustment (or will apply a contract adjustment, as 
appropriate).\358\ The required legend also includes a statement that 
this may result in a significant reduction in the investor's contract 
value that could exceed any protection from the index's loss that would 
be in place if an investor held the option until the end of the term. 
This statement is designed to highlight the potential impact on an 
investor's returns if amounts are removed prior to the end of a 
crediting period. The one comment we received concerning the proposed 
statement addressed the use of the term

[[Page 60015]]

``withdrawn'' and suggested adding the phrase ``or deducted'' to 
reflect that deductions other than withdrawals may result in a contract 
adjustment.\359\ We agree that referring solely to amounts being 
``withdrawn'' from an index-linked option may not be understood to 
cover all of the circumstances in which a contract adjustment may 
apply. Accordingly, and consistent with wording used elsewhere in the 
form, we are modifying the first sentence of the required statement to 
state that ``if amounts are removed from an Index-Linked Option before 
the end of its Crediting Period, we [may/will] apply a Contract 
Adjustment.'' \360\ As proposed, we are also requiring the statement to 
include appropriate cross-references to the section(s) of the 
prospectus that describe the features of the index-linked options as 
well as contract adjustments.\361\ This approach is designed to help 
investors that are interested in more detail about key aspects of the 
index-linked options to locate that information quickly.
---------------------------------------------------------------------------

    \358\ The proposed legend required a statement that included the 
phrase ``we may apply a Contract Adjustment.'' The final amendments 
instead include the phrase ``we [may/will] apply a Contract 
Adjustment'' in the legend. This provides flexibility to make a 
definitive statement to the extent that removing amounts from the 
index-linked option before the end of the crediting period will 
always result in the application of a contract adjustment.
    \359\ CAI Comment Letter (discussing the proposed statement ``If 
amounts are withdrawn from an Index-Linked Option before the end of 
its Crediting Period, we may apply a Contract Adjustment.'').
    \360\ Final Form N-4, Item 17(b)(1).
    \361\ Final Form N-4, Instruction 1(a) to Item 17(b).
---------------------------------------------------------------------------

Table
    As proposed, the legend will be followed by a table that lists and 
highlights key elements of each index-linked option available under the 
contract. Specifically, the table will, largely as proposed, require, 
in sequential columns, the identification of (1) each index by name; 
(2) type of index; (3) crediting period, indicating the duration of the 
index-linked option in years; (4) index crediting methodology; (5) 
current limits on index loss if held to the end of the crediting 
period; and (6) minimum limit on index gain for each index-linked 
option.\362\ In a change from the proposal, we are modifying the last 
two column headings in the table to more clearly specify the 
information required. Specifically, we are adding to the fifth column 
heading the word ``Current'' so it now reads ``Current Limits on Index 
Loss (if held until end of Crediting Period),'' and removing from the 
sixth column heading the word ``Guaranteed'' and adding the 
parenthetical ``(for the life of the Index-Linked Option)'' to clarify 
that the minimum limits to be disclosed are for the life of the index 
option (not for the life of the contract).\363\ These column heading 
changes are not intended to change the substance of the information 
that will be provided under each of these headings.
---------------------------------------------------------------------------

    \362\ Final Form N-4, Item 17(b)(1).
    \363\ See also infra footnote 372 and accompanying text 
(discussing separate disclosure describing guaranteed minimum limits 
for the life of the contract).
---------------------------------------------------------------------------

    As proposed, the description of the type of index will be a brief 
statement of the type of index (e.g., market index, exchange-traded 
fund, etc.), or a brief statement describing the assets that the index 
seeks to track (e.g., U.S. large-cap equities).\364\ The column 
indicating the type of index crediting methodology used for each index-
linked option will only be required if the RILA utilizes multiple index 
crediting methodologies under the contract (e.g., point-to-point, step-
up, enhanced upside, etc.), as proposed.\365\ The disclosures regarding 
current limits on index loss will require an issuer to: (1) state the 
current percentage used in the insurance company's interest crediting 
methodology to limit the amount of negative index return credited to 
the index-linked option; and (2) identify in the table whether this 
limit is a buffer, floor, or some other rate or measure.\366\ In the 
last column, issuers will be required to state the minimum percentage 
that may be used to limit the amount of positive index return credited 
to an index-linked option (for the life of the index-linked option) and 
to identify in the table whether this limit is a cap, participation 
rate, or some other rate or measure.\367\ The additional parenthetical 
is designed to distinguish the disclosure that will be provided in this 
column (minimum limits guaranteed for the life of the index-linked 
option) from the new disclosure item that we are adding in a change 
from the proposal discussed in more detail below, providing information 
about guaranteed minimum limits that will always be available under the 
contract.\368\ We understand that it is common for a RILA to offer 
guaranteed minimums on index gains associated with specific index-
linked options, as well as guaranteed minimums for the life of the 
contract. The proposed approach, which only included a column heading 
for ``guaranteed minimum limit on index gain,'' therefore could be 
confusing, and the final amendments' approach will specify separate 
disclosure for each type of guaranteed minimum limit.
---------------------------------------------------------------------------

    \364\ Final Form N-4, Instruction 3 to Item 17(b)(1).
    \365\ Final Form N-4, Instruction 5 to Item 17(b)(1). If all 
index-linked options offered by a RILA contract use the same 
crediting methodology, the table will not include the column. See, 
e.g., supra footnote 297.
    \366\ Final Form N-4, Instruction 6 to Item 17(b)(1). In 
contrast to current limits on index gain, we understand that the 
current limits on index loss typically do not change frequently. In 
a change from the proposal, we added ``Current'' to the column 
heading ``Current Limits on Index Loss (if held until end of 
Crediting Period)'' to clarify the limits to be disclosed in that 
column.
    \367\ Final Form N-4, Instruction 7 to Item 17(b)(1).
    \368\ See infra paragraph accompanying footnotes 372-373.
---------------------------------------------------------------------------

    As proposed, to ensure investors only receive disclosure relevant 
to them, RILAs will only be permitted to include in the table those 
index-linked options that are available under the contract, and must 
indicate if any of the options are restricted (e.g., because of a 
``hard'' or ``soft'' close), consistent with the current disclosure 
requirements for variable options.\369\ Further, to promote disclosure 
in a consistent format to facilitate comparisons, issuers will be 
allowed to add, modify, or exclude table headings only as necessary to 
describe the material features of an index-linked option.\370\
---------------------------------------------------------------------------

    \369\ Final Form N-4, Instruction 1(b) to Item 17(b)(1).
    \370\ Final Form N-4, Instruction 1(c) to Item 17(b)(1).
---------------------------------------------------------------------------

    We are also adopting instructions, largely as proposed, stating 
that if the index's return does not reflect the full investment 
performance of the assets tracked by the index, the table must include 
a footnote that states the index is a price return index, not a total 
return index, and does not reflect dividends paid on the securities 
composing the index, and/or that the index deducts fees and costs when 
calculating index performance, as applicable. In these cases, the 
footnote must state that this will reduce the index's return and cause 
the index to underperform a direct investment in the securities 
composing the index.\371\ Investors evaluating index-linked options may 
be more familiar with a version of a given index that reflects the full 
performance of the index constituents, and this disclosure will alert 
investors that the index associated with a particular index-linked 
option will have relatively lower returns.
---------------------------------------------------------------------------

    \371\ Final Form N-4, Instruction 1(d) to Item 17(b). We are 
making conforming changes to the proposed instruction to mirror 
parallel instructions in other sections of Form N-4. See, e.g., 
supra footnote 311.
---------------------------------------------------------------------------

    In a change from the proposal, we are requiring a new disclosure 
item immediately below the index-linked options table to provide 
investors information about minimum limits on index losses and gains 
that will always be available under the contract.\372\ Although we did 
not propose to require this disclosure in the appendix, this 
requirement reflects the approach taken elsewhere in Form N-4, where 
information about current rates for

[[Page 60016]]

index-linked options is accompanied by information about minimum 
guaranteed limits on downside protection and current upside rates, so 
an investor evaluating information about the terms of an index-linked 
option can consider both the terms currently being offered as well as 
information about terms that may be available in future crediting 
periods.\373\
---------------------------------------------------------------------------

    \372\ Final Form N-4, Item 17(b)(2).
    \373\ See, e.g., final Form N-4, Item 6(d)(2)(i)(B) and (ii)(B).
---------------------------------------------------------------------------

Fixed Options
    Consistent with the approach we are adopting with respect to the 
Item 6 disclosure requirements (Description of the Insurance Company, 
Registered Separate Account, and Investment Options), we are requiring 
in the appendix summary information about fixed options currently 
available under the contract.\374\ These disclosure requirements are 
similar to the legend and table we are adopting for index-linked 
options, adjusted to reflect fixed option details. Under the final 
amendments, the fixed option legend, in addition to identifying that 
what follows is a list of fixed options currently available under the 
contract, will indicate that the insurance company (1) may change the 
features of the fixed options identified, offer new ones, and terminate 
existing ones; and (2) will provide the investor written notice before 
doing so.
---------------------------------------------------------------------------

    \374\ Final Form N-4, Item 17(c).
---------------------------------------------------------------------------

    In a change from the proposal to accommodate the inclusion of 
registered MVA annuities on Form N-4, we are requiring a legend stating 
that if amounts are withdrawn from a fixed option before the end of its 
term, the insurer may (or, as appropriate, will) apply a contract 
adjustment, which may result in a significant reduction in contract 
value.\375\ The other requirements for the fixed option table, which 
will apply to registered MVA annuities as applicable without the need 
for any further changes, are being adopted as proposed. As proposed, 
the fixed option table will include columns identifying (1) the name of 
the fixed option, (2) the term, and (3) the minimum guaranteed interest 
rate.\376\ Insurance companies will be instructed to include 
appropriate cross-references in the legend to the sections of the 
prospectus that describe the features of fixed options as well as the 
contract adjustment.\377\ As with index-linked options, insurance 
companies may add, modify, or exclude table headings only as necessary 
to describe material features of a fixed option.
---------------------------------------------------------------------------

    \375\ Final Form N-4, Item 17(c); see also, e.g., Proposing 
Release at n.362 (describing potential changes to the appendix to 
accommodate registered MVA annuities).
    \376\ Consistent with the approach in Item 6, the minimum 
guaranteed interest rate will be required to be stated as a numeric 
rate rather than referring to any minimums permitted under State 
law.
    \377\ The requirement to cross-reference the sections of the 
prospectus that describe the contract adjustment is a conforming 
change to the proposed requirements to reflect the inclusion of 
registered MVA annuities on Form N-4.
---------------------------------------------------------------------------

    One commenter opposed our proposal to include specific information 
about fixed options in the appendix altogether, consistent with its 
objections regarding our proposal to include fixed option disclosures 
in Item 6, and instead suggested that any disclosure regarding fixed 
options be voluntary and not subject to a specified disclosure 
format.\378\ For the reasons discussed above in connection with fixed 
option disclosure requirements in Item 6, we are requiring insurers to 
provide summary information about fixed options in the appendix, as 
proposed and with conforming modifications to reflect the inclusion of 
registered MVA annuities.
---------------------------------------------------------------------------

    \378\ CAI Comment Letter.
---------------------------------------------------------------------------

5. Principal Risks of Investing in the Contract (Item 5)
    An investment in a contract offering index-linked options exposes 
investors to unique risks that may be different from those that are 
common to other investment products, including contracts that solely 
offer variable options. We are amending Item 5 to address certain 
principal risks that are particularly relevant to investors in RILAs. 
We are adopting these requirements largely as proposed, with conforming 
changes to ensure consistency with other prospectus disclosure 
requirements as discussed below. It is not necessary to include any 
changes from the proposal to address the inclusion of registered MVA 
annuities on Form N-4, because the proposed risk disclosure 
requirements addressed risks associated with negative contract 
adjustments.
    In addition to restructuring the current item to incorporate the 
proposed risk disclosure requirements addressing index-linked options, 
we are adopting certain structural changes that are designed to clarify 
existing requirements but are not anticipated to result in 
substantively different disclosure requirements for contracts offering 
variable options. These changes also will consolidate certain risk 
disclosures insurance companies currently provide for variable 
annuities in other sections of the prospectus. We are requiring these 
risk disclosures in a single location to communicate risks more 
consistently and effectively to investors. As the Commission has 
previously explained, the requirements for principal risk disclosure in 
the prospectus are designed to provide a consolidated presentation of 
principal risks.\379\
---------------------------------------------------------------------------

    \379\ See VASP Adopting Release at n.690 and accompanying text.
---------------------------------------------------------------------------

    One commenter addressed the proposed amendments to Item 5. This 
commenter stated that it did not oppose our proposal to require 
registrants to provide index-linked option risk of loss disclosures in 
Item 5, stating that this section of the prospectus is intended for 
readers who want more detailed information about risks, and the Item 5 
disclosure requirements provide registrants with the ability to give 
appropriate context that an investor may need to better understand 
those risks.\380\ No commenter specifically addressed risk disclosure 
for registered MVA annuities, although as discussed above commenters 
generally supported registering offerings of registered MVA annuities 
on Form N-4 and did not distinguish whether these offerings should be 
subject to different risk disclosure requirements than those that were 
proposed.\381\ We received no other comments on this aspect of the 
proposal.
---------------------------------------------------------------------------

    \380\ CAI Comment Letter.
    \381\ See supra Section II.B.
---------------------------------------------------------------------------

    As proposed, the principal risk disclosure item of Form N-4 will be 
restructured into separate sub-items while also making certain changes 
from the current version designed to clarify existing disclosure 
obligations.\382\ The new sub-items are designed to be non-exclusive 
examples of the principal risks of investing in the contract being 
registered. In addition to existing disclosure requirements, these sub-
items will also include new risk disclosures specific to index-linked 
options, as applicable. We are adopting parallel changes to the risk 
disclosures most applicable to variable annuities to avoid any 
implication that risk disclosure addressing variable annuities should 
be provided at a different level of detail than the disclosures for 
RILAs.
---------------------------------------------------------------------------

    \382\ Final Form N-4, Item 5(a)-(b), (d)-(f).
---------------------------------------------------------------------------

    The approach we are adopting will retain the current requirement 
for registrants to explain the principal risks of purchasing a contract 
but will also require, largely as proposed, an explanation of the 
principal risks associated with market risk, including the risks of 
negative investment performance.\383\ Additionally, for index-

[[Page 60017]]

linked options, we are requiring prominent disclosure of the maximum 
amount of loss an investor could experience from negative index 
performance, as a percentage, after taking into account the current 
limits on index loss provided under the contract.\384\ We are adopting 
this requirement largely as proposed, with conforming changes to 
reflect parallel disclosure we are requiring in other locations in the 
form.\385\ Moreover, in a change from the proposal, the insurer may 
provide a range of the maximum amount of loss if the contract offers 
different limits on index loss. In addition, in a change from the 
proposal, an insurer must prominently disclose any minimum limits on 
index losses that will always be available under the contract, or, 
alternatively prominently state that it does not guarantee that the 
contract will always offer index-linked options that limit index loss 
(which would mean risk of loss of the entire amount invested). These 
changes from the proposal mirror parallel disclosure requirements for 
index-linked options that we are adopting in other parts of the 
form.\386\
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    \383\ Final Form N-4, Item 5(a). In a change from the proposal, 
the heading for this disclosure item in final Form N-4 is ``Market 
Risk'' (instead of ``Investment Option Risk,'' as proposed) to 
clarify the focus of this disclosure item and distinguish it from 
Item 5(c), which specifically addresses Index-Linked Option Risk.
    \384\ Id.
    \385\ See, e.g., final Form N-4, Item 1(a)(6) (for example, in 
the first sentence of Item 5(a), we are replacing ``poor'' 
investment performance, as proposed, with ``negative'' investment 
performance to conform with similar cover page disclosure 
requirements).
    \386\ The changes to Item 5(a) parallel changes to risk 
disclosures in final Form N-4, Item 1(a)(6) and Instruction 3(a) to 
Item 3. See supra discussion at Section II.C.3 and II.C.4.(b).
---------------------------------------------------------------------------

    Although disclosures that address certain risks of index-linked 
options will be required in other locations in the prospectus, we are 
requiring that RILA issuers include certain risk factors, such as 
disclosures related to maximum potential loss from index performance, 
in the consolidated summary of principal risks associated with the 
contract. Including this statement and others in Item 5 will help 
investors assess the particular risks associated with RILAs in the 
context of the other required principal risk disclosures, a premise to 
which a commenter agreed.\387\ This approach also will help ensure that 
an investor who reviews principal risk disclosure will be able to 
review all principal risks in one place in the prospectus, as the 
Commission stated as a goal when redesigning Form N-4 in connection 
with updating disclosure for variable contracts and implementing a 
summary prospectus framework.\388\
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    \387\ See supra footnote 380 and accompanying text. As discussed 
above, we are changing our calculation method for maximum risk of 
loss from index performance throughout the form to account for 
changes being adopted to minimum contract guarantees. See supra 
Section II.C.1.
    \388\ VASP Adopting Release at text following n.689 (``The 
principal risks section is designed to provide a consolidated 
presentation of principal risks which can be cross-referenced by 
registrants to reduce repetition that might otherwise occur if the 
same principal risks are repeated in different sections of the 
prospectus.'').
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    Under the final amendments, the next sub-item, which concerns the 
risks of early withdrawal, will require the prospectus to disclose that 
contracts are unsuitable as short-term savings vehicles and explain the 
limitations on access to cash value through withdrawals, including 
surrender charges, negative contract adjustments, and loss of 
interest.\389\ The disclosure must also explain the possibility of 
adverse tax consequences. We are adopting this sub-item as proposed. 
These are features of annuity contracts that implicate why they are not 
short-term saving vehicles. In addition, insurance companies that offer 
contracts with contract adjustments will be required to state the 
maximum potential loss resulting from a negative contract adjustment, 
as a percentage. Although this last statement will be required to be 
provided in other locations in the prospectus, we are including this 
risk disclosure in the consolidated summary of principal risks because 
contract adjustments can significantly affect contract value.
---------------------------------------------------------------------------

    \389\ Final Form N-4, Item 5(b).
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    The next sub-item, which concerns the principal risks associated 
with index-linked options, will, substantially as proposed, include new 
risk disclosure requirements tailored to address unique risks 
associated with these investment options.\390\ Under these 
requirements, a registrant will (in addition to the risks of potential 
loss from negative index performance, as discussed above) describe the 
principal risks of investing in any index-linked options offered under 
the contract. The sub-item will, as proposed, require the prospectus to 
include a statement that an investor in an index-linked options is not 
invested in the index or in the securities tracked by the index. This 
reflects our concern, based on the results of qualitative investor 
interviews, that investors may be confused about whether an investment 
in an index-linked option is a direct investment in the index.
---------------------------------------------------------------------------

    \390\ Final Form N-4, Item 5(c). In a change from the proposal, 
we are relocating ``as applicable'' from the text of Instructions 1 
and 2 to Item 5(c) to the Instruction preamble to streamline.
---------------------------------------------------------------------------

    To help ensure that RILA prospectuses address certain key risks, 
the instructions to this disclosure requirement will, as proposed, 
specify that discussion of the principal risks related to index-linked 
options must include the principal risks relating to: (1) limiting 
positive index returns; (2) the possibility of losses despite limits on 
negative index returns; (3) interest crediting methodologies; (4) the 
impact of contract fees on the amount of interest credited; and (5) the 
reallocation of contract value at the end of an index-linked option's 
crediting period.\391\ We are also adopting, as proposed, instructions 
specifying that this discussion will be required to include principal 
index risks relating to: (1) the type of index (e.g., market risk, 
small-cap risk, foreign securities risk, emerging market risk, etc.); 
(2) the exclusion of dividends from index return; and (3) market 
volatility.\392\ These instructions require RILA issuers to specify 
which risks relate to each index offered under the contract, and to 
describe the principal risks related to the possible substitution of 
the index before the end of an index-linked option's crediting period.
---------------------------------------------------------------------------

    \391\ Final Form N-4, Instruction 1 to Item 5(c).
    \392\ Final Form N-4, Instruction 2 to Item 5(c).
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    An additional new sub-item will require, as proposed, a description 
of the principal risks associated with any contract benefits (e.g., 
death benefits, living benefits), including the impact of excess 
withdrawals, if applicable.\393\ These risks include, for example, 
investment restrictions associated with a living benefit, which may 
limit investment performance. Because these risks could impact the 
expected performance of the annuity, or in some cases could even 
terminate the annuity, we are requiring issuers to disclose them in the 
prospectus. These risks could be applicable to variable annuities, 
RILAs, or registered MVA annuities.
---------------------------------------------------------------------------

    \393\ Final Form N-4, Item 5(d).
---------------------------------------------------------------------------

    Another new sub-item will require, as proposed, an explanation of 
the principal risks associated with the insurance company's ability to 
meet its guarantees under the contract, including risks relating to its 
financial strength and claims-paying ability, which as described below 
may be of particular concern for investors who allocate contract value 
to index-linked options.\394\ We are requiring this disclosure to be 
included in the consolidated principal risks section of the prospectus 
for completeness, and to help ensure that a prospectus discloses

[[Page 60018]]

the insurance company's claims-paying ability with regard to its 
contractual guarantees.
---------------------------------------------------------------------------

    \394\ Final Form N-4, Item 5(e).
---------------------------------------------------------------------------

    Lastly, we are adopting as proposed a final new sub-item, which 
will require a description of the principal risks relating to any 
material reservation of rights under the contract, including if 
applicable the right to: (1) remove or substitute portfolio companies; 
(2) add or remove index-linked options and change the features of an 
index-linked option from one crediting period to the next; (3) stop 
accepting additional purchase payments; and (4) impose investment 
restrictions or limitations on transfers.\395\ We are requiring this 
disclosure because the ability to discontinue contract features, alter 
an investor's ability to participate in an index's upside performance, 
and otherwise change features is important information for investors 
when making an investment decision.
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    \395\ Final Form N-4, Item 5(f).
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6. Addition of Contract Adjustments and Other Amendments to Fee and 
Expense Disclosures (Items 4, 7, and 22)
    We are adopting amendments to Form N-4, largely as proposed, to 
require specific disclosures regarding contract adjustments and other 
implicit RILA-specific costs that can result in a significant erosion 
of investment principal. The required disclosures, set forth in Items 
4, 7, and 22(d) of Form N-4, are designed to provide investors with a 
better understanding of the mechanics of these costs and the associated 
potential for loss. We are also adopting revisions to the existing 
provisions of these items, applicable to all issuers registering 
offerings on Form N-4, to clarify certain terminology.
a. Amendments to Fee Table Disclosure Requirements (Item 4)
    The fee table of Form N-4 provides detailed information on the fees 
and expenses investors will pay when buying, owning, and surrendering 
or making withdrawals from the contract, as well as those paid each 
year during the time the investor owns the contract. We are amending 
the fee table to require specific disclosures regarding contract 
adjustments and other costs to investors specific to RILAs, including a 
detailed description of contract adjustments in the prospectus that 
will be proximate and similar to other disclosures regarding fees and 
expenses. We are adopting amendments to the fee table largely as 
proposed, with certain modifications after considering comments 
discussed below.\396\
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    \396\ In order to eliminate unnecessary information in the 
prospectus, we are amending instruction 1 to Item 4 to specify that 
registrants may omit a narrative explanation that is not applicable 
under the contract. See final Form N-4, Instruction 1 to Item 4. We 
are also amending instruction 5 to Item 4 regarding the preparation 
of the transaction expenses and adjustments and annual contract 
expenses tables, specifying that the instruction to disclose the 
maximum guaranteed charge as a single number where a fee is 
calculated based on a benchmark does not apply to a contract 
adjustment. See final Form N-4, Instruction 5 to Item 4. We received 
no comments on these changes and are adopting them as proposed.
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Transaction Expenses and Adjustments Tables
    Insurance companies currently must include a transaction expenses 
table in their prospectuses, describing fees and expenses investors 
must pay when buying, owning, and surrendering or making withdrawals in 
connection with a contract. To provide proximate and similar disclosure 
for non-variable annuity-specific costs, we are adopting, with some 
changes to the proposal, a requirement that insurance companies 
additionally include the maximum negative contract adjustment that may 
be imposed, to be expressed as a percentage of contract value at the 
start of the crediting period or the amount withdrawn, as applicable. 
The proposal would have required this disclosure to appear in the 
transaction expenses table that Form N-4 issuers currently include in 
their prospectuses. In response to comments questioning the disclosure 
of contract adjustments in the transaction expenses table, and in a 
change from the proposal, we are adding a separate adjustments table, 
which will follow the transaction expenses table. Finally, to provide 
investors notice of the circumstances where they might be subject to 
this cost, we are also adopting, as proposed, a requirement that 
insurance companies include a footnote describing all transactions 
potentially subject to a contract adjustment.\397\
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    \397\ See final Form N-4, Instruction 12 to Item 4.
---------------------------------------------------------------------------

    The commenters who addressed the proposed amendments to the 
transaction expenses table opposed including the maximum negative 
contract adjustment, asserting that contract adjustments are a product 
feature based on market risk rather than a type of fee or expense.\398\ 
One commenter further stated that characterizing contract adjustments 
as fees penalizes insurance companies for allowing investors to make 
early withdrawals.\399\ Another commenter opposed disclosing the 
maximum negative contract adjustment here because, although contract 
adjustments may result in losses to investors, the commenter believed 
this maximum potential loss disclosure ultimately is risk disclosure, 
and not an explicit fee or charge, and because contract adjustments can 
result in a gain as well as a loss.\400\ The commenter also asserted 
that it grossly mischaracterizes the risk of loss because the risk of 
suffering such a maximum loss is remote.
---------------------------------------------------------------------------

    \398\ VIP Working Group Comment Letter; CAI Comment Letter.
    \399\ VIP Working Group Comment Letter.
    \400\ CAI Comment Letter.
---------------------------------------------------------------------------

    The transaction expenses table discloses all transaction expenses 
paid directly by the investor, such as sales loads or surrender 
charges, including when those transaction expenses are fees or expenses 
paid due to an investor withdrawal.\401\ A negative contract 
adjustment, although not an explicit fee or expense, could have a 
similar impact on an investor as an explicit fee or expense because a 
negative contract adjustment can reduce an investor's investment just 
like a surrender charge, for example, and has the potential to reduce 
it significantly. By disclosing the maximum negative contract 
adjustment, in addition to any transaction expenses, investors are 
alerted to the potential costs they will bear when amounts are 
withdrawn prematurely. These costs could result in the loss of a 
significant amount of money. This is true even if, in the context of a 
RILA, the index has experienced a positive gain at the time of 
withdrawal or the RILA includes a loss protection feature.
---------------------------------------------------------------------------

    \401\ See current and final Form N-4, Item 4.
---------------------------------------------------------------------------

    For these reasons, the maximum negative contract adjustment should 
be disclosed proximate to the transaction expenses currently disclosed 
in the transaction expenses table, including sales loads imposed on 
purchases, deferred sales loads, surrender charges, and transfer fees. 
Including the maximum negative contract adjustment disclosure proximate 
to the transaction expense disclosure helps ensure that investors have 
access, in one place, to full disclosure regarding the economic 
consequences of withdrawing money from an index option or the contract. 
Nonetheless, we appreciate that maximum negative contract adjustments 
may not be as clearly identified by investors as transaction 
``expenses'' per se as other items in this table. To address this 
concern, we have added a separate adjustments table, which will follow 
the transaction expenses table. The table will be preceded by an

[[Page 60019]]

``Adjustments'' heading and describe the adjustments, in addition to 
any transaction expenses, that apply if all or a portion of the 
contract value is removed from an investment option or from the 
contract before the expiration of a specified period. This new table is 
designed to highlight the effect of contract adjustments for investors, 
consistent with the proposal, while conveying that the contract 
adjustment is not itself an explicit fee.
    The transaction expenses table also currently requires registrants 
to describe the maximum exchange fee that investors could incur for any 
exchange or transfer of contract value from the registrant to another 
investment company, or between sub-accounts or to the insurance 
company's general account. In a change relevant to all Form N-4 
issuers, we are adopting, as proposed, a terminology change, replacing 
the term ``exchange fee'' with ``transfer fee,'' as this term better 
reflects that, in the staff's experience, the vast majority of such 
fees are imposed on transfers of contract value among investment 
options under the contract.\402\ We received no comments on this aspect 
of the proposal.
---------------------------------------------------------------------------

    \402\ See final Form N-4, Instruction 10 to Item 4. As defined, 
``transfer fee'' will encompass both the maximum fee charged for any 
exchange or transfer of contract value between investment options as 
well as the maximum fee charged for any exchange or transfer of 
contract value from the registered separate account to another 
investment company or from the registered separate account to the 
insurance company's general account. Thus, the amended definition 
and terminology regarding transfer fees will not result in any 
substantive change for existing Form N-4 issuers.
---------------------------------------------------------------------------

Annual Contract Expenses
    Form N-4 issuers currently must include an annual contract expenses 
table in their prospectuses, detailing the fees and expenses that 
investors pay each year in administrative expenses, base contract 
expenses, and optional benefit expenses. Currently, base contract 
expenses must be expressed as a percentage of average account value. In 
a change relevant to all Form N-4 issuers, we are adopting, as 
proposed, an amendment that will also allow base contract expenses to 
be expressed as a percentage of average account value or contract 
value. Index-linked and fixed MVA options do not generally use the 
concept of average account values (as variable annuities do), but they 
do have a concept of contract value. Making this change will therefore 
facilitate including those investment options on the form as it allows 
them to accurately express base contract expenses. We do not anticipate 
that this change will substantively affect variable annuities' existing 
disclosure and we received no comments on this aspect of the 
proposal.\403\
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    \403\ We are adopting, as proposed, two related, non-substantive 
amendments to the instructions relating to annual contract expenses 
relevant to all issuers. These changes will broaden terminology 
given the expanded scope of securities offerings registered on Form 
N-4 as amended. Currently, the instruction for describing 
administrative expenses references ``any Contract, account, or 
similar fee on all Investor Accounts;'' however, as noted below, we 
are removing the term ``Investor Account,'' and amending this 
instruction to conform to that change. See final Form N-4, 
Instruction 13 to Item 4. Relatedly, we are amending the instruction 
regarding base contract expenses to remove a reference to fees and 
expenses deducted ``from separate account assets or charged to all 
Investor Accounts,'' and replacing it with an instruction to 
consider fees and expenses ``charged to any Investment Option.'' See 
final Form N-4, Instruction 14 to Item 4. We received no comments on 
this aspect of the proposal.
---------------------------------------------------------------------------

    Additionally, to place investors on notice of the unique and 
ongoing trade-off costs associated with RILAs that may not be captured 
by this table, we are requiring, in part as proposed, insurance 
companies to include the following statement in the table with respect 
to index-linked options:

    In addition to the fees described above, we limit the amount you 
can earn on [certain of] the Index-Linked Options. This means your 
returns may be lower than the Index's returns. In return for 
accepting this limit on Index gains, you will receive some 
protection from Index losses.

    As proposed, the disclosure included a sentence stating that 
``Imposing this limit helps us make a profit on the Index-Linked 
Option.'' Some commenters were opposed to including the statement that 
an insurance company limits gains on an index-linked option in order to 
help the insurer make a profit.\404\ These commenters stated that the 
disclosure is an oversimplification of an insurance company's business 
model and that it would provide investors with a false understanding 
about RILA profitability for the issuers. In particular, commenters 
stated that the disclosure suggested that an insurance company applies 
cap rates and participation rates as a means of capturing for itself 
any increases in index value above the cap rate.\405\ Some commenters 
explained that cap rates and participation rates are among the 
investment parameters that a RILA issuer can use to design index linked 
options and that the effectiveness of the options in hedging the 
performance of the reference index is only one of the factors that 
determines the profitability for a RILA issuer.\406\ One commenter 
stated that an explanation of an insurance company's business model or 
the profitability of issuing RILAs would not be helpful to 
investors.\407\
---------------------------------------------------------------------------

    \404\ See ACLI Comment Letter; Gainbridge Comment Letter; CAI 
Comment Letter.
    \405\ Gainbridge Comment Letter; CAI Comment Letter.
    \406\ ACLI Comment Letter; Gainbridge Comment Letter.
    \407\ ACLI Comment Letter.
---------------------------------------------------------------------------

    In a change from the proposal, after considering the comments 
discussed above, insurance companies will not be required to state that 
limits on index earnings help insurance companies make a profit on 
index-linked options. Instead, insurance companies will be required to 
include a sentence stating that ``This means your returns may be lower 
than the Index's returns.'' \408\ The purpose of this disclosure is to 
put investors on notice that although there are typically not explicit 
fees charged for these products, and in exchange for that lack of a 
fee, investors generally will accept some limit on their ability to 
participate in index gains. This disclosure is appropriate to address 
the results of our investor testing, which demonstrated that 
participants may not understand that limits on index earnings reduce an 
investor's potential gains from the market.\409\ This disclosure is 
also necessary to alert investors to the implicit fees inherent in 
limiting upside index participation. Without the disclosure, which will 
follow the other expenses relevant to investors, including 
administrative expenses, base contract expenses, and optional benefit 
expenses in the annual contract expenses table, an annual contract 
expenses table showing no explicit ongoing fees could itself mislead 
investors.
---------------------------------------------------------------------------

    \408\ Final Form N-4, Item 4. Specifically, this disclosure at 
proposal read: ``In addition to the fees described above, we limit 
the amount you can earn on an Index-Linked Option. Imposing this 
limit helps us make a profit on the Index-Linked Option. In return 
for accepting this limit on Index gains, you will receive some 
protection from Index losses.'' See Proposing Release at Section 
II.B.5.a).
    \409\ See OIAD Investor Testing Report at 39 and 59.
---------------------------------------------------------------------------

    In another change from the proposal, the disclosure referring to 
limits on ``an Index-Linked Option'' was revised to ``[certain of] the 
Index-Linked Options.'' Because the disclosure related to the entire 
contract whose offering is being registered, this phrasing did not 
account for variances between index-linked options offered in that 
contract where, for example, some index-linked options have limits on 
upside participation but others do not. One commenter stated that cap 
rates and participation rates do not limit the amount an investor can 
earn in all scenarios, such as when an issuer does not impose a limit 
on an

[[Page 60020]]

index-linked option or an investor earns the full index performance 
because the actual index gain is less than the index limit.\410\ We 
appreciate that a RILA may offer both index-linked options with and 
without limits on the amounts investors can earn.\411\ To account for 
this, we have changed the language of the final disclosure to refer to 
``[certain of]'' the index-linked options in these limited 
circumstances. We are not amending the form to address cases where 
there are limits but the actual index performance is below those limits 
because that cannot be known at the time of the disclosure.
---------------------------------------------------------------------------

    \410\ See ACLI Comment Letter.
    \411\ An insurance company would not include this disclosure if 
none of the index-linked options offered in the prospectus limit the 
amount of an investor's gains. See, e.g., final Form N-4, General 
Instruction C.1(d).
---------------------------------------------------------------------------

Annual Portfolio Company Expenses
    Form N-4 currently requires issuers to include in the prospectus an 
annual portfolio company expenses table, disclosing the minimum and 
maximum total operating expenses charged by the portfolio companies 
offered by variable annuity contracts that may be periodically charged 
to investors during the time they own the contract. This includes costs 
incurred by portfolio companies directly and, if the portfolio company 
invests in other mutual funds, the fees and expenses the portfolio 
company indirectly incurs from these investments. In a change that will 
apply to variable annuity prospectuses, we are adopting, as proposed, a 
requirement that registrants disclose that expenses shown in this table 
may change over time and may be higher or lower in the future. This 
modification will help to ensure that investors understand that these 
charges may increase over time, notwithstanding that these charges are 
described as maximum expenses. Additionally, this disclosure is similar 
to disclosures we are requiring of non-variable annuities that are also 
subject to change, specifically disclosures related to changing upside 
and downside limits.\412\ We received no comments on this aspect of the 
proposal.
---------------------------------------------------------------------------

    \412\ See, e.g., final Form N-4, Item 17(b)(1).
---------------------------------------------------------------------------

Example
    Form N-4 issuers currently must provide an example in their 
prospectuses that is designed to allow variable annuity investors to 
compare the cost of investing in the contract with the cost of 
investing in other variable annuity contracts. We are amending, as 
proposed, the example requirements to clarify, in relation to variable 
annuities and combination contracts that have variable options, that 
the example is designed to permit investors to compare costs of 
investing solely in variable options under the contract with costs 
associated with variable options offered under other annuity contracts. 
The example will be preceded with a legend specifically stating that: 
the example assumes that all contract value is allocated to variable 
options, the example does not reflect contract adjustments, and costs 
would likely differ if an investor selects index-linked options or 
fixed options. The one commenter that spoke to this aspect of the 
proposal supported it and agreed that it served the intended 
purpose.\413\
---------------------------------------------------------------------------

    \413\ CAI Comment Letter.
---------------------------------------------------------------------------

b. Charges and Adjustments (Item 7)
    Item 7 currently requires registrants to provide a brief 
description in their prospectuses of all current charges deducted from 
purchase payments, investor accounts, assets of the registrant, or any 
other source.\414\ For the reasons described above and given the 
potentially significant economic consequences contract adjustments can 
have on investors in non-variable annuities, we are also adopting 
additional specific requirements to incorporate contract adjustments 
into the prospectus's disclosure of charges, which will consist of a 
description in simple terms of any contract adjustments under the 
contract. These disclosures are designed to be comparable and proximate 
to existing disclosures about contract charges applicable to variable 
annuities.\415\ These disclosures are adopted as proposed, except that 
we are changing the title of Item 7 from ``Charges'' to ``Charges and 
Adjustments'' in response to comments, as discussed in more detail 
below.\416\
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    \414\ In addition to the changes discussed below, we are 
adopting as proposed a few clarifying changes to Item 7. 
Specifically, consistent with the adopted changes to the fee table, 
we are adopting proposed changes in terminology that will affect all 
Form N-4 issuers, replacing references in Item 7 to ``investor 
accounts'' and the assets of ``registrants'' with the terms 
``contract value'' and ``investment option'' assets, respectively. 
Therefore, in responding to Item 7, issuers will describe charges 
deducted from purchase payments, contract value, investment option 
assets, or any other source. Additionally, we are adopting as 
proposed two non-substantive terminology changes in Instruction 3 to 
Item 7(a) regarding how registrants must describe the sources that 
will be used to cover shortfalls where proceeds from sales loads 
will not cover expected costs. First, we are replacing the term 
``depositor'' with the term ``insurance company.'' Second, where 
shortfalls are to be made from an insurance company's general 
account, this instruction currently requires a disclosure that 
amounts paid by the insurance company may consist of proceeds 
derived from base contract expenses deducted from the registered 
separate account. We are striking the italicized language referring 
to assets of the registered separate account because it is 
superfluous given the definition of ``base contract expenses'' in 
amended Instruction 14 to Item 4, discussed above. We received no 
comments on these aspects of the proposal.
    \415\ See final Form N-4, Item 7(a)-(d).
    \416\ We proposed to amend Instruction 6 to Item 7 to require a 
description of the relationship between the contract adjustment and 
any other charges or fees applied under the contract, including, for 
example, the sequences in which charges and adjustments are applied. 
In a modification from the proposal, we are amending Instruction 6 
to Item 7 to require a description of the relationship between the 
contract adjustment and any other charges, fees, or adjustments 
applied under the contract, including, for example, the sequences in 
which charges, fees, and adjustments are applied. Fees and 
adjustments were added in respective places in the instruction for 
clarity and completeness compared to the proposal. See final Form N-
4, Instruction 6 to Item 7. These disclosures apply to both RILAs 
and registered MVA annuities.
---------------------------------------------------------------------------

    Specifically, we are adopting a requirement that insurance 
companies must: (1) disclose (as a percentage) the maximum potential 
loss that could result from a negative contract adjustment; (2) define 
the period during which any contract adjustment would apply; and (3) 
describe all transactions subject to a contract adjustment.\417\ 
Insurance companies will also be required to include a description of 
how the contract adjustment will affect the contract value, surrender 
value, death benefit, and any living benefits, and disclose that a 
negative adjustment could reduce the values under the contract in an 
amount greater than the value withdrawn.\418\ They will also need to 
describe, in simple terms, how the contract adjustment is determined 
under the contract, and the relationship between the contract 
adjustment and any other charges, fees, or adjustments applied under 
the contract, including, for example, the sequence in which charges, 
fees, and adjustments are applied.\419\ The required disclosure will

[[Page 60021]]

also require the issuer to briefly describe the purpose of the contract 
adjustment, including, for example, that the contract adjustment 
transfers risk from the insurance company to the investor to protect 
the insurance company from losses on its own investments supporting 
contract guarantees if amounts are withdrawn prematurely.\420\ Finally, 
issuers will be required to disclose how an investor can obtain 
information about the current value of the contract adjustment, while 
stating that this value can fluctuate daily, and that the quoted value 
may differ from the actual value at the time of adjustment.\421\
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    \417\ See final Form N-4, Instructions 1 through 3 to Item 7(e). 
In describing the transactions subject to a contract adjustment, the 
insurance company will need to describe, for example, whether 
adjustments apply if amounts are transferred or withdrawn from an 
index-linked or MVA option, or from the contract, due to a partial 
withdrawal, surrender, election of an annuity option, or payment of 
death benefit proceeds, or where a particular optional benefit 
(e.g., a withdrawal under a guaranteed living benefit) is utilized, 
and to describe any circumstances under which the adjustment will be 
waived.
    \418\ See final Form N-4, Instruction 5 to Item 7(e). If 
applicable, the insurance company will also be required to state the 
impact of the contract adjustment on interest to be credited to an 
index-linked option at the end of its crediting period.
    \419\ See final Form N-4, Instructions 4 and 6 to Item 7(e). The 
description of how the contract adjustment is determined will have 
to provide a meaningful explanation of all the material features of 
the contract adjustment's application, including: (1) information 
about any formula applied (e.g., a change in value of hypothetical 
derivative instruments); (2) the factors that may cause a positive 
or negative adjustment (e.g., timing of withdrawal, index 
volatility, increase in external interest rates); (3) a description 
of any proportionate withdrawal calculations; and (4) how 
adjustments are applied (e.g., allocated among the investment 
options, applied to a withdrawal amount).
    \420\ See final Form N-4, Instruction 7 to Item 7(e).
    \421\ See final Form N-4, Instruction 8 to Item 7(e).
---------------------------------------------------------------------------

    The detailed disclosure on the method of calculating the contract 
adjustment will, as proposed, appear in the SAI, as opposed to the 
prospectus.\422\ Item 7(e) will include a cross-reference to Item 22(d) 
of Form N-4, which will require more detailed disclosure on the 
contract adjustment's calculation (including illustrative examples as 
to adjustment's operation) to appear in the SAI. The more detailed SAI 
discussion will not be, however, a substitute for the Item 7 
requirements. Thus, for example, an insurance company will not be 
permitted to include the formula underlying the contract adjustment 
calculation in the SAI in lieu of the required discussion of the 
contract adjustment in the prospectus. Rather, in addition to stating 
the formula in the SAI, the insurance company will need to include in 
the prospectus a brief description, in simple terms, of how the 
contract adjustment is determined.
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    \422\ See final Form N-4, Instruction 4 to Item 7(e).
---------------------------------------------------------------------------

    Some commenters stated that the proposal generally mischaracterizes 
contract adjustments as charges.\423\ One of these commenters stated 
that, as a result, Item 7 should not include any contract adjustment 
disclosures.\424\ The other of these commenters instead recommended 
that Item 7 be renamed from ``Charges'' to ``Charges and Adjustments.'' 
\425\ This commenter stated that ``Charges and Adjustments'' would more 
accurately describe the disclosures in amended Item 7, which would 
include disclosures related to contract adjustments.\426\ This 
commenter also stated that this disclosure should focus on describing 
the mechanics of contract adjustments and exclude any maximum potential 
loss disclosures, which are already included elsewhere in the 
prospectus.
---------------------------------------------------------------------------

    \423\ VIP Working Group Comment Letter; CAI Comment Letter.
    \424\ VIP Working Group Comment Letter.
    \425\ CAI Comment Letter.
    \426\ The commenter also suggested that we delete the word 
``other'' from the following proposed instruction: ``Describe the 
relationship between the Contract Adjustment and any other charges 
or fees applied under the Contract . . .'' because it suggests that 
contract adjustments are charges or fees. See Proposed Form N-4, 
Instruction 6 to Item 7(e). We decline to make this change for the 
reasons stated in the next paragraph.
---------------------------------------------------------------------------

    Given that Item 7, as amended, includes significant disclosure 
related to contract adjustments, we agree, as one commenter 
recommended, that changing Item 7 from ``Charges'' to ``Charges and 
Adjustments'' is appropriate and provides a clear and accurate 
description of the specific disclosure that investors will find in 
disclosure provided in response to Item 7. However, similar to the 
inclusion of limits on upside gains as a ``fee'' or ``expense,'' as 
discussed above,\427\ a contract adjustment could potentially affect an 
investor the same way as other charges currently disclosed in Item 7, 
such as sales loads, administrative and transaction charges, risk 
charges, contract loan charges, and optional benefit charges. By 
including contract adjustment disclosure in the disclosure required by 
Item 7, including the maximum potential loss that could result from a 
negative contract adjustment, investors are provided with the necessary 
scope and level of detail about contract adjustments, together with 
information about charges that may apply upon a withdrawal, that could 
negatively affect an investor's contract value or the amounts an 
investor could withdraw from the contract. These disclosures 
specifically address areas of confusion identified by investor testing, 
which showed that participants were confused about contract 
adjustments, their purpose, the situations in which they could arise, 
their potential magnitude, and their relationship to other fees and 
charges (e.g., surrender fees).\428\
---------------------------------------------------------------------------

    \427\ See supra Section II.C.6.a (discussing a similar change 
made to the proposed transaction expenses table).
    \428\ See, e.g., OIAD Investor Testing Report at Section 5, 
Qualitative Testing, Results From Round 2 and Section 7, 
Conclusions.
---------------------------------------------------------------------------

c. Purchase of Securities Being Offered (Item 22)
    We are adopting, as proposed, amendments to Item 22, which 
addresses the purchase of securities being offered, to require 
specific, detailed contract adjustment disclosures to appear in 
insurance companies' SAIs. As discussed above, insurance companies will 
be required to provide in simple terms an explanation of the manner in 
which contract adjustments are determined in their prospectuses, while 
noting that further detail is available in the SAI and providing a 
cross reference to that information. To complement the discussion 
required in the prospectus by Item 7, Item 22(d) will require issuers 
to explain fully the operation of any contract adjustment that can be 
applied under the contract. This more detailed explanation will not 
take the place of the prospectus discussion, but will describe the 
technical, detailed aspects of the operation of the adjustment, 
including any formulas and an explanation of such formulas used to 
calculate the adjustment, and at least one numeric example to 
illustrate the application of the contract adjustment. This numeric 
example will be required to include a negative adjustment, reflect 
surrender charges (if applicable), and disclose the percentage change 
in contract value as a result of the adjustment.
    The one commenter who addressed these amendments supported them as 
an effective use of layered disclosure.\429\ Specifically, the 
commenter stated that the detailed disclosure on the method of 
calculating the contract adjustment, including examples, should be 
included in the SAI and a cross-reference to the detailed disclosure 
should be included in Item 7(e).
---------------------------------------------------------------------------

    \429\ CAI Comment Letter.
---------------------------------------------------------------------------

    The mechanics of contract adjustments under a non-variable annuity 
are typically complex, and often involve factors or formulas that can 
be difficult for many investors to understand.\430\ Because the 
application of a negative contract adjustment can substantially affect 
an investor's contract value, it is important that information on 
negative contract adjustments is available in the SAI for investors who 
want to learn more about the calculation. In addition to promoting 
transparency generally, the required disclosure will also ensure that 
liability attaches under section 11 of the Securities Act for any 
material misrepresentations regarding the application of a contract 
adjustment.\431\
---------------------------------------------------------------------------

    \430\ Proposing Release at Section II.B.5.c.
    \431\ See also VASP Adopting Release at n.700 (stating that 
summary prospectus disclosure requirements are designed to 
substantively track parallel disclosure requirements in the 
statutory prospectuses to ensure that the summary prospectus 
disclosures are subject to liability under Section 11 of the 
Securities Act).

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[[Page 60022]]

    We are also, as proposed, applying certain existing SAI disclosure 
requirements to insurance companies about the purchase of non-variable 
annuity securities being offered. Specifically, we are requiring 
insurance companies to describe the manner in which the securities are 
offered to the public by addressing any exchange privileges between 
investment options not described in the prospectus.\432\ Additionally, 
we are requiring RILA and registered MVA annuity issuers to describe 
the method used to determine the sales load.\433\ We are not applying 
the existing disclosure requirement dealing with frequent transfer 
arrangements to non-variable annuity issuers, as its provisions are 
relevant only to variable options.\434\ We received no comments on this 
aspect of the proposal.
---------------------------------------------------------------------------

    \432\ See final Form N-4, Item 22(a).
    \433\ See final Form N-4, Item 22(b).
    \434\ See final Form N-4, Item 22(c).
---------------------------------------------------------------------------

7. Information About Contracts With Index-Linked and/or MVA Options 
(Item 31A)
    We are adopting new Item 31A to Form N-4 to require census-type 
information regarding non-variable annuities offered in connection with 
the registration statement. Item 31A will require an insurance company 
to provide the following information regarding any non-variable annuity 
offered through the registration statement, as of the most recent 
calendar year-end in a tabular format: (1) the name of each contract; 
(2) the number of contracts outstanding; (3) the total value of 
investor allocations attributable to index-linked and/or MVA options; 
(4) the number of contracts sold during the prior calendar year; (5) 
the gross premiums received during the prior calendar year; (6) the 
amount of contract value redeemed during the prior calendar year; and 
(7) whether the contract is a ``combination contract,'' that is, a 
contract that offers variable options in addition to index-linked or 
MVA options.\435\ We are adopting Item 31A largely are as proposed, 
with certain changes designed to include registered MVA annuities in 
this item.\436\ In a change from the proposal, we also are requiring 
insurance companies that incorporate current limits on index gains into 
the prospectus by reference to a website to provide in response to Item 
31A all of the then-current limits on index gains that were in effect 
during the twelve months ending on December 31 of the prior year for 
each index-linked option. One commenter supported a similar 
approach.\437\ Because this information will be required as of the most 
recent calendar year-end, insurance companies generally will need to 
update this information through a post-effective amendment to a 
registration statement on Form N-4.\438\ Accordingly, under the final 
amendments, insurance companies will file with the Commission 
information on current upside rates either via prospectus supplements 
(if the insurance company discloses these rates directly in the 
prospectus) or annually in response to Item 31A (if the insurance 
company incorporates current upside rates into the prospectus by 
reference to a website). We anticipate most insurance companies will 
incorporate this information by reference to a website and therefore 
file it in response to Item 31A.\439\ One commenter opposed the 
proposed census-type disclosures in Item 31A, asserting that they would 
require insurance companies to publicly reveal private and confidential 
information that could be used by competitors and that would not be 
useful to investors in making investment decisions.\440\ The commenter 
stated that the Commission could obtain the census-type information 
from insurance companies individually, if needed, upon request.
---------------------------------------------------------------------------

    \435\ See final Form N-4, Item 31A.
    \436\ See supra Section II.B.
    \437\ Coenen Comment Letter (supporting an approach in which 
insurance companies would file annual reports disclosing the upside 
rates offered during the previous one-year period or a range of such 
rates).
    \438\ See final Form N-4, Item 31A(a). The information required 
for Item 31A will need to be updated as part of an issuer's annual 
update to its registration statement for such contracts. See 15 
U.S.C. 77j(a)(3). An issuer transitioning from an existing 
registration statement on Form S-1 or S-3 to Form N-4 through a 
post-effective amendment will be required to report this information 
as of the most recently completed calendar year in its first post-
effective amendment transitioning onto final Form N-4.
    \439\ See supra paragraph accompanying footnote 284.
    \440\ See CAI Comment Letter.
---------------------------------------------------------------------------

    We are adopting the proposed requirements for census-type 
information to provide improved transparency to investors and others by 
supplementing the information available in the marketplace for the non-
variable annuity contracts registered on Form N-4. The information will 
help us carry out regulatory responsibilities, including monitoring 
risk and trends, formulating policy and guidance, and reviewing 
registration statements. Moreover, third parties, including data 
aggregators, academics, and the press, as well as financial 
professionals who recommend or provide advice on non-variable 
annuities, are also likely users of this data which may ultimately help 
inform investor decisions. Requiring this high-level reporting will 
permit the Commission to identify trends occurring in this market 
segment over time and assist with allocating the Commission's resources 
in administering Form N-4. Also, because providing this information on 
Form N-4 will result in having information provided to the Commission 
as of a uniform date for all offerings of non-variable annuities 
registered on this form, regardless of the date the annual amendment is 
filed, this information will provide for increased comparability across 
issuers and contracts and give data points over time with which to 
compare.\441\
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    \441\ We understand that insurance companies offering RILAs have 
a December 31 fiscal year end which, in practice, means a 
distinction between calendar year and fiscal year will result in 
limited effect on the reporting.
---------------------------------------------------------------------------

    We disagree with the comment suggesting that requiring this 
information to be disclosed will result in private and confidential 
information being disclosed that will aid competitors. The information 
that will be reported will complement the parallel census-type 
information that is currently required to be reported annually on Form 
N-CEN by registered unit investment trusts offering variable 
annuities.\442\ Moreover, information that insurance companies will 
report in response to Item 31A will be aggregated at the contract 
level, which reduces the possibility that any confidential or private 
information would be disclosed. Requiring individual insurance 
companies to produce the census-type information to the Commission upon 
request, as suggested by the commenter who opposed the proposed 
approach, would not facilitate the ability of the Commission and staff 
to observe and study relevant trends in the market for these products 
in the same manner as an annual filing requirement for all insurance 
companies. The information also would not be available to investors or 
analysts and others who analyze data for the benefit of investors.
---------------------------------------------------------------------------

    \442\ Issuers registering combination contracts on Form N-4 will 
be required to exclude amounts allocated to a variable option when 
providing information in response to Item 31A as these allocations 
will be separately reported by registered separate accounts on Form 
N-CEN. See final Form N-4, Instruction 2 to Item 31A(a).
---------------------------------------------------------------------------

    In addition to the information discussed above, and in a change 
from the proposal, Item 31A of final Form N-4 also requires that 
insurance companies provide, for any contract with index-linked options 
offered through the registration statement, the current limits on index 
gains in effect for each index-linked option during the

[[Page 60023]]

twelve months ending on December 31 of the prior year as provided on a 
website in accordance with the requirements of Item 6. As discussed 
above, we proposed to require that the current limits on index gains be 
provided in the statutory prospectus, but after considering comments, 
are permitting insurance companies to disclose these current upside 
rates by posting them to a website and incorporating this website 
disclosure by reference into the prospectus.\443\ Requiring insurance 
companies to disclose the current limits on index gains that were in 
effect over the course of the prior year preserves one of the benefits 
of the proposal, which would have ensured that all rates used over time 
remained available on EDGAR, while addressing concerns insurance 
companies raised by otherwise allowing them to supply the information 
on a website. This historical record will allow investors and analysts 
and others analyzing the data on investors' behalf to consider the 
frequency and magnitude of changes in upside rates. This is an 
important consideration because RILAs are long-term investments, and an 
investor's ultimate returns therefore depend on future upside rates set 
by the insurance company and not just the current rates at the time of 
investment. Two commenters recognized the value in maintaining 
historical rates used by an insurance company in suggesting that the 
Commission permit insurance companies to disclose the rates on a 
website, subject to a recordkeeping requirement.\444\
---------------------------------------------------------------------------

    \443\ See supra Section II.C.4.a.
    \444\ See VIP Working Group Comment Letter; Coenen Comment 
Letter.
---------------------------------------------------------------------------

    Given the potentially large volume of this information, insurance 
companies will be permitted to file this information as an exhibit to, 
rather than directly in, the registration statement itself.\445\ As 
with the other information required by this item, insurance companies 
must structure this information regardless of whether it is filed as an 
exhibit to, or provided directly in, the registration statement.
---------------------------------------------------------------------------

    \445\ In a modification from the proposal, we have added this 
exhibit to the exhibit list in Item 27 of the final form. This will 
standardize the location of this exhibit and make it easier to find 
in EDGAR.
---------------------------------------------------------------------------

    We are adopting a disclosure requirement, rather than a 
recordkeeping requirement as one commenter suggested, because 
disclosing this information in the registration statement will 
integrate this information more seamlessly into the existing methods of 
data collection required by the form. Furthermore, requiring filers to 
submit this information on EDGAR also will make it more accessible to 
the Commission and the public than a recordkeeping requirement. Under 
the final rule, historical current rate information filed on EDGAR will 
also be structured, consistent with the requirement to tag current rate 
information disclosed directly in the prospectus.\446\ As discussed in 
more detail below, there is value in having this information available 
in a structured data format.\447\
---------------------------------------------------------------------------

    \446\ See final Form N-4, Instruction C.3(h)(i).
    \447\ See infra Section II.C.10. As discussed below, the final 
amendments incorporate structured data requirements for certain of 
the disclosures that insurance companies will include in their Form 
N-4 registration statements.
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8. Other Amendments and Provisions
    We are adopting, largely as proposed, amendments to include certain 
other modifications to Form N-4 and related rules designed to 
accommodate the inclusion of offerings of non-variable annuities on the 
form. These include amendments to Form N-4's facing sheet, definitions, 
exhibit list, and required representations, as well as amendments to 
certain Securities Act rules that help to implement the registration of 
non-variable annuities on Form N-4. These amendments are discussed 
below.
a. Facing Sheet
    We are adopting, largely as proposed, amendments to include a new 
check box section on the facing sheet. Specifically, an issuer will be 
required to identify in this new section: (1) if it is a new 
registrant, defined, as applicable, as a registered separate account or 
insurance company that has not filed a Securities Act registration 
statement or amendment thereto within 3 years preceding this filing; 
\448\ (2) if it is an emerging growth company (``EGC''), as defined by 
Rule 12b-2 under the Exchange Act; \449\ (3) if it is an EGC, whether 
it has elected not to use the extended transition period for complying 
with any new or revised financial accounting standards provided 
pursuant to Section 7(a)(2)(B) of the Securities Act; (4) if it is an 
insurance company relying on an exemption from Exchange Act reporting 
requirements in reliance on rule 12h-7 (``12h-7 check box''); and (5) 
if it is a smaller reporting company as defined by rule 12b-2 under the 
Exchange Act.\450\ These check boxes will help the Commission better 
understand the types of registration statements being filed on Form N-4 
and, in the case of the EGC information, mirror similar facing sheet 
requirements found in Form S-1. In addition, we are amending the 
descriptions of the types of entities that use Form N-4 to include 
insurance companies that offer index-linked or MVA options, either as 
stand-alone or combination products.\451\
---------------------------------------------------------------------------

    \448\ For example, a variable annuity separate account that has 
not previously filed a Securities Act registration statement will 
identify itself as a new registrant, regardless of whether the 
sponsoring insurance company filed a recent Securities Act 
registration statement or amendment thereto as the amended 
requirements request information on the registrant. In the same 
manner, an insurance company filing on Form N-4 will determine 
whether it is a new registrant solely with respect to its own 
Securities Act registration statement filings.
    \449\ The term ``EGC'' is defined as an issuer that had total 
annual gross revenues of less than $1,235,000,000 during its most 
recently completed fiscal year. 17 CFR 240.12b-2.
    \450\ These five check boxes will be new to final Form N-4 as 
they are not on the current form.
    \451\ See supra Sections II.A and II.B. The final form updates 
the language on the facing sheet that explains what Form N-4 is to 
be used for by, among other things, adding references to RILAs and 
registered MVA annuities.
---------------------------------------------------------------------------

    One commenter provided several specific suggestions on the proposed 
amendments to the facing sheet.\452\ The commenter stated that the rule 
12h-7 check box could create confusion without clarification because 
that check box is directed towards the status of the registrant. In the 
case of variable options, there are two ``registrants,'' the registered 
separate account and the insurance company, and it was unclear which 
entity the check box was intended to apply. The rule 12h-7 check box 
was intended to refer to an insurance company's reliance on that rule 
because registered separate accounts satisfy their Exchange Act 
reporting requirements with the filing of Form N-CEN and therefore do 
not rely on rule 12h-7.\453\ Thus, in a change from the proposal, the 
final form has been updated accordingly to specify that the box should 
be checked if the insurance company is relying on rule 12h-7.\454\
---------------------------------------------------------------------------

    \452\ CAI Comment Letter.
    \453\ See, e.g., 12h-7 Adopting Release at n.146.
    \454\ The commenter further stated their view that the 
registration of variable contracts without registered non-variable 
options generally has not triggered a requirement to file Exchange 
Act reports for either the registered separate account or the 
depositor, and thus neither entity needs to rely on rule 12h-7. CAI 
Comment Letter. As a result, this commenter suggested that the check 
box be clarified to not be applicable to those entities. The overall 
application of rule 12h-7 is beyond the scope of this rulemaking. 
However, this requirement mirrors a similar disclosure requirement 
in Item 6(a) where, as noted above, insurance companies can add 
additional details as to which securities they are relying upon rule 
12h-7 for if they so choose in response to that item. See supra 
footnotes 238-242 and accompanying text; see also final Form N-4, 
Item 6(a).
---------------------------------------------------------------------------

    The commenter also suggested that the new check-the-box section 
include a box for smaller reporting companies, as is the case with Form 
S-1 and Form S-

[[Page 60024]]

3. The commenter stated that a box for smaller reporting companies 
would be helpful because there could be RILA registrants that are 
smaller reporting companies that qualify for scaled financial statement 
requirements under Article 8 of Regulation S-X.\455\ Insurance 
companies offering non-variable annuities could, where applicable, 
qualify for smaller reporting company status, and we agree that a check 
box would help provide specificity to insurance companies while 
assisting Commission staff in tracking the extent to which insurance 
companies offering non-variable annuities are smaller reporting 
companies. Therefore, in a change from the proposal, we are adding a 
check box on the facing sheet for smaller reporting company status.
---------------------------------------------------------------------------

    \455\ Regardless of whether an issuer's financial statements are 
prepared in accordance with GAAP or SAP, the number of periods shown 
in the financial statements must follow the requirements of 
Regulation S-X. See Articles 3 and 8 of Regulation S-X, 17 CFR part 
210.
---------------------------------------------------------------------------

b. Definitions (General Instruction A)
    We are adopting, largely as proposed, amendments to General 
Instruction A to update the existing definitions in Form N-4 and to add 
new definitions to accommodate the inclusion of non-variable annuities 
on Form N-4. We are implementing these proposed definitions throughout 
the form. However, unless otherwise stated, the proposed amendments to 
the definitions in General Instruction A do not alter the existing 
obligations under Form N-4 for offerings of variable annuities. These 
changes provide a standard set of definitions to convey form provisions 
in a consistent and efficient manner without the need for lengthy 
descriptions in each instance and clarify which form provisions apply 
to which categories of issuers and investment products.\456\
---------------------------------------------------------------------------

    \456\ We also are amending Form N-4 throughout to use the 
gender-neutral reference of ``investor'' where appropriate. See, 
e.g., final Form N-4, Instruction 6 to Item 2.
---------------------------------------------------------------------------

    For a number of these definitions, we did not receive any comments 
and are adopting them as proposed. These are the definitions of the 
terms contract, crediting period, index, insurance company, investment 
option, portfolio company, registrant, and registered separate 
account.\457\ These definitions are designed to help refine which 
provisions of the form apply to the different types of annuities. We 
also proposed to eliminate the previously defined term ``investor 
account'' from General Instruction A and to make related amendments 
throughout Form N-4 to help implement the proposed new 
definitions.\458\ We did not receive comments on these points either 
and are adopting them as proposed.\459\ We retained the definition of 
``fixed option,'' but, in a change from the proposal to accommodate the 
requirement that registered MVA annuities also use Form N-4, added a 
sentence explaining that the term includes fixed options that are 
subject to contract adjustments.
---------------------------------------------------------------------------

    \457\ Proposing Release at Section II.B.7.b.
    \458\ See id.
    \459\ See, e.g., final Form N-4, Items 3, 7, 8, 11, 24, 32, and 
34(a); see also definitions for ``class'' (clarifying applies to all 
contracts) and ``platform charge'' (clarifying only applies if there 
is a variable option). For example, on the latter point, we refined 
the applicability of certain variable annuity or Investment Company 
Act-specific disclosure to limit those requirements to ``registered 
separate accounts'' or ``variable options'' when appropriate.
---------------------------------------------------------------------------

    We did, however, receive comments on other definitions. 
Specifically, we proposed a new definition for ``index-linked option'' 
to General Instruction A. The definition was proposed to cover RILAs 
and index-linked options offered in combination contracts, as an 
investment option offered under any contract, pursuant to which the 
value of the contract, either during an accumulation period or after 
annuitization, or both, will earn positive or negative interest based, 
in part, on the performance of a specified index.\460\ This is a 
functional definition focused on the key features of a RILA and covers 
RILAs as defined in the RILA Act. Some commenters asked that we clarify 
that the definition of ``index-linked option'' is only intended to 
address RILAs or otherwise clarify that RILA disclosures are not 
required in connection with unregistered indexed options.\461\ The 
definition is limited to RILAs as it expressly refers to the potential 
to earn negative interest which is limited to RILAs. The definition for 
index-linked option would not include MVA or unregistered indexed 
options, which, because they earn interest at a rate specified by the 
insurance company, fall under the definition of ``fixed option'' under 
the form.
---------------------------------------------------------------------------

    \460\ Because RILA returns may not be one for one with the 
index, we indicate that positive or negative interest is only based 
``in part'' on the index's performance.
    \461\ CAI Comment Letter; Comment Letter of Holly J. (Nov. 22, 
2023) (``Holly J. Comment Letter'').
---------------------------------------------------------------------------

    We proposed definitions of ``contract adjustment'' and ``crediting 
period'' to refer to these non-variable annuity-centric concepts in the 
form and to help clarify when the relevant disclosures would be 
required.\462\ One commenter stated that our proposed definition of 
``contract adjustment'' is ambiguous and could be construed as covering 
types of transactions that we do not intend, such as a change in 
investment base for an index-linked option that occurs upon withdrawal, 
surrender charges deducted from remaining contract value, or reset 
features under guaranteed living benefits. This commenter suggested 
that we specify that the term only refers to (1) interim value 
adjustments applied when withdrawals and other deductions are made from 
an index-linked option before the end of a crediting period; (2) market 
value adjustments applied to amounts withdrawn or otherwise deducted 
from a contract; and (3) similar adjustments that may be imposed under 
a contract.\463\
---------------------------------------------------------------------------

    \462\ Proposing Release at Section II.B.7.
    \463\ CAI Comment Letter.
---------------------------------------------------------------------------

    We are adopting these definitions, including that of the term 
``contract adjustment,'' as proposed. The definition is sufficiently 
specific to adjustments ``to the value of the Contract'' that are 
``positive or negative'' and applied to withdrawals ``before the end of 
a specified period,'' which would not cover the examples that concerned 
the commenter. For example, while the investment base for an index-
linked option reflects a positive or negative contract adjustment 
resulting from that option's daily interim valuation, any change in the 
investment base as a result of a withdrawal is a reduction in the 
investment base, not an adjustment, and would be described separately 
from, although perhaps in conjunction with, the contract adjustment. 
Moreover, we do not anticipate there would be any misunderstanding by 
insurance companies preparing the disclosure that a surrender charge or 
a living benefit reset feature is a contract adjustment under the form. 
Although a surrender charge, like a contract adjustment, is imposed if 
a withdrawal is taken before the end of a specified period, a surrender 
charge always results in a decrease rather than a positive or negative 
adjustment. More importantly, Form N-4 as amended is clear throughout 
in distinguishing between surrender charges and contract adjustments. 
For example, the fee table provides for disclosure of deferred sales 
loads separate from disclosure of the maximum potential loss from a 
contract adjustment.\464\ Indeed, many of the form items and 
instructions that require disclosure of contract adjustments separately 
require disclosure of surrender charges. Lastly, while a contract 
adjustment is a positive or negative adjustment to the contract's

[[Page 60025]]

value if amounts are withdrawn before the end of a specified period, a 
reset feature under a guaranteed living benefit rider results in an 
increase in the rider's benefit base on a recurring basis, such as on 
each contract anniversary, and without regard to whether a withdrawal 
is occurring.
---------------------------------------------------------------------------

    \464\ See, e.g., final Form N-4, Item 1(a)(7), Instructions 
2(a), 2(b), 2(c)(ii)(A), 3(b) to Item 3, Item 4, Item 5(b), Item 
6(d)(2)(ii)(B), Item 6(d)(2)(iii)(B), Items 7(a) and (e), and 
Instruction to Item 22(d).
---------------------------------------------------------------------------

    One commenter suggested the Commission provide guidance that 
registrants would generally not be required to use the defined terms in 
the form so long as the terminology used by the insurance company 
clearly conveys the meaning of, or provides comparable information to, 
the terminology included in the form.\465\ Both currently and as 
amended, Form N-4 permits the use of alternative terminology so long as 
that alternative conveys the same meaning of, or provides comparable 
information as, the terminology called for in the form.\466\ Given the 
results of investor testing, which found that investors were confused 
by some of the terminology used in RILAs, we encourage insurance 
companies to consider if their prospectuses are using terminology that 
investors will be able to understand.\467\
---------------------------------------------------------------------------

    \465\ CAI Comment Letter.
    \466\ See final Form N-4, General Instruction C.3.(d)(ii); see 
also final Form N-4, General Instruction C.1(d) (stating that the 
requirements for prospectuses filed on Form N-4 will be administered 
by the Commission in a way that will allow variances in disclosure 
or presentation if appropriate for the circumstances involved while 
remaining consistent with the objectives of the form).
    \467\ See OIAD Investor Testing Report at Section 5, Qualitative 
Testing, Results from Round 2. For example, investor testing 
suggested that the use of the phrase ``term'' in conjunction with 
the concept of crediting periods could cause some confusion to the 
extent it is not clear from the disclosure that ``term'' refers to 
the length of the index-linked option rather than to the length of 
the contract.
---------------------------------------------------------------------------

c. Rules 405, 480, 481, 483, and 484
    We are amending, as proposed, rule 405 under the Securities Act to 
add the new defined terms ``form available solely to investment 
companies registered under the Investment Company Act of 1940'' and 
``registered index-linked annuity'' for purposes of Securities Act 
rules. We did not receive any comments on this part of our proposal. We 
are also, as discussed above, adding a defined term ``registered market 
value adjustment annuity'' to rule 405 in order to apply the 
appropriate Securities Act rules to registered MVA annuities.\468\ 
Finally, because the final amendments extend the Form N-4 offering 
framework to both RILAs and registered MVA annuities, we are adopting 
the new defined term in rule 405 ``registered non-variable annuity,'' 
which means a ``registered index-linked annuity'' or ``registered 
market value adjustment annuity.''
---------------------------------------------------------------------------

    \468\ See supra footnote 85 and accompanying text; see also 
Proposing Release at Section II.H. (discussing a similar change).
---------------------------------------------------------------------------

    The amendments to rule 405 are designed to apply specific 
Securities Act rules to insurance companies issuing non-variable 
annuities to ensure consistency across Form N-4 filers. Certain 
Securities Act rules apply only to registration statements that are 
prepared on a form available solely to a registered investment company 
or a business development company. These rules are 17 CFR 230.480 
(``rule 480''), 17 CFR 230.481 (``rule 481''), 17 CFR 230.483 (``rule 
483''), and 17 CFR 230.484 (``rule 484'') under the Securities Act, and 
include forms such as Forms N-1A, N-2, N-3, N-4, N-5, and N-6. These 
rules prescribe requirements relating to: information given with the 
title of securities; information contained in registration statements; 
exhibits filed as part of the registration statement; and undertakings 
required with respect to requests for acceleration.
    By virtue of moving non-variable annuities, which are not issued by 
a registered investment company, onto Form N-4, Form N-4 would be 
outside the scope of this description absent these amendments that we 
are adopting. As such, the new defined term ``form available solely to 
investment companies registered under the Investment Company Act of 
1940'' specifies that these rules apply to registration statements 
filed on Form N-4. Specifically, we are amending rule 405 to state that 
``a form available solely to investment companies registered under the 
Investment Company Act of 1940'' includes the form used to register the 
offering of securities of a registered non-variable annuity for 
purposes of the Securities Act of 1933. By operation of this amendment, 
registration statements relating to the offering of non-variable 
annuities on Form N-4 are subject to rules 480, 481, 483, and 484.\469\
---------------------------------------------------------------------------

    \469\ These rules apply to registration statements on Form N-4. 
Rule 480 prescribes requirements relating to information given with 
the title of securities. Rule 481 prescribes certain information to 
be required in the registration statement (e.g., certain legends to 
appear on the front and back cover pages of prospectuses). Rule 483 
prescribes certain requirements relating to exhibits filed as part 
of the registration statement. Rule 484 prescribes certain required 
undertakings with respect to requests for acceleration under 17 CFR 
230.461 when certain arrangements exist with respect to 
indemnification of specified persons against liability under the 
Securities Act.
---------------------------------------------------------------------------

    We also are adding a definition of ``registered index-linked 
annuity'' to rule 405, which provides consistent definitions for select 
terms used throughout the Securities Act rules, to simplify references 
to RILAs in the proposed Securities Act rule amendments.\470\ 
Specifically, as proposed, we are defining ``registered index-linked 
annuity'' as an annuity or an option available under an annuity (1) 
that is deemed a security; (2) that is offered or sold in a registered 
offering; (3) that is issued by an insurance company that is the 
subject to the supervision of either the insurance commissioner or bank 
commissioner of any state or any agency or officer performing like 
functions as such commissioner; (4) that is not issued by an investment 
company; and (5) whose contract value, either during the accumulation 
period or after annuitization or both, will earn positive or negative 
interest based, in part, on the performance of any index, rate, or 
benchmark. As discussed in the Proposing Release, this definition is 
designed to cover all of the offerings addressed by the RILA Act.\471\
---------------------------------------------------------------------------

    \470\ See also supra footnote 85 and accompanying text 
(discussing other changes to rule 405 to accommodate the addition of 
offerings of registered MVA annuities to the form).
    \471\ Proposing Release at Section II.B.7.c.
---------------------------------------------------------------------------

d. Exhibits and Undertakings (Items 27 and 34)
    As discussed in the Proposing Release,\472\ the exhibits required 
in a registration statement differ between filers using Forms S-1 or S-
3 on one hand and Form N-4 on the other. As a function of moving non-
variable annuities onto Form N-4, we are requiring insurance companies 
to continue filing various exhibits as part of registration statements 
relating to offerings of non-variable annuities.\473\ These 
requirements are similar to those to which currently apply to insurance 
companies offering non-variable annuities on Forms S-1 and S-3. We are 
also standardizing the location in Form N-4 of exhibits containing any 
power of attorney included pursuant to rule 483(b) to assist the public 
in comparing these exhibits.\474\
---------------------------------------------------------------------------

    \472\ See Proposing Release at Section II.B.7.
    \473\ See final Form N-4, Item 27 (adding sub-items (p) Power of 
Attorney and (q) Letter Regarding Change in Certifying Accountant); 
see also Form S-1, Item 16; Form S-3, Item 16; Regulation S-K, Item 
601.
    \474\ Non-variable annuity registration statements on Forms S-1 
and S-3 similarly include a power of attorney, when applicable, to 
be filed as part of the registration statement. See 17 CFR 
229.601(b)(24); see also infra Section II.E (discussing the addition 
of a new exhibit relating to changes in accountants).
---------------------------------------------------------------------------

    Further, in addition to the requirements of rule 484, we are 
amending Form N-4 to include certain

[[Page 60026]]

undertakings that were required of insurance companies as part of their 
non-variable annuity Form S-1 and S-3 registration statements.\475\ 
Specifically, we proposed to require insurance companies to furnish, in 
connection with offerings of RILAs, undertakings (1) to file, during 
any period in which offers or sales are being made, through a post-
effective amendment to their registration statement, any prospectus 
required by section 10(a)(3) of the Securities Act and (2) that, for 
the purposes of determining liability under the Securities Act, each 
post-effective amendment shall be deemed to be a new registration 
statement relating to the securities offered therein, and the offering 
of such securities at that time shall be deemed to be the initial bona 
fide offering thereof. These undertakings are the same as two 
undertakings insurance companies are required to provide in 
registration statements when they register offerings of non-variable 
annuities on Forms S-1 or S-3,\476\ and mirror the effect of similar 
provisions of section 24(e) of the Investment Company Act, which 
applies to amendments to Form N-4 registration statements by registered 
separate accounts.\477\ We did not receive any comments on the proposed 
amendments and are adopting them as proposed, except that we also are 
extending them to MVA annuities and including in the exhibit list any 
exhibit that contains the information called for in Item 31A(b) as 
discussed above.\478\
---------------------------------------------------------------------------

    \475\ See final Form N-4, Item 34. The disclosure currently 
required in Item 34, the fee representation mandated of registered 
separate accounts under the Investment Company Act, will be retained 
as paragraph (a) of this item, limited in application to variable 
options, and the new undertakings added as new paragraph (b) and 
limited to index-linked options and/or MVA options. See also 15 
U.S.C. 80a-26(f)(2)(A). We have renamed this item ``Fee 
Representation and Undertakings.''
    \476\ See rule 415(a)(3) and 17 CFR 229.512(a). Under the final 
amendments, non-variable annuities are exempt from the conditions of 
rule 415, including furnishing the required undertakings pursuant to 
Item 512(a) of Regulation S-K. See infra footnote 625. For example, 
non-variable annuity registration statements no longer need to 
include a statement that the issuer undertakes to file a post-
effective amendment to reflect in the prospectus any facts or events 
arising after the effective date of the registration statement (or 
the most recent post-effective amendment thereof) which, 
individually or in the aggregate, represent a fundamental change in 
the information set forth in the registration statement. This 
requirement is not necessary for non-variable annuity registration 
statements on Form N-4 in light of the other amendments we are 
making to the prospectus and registration statement filing process 
for non-variable annuities. See infra Section II.F.2. (discussing 
amendments to rules 485 and 497 under the Securities Act).
    \477\ See Section 24(e) of the Investment Company Act [15 U.S.C. 
80a-24(e)]. Section 24(e) generally requires a registered separate 
account to amend its registration statement annually to update its 
prospectus for the purposes of section 10(a)(3). Section 24(e) also 
provides that, for the purposes of liability under Securities Act, 
the effective date of the latest amendment is deemed to be the 
effective date of the registration statement with respect to 
securities sold after the effectiveness of amendment.
    \478\ See supra footnote 445.
---------------------------------------------------------------------------

9. Remaining Form N-4 Items
    We are adopting amendments, largely as proposed, to make the 
remaining requirements and disclosure items on the existing Form N-4 
applicable to non-variable annuities without substantive changes to the 
current requirements and disclosure items.\479\ These are: (1) general 
instructions to the final form including both organizational 
requirements along with substantive requirements for the preparation of 
the registration statement; (2) information about the annuity contract 
and how it operates; and (3) items that provide basic information about 
the insurance company or the securities offering itself, consistent 
with some of the disclosures provided currently in Forms S-1 or S-3.
---------------------------------------------------------------------------

    \479\ As noted above, some of these items have been amended to 
account for changes in defined terms and to use gender-neutral 
terminology. See supra Section II.C.8.b. Also as discussed above, in 
a modification from the proposal these items extend to registered 
MVA annuities, as applicable.
---------------------------------------------------------------------------

a. General Instructions
    Largely as proposed, non-variable annuity offerings registered on 
Form N-4 will need to comply with the general instructions of that 
form. These general instructions are structured to include four parts: 
(A) Definitions; (B) Filing and Use of Form; (C) Preparation of the 
Registration Statement; and (D) Incorporation by Reference.\480\ As 
discussed in more detail in the Proposing Release, these instructions 
relate to the use of plain English; organization of the registration 
statement; information not otherwise required; terminology; offering 
multiple contracts in a prospectus and including multiple prospectuses 
in a registration statement; timing; websites included in electronic 
versions of the prospectus; and incorporation by reference (e.g., 
addressing when information may be incorporated by reference into the 
prospectus).\481\
---------------------------------------------------------------------------

    \480\ See supra Section II.C.8.b (discussing amendments to the 
definitions used in the form).
    \481\ See Proposing Release at Section II.B.2.b. We are also, as 
proposed, correcting a typographical error in General Instruction 
B.2(b) regarding items that can be omitted for registration 
statements or amendments filed only under the Investment Company 
Act. Currently, the instructions state that issuers can omit from 
Part C Items 26(c), (k), (l), and (m), but those items do not exist 
in the form and Item 26 (Financial Statements) is in the SAI, not 
Part C. This will now refer to Item 27 (Exhibits), which does exist, 
and is in Part C. We received no comments on this aspect of the 
proposal.
---------------------------------------------------------------------------

    Collectively, the general instructions, as they existed prior to 
the amendments to Form N-4, are designed to require clear disclosure to 
investors about the variable annuity contracts currently registered on 
the form and to make clear how issuers must prepare and file their 
registration statements. Requiring insurance companies to prepare 
registration statements relating to the offering of non-variable 
annuities in accordance with these instructions will likewise 
facilitate the provision of clear disclosure to investors and provide 
clear direction to these issuers on how to prepare and file their 
registration statements. Further, applying these requirements to non-
variable annuities will help ensure the comparability of different 
annuity offerings, for example, by ensuring that the filings are held 
to the same plain English, multiple contract disclosure, timing, 
website, and incorporation by reference standards.
    We received one comment on the proposed general instructions.\482\ 
The commenter requested clarification regarding the ability of 
insurance companies to file required financial statements using the N-
VPFS EDGAR submission type for incorporation by reference into the 
SAI.\483\ This commenter stated that this or a similar EDGAR submission 
type would streamline preparing and filing registration statements on 
Form N-4 and would be consistent with the manner in which registered 
separate accounts are permitted to incorporate financial statements of 
the insurance company and the separate account into the SAI for 
variable annuity contracts and variable life insurance policies. All 
Form N-4 filers currently can use N-VPFS instead of refiling their 
financial statements in every registration statement and many active 
variable contracts use N-VPFS for their financial statements.\484\ For 
example, if a separate account funds 20 variable contracts with 20 
Securities Act registration statements, instead of filing the identical 
information 20 times, the separate account can file it just once. Based 
on staff experience, we understand that doing so may reduce the costs 
of auditor consents as well because the auditor can focus its review

[[Page 60027]]

on the one N-VPFS instead of the 20 registration statements. Similarly, 
the availability of N-VPFS may facilitate the registration of RILAs and 
registered MVA annuities. We confirm that insurance companies can use 
N-VPFS for all offerings registered on Form N-4, including with respect 
to non-variable annuities on Form N-4, as amended. However, the 
insurance company should file its own N-VPFS and not reference the N-
VPFS of a separate account, which might also include lengthy and 
irrelevant separate account financials.\485\
---------------------------------------------------------------------------

    \482\ See CAI Comment Letter.
    \483\ See VASP Adopting Release at n.954 and accompanying text 
(discussing the submission via EDGAR of financial statements with 
respect to certain variable annuities).
    \484\ See Chapter 3 (Index to Forms) of the EDGAR Filer Manual, 
Volume II: ``EDGAR Filing,'' (March 2024), available at https://www.sec.gov/files/edgar/filermanual/efmvol2.pdf.
    \485\ Conversely, a separate account can reference the insurance 
company's financial statements in the insurance company's N-VPFS 
because the insurance company's N-VPFS would not contain information 
that is irrelevant to the separate account.
---------------------------------------------------------------------------

b. Contract Disclosures
    The table below summarizes disclosures in the existing Form N-4 
about the annuity contract, how it operates, and how it is serviced by 
the insurance company. We are amending Form N-4 to apply these 
requirements to the registration statements of offerings of non-
variable annuities with a minor change to the existing form--insurance 
companies will be required to indicate in Item 12 whether charges or 
contract adjustments will apply in the event of a contract surrender or 
withdrawal.\486\ Currently, Item 12 refers only to charges. We received 
no comments on this part of the proposal and are adopting these changes 
largely as proposed. Because offerings of registered MVA annuities will 
be registered on Form N-4, as amended, these amendments also apply to 
disclosure regarding registered MVA annuities, as applicable, in a 
modification from the proposal.
---------------------------------------------------------------------------

    \486\ See final Form N-4, Item 12(c).

                      Table 5--Contract Disclosures
------------------------------------------------------------------------
             Item                             Description
------------------------------------------------------------------------
                           Prospectus (Part A)
------------------------------------------------------------------------
General Description of the     A general description of the contract,
 Contracts (Item 8).            including disclosure of the parties'
                                material rights under the contract;
                                relevant contract provisions and
                                limitations; contract obligations funded
                                by the insurance company's general
                                account; class of purchasers, and
                                material changes that can be made to the
                                contract by the insurance company.
Annuity Period (Item 9)......  A brief description of the annuity
                                options available, including a
                                discussion of material factors that
                                determine the benefits; annuity
                                commencement date; frequency and
                                duration of annuity payments, and the
                                effect of these on the level of payment;
                                the effect of assumed investment return;
                                any minimum amount necessary for an
                                annuity option and the consequences of
                                an insufficient amount; rights to change
                                annuity options; and, if applicable, a
                                disclosure that the investor will be
                                unable to withdraw any contract value
                                amounts after the annuity commencement
                                date.
Benefits Available Under the   A tabular summary overview of the
 Contract (Item 10).            benefits available under the contract
                                (e.g., standard or optional death
                                benefits, standard or optional living
                                benefits, etc.), briefly discussing,
                                among other things: whether the benefit
                                is optional; current and maximum fees
                                associated with the benefit; how the
                                benefit amount is calculated; and any
                                associated restrictions or limitations.
Purchases and Contract Value   A brief description of the procedures for
 (Item 11).                     purchasing a contract, including concise
                                explanations of minimum initial and
                                subsequent purchase payment required,
                                when these payments are credited, and
                                how they are allocated to investment
                                options. Issuers should also identify
                                each principal underwriter (other than
                                the insurance company) of the contracts
                                and other information about that
                                underwriter such as any affiliations.
Surrenders and Withdrawals     A brief description of how surrenders and
 (Item 12).                     withdrawals can be made from a contract,
                                including limits on the ability to
                                surrender, how proceeds are calculated,
                                and when surrenders and withdrawals are
                                payable. Issuers must also describe
                                potential effect of surrenders and
                                withdrawals, including how they could
                                affect a contract's value or benefits,
                                and whether any charges will apply.\1\
                                Issuers should also describe any
                                involuntary redemption provisions and
                                any revocation rights, disclosing the
                                calculation methodology and any
                                associated limitations to investment
                                options.
Loans (Item 13)..............  A brief description of the loan
                                provisions of the contract, including,
                                for example, loan availability and
                                related restrictions, interest
                                mechanics, the effect of a loan on the
                                contract's value and death benefit,
                                other effects that a loan could have on
                                a contract; and loan procedures.
Taxes (Item 14)..............  A description of the material tax
                                consequences to the investor and
                                beneficiary of buying, holding,
                                exchanging, or exercising rights under
                                the contract. The description should
                                include a discussion of the taxation of
                                annuity payments, death benefit
                                proceeds, periodic and non-periodic
                                withdrawals, loans, and any other
                                distribution that may be received under
                                the contact, as well as the tax benefits
                                accorded the contract and other material
                                tax consequences. Issuers must identify
                                the types of qualified plans for which
                                the contracts are intended to be used
                                and describe any effect of taxation on
                                the determination of contract values.
------------------------------------------------------------------------
              Statement of Additional Information (Part B)
------------------------------------------------------------------------
Cover Page and Table of        A statement of the name of the insurance
 Contents (Item 18).            company, the contract, and related class
                                or classes. This item also requires a
                                table of contents, a statement that the
                                SAI is not a prospectus, information
                                about how to obtain the prospectus, and
                                a discussion of information the SAI
                                incorporates by reference.
Non-principal Risks of         A summary of the non-principal risks of
 Investing in the Contract      purchasing a contract to the extent not
 (Item 20).                     disclosed in the prospectus.

[[Page 60028]]

 
Services (Item 21)...........  Information on certain services provided
                                to the registrant in connection with the
                                contract. If not disclosed elsewhere,
                                this requires a summary of the
                                substantive provisions of certain
                                significant administrative or management-
                                related service contracts. The
                                registrant must also provide the name
                                and address of its independent public
                                accountant. Where affiliates of the
                                insurance company act as agents for the
                                registrant in connection with the
                                contract, issuers are required to
                                provide specific information about the
                                services performed and remuneration paid
                                for the services. Issuers must also
                                disclose if the insurance company is the
                                principal underwriter of the contract.
Annuity Payments (Item 25)...  A description of the method for
                                determining the amount of annuity
                                payments if not described in the
                                prospectus and how any change in the
                                amount of a payment after the first
                                payment is determined.
------------------------------------------------------------------------
                       Other Information (Part C)
------------------------------------------------------------------------
Management Services (Item 33)  A summary of the substantive provisions
                                of any management-related service
                                contract not discussed in Parts A or B,
                                including the parties to the contract,
                                and the total paid and by whom for the
                                registrant's last three year fiscal
                                years.
------------------------------------------------------------------------
Note to Table 5
\1\ In addition to charges, the final amendments will require issuers to
  describe any contract adjustments that will apply.

    These requirements apply to existing Form N-4 issuers because these 
disclosures provide investors in these products with a concise 
presentation of material information about the annuity contract they 
would be purchasing, as well as other information that provides 
necessary context about the contracts such as management service 
disclosures.\487\ We are applying these requirements to non-variable 
annuities because this information is equally fundamental to the 
ability of investors to make informed investment decisions about non-
variable annuities. For example, existing Form N-4 issuers are required 
to summarize standard and optional benefits available to the investor 
under the contract because these benefits are primary features of 
variable contracts and are also often key differentiators between 
competing products.\488\ Insurance companies also offer these benefits 
in connection with non-variable annuities.
---------------------------------------------------------------------------

    \487\ See Forms N-3 and N-4 Adopting Release.
    \488\ See VASP Adopting Release at n.26 and accompanying text.
---------------------------------------------------------------------------

c. Issuer and Offering Disclosures
    In addition to disclosures about the contract, we are adopting 
amendments to Form N-4 that will require that insurance companies make 
certain disclosures relating to the issuer and offering consistent with 
the form's current requirements. The table below summarizes these 
items, omitting items in Form N-4 that, by their terms, will not apply 
to non-variable annuities. We received no comments on these proposed 
amendments and are adopting them as proposed. However, in a 
modification from the proposal, because offerings of registered MVA 
annuities will be registered on Form N-4, as amended, these amendments 
also apply to disclosure regarding registered MVA annuities, as 
applicable.

                Table 6--Issuer and Offering Disclosures
------------------------------------------------------------------------
                                                        Similar Form S-1
             Item                     Description           disclosure
------------------------------------------------------------------------
                           Prospectus (Part A)
------------------------------------------------------------------------
Legal Proceedings (Item 15)...  A description of        Item 11(c)
                                 material pending        (legal
                                 legal proceedings to    proceedings).
                                 which the registered
                                 separate account, the
                                 principal
                                 underwriter, or the
                                 insurance company is
                                 a party, including
                                 similar information
                                 regarding any
                                 proceedings
                                 instituted or known
                                 to be contemplated by
                                 a governmental
                                 authority.
------------------------------------------------------------------------
              Statement of Additional Information (Part B)
------------------------------------------------------------------------
General Information and         Basic information       Item 11(a)
 History (Item 19).              regarding the           (description of
                                 background and          business).
                                 organization of the
                                 insurance company,
                                 including the
                                 jurisdiction in which
                                 it is organized and a
                                 short description of
                                 its business.
Underwriters (Item 23)........  Identification of the   Item 8 (plan of
                                 principal               distribution).
                                 underwriters (other
                                 than the insurance
                                 company), and for
                                 affiliated
                                 underwriters, a
                                 description of the
                                 nature of the
                                 affiliation. For each
                                 principal underwriter
                                 distributing the
                                 registrants'
                                 contracts, the
                                 insurance company
                                 must provide
                                 information about the
                                 offering and related
                                 commissions. If the
                                 registrant made
                                 payments to an
                                 underwriter of or
                                 dealer in the
                                 contracts during its
                                 last fiscal year over
                                 a threshold amount,
                                 the registrant must
                                 disclose certain
                                 information about
                                 those payments.
------------------------------------------------------------------------

[[Page 60029]]

 
                       Other Information (Part C)
------------------------------------------------------------------------
Directors and Officers of the   A statement of the      Item 11(k)
 Insurance Company (Item 28).    name, principal         (directors and
                                 business address,       executive
                                 position, and office    officers).
                                 held for each
                                 director or officer
                                 of the insurance
                                 company.
Persons Controlled by or Under  Disclosure of persons   Item 11(k)
 Common Control with the         directly or             (directors and
 Insurance Company or the        indirectly controlled   executive
 Registrant (Item 29).           by or under common      officers).
                                 control with the
                                 registrant or the
                                 insurance company.
Indemnification (Item 30).....  Information about the   Item 14
                                 general effect of       (indemnificatio
                                 relevant                n of directors
                                 indemnification         and officers).
                                 agreements,
                                 arrangements, or
                                 statutory provisions
                                 through which
                                 underwriters or
                                 affiliates are
                                 insured or
                                 indemnified against
                                 any liability
                                 incurred in their
                                 official capacity.
Principal Underwriters (Item    A statement of          Item 8 (plan of
 31).                            investment companies,   distribution).
                                 other than any
                                 registered separate
                                 account related to
                                 the filing, for which
                                 each principal
                                 underwriter is also
                                 acting as a principal
                                 underwriter. More
                                 detailed information
                                 about principal
                                 underwriters
                                 identified in Item
                                 23, such as recent
                                 information about
                                 commissions and other
                                 compensation received
                                 from the registrant
                                 by each principal
                                 underwriter.
------------------------------------------------------------------------

    Information about the issuer and the offering process are relevant 
when purchasing an annuity contract, including in the context of a non-
variable annuity.\489\ These items, which largely correspond to items 
currently required to be disclosed by insurance companies on Forms S-1 
and S-3 when registering the offering of non-variable annuities as 
detailed in the table above, provide the appropriate amount of 
information about the issuing insurance company and the offering of 
securities in a way tailored to annuity contract investors. For 
example, because an investor's rights under non-variable annuities are 
dependent on the insurance company's claim-paying ability, purchasers 
of those securities also share an interest in disclosures of material 
pending legal proceedings involving the insurance company or related 
parties. On the other hand, where Form S-1 disclosures have less 
relevance to non-variable annuities, we have not included those 
disclosures in the final Form N-4.
---------------------------------------------------------------------------

    \489\ See Forms N-3 and N-4 Adopting Release.
---------------------------------------------------------------------------

10. Inline XBRL
    Under the final amendments, Form N-4 filers will be required to tag 
in Inline XBRL certain specified disclosures.\490\ Specifically, these 
issuers will be required to tag selected information in Inline XBRL in 
accordance with Rule 405 of Regulation S-T and the EDGAR Filer 
Manual.\491\
---------------------------------------------------------------------------

    \490\ See final Form N-4, Items 2(b)(2), 2(d), 3, 4, 5, 6(a) 
(instruction), 6(d), 6(e), 7(e), 10, 17, 26(c) and 31A.
    \491\ We are amending General Instruction C.3(h) of Form N-4 and 
making conforming changes to rule 405(b) of Regulation S-T to 
implement the non-variable annuity specific disclosure tagging 
requirements. Pursuant to rule 301 of Regulation S-T, the EDGAR 
Filer Manual is incorporated by reference into the Commission's 
rules. In conjunction with the EDGAR Filer Manual, Regulation S-T 
governs the electronic submission of documents filed with the 
Commission. Rule 405 of Regulation S-T specifically governs the 
scope and manner of disclosure tagging requirements for operating 
companies and investment companies, including the requirement in 
rule 405(a)(3) to use Inline XBRL as the specific structured data 
language to use for tagging the disclosures.
---------------------------------------------------------------------------

    Certain of the final amendments' new structured data requirements 
will apply, as proposed, to issuers of non-variable annuities that 
register on Form N-4. Specifically, these include, as applicable, 
requirements to tag specified portions of the overview and the more in-
depth descriptions of index-linked options and contract adjustments 
that issuers include in their prospectuses, the disclosure of census-
type information regarding contracts with index-linked options and MVA 
options, and information disclosed about changes in and disagreements 
with accountants.\492\
---------------------------------------------------------------------------

    \492\ See final Form N-4, General Instruction C.3(h); see also 
final Form N-4, Items 2(b)(2), 2(d), 6(d), 7(e), 26(c), and 31A.
---------------------------------------------------------------------------

    Certain of the final amendments' new tagging requirements will 
apply to all Form N-4 filers as applicable. All Form N-4 filers must 
tag the descriptions of fixed options available under the contract, 
including any fixed options subject to contract adjustments.\493\ All 
Form N-4 filers also must tag the new disclosures indicating that the 
insurance company is relying on the exemption provided by rule 12h-
7.\494\ This approach is generally as proposed, with conforming changes 
to reflect the registration of the offerings of registered MVA 
annuities on Form N-4. In response to comments, we are not adopting the 
proposed requirement to structure the statement regarding the risk of 
loss of the entire amount invested associated with an investment in a 
variable option, as discussed below.\495\
---------------------------------------------------------------------------

    \493\ See final Form N-4, General Instruction C.3(h); see also 
final Form N-4, Item 6(e).
    \494\ See final Form N-4, General Instruction C.3(h); see also 
final Form N-4, Instruction to Item 6(a).
    \495\ See infra footnotes 506-508 and accompanying text.
---------------------------------------------------------------------------

    Comments regarding our proposal to require RILA registration 
statements to be tagged using Inline XBRL were mixed. One commenter 
supported extending Inline XBRL requirements to RILAs, suggesting that 
all investors would benefit from tagging as it would facilitate access 
to data about RILAs through a structured, machine-readable format.\496\ 
Two commenters supported tagging some but not all of the proposed new 
disclosures, suggesting that only disclosures that would aid the 
investor in comparing products should be tagged.\497\ One commenter 
suggested that XBRL has little value as it relates to investment 
companies and insurance products.\498\ No commenter specifically 
addressed the tagging of registered MVA annuity specific disclosures, 
although as discussed above, commenters generally supported registering 
offerings of registered MVA annuities on Form N-4

[[Page 60030]]

and did not distinguish whether these annuities should be subject to 
different tagging requirements than RILAs and variable annuities.\499\
---------------------------------------------------------------------------

    \496\ Comment Letter of XBRL US (Nov. 28, 2023) (``XBRL US 
Comment Letter'').
    \497\ See XBRL US Comment Letter (suggesting that disclosures 
that are boilerplate in nature not be tagged as they would not help 
an investor differentiate between products); see also CAI Comment 
Letter (generally not objecting to extending Inline XBRL 
requirements to RILAs, but suggesting a new disclosure regarding the 
risks of investing in variable options not be tagged as the 
disclosure would call for generally standardized statements 
applicable to all variable annuities).
    \498\ Johnson Comment Letter.
    \499\ See supra Section II.B.
---------------------------------------------------------------------------

    After considering these comments, we are adopting these 
requirements largely as proposed, with certain conforming and other 
changes described below. As a result, non-variable annuity issuers must 
tag those prospectus disclosures that Form N-4 currently requires to be 
tagged in Inline XBRL.\500\ These include the following disclosure 
items: the Key Information Table, Fee Table, Principal Risks of 
Investing in the Contract, Benefits Available Under the Contract, and 
Investment Options Available Under the Contract in the statutory 
prospectus. In addition to these existing items, we are requiring 
Inline XBRL tagging of selected new, non-variable annuity-specific 
disclosures to benefit investors, other market participants, and the 
Commission by making the disclosures more readily available and easily 
accessible for aggregation, comparison, filtering, and other 
analysis.\501\ We chose these items to be structured--including those 
that issuers of variable annuities will newly have to structure--
because they are well-suited to being tagged in a structured format and 
are of significant utility for investors and other data users that seek 
structured data to analyze and compare contracts. For example, this 
tagging enables automated extraction and analysis of descriptions of 
index-linked options available under a contract, information regarding 
the features of each currently offered index-linked option, and 
information regarding contract adjustments. This allows investors and 
other market participants more efficiently to perform large-scale 
analysis and comparison across non-variable annuities (including the 
index-linked options that different RILAs offer) and time periods. 
Similarly, the requirement to tag information about fixed options, 
including fixed options subject to contract adjustments, permits the 
same type of analysis with respect to these investment options offered 
under RILA and variable contracts, as well as with respect to 
registered MVA annuities. This analysis could include comparing fixed 
options across contracts, as well as index-linked options, variable 
options, and fixed options offered under the same contract.
---------------------------------------------------------------------------

    \500\ See final Form N-4, General Instruction C.3(h), and Items 
3, 4, 5, 10, and 17; see also final rule 405(b)(2)(iii) of 
Regulation S-T.
    \501\ See infra footnotes 511-512. These primarily include the 
new disclosure items that are specific to non-variable annuities, as 
opposed to extant Form N-4 disclosure items to which we are adopting 
incremental amendments to address non-variable annuities along with 
variable annuities.
---------------------------------------------------------------------------

    Census-type information about variable annuity contracts, which 
parallels the SAI disclosure we are adopting to require for contracts 
with index-linked options and/or MVA options, is currently reported in 
structured data format.\502\ Requiring census-type information about 
contracts with index-linked options and/or MVA options to be tagged in 
Inline XBRL will help the Commission and staff identify trends in 
insurance companies' offerings of the contracts, similar to the tools 
the Commission and staff currently have to identify trends in the 
offering of variable annuity contracts. An Inline XBRL tagging 
requirement will also provide other benefits, such as the ability to 
more easily analyze disclosures about annuity contracts with index-
linked options and/or MVA options, and automatically compare these 
disclosures against prior periods.
---------------------------------------------------------------------------

    \502\ See supra Section II.C.7; see also Form N-CEN, Item F.14.
---------------------------------------------------------------------------

    The benefits of structured data as a general matter are supported 
by empirical data of public usage of similar structured data.\503\ In 
addition, Inline XBRL tagging requirements within the context of public 
operating company financial statement disclosures have been observed to 
improve investor understanding of the disclosed information.\504\ 
Inline XBRL tagging requirements for Form N-4 non-variable annuity 
disclosures could similarly provide investors with increased 
understanding or insight into key features of contracts with index-
linked options and/or MVA options. This could provide value to 
investors by, for example, facilitating the ease with which investors 
could compare contract features of different products, and thereby 
helping investors to determine which non-variable annuities may be 
appropriate for their particular investment goals.\505\
---------------------------------------------------------------------------

    \503\ There is some empirical evidence of public usage of this 
data. See Semi-Annual Report to Congress Regarding Public and 
Internal Use of Machine-Readable Data for Corporate Disclosures, 
U.S. Securities and Exchange Commission (Dec. 2023), at n.63, 
available at https://www.sec.gov/files/fdta-report-12-2023.pdf 
(providing that, for example, the Commission's quarterly XBRL 
datasets for mutual fund summary prospectus risk/return summaries 
garnered over 13,000 page views from September 2022 to September 
2023, according to a Google Analytics query of the Commission's XBRL 
dataset web page).
    \504\ Proposing Release at n.452 and accompanying paragraph.
    \505\ See infra Section IV.C.1.b. (discussing how improved 
investor understanding of non-variable annuity disclosures could 
benefit Form N-4 filers directly or indirectly).
---------------------------------------------------------------------------

    In a change from the proposal and in response to comments, the 
Inline XBRL requirements we are adopting will not require insurance 
companies to tag the new statement regarding the risk of loss of the 
entire amount invested associated with an investment in a variable 
option.\506\ Even a commenter that supported the proposed structuring 
requirements generally suggested that the Commission not require 
tagging of ``boilerplate'' disclosures and disclosures that would be 
the same across entities.\507\ Another commenter suggested that this 
disclosure item in particular would not differ substantively on a 
contract-by-contract basis and therefore should not be structured.\508\ 
In response to those comments, the Commission reviewed each of the 
proposed new disclosure items to be tagged and determined that only one 
of those proposed new disclosure items--the new statement regarding the 
risk of loss of the entire amount invested associated with an 
investment in a variable option--generally would not differ 
substantively on a contract-by contract basis. We are not requiring 
structuring for this disclosure item.
---------------------------------------------------------------------------

    \506\ See final Form N-4, Item 6(c)(1).
    \507\ See XBRL US Comment Letter.
    \508\ See CAI Comment Letter; see also IRI Comment Letter 
(expressing agreement with and supporting the CAI Comment Letter).
---------------------------------------------------------------------------

    As proposed, the new Inline XBRL tagging requirements will only 
apply to contracts being sold to new investors. The result of this 
approach is that prospectus disclosure for contracts that are no longer 
being sold to new investors do not need to be tagged, as this 
disclosure has less utility for current investors and other market 
participants. This is consistent with the existing approach for Form N-
4 issuers.\509\ Commenters supported this aspect of the proposal.\510\
---------------------------------------------------------------------------

    \509\ See VASP Adopting Release at paragraph accompanying n.904.
    \510\ See CAI Comment Letter; XBRL US Comment Letter.
---------------------------------------------------------------------------

    We are requiring non-variable annuity issuers to submit Interactive 
Data Files as follows, consistent with the approach for issuers of 
variable annuities registered on Form N-4:
     For most post-effective amendments, Interactive Data Files 
must be filed either concurrently with the filing, or in a subsequent 
amendment that is filed on or before the date that the post-effective 
amendment that contains the related information becomes effective; 
\511\
---------------------------------------------------------------------------

    \511\ See final Form N-4, General Instruction C.3(h)(i)(B). This 
instruction relates to post-effective amendments filed pursuant to 
paragraph (b)(1)(i), (ii), (v), (vi), or (vii) of rule 485.
---------------------------------------------------------------------------

     For initial registration statements (and post-effective 
amendments other than as described in the bullet

[[Page 60031]]

immediately above), Interactive Data Files must be filed in a 
subsequent amendment on or before the date the registration statement 
or post-effective amendment that contains the related information 
becomes effective; \512\ and
---------------------------------------------------------------------------

    \512\ See final Form N-4, General Instruction C.3(h)(i)(A). This 
instruction relates to initial registration statements and post-
effective amendments other than those filed pursuant to paragraph 
(b)(1)(i), (ii), (v), (vi), or (vii) of rule 485.
---------------------------------------------------------------------------

     For any form of prospectus filed pursuant to rule 497(c) 
or (e), Interactive Data Files must be submitted concurrently with the 
filing.\513\
---------------------------------------------------------------------------

    \513\ See final Form N-4, General Instruction C.3(h)(ii).
---------------------------------------------------------------------------

    This approach facilitates the timely availability of important 
information in a structured format for investors, investment 
professionals, and other data users yielding substantial benefits. For 
data aggregators responding to investor demand for the data, the 
availability of the required disclosures in the Inline XBRL format 
concurrent with filing or before the date of effectiveness allows them 
to quickly process and share the data and related analysis with 
investors. Like other issuers, non-variable annuity issuers could 
request temporary and continuing hardship exemptions for the inability 
to timely file electronically the Interactive Data File.\514\
---------------------------------------------------------------------------

    \514\ See rule 201 Regulation S-T (temporary hardship exemption) 
and rule 202 of Regulation S-T (continuing hardship exemption).
---------------------------------------------------------------------------

D. Option To Use a Summary Prospectus

    We are adopting, largely as proposed, amendments to rule 498A to 
permit RILA issuers, as well as issuers of ``combination contracts'' 
offering a combination of index-linked options and variable options, to 
use a summary prospectus to satisfy their statutory prospectus delivery 
obligations.\515\ In a modification from the proposal, we also are 
adopting amendments to rule 498A to permit issuers of registered MVA 
annuities or ``combination contracts'' offering MVA options with 
variable options and/or index-linked options to use summary 
prospectuses under the amendments to rule 498A.\516\ As a result, all 
annuities both variable annuities and non-variable annuities--
registered on Form N-4 are permitted to use summary prospectuses under 
the final amendments. Likewise, all investors in those annuities may 
benefit from the layered disclosure approach offered by a summary 
prospectus: an approach, in the context of financial products other 
than non-variable annuities that investors have generally indicated 
that they prefer.\517\
---------------------------------------------------------------------------

    \515\ Section 5(b)(2) of the Securities Act makes it unlawful to 
carry or cause to be carried a security for purposes of sale or for 
delivery after sale ``unless accompanied or preceded'' by a 
prospectus that meets the requirements of section 10(a) of the Act. 
See section 10(a) of the Securities Act (generally requiring a 
prospectus relating to a security to contain the information 
contained in the registration statement). For purposes of this 
Release, a prospectus meeting the requirements of a section 10(a) 
prospectus is referred to as a ``statutory prospectus.'' For 
purposes of this section, we refer to RILA contracts and combination 
contracts together as ``RILA contracts.''
    \516\ See Proposing Release at section II.H (discussing 
registered MVA annuities and requesting comment on whether to 
require insurance companies to register offerings of registered MVA 
annuities on Form N-4; and--to the extent registered MVA annuities 
were required to register on Form N-4--the Commission's anticipation 
that it would extend the same functional changes that it was 
proposing for RILAs to registered MVA annuities, including the 
ability to use a summary prospectus).
    \517\ See Investor Advocate Comment Letter.
---------------------------------------------------------------------------

    Rule 498A uses a layered disclosure approach designed to provide 
investors directly with key information relating to the contract's 
terms, benefits, and risks in a concise and reader-friendly 
presentation, with more detailed information available elsewhere. 
Investors will continue to have access to the statutory prospectus of 
non-variable annuities and other information about these non-variable 
annuities online, with paper or electronic copies of this information 
upon request.\518\ This approach provides parity between non-variable 
annuity issuers and issuers of variable annuities registered on Form N-
4, which are permitted to use summary prospectuses to satisfy their 
prospectus delivery obligations, and builds on the Commission's decades 
of experience with layered disclosure and rules permitting the use of 
summary prospectuses.\519\ The approach also recognizes investors' 
expressed preferences for concise and engaging disclosure of key 
information. Accordingly, the approach is consistent with the RILA 
Act's mandate of designing disclosure requirements with the goal of 
ensuring that key information is conveyed in terms that a purchaser is 
able to understand. We anticipate that the summary prospectus framework 
will improve investor understanding of non-variable annuities, as the 
Commission similarly expressed when it adopted the summary prospectus 
rule for variable contracts.\520\
---------------------------------------------------------------------------

    \518\ To further effectuate the changes we are adopting, we are 
excluding non-variable annuity offerings from the provisions of rule 
172, which provides that a final prospectus will be deemed to 
precede or accompany a security for sale for purposes of Securities 
Act section 5(b)(2) as long as the final prospectus meeting the 
requirements of Securities Act section 10(a) is filed or the issuer 
will make a good faith and reasonable effort to file it with the 
Commission as part of the registration statement within the required 
rule 424 prospectus filing timeframe. Consistent with registered 
investment companies and business development companies, non-
variable offerings are subject to a separate framework governing 
communications with investors. See infra Section II.G; see also 
Securities Offering Reform for Closed-End Investment Companies, 
Investment Company Act Release No. 33836 (Apr. 8, 2020) [85 FR 33290 
(June 1, 2020)] (``Closed-End Fund Offering Reform Adopting 
Release'') at Section VI.B.1.b.
    \519\ See VASP Adopting Release at n.21 and accompanying text; 
see also Enhanced Disclosure and New Prospectus Delivery Option for 
Registered Open-End Management Investment Companies, Investment 
Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4545 (Jan. 26, 
2009)] (``2009 Summary Prospectus Adopting Release''); Tailored 
Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee 
Information in Investment Company Advertisements, Investment Company 
Act Release No. 34731 (Oct. 26, 2022) [87 FR 72758 (Nov. 25, 2022)] 
(``Tailored Shareholder Reports Adopting Release'') (adopting rules 
incorporating a layered disclosure approach to open-end funds' 
annual and semi-annual reports to shareholders).
    \520\ See VASP Adopting Release at n.21 and accompanying text.
---------------------------------------------------------------------------

    Commenters that spoke to this issue largely supported the extension 
of rule 498A to RILAs as proposed, stating that a summary prospectus 
framework for RILAs would be as successful for those products as it has 
been for variable insurance products and that investors and registrants 
alike would benefit from the rule's layered disclosure framework that 
would align RILAs with the treatment of variable annuities.\521\ Other 
commenters addressed the inclusion of minimum guaranteed rates in the 
summary prospectus, and this topic is discussed in detail above.\522\ 
No commenter specifically addressed the use of summary prospectuses for 
registered MVA annuity registration statements, although as discussed 
above, commenters generally supported including offerings of registered 
MVA annuities on Form N-4 and did not address whether these offerings 
should be subject to different summary prospectus requirements than 
RILAs and variable annuities.\523\ Except as discussed below, no 
commenters discussed the contents of summary prospectuses in a manner 
that was distinct from their discussion of the Form N-4 content 
requirements generally, which are discussed above.

[[Page 60032]]

Further, when discussing the proposed amendments to rule 498A, 
commenters generally did not differentiate between initial and updating 
summary prospectuses.
---------------------------------------------------------------------------

    \521\ See, e.g., CAI Comment Letter; Investor Advocate Comment 
Letter (stating that in the context of other financial products, 
investors have generally indicated that they prefer this type of 
layered disclosure approach); IRI Comment Letter. One commenter 
questioned whether there is a need to continue to have a statement 
of additional information section outside of the statutory 
prospectus. See Johnson Comment Letter. Wholesale changes to the 
arrangement of registration statements that would be necessary to 
accommodate this suggestion are outside the scope of this 
rulemaking.
    \522\ See Johnson Comment Letter; Datop Comment Letter; see 
supra Sections II.C.1 and II.C.2.
    \523\ See supra Section II.B.
---------------------------------------------------------------------------

1. Overview--Use of Summary Prospectus for Non-Variable Annuities
    The amendments to rule 498A broaden the scope of the rule to 
address non-variable annuities.\524\ Under the final amendments, the 
rule's conditions for non-variable annuities relying on the rule to 
satisfy prospectus delivery obligations mirror the conditions 
applicable to variable contracts.\525\ These conditions include the 
requirements to send or give a summary prospectus to an investor no 
later than the time of the ``carrying or delivery'' of the contract 
security, as well as: (1) requirements for the contents that must be 
included in a summary prospectus, (2) limitations on binding a summary 
prospectus with other materials, and (3) requirements that the summary 
prospectus, statutory prospectus, and contract statement of additional 
information must be publicly accessible, free of charge, and on a 
website in the manner that the rule specifies.
---------------------------------------------------------------------------

    \524\ To facilitate this change, and to make the terminology 
used in rule 498A more consistent with certain terms used in the 
final amendments to Form N-4, we are also adopting amendments to the 
rule's definitions. Specifically, we are (1) amending the 
definitions to ``Class,'' ``Contract,'' Investment Option,'' 
``Registrant,'' ``Variable Annuity Contract,'' and ``Variable Life 
Insurance Contract'' to address non-variable annuities, and/or to 
make changes to these definitions that correspond with amendments to 
certain definitions in Form N-4 (either definitions of these same 
terms in Form N-4, or definitions of other terms in Form N-4 that 
will otherwise affect the way these terms are defined in rule 498A); 
(2) adding definitions for ``Contract Adjustment,'' ``Fixed 
Option,'' ``Index-Linked Option,'' ``Insurance Company,'' 
``Registered Market Value Adjustment Annuity Contract,'' 
``Registered Separate Account,'' ``RILA Contract,'' and ``Variable 
Option'' consistent with their counterparts in the Form N-4 
amendments; and (3) deleting the definition of ``Depositor.'' These 
changes are necessary to implement the provisions of the rule that 
will be applicable to non-variable annuities and combination 
contracts.
    \525\ See final rule 498A(f). Rule 498A also provides that a 
communication relating to an offering registered on Form N-4 that a 
person sends or gives after the effective date of the registration 
statement (other than a prospectus that Section 10 of the Securities 
Act permits or requires) will not be deemed a prospectus under 
section 2(a)(10) of the Securities Act, under certain conditions. 
Final rule 498A extends this provision to non-variable annuities. 
See final rule 498A(g). Under the final amendments, the rule 498A 
provision addressing information that may be incorporated by 
reference into a summary prospectus also applies the same to non-
variable annuities as it does to other contracts currently within 
the scope of the rule. See final rule 498A(d).
---------------------------------------------------------------------------

    As with variable contracts, final rule 498A involves the use of two 
distinct types of summary prospectuses for non-variable annuity 
contracts. An ``initial summary prospectus,'' covering contracts 
offered to new investors, includes certain key information about the 
contract's most salient features, benefits, and risks, presented in 
plain English in a standardized order. The rule amendments also require 
``updating summary prospectuses'' to be provided to existing investors 
in non-variable annuity contracts as a condition to relying on the 
rule. The updating summary prospectus includes a brief description of 
certain changes to the contract that occurred during the previous year, 
as well as a subset of the information required to appear in the 
initial summary prospectus. Certain key information about the 
investment options that the contract offers (including as applicable 
index-linked options and fixed options) must be provided in both the 
initial summary prospectus and updating summary prospectus.\526\
---------------------------------------------------------------------------

    \526\ This approach is consistent with the approach for 
information about variable options in variable contracts' summary 
prospectuses, in which certain key information about the portfolio 
companies offered as variable options appears in both the initial 
summary prospectus and updating summary prospectus. See final rule 
498A(b)(5)(ix); final rule 498A(c)(6)(iv).
---------------------------------------------------------------------------

    As under rule 498A for variable contracts, the use of summary 
prospectuses for non-variable annuity contracts is voluntary. This is 
appropriate to provide non-variable annuity issuers with sufficient 
time to transition to a summary prospectus regime, as well as to 
recognize that there could be different relative benefits of using a 
summary prospectus for certain non-variable annuity issuers and 
investors in these contracts.\527\ Similar considerations informed the 
Commission's decision to adopt a voluntary summary prospectus regime 
for variable contracts.\528\
---------------------------------------------------------------------------

    \527\ The Commission similarly discussed the relative benefits 
to variable contract issuers of using a summary prospectus, based on 
the types of products that these issuers offer and the length of 
their current prospectuses, as well as the benefit of more concise 
disclosure to investors, in adopting rule 498A. See, e.g., VASP 
Adopting Release at Section IV.E.1 (discussion in the Economic 
Analysis section of the release, addressing the Commission's 
consideration of mandating summary prospectuses for variable 
contracts).
    \528\ See VASP Adopting Release at discussion accompanying 
nn.41-45; see also infra Section IV.C.1.c (discussing that different 
issuers and investors could expect to benefit differently from this 
optional prospectus delivery regime, although we expect a majority 
of non-variable annuity issuers to choose to use summary 
prospectuses and that therefore the majority of non-variable annuity 
investors will have the option to use both summary prospectuses and 
statutory prospectuses in their decision-making, in whatever 
proportion investors think is best for their preferences).
---------------------------------------------------------------------------

2. Initial Summary Prospectus
    As with an initial summary prospectus for a variable annuity, an 
initial summary prospectus for a non-variable annuity contract must 
only describe a single contract that the insurance company currently 
offers for sale.\529\ An initial summary prospectus may describe more 
than one class of a currently offered contract.\530\ Aggregating 
disclosures for multiple contracts can hinder investors from 
distinguishing between contract features and options that apply to them 
and those that do not. As a result, an initial summary prospectus 
limited to a single contract currently offered for sale is designed to 
simplify and consolidate lengthy and complex disclosures. The content 
and ordering of items are designed to highlight aspects of a non-
variable annuity that may not be emphasized in marketing materials and 
other disclosures.
---------------------------------------------------------------------------

    \529\ See final rule 498A(b)(1).
    \530\ The definition of the term ``class'' in the final 
amendments is the same as the definition in the current rule (that 
is, as a class of a contract that varies principally with respect to 
distribution-related fees and expenses). Final rule 498A(a).
---------------------------------------------------------------------------

    Like other summary prospectuses that rule 498A for variable 
contracts addresses, we are adopting as proposed a standardized 
presentation for non-variable annuity initial summary prospectuses to 
require certain disclosure items that would be most relevant to 
investors to appear at the beginning of the initial summary prospectus, 
followed by supplemental information.\531\ The required presentation 
also could facilitate comparisons of different non-variable annuities, 
as well as comparisons between non-variable annuities and variable 
annuities. An initial summary prospectus must contain the information 
required by the rule, and only that information, in the order specified 
by the rule.\532\ The information is required to appear in the same 
order, and under relevant corresponding headings, as the rule 
specifies.
---------------------------------------------------------------------------

    \531\ See VASP Adopting Release at paragraph accompanying nn.58-
59.
    \532\ Final rule 498A(b)(5).
---------------------------------------------------------------------------

    The chart in Table 7 below outlines the information that must 
appear in an initial summary prospectus for a non-variable annuity 
contract. These are the same content requirements for an initial 
summary prospectus for a variable contract, with the exception of the 
ordering of the Overview of the Contract and KIT disclosures. We are 
adopting these content requirements as proposed. The Commission has 
historically viewed these items as providing annuity

[[Page 60033]]

investors with key information relating to a contract's terms, 
benefits, and risks in a concise and reader-friendly presentation, and 
highlighting aspects of the contract that may not be emphasized in 
marketing materials and other disclosures.\533\ This rationale is 
equally true in the context of non-variable annuity disclosure.
---------------------------------------------------------------------------

    \533\ See VASP Adopting Release at nn.47-48 and accompanying 
text. To the extent that these content requirements are unchanged 
from the content requirements for variable annuity summary 
prospectuses, our rationale for these requirements has not changed 
from the rationale that is discussed throughout the sections of the 
VASP Adopting Release that address each of the content items 
discussed in Table 7 below. See VASP Adopting Release at Section 
II.A.1.c. Further, we provide our reasoning as to why these 
particular disclosures are important to investors in the non-
variable annuity context as a general matter in Section II.C supra.
---------------------------------------------------------------------------

    Further, as discussed above, the Overview of the Contract 
disclosures (previously Item 3 of Form N-4, but now re-numbered as Item 
2) must precede the KIT (previously Item 2 of Form N-4, but now re-
numbered as Item 3), due to the context that the Overview section 
provides and based upon our experience with the form and taking into 
account the results of investor testing.\534\ This change is reflected 
in final rule 498A. Otherwise, the same order of disclosures under 
final rule 498A is provided as under the current rule.
---------------------------------------------------------------------------

    \534\ See supra Sections II.C.2 and II.C.3. Prior to the final 
amendments, rule 498A required issuers to place ``Important 
Information You Should Consider About the [Contract]'' disclosures 
before ``Overview of the [Contract] disclosures.''

                               Table 7--Outline of the Initial Summary Prospectus
----------------------------------------------------------------------------------------------------------------
                                                                                                Applicable to
    Heading in initial summary      Relevant paragraph  Item of Form N-  Applicable to non-   variable annuities
            prospectus               in amendments to   4 (as amended)  variable annuities?   registered on Form
                                        rule 498A                                                    N-4?
----------------------------------------------------------------------------------------------------------------
Cover Page:
    Identifying Information        Rule 498A(b)(2)(i)   ..............  [check]............  [check]
     (front cover page) \1\.        through (iv).
    Legends (front cover page)     Rule 498A(b)(2)(v)   ..............  [check]............  [check]
     \2\.                           through (vi).
    EDGAR Contract Identifier      Rule 498A(b)(3)(ii)  ..............  [check]............  [check]
     (back cover page).
    Table of Contents (optional).  Rule 498A(b)(4)....  ..............  [check]............  [check]
Content:
    Overview of the [Contract]...  Rule 498A(b)(5)(ii)               2  [check]............  [check]
                                                                        (each paragraph of   (each paragraph of
                                                                         Item 2, as           Item 2 except
                                                                         applicable).         (b)(2) and (d),
                                                                                              which are
                                                                                              generally only
                                                                                              applicable to non-
                                                                                              variable annuity
                                                                                              contracts).
    Important Information You      Rule 498A(b)(5)(i).               3  [check]............  [check]
     Should Consider About the                                          (with instructions   (with instructions
     [Contract].                                                         appliable to non-    appliable to
                                                                         variable             variable
                                                                         annuities).          annuities).
    Benefits Available Under the   Rule 498A(b)(5)(iv)           10(a)  [check]............  [check]
     [Contract].
    Buying the [Contract]........  Rule 498A(b)(5)(v).           11(a)  [check]............  [check]
    Making Withdrawals: Accessing  Rule                          12(a)  [check]............  [check]
     the Money in Your [Contract].  498A(b)(5)(vii).
    Additional Information About   Rule                              4  [check]............  [check]
     Fees.                          498A(b)(5)(viii).
    Appendix: [Investment Options/ Rule 498A(b)(5)(ix)              17  [check]............  [check]
     Portfolio Companies]                                               (Items 17(b),        (Items 17(a),
     Available Under the Contract.                                       17(c), and 17(d),    17(c), and 17(d),
                                                                         as applicable).      as applicable).
----------------------------------------------------------------------------------------------------------------
Notes
\1\ The beginning or front cover page of a non-variable annuity contract's initial summary prospectus, like the
  initial summary prospectus of a variable annuity registered on Form N-4, must include the following
  information: (1) the insurance company's name; (2) the name of the contract, and the class or classes if any,
  to which the initial summary prospectus relates; (3) a statement identifying the document as a ``Summary
  Prospectus for New Investors''; and (4) the approximate date of the first use of the initial summary
  prospectus.
\2\ The required legends are the same for non-variable annuities and for variable annuities registered on Form N-
  4. These legends address the purpose of the summary prospectus, the availability of the statutory prospectus
  and other information, information regarding the permitted cancellation period for the contract, and a
  statement that additional information about certain investment products, including the type of contract has
  been prepared by Commission staff and is available at investor.gov. They also include, for RILAs and
  combination contracts that offer index-linked options along with other investment options, a legend that the
  Commission has not approved or disapproved of the securities being registered. The initial summary
  prospectuses for non-variable annuities as well as for variable annuities also must include additional
  statements that we require on the cover page of the prospectus for all Form N-4 issuers. See supra Section
  II.C.10; see also Item 1(a)(6) through (8) of final Form N-4. We also have updated the legends in the summary
  prospectus to reflect the final text of these items, including a statement that while an investor can cancel
  the contract within 10 days, contract adjustments may be applied.

    A non-variable annuity initial summary prospectus is permitted to 
include a table of contents. A table of contents must show the page 
number of the various sections or subdivisions of the summary 
prospectus, and immediately follow the cover page in any initial 
summary prospectus delivered electronically.
    The topics of the contents included in an initial summary 
prospectus--as well as the required headings under which these contents 
must appear--are the same for a non-variable annuity summary prospectus 
as they are for a summary prospectus of a variable annuity registered 
on Form N-4.\535\ Nevertheless, certain of these required

[[Page 60034]]

contents vary in substance to reflect the unique aspects of non-
variable annuities as compared to variable annuities. These are 
indicated in Table 7 above and include:
---------------------------------------------------------------------------

    \535\ Final rule 498A(b)(5).
---------------------------------------------------------------------------

     Disclosure provided under the heading ``Overview of the 
Contract'' (Item 2 of Form N-4), where disclosure for RILA contracts 
must include specific information about index-linked options currently 
offered under the contract, and disclosure for RILAs and registered MVA 
annuities must include information about interim value adjustments or 
market value adjustments that could affect an investor's contract 
value;
     Disclosure provided under the heading ``Important 
Information You Should Consider About the Contract'' (Item 3 of Form N-
4), where the instructions vary for non-variable annuities as opposed 
to variable annuities;
     Disclosure provided under the heading ``Additional 
Information About Fees'' (Item 4 of Form N-4), where the instructions 
vary for non-variable annuities as opposed to variable annuities; and
     Disclosure under the heading ``Appendix: Investment 
Options Available Under the Contract'' (Item 17 of Form N-4), where 
RILA contract disclosure includes a different summary table for index-
linked options offered under the contract than the summary table of 
variable options offered under a variable annuity. In addition, the 
disclosure includes a summary table for fixed options offered under the 
contract (which could be applicable for RILAs, registered MVA 
annuities, or variable annuities, depending on the investment options 
the contract offers).
    Each of these disclosure items, which also appears in a non-
variable annuity statutory prospectus, is discussed in more detail in 
Section II.C. above.
    One commenter suggested that because a RILA has the term 
``registered'' in its name, the Commission should require the cover 
pages of both an initial summary prospectus and an updating summary 
prospectus to include the legend that is required to be on the cover 
pages of registration statements--namely, that the Commission has not 
approved or disapproved of the securities or passed upon adequacy of 
the disclosure of in the prospectus.\536\
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    \536\ See VIP Working Group Comment Letter.
---------------------------------------------------------------------------

    After considering the commenter's suggestion, the Commission has 
determined to amend rule 498A to require the legend required by rule 
481 under the Securities Act on the cover pages of initial and updating 
summary prospectuses for RILAs or combination contracts that offer 
index-linked options along with other investment options. Many RILAs 
whose offerings are registered with the Commission use the term 
``registered'' in their names and, accordingly, clarification about the 
term ``registered'' is important to the extent that this term may cause 
confusion. The legend required by rule 481 on RILAs' and combination 
contracts' summary prospectus cover pages is anticipated to communicate 
important information to an investor about what ``registered'' means in 
this context. Further, the legend required by rule 481 will alert 
investors about the limits of the Commission's registration process. We 
do not anticipate that the disclosure required by the legend would be 
so lengthy as to dissuade an investor from reviewing the summary 
prospectus. We recognize that previously the Commission determined not 
to require the legend required by rule 481 under the Securities Act on 
initial and updating summary prospectus cover pages for variable 
annuities and mutual funds.\537\ Those investment products, however, do 
not typically include the term ``registered'' in their names.\538\
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    \537\ See VASP Adopting Release at paragraph accompanying n.100; 
see also rule 498 under the Securities Act.
    \538\ Similarly, we are not including registered MVA annuities 
in this instruction because they also typically do not include the 
term ``registered'' in their name.
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3. Updating Summary Prospectus
    As proposed and as under current rule 498A for variable contracts, 
insurance companies under final rule 498A will not send an updated 
initial summary prospectus to investors each year. Instead, insurance 
companies will send an updating summary prospectus, which will provide 
a brief description of certain changes with respect to the contract 
that occurred within the prior year.\539\ This will allow investors to 
focus their attention on new or updated information relating to the 
contract. Additionally, the updating summary prospectus, as proposed 
and as required by final rule 498A, includes certain of the items 
required in the initial summary prospectus that are most likely to 
entail contract changes and where any such contract changes are most 
likely to be important to investors because they affect how investors 
evaluate non-variable annuity contracts and are relevant to investors 
when considering additional investment decisions or otherwise 
monitoring their contracts. This is consistent with the Commission's 
approach for variable annuity updating summary prospectuses.\540\ All 
comments received about the proposed amendments to rule 498A, including 
updating summary prospectuses, are discussed above.\541\
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    \539\ A non-variable annuity issuer, like a variable annuity 
issuer, can only use an updating summary prospectus if it uses an 
initial summary prospectus for each currently offered contract 
described under the contract statutory prospectus to which the 
updating summary prospectus relates. Final rule 498A(c)(1). See also 
VASP Adopting Release at n.209 and accompanying text.
    \540\ See VASP Adopting Release at Section II.A.2.a. As 
discussed above, the policy rationale for the content of a non-
variable annuity updating summary prospectus and the location of 
that required content is the same rationale that the Commission 
articulated in adopting rule 498A for a variable annuity updating 
summary prospectus. To the extent that these content requirements 
are unchanged from the content requirements for variable annuity 
summary prospectuses, our rationale for these requirements has not 
changed from the rationale that is discussed throughout the sections 
of the VASP Adopting Release that address each of the content items 
discussed in Table 8 below. See VASP Adopting Release at Section 
II.A.2.c. Further, we provide our reasoning as to why these 
particular disclosures are important to investors in the non-
variable annuity context as a general matter in Section II.C. supra.
    \541\ See supra sections II.D.1. and 2. One commenter, as 
discussed above, specifically addressed an updating summary 
prospectus. That commenter suggested that the Commission include an 
additional legend on the cover pages of initial and updating summary 
prospectuses. See VIP Working Group Comment Letter.
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    Because the Commission designed the initial summary prospectus for 
someone making an initial investment decision, existing non-variable 
annuity investors will benefit more from receiving a shorter-form 
document including a brief summary of the changes to the contract, than 
from receiving the initial summary prospectus year after year.\542\ 
This approach also takes into account the cost to maintain and update 
separate initial summary prospectuses for currently offered contracts 
and those no longer offered.
---------------------------------------------------------------------------

    \542\ The Commission discussed this rationale when it initially 
adopted rule 498A. See VASP Adopting Release at Section II.A.2.a.
---------------------------------------------------------------------------

    Unlike an initial summary prospectus, which only can describe a 
single contract that the insurance company currently offers for sale, 
an updating summary prospectus for a non-variable annuity may describe 
one or more contracts covered in the statutory prospectus to which the 
updating summary prospectus relates, as proposed and as under current 
rule 498A for variable contracts.\543\ Similar to the initial summary 
prospectus, an updating summary prospectus may also describe more than 
one class of a contract.
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    \543\ Final rule 498A(c)(2); see also VASP Adopting Release at 
nn.342-343 and accompanying paragraph.

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[[Page 60035]]

    Updating summary prospectuses for non-variable annuities, like 
initial summary prospectuses, must include specific disclosure items 
appearing in a prescribed order, under relevant corresponding 
headings.\544\ An updating summary prospectus for a non-variable 
annuity must contain the information required by the rule, and only 
that information, in the order specified by the rule. We are adopting 
these content requirements generally as proposed.\545\ The chart in 
Table 8 below outlines the information that is required to appear in an 
updating summary prospectus for a non-variable annuity.
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    \544\ Final rule 498A(c)(6).
    \545\ In a change from the proposal, the cover page of an 
updating summary prospectus for a RILA or combination contract that 
offers index-linked options along with other investment options must 
contain the legend required by rule 481 under the Securities Act. 
See supra paragraph accompanying footnote 537.

                               Table 8--Outline of the Updating Summary Prospectus
----------------------------------------------------------------------------------------------------------------
                                                                                                Applicable to
   Heading in updating summary      Relevant paragraph   Item of final   Applicable to non-   variable annuities
            prospectus               in amendments to      Form N-4     variable annuities?   registered on Form
                                        rule 498A                                                    N-4?
----------------------------------------------------------------------------------------------------------------
Cover Page:
    Identifying Information        Rule 498A(c)(3)(i)   ..............  [check]............  [check]
     (front cover page) \1\.        through (iv).
    Legends (front cover page)     Rule 498A(c)(3)(v)   ..............  [check]............  [check]
     \2\.                           through (vi).
    EDGAR Contract Identifier      Rule 498A(c)(4)....  ..............  [check]............  [check]
     (back cover page).
    Table of Contents (optional)   Rule 498A(c)(5)....  ..............  [check]............  [check]
     \3\.
Content:
    Updated Information About      Rule 498A(c)(6)(i)   ..............  [check]............  [check]
     Your Contract.                 through (ii).
    Important Information You      Rule                              3  [check]............  [check]
     Should Consider About the      498A(c)(6)(iii).                    (with instructions   (with instructions
     [Contract].                                                         appliable to non-    appliable to
                                                                         variable             variable annuities
                                                                         annuities).          )
    Appendix: [Investment Options/ Rule 498A(c)(6)(iv)              17  [check]............  [check]
     Portfolio Companies]                                               (Items 17(b),        (Items 17(a),
     Available Under the Contract.                                       17(c), and 17(d),    17(c), and 17(d),
                                                                         as applicable).      as applicable)
----------------------------------------------------------------------------------------------------------------
Notes
\1\ The beginning or front cover page of a non-variable annuity's updating summary prospectus, like the updating
  summary prospectus of a variable annuity registered on Form N-4, must include the following information: (1)
  the insurance company's name; (2) the name of the contract(s), and the class or classes if any, to which the
  updating summary prospectus relates; (3) a statement identifying the document as an ``Updating Summary
  Prospectus''; and (4) the approximate date of the first use of the updating summary prospectus.
\2\ The required legends are the same for non-variable annuities and for variable annuities registered on Form N-
  4. These legends address the purpose of the summary prospectus, the availability of the statutory prospectus
  and other information, and a statement that additional information about certain products, including the type
  of contract, has been prepared by the SEC staff and is available at investor.gov. They also include, for RILAs
  and combination contracts that offer index-linked options along with other investment options, a legend that
  the Commission has not approved or disapproved of the securities being registered. Updating summary prospectus
  cover pages also must include additional statements that are required on the cover page of the prospectus for
  all Form N-4 issuers. See supra Section II.C.10; see also final Form N-4, Item 1(a)(6) through (8).
\3\ The requirements for this optional table of contents are the same for an updating summary prospectus as for
  an initial summary prospectus. See final rule 498A(b)(4); final rule 498A(c)(5).

    The updating summary prospectus for a non-variable annuity must 
include a concise description of certain changes to the contract made 
after the date of the most recent updating summary prospectus or 
statutory prospectus that was sent or given to investors. These changes 
appear under the heading ``Updated Information About Your Contract,'' 
with a required legend following the heading.\546\ The changes that the 
rule requires a non-variable annuity issuer to describe include those 
that relate to: (1) the availability of investment options under the 
contract; (2) the overview of the contract; (3) the KIT; (4) certain 
information about fees; (5) benefits available under the contract; (6) 
purchases and contract value; and (7) surrenders and withdrawals. The 
updating summary prospectus also could include a concise description of 
any other changes that the non-variable annuity issuer wishes to 
disclose, provided they occurred within the same time period as the 
other changes the rule requires the issuer to describe. In providing a 
concise description of a contract-related change in the updating 
summary prospectus, non-variable annuity issuers must provide enough 
detail to allow investors to understand the change and how it will 
affect them.\547\
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    \546\ The legend is the same for non-variable annuities and 
variable annuities: ``The information in this Updating Summary 
Prospectus is a summary of certain [Contract] features that have 
changed since the Updating Summary Prospectus dated [date]. This may 
not reflect all of the changes that have occurred since you entered 
into your [Contract].'' Final rule 498A(c)(6)(i)(A).
    \547\ Final rule 498A(c)(6)(i)(B); see also VASP Adopting 
Release at paragraph accompanying n.374.
---------------------------------------------------------------------------

    The topics for which a change necessitates a description in the 
updating summary prospectus, as proposed, are the same for non-variable 
annuities as for variable annuities registered on Form N-4. We do not 
anticipate that disclosures addressing these topics in a contract 
statutory prospectus will change frequently, and thus providing 
investors with a notice and a brief description of any changes that do 
occur may be more informative than repeating all the disclosures each 
year.\548\ Despite the infrequency of changes, investors should be 
notified of any changes to these items given their importance to the 
investor's experience of investing in a non-variable annuity 
contract.\549\
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    \548\ See VASP Adopting Release at paragraph following n.372.
    \549\ See id. at paragraph accompanying nn.365-369.

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[[Page 60036]]

    Substantially as proposed, we are amending rule 498A to specify 
that, in the context of a RILA contract updating summary prospectus, 
the change of availability of investment options includes a change to 
any of the features of the index-linked options disclosed in the table 
that Item 17(b)(1) of Form N-4 requires (that is, the features that are 
disclosed in the table in the appendix of investment options that will 
appear in a RILA contract summary prospectus).\550\ Similarly, in a 
change from the proposal, we are adopting a conforming change to rule 
498A to specify that, for a contract that offers fixed options, the 
change of availability of investment options includes a change to any 
of the features of the fixed options disclosed in the table that Item 
17(c) of Form N-4 requires.\551\ When the Commission adopted rule 498A, 
it stated that a change that has affected availability of portfolio 
companies (or investment options) includes changes in the portfolio 
companies (or investment options) offered under the contract or 
available in connection with any optional benefit.\552\ In the context 
of index-linked options, any change to the features of the index-linked 
options that the required table will describe--that is, the index, type 
of index, crediting period, index crediting methodology, and/or current 
limit on index loss--as well as the inclusion or exclusion of index 
options will meaningfully change the investor's experience of investing 
in a RILA contract. Similarly, in the context of fixed options, any 
change to the features of the fixed options that the required table 
will describe--that is, the term and the minimum guaranteed interest 
rate--will meaningfully change the investor's experience of investing 
in an annuity contract offering fixed options. For these reasons, under 
the final amendments a change to any of these features represents a 
change in the availability of the investment options that the contract 
offers.
---------------------------------------------------------------------------

    \550\ As the Item 17(b) table does not include current limits on 
index gains, changes in current limits on index gains are not 
changes in the features of index-linked options that would require 
discussion in the updating summary prospectus.
    \551\ Final rule 498A(c)(6)(i). The amendments reflect a 
conforming change from the proposal to address the inclusion of 
registered MVA annuities on Form N-4.
    \552\ VASP Adopting Release at n.361.
---------------------------------------------------------------------------

    The topics of the additional contents included in an updating 
summary prospectus--as well as the required headings under which these 
contents must appear--are, as proposed, the same for non-variable 
annuities and for variable annuities registered on Form N-4.\553\ 
Certain of these required contents, however, as proposed vary in 
substance to reflect the unique aspects of non-variable annuities as 
compared to variable annuities. These are indicated in Table 8 above 
and include:
---------------------------------------------------------------------------

    \553\ Final rule 498A(c)(6).
---------------------------------------------------------------------------

     Disclosure provided under the heading ``Important 
Information You Should Consider About the Contract'' (Item 3 of Form N-
4), where instructions to the required table are specific to non-
variable annuities as opposed to variable annuities; and
     Disclosure under the heading ``Appendix: Investment 
Options Available Under the Contract'' (Item 17 of Form N-4), where 
RILA contract disclosure will include a different summary table for 
index-linked options offered under the contract than the summary table 
of variable options offered under a variable annuity. In addition, the 
disclosure includes a summary table for fixed options offered under the 
contract (which could be applicable for RILAs, registered MVA 
annuities, or variable annuities, depending on the investment options 
the contract offers).
4. Online Accessibility of Contract Statutory Prospectus and Certain 
Other Documents Relating to the Contract
    Investors who receive a non-variable annuity initial or updating 
summary prospectus will have access to more detailed information about 
the non-variable annuity, either by reviewing the information online, 
or by requesting the information to be sent in paper or electronically. 
In this respect, the final amendments include the same requirements for 
non-variable annuities as for variable contracts. These requirements 
further the layered disclosure framework that rule 498A creates for 
variable contracts and will, under the final amendments, similarly 
create for non-variable annuities. Those insurance companies that issue 
non-variable annuities, to the extent that they also issue variable 
annuity contracts that use summary prospectuses under rule 498A, 
therefore, should be generally familiar with the practice of making 
this information available online and be able to integrate it with 
existing processes for variable annuities. Similar to what the 
Commission expressed in the context of variable annuity summary 
prospectuses, permitting non-variable annuity investors to access the 
contract statutory prospectus in several ways (online and by physical 
or electronic delivery) maximizes the accessibility and usability of 
this information for all investors, including investors who continue to 
prefer to access information through paper resources.\554\
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    \554\ See VASP Adopting Release at n.417 and accompanying text; 
see also Office of Investor Education and Advocacy of the U.S. 
Securities and Exchange Commission, Study Regarding Financial 
Literacy Among Investors (Aug. 2012) at iv, xix, available at 
https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf. These requirements are unchanged from the requirements 
for variable annuity summary prospectuses, and our rationale for 
these requirements has not changed from the Commission's rationale 
that is discussed throughout the sections of the VASP Adopting 
Release that discuss online accessibility requirements. See VASP 
Adopting Release at Sections II.A.5 and II.A.6.
---------------------------------------------------------------------------

    As discussed above, commenters stated that investors and 
registrants will benefit from rule 498A's layered disclosure framework, 
with access to more detailed information available online and 
electronically or in paper format on request.\555\ No other commenters 
specifically addressed online accessibility to the statutory prospectus 
and certain other documents relating to the contract.
---------------------------------------------------------------------------

    \555\ See supra footnote 521 and accompanying text.
---------------------------------------------------------------------------

    Under the final amendments and as proposed, an insurance company 
relying on rule 498A to satisfy prospectus delivery obligations with 
respect to non-variable annuities (like a variable annuity issuer 
relying on this rule before the final amendments), must make the 
contract's current initial summary prospectus, updating summary 
prospectus, statutory prospectus, and SAI (together, the ``required 
online contract documents'') available online.\556\ These required 
online contract documents are required to be publicly accessible, free 
of charge, at the website address that the cover page of the summary 
prospectus specifies, on or before the time that the person relying on 
the rule provides the summary prospectus to investors.\557\ The website 
address on which the required online contract documents appear must be 
specific enough to lead investors directly to the documents, although 
the website could be a central site with prominent links to each 
document.\558\ The required online contract documents must be presented

[[Page 60037]]

in a manner that is human-readable and capable of being printed on 
paper in human-readable format, and persons accessing the documents 
must be able to permanently retain electronic versions of the 
documents. The final amendments require linking within the electronic 
versions of the contract statutory prospectus and SAI that are 
available online, and also for linking between electronic versions of 
contract summary and statutory prospectuses that are available online.
---------------------------------------------------------------------------

    \556\ For requirements relating to the required online contract 
documents, see generally final rule 498A(h).
    \557\ A current version of each of the required online contract 
documents must remain available for at least 90 days following 
either: (1) the time of the ``carrying or delivery'' of the contract 
security if a person is relying on the rule to satisfy its section 
5(b)(2) prospectus delivery obligations; or (2) if a person is 
relying on the rule to send communications that will not be deemed 
to be prospectuses, the time that the person sends or gives the 
communication to investors. Final rule 498A(h)(1).
    \558\ Final rule 498A(b)(2)(v)(B).
---------------------------------------------------------------------------

    As proposed, both initial summary prospectuses and updating summary 
prospectuses for non-variable annuities, like variable annuity summary 
prospectuses, must define any ``special terms'' elected by the 
registrant, using any presentation that clearly conveys their meaning 
to investors.\559\ In non-variable annuity summary prospectuses that 
are available online, the final amendments (like the current rule) as 
proposed require that investors be able either to view the definition 
of each special term upon command, or to move directly back and forth 
between each special term and the corresponding entry in any glossary 
or list of definitions the summary prospectus includes.
---------------------------------------------------------------------------

    \559\ Final rule 498A(e).
---------------------------------------------------------------------------

    Satisfying each of these requirements regarding online 
accessibility of contract statutory prospectuses and certain other 
documents relating to the contract is, as proposed, a condition for an 
insurance company to rely on rule 498A to satisfy prospectus delivery 
obligations with respect to non-variable annuities.\560\ Failure to 
comply with any of these conditions could result in a violation of 
section 5(b)(2) unless the contract statutory prospectus is delivered 
by means other than reliance on the rule. We recognize, however, that 
there may be times when, due to events beyond a person's control, the 
person may temporarily not be in compliance with the rule's conditions 
regarding the availability of the required online contract documents. 
The final amendments, like rule 498A before the amendments that we are 
adopting and as proposed, include a safe harbor provision addressing 
temporary noncompliance.\561\
---------------------------------------------------------------------------

    \560\ Final rule 498A(f)(4); final rule 498A(g)(4).
    \561\ Final rule 498A(h)(4). This provides that the conditions 
regarding the availability of the required online contract documents 
will be deemed to be met, even if the required online contract 
documents are temporarily unavailable, provided that the person has 
reasonable procedures in place to ensure that those materials are 
available in the required manner. A person relying on the rule to 
satisfy prospectus delivery obligations is required to take prompt 
action to ensure that those materials become available in the manner 
required as soon as practicable following the earlier of the time 
when the person knows, or reasonably should have known, that the 
documents were not available in the manner required.
---------------------------------------------------------------------------

5. Other Requirements for Summary Prospectus and Other Contract 
Documents
    Like current rule 498A, final rule 498A as proposed includes 
additional requirements for non-variable annuity summary 
prospectuses.\562\ These include:
---------------------------------------------------------------------------

    \562\ For these additional requirements, see generally final 
rule 498A(i).
---------------------------------------------------------------------------

     Certain requirements regarding the delivery of paper or 
electronic copies of the required online contract documents upon 
request;
     The requirement that a contract summary prospectus must be 
given greater prominence than any materials that accompany the contract 
summary prospectus;
     Requirements that: (1) the required online documents be 
presented in a format that is convenient for reading and printing, and 
(2) a person be able to retain electronic versions of these documents 
in a format that is convenient for reading and printing; and
     The requirement for any website address that is included 
in an electronic version of the summary prospectus to be an active 
hyperlink.
    Failure to comply with these additional requirements will not, 
however, negate a person's ability to rely on the rule to satisfy 
prospectus delivery obligations.\563\ No commenters specifically 
addressed these additional requirements.
---------------------------------------------------------------------------

    \563\ Final rule 498A(i)(5).
---------------------------------------------------------------------------

E. Accounting (Items 16 and 26)

    We are adopting, as proposed, amendments to permit RILA issuers to 
provide financial statements on Form N-4 in the same way that insurance 
companies currently provide financial statements on Form N-4. We are 
also extending these amendments to registered MVA annuities. As a 
result, the financial statements filed in connection with a 
registration statement that relates to the offering of either of these 
securities may be prepared in accordance with SAP to the same extent as 
currently permitted for insurance companies' financial statements filed 
on that form.
    As discussed in the Proposing Release, Instruction 1 to Item 26(b) 
of Form N-4 currently permits insurance companies that are the 
depositors of variable annuity separate accounts to prepare their 
financial statements for use in a registration statement filed on Form 
N-4 in accordance with SAP if the depositor would not have to prepare 
its financial statements in accordance with GAAP except for use in that 
registration statement or other registration statements filed on Forms 
N-3, N-4, or N-6 (the forms used to register insurance products that 
are issued by investment companies).\564\ The instruction further 
states that the depositor insurance company's financial statements must 
be prepared in accordance with GAAP if it prepares financial 
information in accordance with GAAP for use by its parent (as defined 
in Regulation S-X) in any report under sections 13(a) and 15(d) of the 
Exchange Act or any registration statement filed under the Securities 
Act.\565\ In interpreting this instruction, the Commission has stated 
that SAP financial statements could be used under the insurance product 
forms, in limited circumstances, when: (1) GAAP financial statements 
are not prepared for either the depositor or its parent; or (2) the 
depositor's parent prepares GAAP financial statements, but the 
depositor's accounts are immaterial to its parent's consolidated 
financial statements and, therefore, neither partial GAAP financial 
statements nor a GAAP reporting package is prepared by the 
depositor.\566\
---------------------------------------------------------------------------

    \564\ See Proposing Release at Section II.D. Similar to 
insurance products currently filing registration statements on these 
forms, insurance companies registering offerings of non-variable 
annuities will also be required, if all of the required financial 
statements of the insurance company are not in the prospectus, to 
state in the prospectus, under a separate caption, where the 
financial statements may be found and to briefly explain how 
investors may obtain any financial statements not in the SAI. See 
current and final Form N-4, Item 16.
    \565\ Similar instructions are contained in the other forms used 
to register insurance products issued by investment companies. See 
Form N-3, Instruction 1 to Item 31(b), and Form N-6, Instruction 1 
to Item 28(b).
    \566\ See Registration Form for Insurance Company Separate 
Accounts Registered as Unit Investment Trusts that Offer Variable 
Life Insurance Policies, Investment Company Act Release No. 23066 
(Mar. 13, 1998) [63 FR 13988 (Mar. 23, 1998)] (discussing the same 
instruction in Form N-6).
---------------------------------------------------------------------------

    Commenters supported permitting RILA issuers to provide financial 
statements on Form N-4 in the same way that insurance companies 
offering variable annuities currently provide financial statements on 
Form N-4.\567\ Commenters stated that requiring GAAP financial 
statements in cases where the insurance company is not otherwise

[[Page 60038]]

required to prepare financial statements in accordance with GAAP would 
result in significant costs and administrative burdens.\568\ Some 
commenters further stated that permitting the use of SAP financial 
statements would reduce the burdens on many insurance companies 
offering or seeking to offer RILAs, which would lead to an increased 
selection of competitive products available to investors.\569\ Some 
commenters also suggested that SAP financial statements, which focus on 
an issuer's ability to meet its obligations under its insurance 
contracts, provide sufficient material information that is relevant and 
meaningful for investors evaluating RILAs.\570\ Moreover, some 
commenters suggested that permitting the use of SAP financial 
statements would benefit investors by promoting comparability between 
insurance companies, allowing contract holders to compare issuers and 
their solvency.\571\ Commenters also supported extending this treatment 
to registered MVA annuities for the same reasons.\572\
---------------------------------------------------------------------------

    \567\ CAI Comment Letter; IRI Comment Letter; VIP Working Group 
Comment Letter, Gainbridge Comment Letter; Johnson Comment Letter; 
Meeting of American Council of Life Insurers, Committee of Annuity 
Issuers, and Insured Retirement Institute with SEC Staff Regarding 
SAP Financial Statements (Sep. 29, 2023) (``Presentation from 
Insurance Product Trade Groups on SAP Financial Statements'').
    \568\ CAI Comment Letter; IRI Comment Letter; Presentation from 
Insurance Product Trade Groups on SAP Financial Statements.
    \569\ CAI Comment Letter; Gainbridge Comment Letter; IRI Comment 
Letter; Presentation from Insurance Product Trade Groups on SAP 
Financial Statements.
    \570\ CAI Comment Letter; IRI Comment Letter; Presentation from 
Insurance Product Trade Groups on SAP Financial Statements.
    \571\ CAI Comment Letter; Presentation from Insurance Product 
Trade Groups on SAP Financial Statements.
    \572\ See, e.g., CAI Comment Letter (stating that ``we 
completely support extending Form N-4 [to facilitate registering 
offerings of registered MVA annuities on the form]'' and that 
``[o]ur comments here relating to financial statements apply equally 
to MVA contracts'').
---------------------------------------------------------------------------

    One commenter suggested that we eliminate or more clearly explain 
the instruction to Form N-4 that says that an insurance company cannot 
use SAP financial statements if it prepares GAAP financial statements 
for a corporate parent that is a GAAP filer.\573\ This commenter 
questioned the basis for the instruction because insurance companies 
that have publicly-traded parent companies have been provided 
exemptions from the requirement to provide GAAP financial statements in 
connection with the registration of certain annuities based on the 
authority provided in 17 CFR 210.3-13 (``3-13 Exemptions'').\574\ We 
are retaining this instruction without modification. GAAP financial 
statements provide the most useful information for all users of 
financial statements,\575\ and requiring filers to provide GAAP 
financial statements promotes uniformity and consistency in financial 
reporting.\576\ Accordingly, the Commission generally requires that all 
financial statements be presented on a GAAP basis and has permitted the 
use of SAP financial statements only in limited circumstances. In the 
examples cited by the commenter, 3-13 Exemptions from the requirement 
to provide GAAP financial statements were provided to insurance 
companies consistent with the instructions regarding financial 
statements on Forms N-3, N-4, and N-6.\577\ Under the final amendments, 
an insurance company registering a RILA or registered MVA annuity 
offering on Form N-4 will not need a 3-13 Exemption in order to provide 
SAP financial statements provided the insurance company satisfies the 
requirements of the instruction in Form N-4.\578\
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    \573\ VIP Working Group Comment Letter.
    \574\ Rule 3-13 provides, in part, that the ``Commission may, 
upon the informal written request of the registrant, and where 
consistent with the protection of investors, permit the omission of 
one or more of the financial statements herein required or the 
filing in substitution therefor of appropriate statements of 
comparable character.''
    \575\ See generally Commission Statement of Policy Reaffirming 
the Status of the FASB as a Designated Private-Sector Standard 
Setter, Investment Company Act Release No. 26028 (Apr. 23, 2003) [68 
FR 23333 (May 1, 2003)].
    \576\ See VASP Adopting Release at text following n.813.
    \577\ See Form N-3, Instruction 1 to Item 31(b); current Form N-
4, Instruction 1 to Item 26(b); and Form N-6, Instruction 1 to Item 
28(b).
    \578\ See final Form N-4, Instruction 1 to Item 26(b).
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    Amendments permitting insurance companies registering offerings of 
RILAs and registered MVA annuities to rely on Instruction 1 to Item 26 
to provide SAP financial statements to the same extent as they do when 
registering offerings of variable annuities on Form N-4 alleviate the 
cost burdens that would be imposed by requiring GAAP financial 
statements in cases where the insurance company is not otherwise 
required to prepare financial statements in accordance with GAAP and 
provide for the consistent treatment of financial statements for all 
insurance companies that meet the circumstances permitted by Form N-
4.\579\ Additionally, permitting RILA and registered MVA annuity 
issuers to provide SAP financial statements to the same extent as 
variable annuity issuers registering offerings on Form N-4 is 
consistent with maintaining investor protection. At the same time, SAP 
financial statements, which focus on an issuer's ability to meet its 
obligations under its insurance contracts, as regulated by State law, 
provide material information for investors evaluating RILAs and 
registered MVA annuities.
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    \579\ These amendments are consistent with the Commission's 
current approach to non-variable annuities registered on Form S-1. 
Because Forms S-1 and S-3 do not include an instruction similar to 
Form N-4, Instruction 1 of Item 26(b), non-variable annuities 
currently registered on these forms are required to provide their 
financial statements in accordance with GAAP. However, the 
Commission, acting through authority delegated to the staff, has 
permitted insurance companies registering on Form S-1 to include SAP 
financial statements in non-variable annuity registration statements 
in the limited circumstances permitted by Form N-4. See, e.g., 
Letter from Jenson Wayne, Chief Accountant, Division of Investment 
Management, to Stephen E. Roth, Eversheds Sutherland (US) LLP, 
regarding Fidelity & Guaranty Life Insurance Company and Fidelity & 
Guaranty Life Insurance Company of New York (Mar. 17, 2023), 
available at https://www.sec.gov/files/fidelity-guaranty-031723.pdf. 
The Commission has stated that this approach appropriately 
recognizes the cost burdens that would be imposed if the Commission 
were to require GAAP financial statements in cases where the 
depositor is not otherwise required to prepare financial information 
in accordance with GAAP. See Registration Form for Insurance Company 
Separate Accounts Registered as Unit Investment Trusts That Offer 
Variable Life Insurance Policies, Investment Company Act Release No. 
25522 (Apr. 12, 2002) [67 FR 19848 (Apr. 23, 2002)]; see also VASP 
Adopting Release at n.813 and accompanying text.
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    Requiring insurance companies to register offerings of non-variable 
annuities on Form N-4 will also provide those companies greater 
flexibility to update their registration statements without the need to 
update certain financial statements. Under section 10(a)(3) of the 
Securities Act, insurance companies currently are generally required to 
file a post-effective amendment annually to update their audited fiscal 
year-end financial statements as they relate to offerings of non-
variable annuities.\580\ In addition, Regulation S-X currently requires 
Form S-1 filers to include unaudited interim financial statements in 
any new registration statement or post-effective amendment that goes 
effective later than 134 days after the end of the insurer's fiscal 
year.\581\ However, Form N-4 filers are not subject to this 
requirement.\582\ Moreover, after the end of an insurer's fiscal year, 
insurance companies are currently required to include year-end audited 
financial statements in any new registration statement or post-
effective amendment relating to non-variable annuities filed 45 days 
after the fiscal year-end.\583\ However, Form N-4 filers

[[Page 60039]]

instead have a 90-day grace period.\584\ Consequently, under the final 
amendments, insurance companies will be able to file and amend their 
non-variable annuity registration statements during certain times of 
year without the need to update their financial statements.\585\ The 
final amendments, similar to permitting insurance companies to rely on 
Instruction 1 to Item 26 for non-variable annuities, as discussed 
above, provide for the consistent treatment of financial statements for 
all insurance companies registering offerings on Form N-4 that meet the 
circumstances permitted by Form N-4. The commenter that addressed this 
aspect of the proposal suggested that relief from these requirements to 
prepare interim financial statements on a quarterly basis is 
appropriate because investors in non-variable annuities, like investors 
in variable annuities, are less interested in the insurance company's 
operating results from period to period.\586\
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    \580\ See Proposing Release at Section II.D.
    \581\ 17 CFR 210.3-12(a). Insurance companies that rely on rule 
12h-7 are not required to provide periodic Exchange Act reports, 
including quarterly reports that include interim financial 
statements. Therefore, they must prepare interim financial 
statements for Securities Act registration statements, like Form S-1 
and Form S-3, even though they do not prepare interim financial 
statements for other purposes.
    \582\ See final Form N-4, Instruction 3 to Item 26(b).
    \583\ See 17 CFR 210.3-01(c).
    \584\ Consistent with the proposal, insurance companies filing 
on Form N-4 will have a 90-day grace period to file audited 
financial statements after fiscal year-end. See final Form N-4, 
Instruction 3 to Item 26(b). One commenter suggested amending Form 
N-4 to provide separate accounts filing on the form the same 90-day 
grace period provided to insurance companies filing on the form. See 
VIP Working Group Comment Letter. In a change from the proposal, 
Item 26(a) has been amended to provide separate accounts a 90-day 
grace period for financial statements similar to the 90-day grace 
period provided to insurance companies for similar reasons. The 
exceptions to rule 3-12 of Regulation S-X contained in instruction 5 
to Item 26(a) do not apply if the financial statements of the 
registered separate account have never been included in an effective 
registration statement for annuity contracts or life insurance 
contracts under the Securities Act. See final Form N-4, Instruction 
5 to Item 26(a). The exceptions to rule 3-12 of Regulation S-X 
contained in instruction 3(a) to Item 26(b) have been modified from 
the proposal so that the exceptions do not apply if the financial 
statements of the insurance company have never been included in an 
effective registration statement for annuity contracts or life 
insurance contracts under the Securities Act. See final Form N-4, 
Instruction 3 to Item 26(b). As proposed, the exceptions would not 
have applied if the financial statements of the insurance company 
had never been included in an effective registration statement for 
annuity contract or variable life insurance contracts.
    \585\ A further consequence of the changes will be that 
insurance companies will generally be making available their non-
variable annuity-related financial statements to investors on an 
annual basis, consistent with the timing of financial statements for 
variable annuities. Currently, insurance companies relying upon rule 
12h-7 provide their non-variable annuity-related financials 
annually, whereas insurance companies not relying on that rule 
provide financial statements quarterly. Insurance companies not 
relying on rule 12h-7 will file financial statements more frequently 
than annually if there are any post-effective amendments to the 
registration statement that require updated financial statements. 
See Form 10-Q.
    \586\ CAI Comment Letter.
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    We are also adopting, as proposed, a requirement for RILA issuers 
to provide information relating to changes in and disagreements with 
accountants on accounting and financial disclosure as detailed in 17 
CFR 229.304 (``Item 304 of Regulation S-K'') in the SAI. We are also 
extending this requirement to registered MVA annuity issuers. 
Additionally, non-variable annuities will be required to provide as an 
exhibit any letter from the insurance company's former independent 
accountant regarding its concurrence or disagreement with the 
statements made by the insurance company in the registration statement 
concerning the resignation or dismissal as the insurance company's 
principal accountant. Prior to these amendments, non-variable annuities 
provided these items on Forms S-1, 8-K, and 10-K, as applicable. These 
items are designed to address the practice of ``opinion shopping'' for 
an auditor willing to support a proposed accounting treatment designed 
to help a company achieve its reporting objectives even though that 
treatment might frustrate reliable reporting.\587\ The commenter that 
addressed this issue stated that it did not oppose this requirement as 
it applied to RILA issuers only and agreed with the placement of the 
disclosures modeled on Item 304 of Regulation S-K in the SAI.\588\
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    \587\ See Disclosure Amendments to Regulation S-K, Form 8-K and 
Schedule 14A Regarding Changes in Accountants and Potential Opinion 
Shopping Situations, Investment Company Act Release No. 16358 (Apr. 
12, 1988) [53 FR 12924 (Apr. 20, 1988)] (``Disclosure Amendments to 
Regulation S-K, Form 8-K and Schedule 14A''); see also Form S-1, 
Item 11(i).
    \588\ See CAI Comment Letter. As registered MVA annuities 
similarly provide this disclosure currently and it will also be in 
the SAI, we are applying this requirement to registered MVA 
annuities for the same reason we are applying it to RILAs.
---------------------------------------------------------------------------

    Some insurance companies issue index-linked life insurance products 
that have a similar payment structure to RILAs, resulting in similar 
regulatory treatment as RILAs currently. Some commenters stated that 
these life insurance policies should be permitted to register on Form 
N-6,\589\ which, among other things, would allow insurance companies 
registering those policies to provide SAP financial statements in the 
same way that other insurance companies are currently permitted to on 
Form N-6.\590\ The Commission did not propose to amend Form N-6 to 
permit insurance companies to register offerings of index-linked life 
insurance on the form, and any such amendments are beyond the scope of 
this rulemaking.
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    \589\ Similar to Form N-4 and variable annuities, Form N-6 is 
used to register offerings of variable life insurance policies.
    \590\ See, e.g., CAI Comment Letter; ACLI Comment Letter; IRI 
Comment Letter.
---------------------------------------------------------------------------

F. Filing and Prospectus Delivery Rules

1. Fee Payment Method and Amendments to Form 24F-2
    We are adopting, largely as proposed, amendments to require 
insurance companies to pay securities registration fees relating to 
RILA offerings using the same method used for variable annuities.\591\ 
In a modification from the proposal, we are also adopting this 
framework for registered MVA annuities. Under the final amendments, 
issuers registering the offerings of non-variable annuities on final 
Form N-4 will be deemed to be registering an indeterminate amount of 
securities upon effectiveness of the registration statement.\592\ These 
issuers will be required to pay registration fees annually based on 
their net sales of these securities, no later than 90 days after the 
issuer's fiscal year ends, on Form 24F-2, the form that is used by 
registered separate accounts to pay securities registration fees 
relating to variable annuities.\593\ We are further

[[Page 60040]]

specifying the calculation method for paying securities registration 
fees for non-variable annuity offerings, consistent with the fee 
calculation methodology that applies to variable annuities.\594\ We 
also are amending, as proposed, Form 24F-2 to specify when issuers can 
take credits for non-variable annuity redemptions that pre-date their 
use of that form and when expiring annuity contracts are rolled over 
into a new crediting period, as well as other non-substantive and 
conforming amendments.\595\ Commenters were supportive of our proposal 
to allow RILA issuers to pay fees in arrears on Form 24F-2, though they 
did have comments on specific elements of this part of the proposal as 
discussed below.\596\ Commenters also supported extending this 
treatment to registered MVA annuities, subject to those comments.\597\
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    \591\ To accommodate the changes, EDGAR will be modified to 
require insurance companies registering non-variable annuities to 
use a different CIK than that used for their other offerings. One 
CIK will be utilized to register the offerings of non-variable 
annuities on Form N-4 and pay registration fees for securities 
relating to non-variable annuity offerings on Form 24F-2. The other 
CIK will be utilized to register the insurance company's other 
offerings of securities as they do currently. As a result, insurance 
companies will need to utilize separate CIKs for their non-variable 
annuity-related filings. If the issuer only offers non-variable 
annuities, the issuer will only use one CIK. Further, we are 
amending rule 313 of Regulation S-T to permit filings relating to 
non-variable annuities offerings to have both an investment company 
type and contract identifier to facilitate insurance companies 
filing these forms and for ease in identification of particular 
contracts.
    \592\ The rule amendments apply the same registration fee 
payment approach to non-variable annuities that is provided by rule 
24f-2 to other Form N-4 issuers. See final rules 456(e) (providing 
that where the registration statement relates to an offering of non-
variable annuities, insurance companies will be deemed to have 
registered an indeterminate amount of securities for purposes of 
sections 5 and 6(a) of the Securities Act upon the effective date of 
its registration statement); and 457(u) (providing for insurance 
companies to pay registration fees for offerings of non-variable 
annuity securities on the same annual net basis as other Form N-4 
issuers); see also final Form 24F-2. See 15 U.S.C. 78d(e) and 77z-3. 
We believe that these actions are necessary and appropriate in the 
public interest and consistent with the protection of investors.
    \593\ As a general matter, the final amendments provide the same 
process for registering an indeterminate amount of securities 
relating to non-variable annuity offerings as is currently provided 
for exchange-traded vehicle securities under rule 456(d) (which, in 
turn, mirrors the process for current Form N-4 issuers to register 
securities) except that: (1) this process will be mandatory for 
insurance companies that register non-variable annuities on Form N-
4; and (2) such insurance companies will pay fees on Form 24F-2 
instead of filing a prospectus supplement in accordance with rule 
424. See also Closed-End Fund Offering Reform Adopting Release. For 
example, the final amendments will provide the same mechanics as 
other Form 24F-2 issuers when addressing interest calculations for 
late payments.
    \594\ All payments of filing fees for non-variable annuities 
registration statements will continue to be made by wire transfer, 
debit card, or credit card or via an ACH and there will be no 
refunds. See 17 CFR 230.111; Final Form 24F-2, Instruction A.5.
    \595\ In addition to conforming changes in final Form 24F-2 to 
effectuate the changes discussed below, to improve the form we are: 
(1) removing reporting relating to shares paid for prior to Oct. 11, 
1997; (2) removing the statement in current Instruction A.3 to 
consult the EDGAR Filer Manual because the instructions referenced 
in Instruction A.3 are intended to be removed from the EDGAR Filer 
Manual; (3) removing current Instruction C.4, which includes EDGAR 
header tags for Item 5 of the form, as this information is no longer 
sufficient for filing purposes and current technical specifications 
are provided through the technical specifications page on the 
Commission's web page; (4) revising current Instruction C.9 for Item 
5(vii) to correspond to the current instructions for fee filing 
rates on the Commission's website; (5) correcting the website linked 
in current Instruction D.1; and (6) removing the estimated Paperwork 
Reduction Act burden cited in current Instruction F as extraneous in 
light of the OMB approval box that contains information on this 
topic.
    \596\ See CAI Comment Letter; IRI Comment Letter; Gainbridge 
Comment Letter.
    \597\ See, e.g., CAI Comment Letter.
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    Without the adoption of these final amendments, insurance 
companies, like most issuers, would need to register a specific amount 
of securities when registering non-variable annuities. Indeed, until 
now, issuers of non-variable annuities were required to pay a 
registration fee for such securities to the Commission at the time of 
filing a registration statement on Form S-1 or S-3.\598\ As a result, 
under Forms S-1 and S-3, insurance companies had to ensure that they 
did not inadvertently sell more non-variable annuities than were 
registered, even though this was not (and is not) a concern in relation 
to variable annuities. Further, insurance companies were required to 
pay fees at effectiveness on Forms S-1 or S-3 for the non-variable 
annuities being registered, in contrast with registered separate 
accounts, which do not have to pay a fee at effectiveness on Form N-4 
but rather pay fees annually on Form 24F-2 on the net sales of 
securities that year. Now, under the final amendments, insurance 
companies will be required to pay fees under the framework outlined by 
the Investment Company Act, which provides that certain registered 
investment companies, including the variable annuity separate accounts 
that file on Form N-4, are deemed to have registered an indefinite 
amount of securities upon the effective date of their registration 
statement.\599\ Instead of having to pay registration fees at the time 
of filing a registration statement, the final amendments will require 
insurance companies to pay registration fees in arrears based on their 
net issuance of non-variable annuities, no later than 90 days after the 
issuer's fiscal year end, on Form 24F-2.\600\
---------------------------------------------------------------------------

    \598\ In general, issuers today--including insurance companies 
issuing non-variable annuities--are required under the Securities 
Act to pay a registration fee to the Commission at the time of 
filing a registration statement. See sections 6(b)(1) (requiring 
applicants to pay a fee to the Commission at the time of filing a 
registration statement) and (c) (providing that a registration 
statement shall not be deemed to have taken place without payment of 
a registration fee) of the Securities Act [15 U.S.C. 77f(b)(1) and 
(c)]. This means they pay registration fees at the time they 
register the offering of securities, regardless of when (or if) they 
sell them. In addition, although well-known seasoned issuers 
(``WKSIs'') have additional flexibility in paying filing fees, none 
of the insurance companies that issue non-variable annuities 
currently claim status as a WKSI. See Proposing Release at n.21 and 
accompanying text (citing, inter alia, section 6(b)(1) of the 
Securities Act [15 U.S.C. 77f(b)(1)]).
    \599\ See 15 U.S.C. 80a-24(f).
    \600\ See id.; final Form 24F-2.
---------------------------------------------------------------------------

    The final amendments are designed to require insurance companies to 
use the same framework to pay securities registration fees for non-
variable annuities that they do for variable annuities. Insurance 
companies offer non-variable annuities in a manner substantially 
similar to variable annuities and similarly will benefit from paying 
registration fees on an annual net basis and from registering offerings 
of an indeterminate number of securities. The final amendments provide 
registration fee payment parity for an insurance company that may offer 
one or more related insurance products, including index-linked options 
offered as part of combination annuity contracts.\601\ The final 
amendments' requirement that insurance companies pay registration fees 
for non-variable annuities on Form 24F-2 therefore should be efficient 
for insurance companies. This approach eliminates the risk that an 
insurance company will inadvertently oversell non-variable annuities 
with respect to a registration statement on Form N-4, and the payment 
of fees on an annual net basis furthermore should lead to a reduction 
in overall filing fees relating to these securities.\602\ Further, by 
requiring insurance companies to use the same form and payment method 
under the final amendments for both variable and non-variable 
annuities, this process also will be efficient for the Commission.
---------------------------------------------------------------------------

    \601\ For combination products, each issuer of securities under 
the product (e.g., the separate account for the variable option and 
the insurance company for the index-linked or MVA option) will file 
a separate Form 24F-2 relating to the payment of registration fees 
for its respective securities offered under the product.
    \602\ As part of the amendments to Form 24F-2, insurance 
companies will be required to include the value of any expiring non-
variable annuities contract or index-linked or MVA option that is 
rolled over into a new crediting period in its calculation of the 
aggregate sale price of securities sold during the fiscal year. 
Insurance companies further will be required to report such 
contracts or options as redemptions. This will result in zero net 
sales being reported in this situation. See final Form 24F-2, 
Instruction C.4.
---------------------------------------------------------------------------

    The fee calculation method is consistent with the continuous 
offering of non-variable annuities to investors. These investors may 
make additional allocations or other investment decisions over time 
with respect to an investment in non-variable annuities. One effect of 
this was that, prior to these rule amendments, insurance companies, 
unlike other Form S-1 or S-3 issuers, could have increased difficulty 
in using the filing fees associated with unsold non-variable annuities 
of a particular offering to offset the filing fees due for a subsequent 
registration statement. This was because many insurance companies could 
not easily terminate an offering of non-variable annuities, a necessary 
step to recoup fees paid on unsold securities for use in a separate 
offering.\603\
---------------------------------------------------------------------------

    \603\ See 17 CFR 230.457(p). To facilitate the transition to 
calculating fees on an annual net basis and filing Form 24F-2, a 
filer will reduce the number reported in Item 5(i) in connection 
with non-variable annuities by any excess securities that were 
registered under its last registration statement that remain unsold 
prior to the effectiveness of the final rule. See final Form 24F-2, 
Instruction C.5. This will be so that a filing fee is not charged 
twice for the same securities being registered.
---------------------------------------------------------------------------

    We also are amending Form 24F-2 to indicate when insurance 
companies can take credits for redemptions of non-variable annuity 
securities not claimed

[[Page 60041]]

during a prior fiscal year (``non-claimed prior redemptions''). 
Typically, issuers that file Form 24F-2 are eligible for a credit for 
fees paid on prior redemptions, which may be used to offset 
registration fees due for securities sold during the current fiscal 
year. This credit will only be available for non-claimed prior 
redemptions that occurred during any prior fiscal year that ended no 
earlier than the date the issuer became eligible to use Form 24F-
2.\604\ The current form, however, includes a legacy instruction that 
permits a credit for any non-claimed redemptions in a prior fiscal year 
that ends no earlier than October 11, 1995. This specific date is 
related to the timing of open-end funds' and unit investment trusts' 
transition to Form 24F-2.\605\ With the addition of non-variable 
annuities to this form, we are removing the reference to October 11, 
1995 in Item 5(iii) of Form 24F-2 and amending the related instructions 
so that Form 24F-2 is clear that issuers only will be able to take 
credit for non-claimed prior redemptions for a fiscal year prior to the 
date the issuer became eligible to use the form, which for insurance 
companies issuing non-variable annuities would be the date on which we 
adopt these amendments.\606\
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    \604\ See Form 24F-2, Item 5(iii); see also generally Closed-End 
Fund Offering Reform Adopting Release at n.348.
    \605\ See Registration Under the Securities Act of 1933 of 
Certain Investment Company Securities, Investment Company Act 
Release No. 22815 (Sep. 10, 1997) [62 FR 47934 (Sep. 12, 1997)] at 
n.9.
    \606\ In addition to insurance companies, interval funds have 
been able to use Form 24F-2 since Aug. 1, 2021 (the effective date 
of rule 24f-2 as applied to interval funds), so these funds likewise 
would only be able to take credit for non-claimed prior redemptions 
since that date.
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    While generally supportive of the proposal, commenters had some 
specific recommendations on how we could modify Form 24F-2. One 
commenter recommended that a separate line item be added to Form 24F-2 
for unsold interests that were registered using Forms S-1 and S-3 
registration statements.\607\ This commenter suggested that, to provide 
greater transparency in the calculation of registration fees and to 
ensure RILA issuers receive credit for the amount of registration fees 
previously paid for unsold securities registered on the Forms S-1 and 
S-3 registrations statements, we provide a separate line item (e.g., a 
``redemption credit line'') on Form 24F-2 to explicitly treat such 
unsold securities as redemption credits. We have not added such a line 
item to Form 24F-2 because final Form 24F-2 will allow insurance 
companies to exclude non-variable annuities previously registered on 
Forms S-1 or S-3 from the registration fee payment calculation in the 
first Form 24F-2 filed following the conversion to Form N-4. 
Specifically, the form, both as proposed and as adopted, instructs 
filers to reduce the calculation of the amount of securities sold (and, 
thus, for which registration fees are to be paid) by the amount of 
securities registered under the Securities Act for which the issuer 
paid registration fees on a form other than Form 24F-2.\608\ Thus, 
because those securities identified by the commenter were not 
registered pursuant to the final amendments (or section 24(f) of the 
Investment Company Act), insurance companies will be able to deduct 
those securities from the calculation without the need for a specific 
line item in that calculation that eventually would become obsolete. If 
additional clarity is desired, insurance companies may optionally use 
the explanatory notes section of the form to provide it.
---------------------------------------------------------------------------

    \607\ CAI Comment Letter.
    \608\ See Final Form 24F-2, Item 5(i) and Instruction C.5; see 
also supra footnote 603.
---------------------------------------------------------------------------

    Proposed Instruction C.4 to Form 24F-2 provided a special rule for 
RILAs that clarified that the value of any expiring annuity contract or 
investment option that is rolled over into a new crediting period 
should be reported both as securities sold and as securities redeemed, 
resulting in a net-zero calculation to the extent that these amounts 
are the same. One commenter stated, in discussing this proposed 
approach, that transfers from index-linked options to options (and 
variable options to index-linked options) should be viewed as 
substantially similar to rollovers of crediting periods from a 
registration fee payment perspective. The commenter stated that, in 
both cases, simultaneous purchases and redemptions of equal amounts 
occur, and thus both should be afforded comparable treatment in the 
context of registration fee payment.\609\ This commenter therefore 
recommended that, with respect to combination contracts, we provide 
expanded guidance in Instruction C.4 in Form 24F-2 regarding net zero 
fee transactions to include (1) transfers from index-linked options to 
variable separate account subaccounts; and (2) transfers from variable 
separate account subaccounts to index-linked options. We are not 
adopting this recommendation because in a combination contract, the 
separate account and insurance company each file their own separate 
Form 24F-2. Expanding net zero fee transactions to include transfers 
from index-linked or MVA options to variable separate account 
subaccounts and vice versa would expand the ability of a registrant to 
determine net sales, and thus potentially reduce registration fees, to 
a greater extent than other registrants using Form 24F-2. This is 
because the form does not currently permit two or more legal entities 
to net purchases and redemptions and we do not believe netting across 
legal entities is appropriate. Therefore, we are not adding transfers 
from index-linked or MVA options to variable separate account 
subaccounts (and vice versa) to final Instruction C.2.
---------------------------------------------------------------------------

    \609\ CAI Comment Letter.
---------------------------------------------------------------------------

    One commenter asked us to confirm that RILA issuers could file a 
single Form 24F-2 annually to pay registration fees for all ongoing 
RILA offerings and pay registration fees on a net basis across all such 
offerings rather than having to make multiple Form 24F-2 filings and 
pay registration fees on a RILA offering-by-offering basis as with 
variable product separate account registration fee payments because 
paying registration fees in the aggregate across all RILA offerings 
would allow companies to more effectively use their unsold interests 
registered on Forms S-1 or S-3.\610\ Another commenter suggested that 
we permit RILA issuers to use a single Form 24F-2 on the grounds that 
requiring multiple nearly identical filings has little value to 
investors, leads to additional complexity for both the staff and 
insurance companies, makes tagged data less useful (as a single product 
will have multiple identical tags under different registrants and IDs), 
and provides no upside.\611\ Consistent with the treatment for variable 
annuity and variable life insurance offerings, we agree that issuers 
should be permitted to pay registration fees for multiple offerings of 
non-variable annuities with different Securities Act numbers--provided 
that those Securities Act numbers are under the same Central Index Key 
(CIK) number--on a single Form 24F-2 and have added an instruction to 
that effect.\612\
---------------------------------------------------------------------------

    \610\ CAI Comment Letter.
    \611\ VIP Working Group Comment Letter.
    \612\ See final Form 24F-2, Instruction A.6.
---------------------------------------------------------------------------

2. Post-Effective Amendments and Prospectus Supplements
    The final amendments, which we are adopting as proposed, will 
require RILA issuers to use the same framework for filing post-
effective amendments to the registration statement that other issuers 
on Form N-4 use. We are also adopting

[[Page 60042]]

this requirement in connection with offerings of registered MVA 
annuities. Specifically, we are amending rule 485 to require insurance 
companies to use that rule when amending non-variable annuity 
registration statements on Form N-4. This change will permit insurance 
companies to file post-effective amendments relating to non-variable 
annuity registration statements that become automatically effective 
under rule 485(a) after a specified period of time after the filing or, 
in certain enumerated circumstances, immediately effective under rule 
485(b).\613\ In addition, we also are requiring insurance companies to 
apply rule 497 under the Securities Act when appropriate to file non-
variable annuity prospectuses and prospectus supplements with the 
Commission.\614\ These amendments will facilitate a uniform post-
effective amendment and prospectus filing framework for issuers on Form 
N-4 and will provide increased efficiencies for insurance companies and 
Commission staff by applying consistent procedures for all security 
offerings registered on Form N-4. The one commenter who addressed this 
aspect of the proposal supported the proposed amendments and supported 
their application to registered MVA annuities.\615\
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    \613\ See rule 485(b).
    \614\ Consistent with this change, we are making corresponding 
changes to (1) rule 424(f) to specify that insurance companies must 
use rule 497 rather than rule 424 when filing non-variable annuity 
prospectuses and prospectus supplements, and (2) rule 415(b) to 
exempt offerings of non-variable annuities from the requirements of 
paragraph (a) of that rule consistent with the treatment of variable 
annuity separate accounts.
    \615\ CAI Comment Letter. This and one other commenter did raise 
questions on the effective dates of the amendments to rules 485 and 
497 which we address below. See CAI Comment Letter; VIP Working 
Group Comment Letter; see also infra Section II.J. Additionally, 
while not specific to this requirement, one commenter suggested that 
we amend 17 CFR 240.10b-10(b)(1) to permit RILA issuers to use 
quarterly statements rather than the immediate confirmations usually 
required, consistent with the treatment of variable annuities under 
that rule. See CAI Comment Letter. We are not adopting this change 
at this time because it is beyond the scope of this rulemaking.
---------------------------------------------------------------------------

    Prior to the adoption of these final amendments, our rules provided 
different processes for insurance companies when registering offerings 
of non-variable annuities on Forms S-1 and S-3, as compared to those of 
variable annuities on Form N-4, to update and keep current a 
registration statement or prospectus. Form N-4 was used by separate 
accounts that are unit investment trusts that offer variable contracts 
to register their securities under the Investment Company Act and to 
register an indefinite amount of continuously-sold securities under the 
Securities Act. As such, these issuers had a system of updating their 
disclosures that facilitates that structure. Issuers on Form N-4 
typically update their registration statements annually through a post-
effective amendment filed in accordance with rule 485 to, among other 
things, comply with Securities Act requirements.\616\ Rule 485(b) 
provides for the immediate effectiveness of many of the routine updates 
that issuers on Form N-4 may make over the course of a continuous, 
long-term offering, such as those amendments filed for no purpose other 
than to bring the financial statements up to date under section 
10(a)(3) of the Securities Act.\617\ These issuers also file forms of 
prospectuses used in their offerings through rule 497 and can 
supplement their prospectuses, also known as ``stickering,'' to reflect 
certain changes to the information disclosed by making a filing with 
the Commission in accordance with rule 497.
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    \616\ See, e.g., section 10(a)(3) of the Securities Act [15 
U.S.C. 77j(a)(3)].
    \617\ See rule 485(b)(1)(i). Material post-effective amendments, 
however, are not immediately effective. See rule 485(a).
---------------------------------------------------------------------------

    Prior to the final amendments that we are adopting today, insurance 
companies had to follow the processes operating companies use, when 
these insurance companies were updating non-variable annuity 
registration statements. Operating companies that are engaged in a 
continuous offering of securities, like these issuers, are similarly 
required to update their registration statement each year and may 
update their registration statement for changes other than to bring the 
financial statements up to date.\618\ For non-variable annuities whose 
offerings were registered on Form S-1, these updates typically occurred 
through a post-effective amendment.\619\ Rule 462 provided insurance 
companies with a limited set of circumstances, none of which are 
specific or generally relevant to offerings of non-variable annuities, 
in which a post-effective amendment to a registration statement is 
effective upon filing.\620\ Rather, when an insurance company sought to 
update a non-variable annuity registration statement on Form S-1, the 
issuer had to file a post-effective amendment that was typically 
declared effective by Commission staff acting pursuant to delegated 
authority.\621\
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    \618\ See, e.g., section 10(a)(3) of the Securities Act; rule 
415(a); Item 512 of Regulation S-K.
    \619\ Under Form S-3, the section 10(a)(3) update need not be 
made through a post-effective amendment. Rather, under this form, 
the section 10(a)(3) update generally occurs when the issuer files 
its annual report on Form 10-K containing the issuer's audited 
financial statements for its most recently completed fiscal year.
    \620\ See rule 462(d) and (e). For example, this rule provides 
that a post-effective amendment that seeks only to add exhibits to a 
registration statement would be effective upon filing. In addition, 
although a well-known seasoned issuer is permitted to file a post-
effective amendment to an automatic shelf registration statement 
with immediate effectiveness, none of the insurance companies 
currently offering non-variable annuities currently claims status as 
a well-known seasoned issuer.
    \621\ See 15 U.S.C. 77h; 17 CFR 229.501(a); 17 CFR 230.473. See 
also supra footnote 619 (describing the Form S-3 post-effective 
amendment process).
---------------------------------------------------------------------------

    In addition to differences in the post-effective amendment process, 
insurance companies also followed, prior to the adoption of the final 
amendments, different processes to file non-variable annuity 
prospectuses than current Form N-4 filers, relying on rule 424 rather 
than rule 497. Although these rules provide for similar processes, 
certain differences affected these insurance companies. For example, 
rule 424 requires an issuer to file a prospectus only if the issuer 
makes substantive changes or additions to a previously-filed 
prospectus, whereas rule 497 requires funds to file every prospectus 
that varies from any previously-filed prospectus.\622\ Accordingly, 
under the final amendments, an insurance company will need to file 
every prospectus relating to a non-variable annuity offering that 
varies in form from a previously filed prospectus before the modified 
prospectus is first used.\623\ This approach will provide a publicly 
accessible, usable database of current non-variable annuity 
prospectuses which also will assist the Commission in conducting its 
regulatory functions. In addition, rule 424 includes provisions related 
to continuous or delayed securities offering under rule 415.\624\ 
However, in light of the amendments we are making to the non-variable 
annuity registration framework with this rulemaking, these provisions 
will no longer be applicable to non-variable annuities.\625\
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    \622\ See rule 424(a); rule 497.
    \623\ See rule 497(e).
    \624\ See rule 424(b).
    \625\ See rule 415(b).
---------------------------------------------------------------------------

    Consistent with the other elements of this proposal, the final 
amendments are designed to provide parity between non-variable 
annuities and variable annuities that are currently registered on Form 
N-4. Non-variable annuities, like variable annuities, are longer-term 
investment products that are continuously offered and must maintain a 
current registration statement and up-to-date prospectus for new 
investors as well as for existing investors that may be able to make 
additional contributions

[[Page 60043]]

or reallocate assets. Accordingly, applying rule 485's simplified post-
effective amendment process is a more appropriate framework for non-
variable annuity registration statements given their similarity to 
variable annuities. Non-variable annuity registration statements are 
routinely updated over the course of an offering and may be subject to 
material and non-material amendments over the long-term nature of the 
investment product. As such, the final amendments address the post-
effective amendment process for non-variable annuity registration 
statements and thereby provide benefits to insurance companies 
currently using Form S-1 in relation to non-variable annuity offerings 
by reducing administrative complexity when updating financial 
statements included in a registration statement or when making other 
changes to a registration statement through rule 485's provisions for 
automatic and immediate effectiveness.\626\ Requiring insurance 
companies to rely on the simplified post-effective amendment process 
will enable these issuers to update their disclosures in a manner that 
complements and facilitates the offering structure of non-variable 
annuities and will provide efficiency in the context of combination 
contracts.\627\
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    \626\ See rule 485.
    \627\ Some commenters asked if RILA issuers would be permitted 
to use the ``rate sheet'' process outlined in ADI 2018-05 for the 
disclosure of certain rate changes. See CAI Comment Letter. The 
application of that staff statement beyond variable contracts is 
beyond the scope of this rulemaking. Insurance companies are 
encouraged to engage with Commission staff on this ADI and whether 
modifications to address RILAs would be appropriate.
---------------------------------------------------------------------------

    Requiring insurance companies to rely on rules 485 and 497 in 
connection with non-variable annuities also will provide a uniform 
post-effective amendment and prospectus filing framework for all 
issuers using Form N-4 and provide insurance companies that may offer 
one or more related insurance products, including index-linked or MVA 
options offered as part of combination annuity contracts, consistent 
filing requirements across related products. This also should result in 
enhanced efficiencies as these issuers would no longer be required to 
manage distinct filing processes for related products. In addition, 
employing the framework provided by rules 485 and 497 will provide 
Commission staff with an increased degree of administrative efficiency 
by facilitating the review of amendments containing material changes to 
non-variable annuity registration statements while permitting 
amendments with non-material changes to become effective immediately.
3. Prospectus Delivery
    As proposed, we are prohibiting the use of rule 172 in connection 
with RILA offerings. We are also prohibiting its use in connection with 
registered MVA annuity offerings. Under rule 172, a final prospectus is 
deemed to precede or accompany a security for sale for purposes of 
Securities Act section 5(b)(2) as long as the final prospectus meeting 
the requirements of Securities Act section 10(a) is filed or the issuer 
will make a good faith and reasonable effort to file the final 
prospectus with the Commission as part of the registration statement 
within the required rule 424 prospectus filing timeline.\628\ We 
received no comments on this aspect of the proposal.
---------------------------------------------------------------------------

    \628\ See rule 172(b) and (c); see also Closed-End Fund Offering 
Reform Adopting Release at n.561 and accompanying text.
---------------------------------------------------------------------------

    Registered investment companies, including variable annuity 
separate accounts, are excluded from rule 172 and therefore must 
deliver a prospectus to investors.\629\ Therefore, we are excluding 
offerings of non-variable annuities from rule 172 to ensure that 
investors receive a prospectus about these complex investments and 
because we are treating these offerings like offerings of variable 
annuities in other respects. Moreover, we understand that, as a 
practical matter, insurance companies typically do not rely on rule 172 
in connection with non-variable annuities because they usually deliver 
prospectuses to accompany or precede other communications, such as 
annuity applications, to avoid those communications being offers that 
otherwise would be non-conforming prospectuses that violate section 5 
of the Securities Act.\630\
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    \629\ Id. at Section VI.B.1.a.
    \630\ See section 2(a)(10) of the Securities Act (providing, in 
part, that a communication sent or given after the effective date of 
the registration statement shall not be deemed a prospectus if it is 
proved that prior to or at the same time with such communication a 
written prospectus meeting the requirements of section 10(a) was 
sent or given to the person to whom the communication was made). See 
also Closed-End Fund Offering Reform Adopting Release at n.561 
(stating that a final prospectus only filed as provided in rule 172 
will not be considered to be sent or given prior to or with a 
written offer within the meaning of this clause of section 
2(a)(10)).
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G. Communication Rules Applicable to Non-Variable Annuities

    As proposed, we are amending rule 156 to make its provisions 
applicable to RILA sales literature, and, in a change from the 
proposal, we are also applying these changes to registered MVA 
annuities in light of the similarities in the products.\631\ 
Additionally, in a change from the proposal, we are also making a 
technical amendment to rule 433 to allow certain RILA issuers that can 
meet 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.
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    \631\ See final rule 156.
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1. Sales Literature (Rule 156)
    Under the Federal securities laws applicable to all securities 
(including non-variable annuity offerings), it is unlawful for any 
person to use materially misleading communications in connection with 
the offer or sale of any security.\632\ Rule 156 does not prohibit or 
permit any particular representations or presentation, rather it is an 
interpretive rule that provides factors to be weighed in considering 
whether, in the specific context of investment company sales 
literature, a statement involving a material fact is or might be 
misleading for purposes of the Federal securities laws.\633\ Amending 
rule 156's provisions to include non-variable annuity sales literature 
will provide guidance to insurance companies on ways to avoid 
presenting investors with materially misleading advertisements, which, 
consistent with the RILA Act, should help ensure that investors receive 
the information necessary to make informed decisions about these 
products.
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    \632\ See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b-5.
    \633\ See Mutual Fund Sales Literature Interpretive Rule, 
Investment Company Act Release No. 10915 (Oct. 26, 1979); [44 FR 
64070 (Nov. 6, 1979)] (``Rule 156 Release'').
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    Rule 156 provides guidance on whether a statement involving a 
material fact is misleading in sales literature, depending on an 
evaluation of the context in which it is made, with the rule providing 
four non-exhaustive factors to guide in this determination.\634\ Like 
investment company sales literature generally (and variable annuity 
marketing materials particularly), RILA advertisements discuss complex 
investment features that could benefit from rule 156's contextual 
analysis in considering whether a particular representation is 
materially misleading. Moreover, Commission staff reviewed RILA 
advertisements to better understand how insurance companies market 
these products to investors. As part of this review, and based upon 
prior

[[Page 60044]]

experience reviewing RILA registration statements, the staff identified 
RILA marketing approaches that could benefit from rule 156's guidance 
about advertising statements that could be misleading under the Federal 
securities laws without appropriate context. Thus, by extending this 
guidance to RILAs, the final amendments to rule 156 focus attention to 
specific areas of RILA sales literature that we have identified as 
being particularly susceptible to misleading statements.\635\ These 
considerations are equally applicable to registered MVA annuities given 
the similarities in the products.
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    \634\ See current rule 156(b).
    \635\ See Rule 156 Release (Rule 156 is ``intended to highlight 
general areas which, based on the Commission's regulatory experience 
with investment company sales literature, had proven to be 
particularly susceptible to misleading statements'').
---------------------------------------------------------------------------

    Several commenters expressed support for the proposed amendments to 
rule 156 and no commenters opposed them.\636\ Commenters stressed the 
benefits to investors of applying rule 156 to RILA advertising. One 
commenter stated that the application of rule 156 to RILA sales 
literature is a ``natural fit'' given the applicability of its guidance 
to RILAs, noting that the proposed amendments would protect investors 
by, among other things, requiring insurance companies to consider the 
potentially misleading nature of statements about past performance in 
their sales literature.\637\ Because the features of a RILA investment, 
such as limits on gains, change frequently, this commenter observed 
that past performance is often irrelevant to current RILA investors who 
are not able to utilize those past rates in current market conditions. 
Referring to news reports expressing concerns about sales techniques 
used to sell annuities generally, this commenter suggested that these 
concerns further emphasize the need for marketing rule protections in 
the context of RILA sales literature.\638\
---------------------------------------------------------------------------

    \636\ See, e.g., Better Markets Comment Letter; Johnson Comment 
Letter. One commenter stated concern that the Proposing Release 
implied that misleading marketing practices are common in RILA 
advertising. See CAI Comment Letter. We did not intend to express, 
and are not expressing, a view about the prevalence of misleading 
marketing practices in RILA advertising. This commenter also 
suggested that it is noteworthy that most RILA advertisements are 
submitted for review to the Financial Industry Regulatory Authority 
even though there is currently no legal requirement to do so. We 
discuss this in more detail below. See infra Section II.G.2.
    \637\ See Better Markets Comment Letter.
    \638\ See id. (citing 2023 N.Y. Times article discussing the 
fact that investors often face aggressive sales pitches on annuities 
with opaque terms and hefty commissions that give brokers incentives 
to sell annuities that pay them the most).
---------------------------------------------------------------------------

    Some commenters also expressed concerns about the potential for 
confusion about other RILA features.\639\ One of these commenters 
stated that RILAs are inherently misleading products and urged the 
Commission to do more to protect investors with regard to certain 
confusing RILA features.\640\ For example, some commenters stated that 
claims that RILAs have no ongoing fees are misleading because investors 
will sometimes incur fees even if they hold the investment past the 
surrender charge period.\641\ These commenters urged that we require 
disclosure of such fees and charges even if they are hard to quantify. 
These commenters also stated that there was the potential for investor 
confusion because RILA returns are based on a price return index 
instead of a total return index, suggesting that insurance companies 
need to explain the difference and specify which return is applicable 
to the RILA so that investors can understand the difference between 
investing in an index fund (which might be subject to explicit ongoing 
fees, but in which investors receive a total return, including 
dividends) and a RILA based on a price return index (whose return would 
be less than that of an index fund that includes a total return).
---------------------------------------------------------------------------

    \639\ See Johnson Comment Letter; Lee Comment Letter.
    \640\ See Lee Comment Letter.
    \641\ See Johnson Comment Letter; Lee Comment Letter.
---------------------------------------------------------------------------

    One commenter also expressed concerns about representations 
concerning tax deferral and death benefits in RILA advertisements.\642\ 
For example, this commenter suggested that the term ``death benefit'' 
is misleading because these features are just a return on an investment 
(like that provided by mutual funds, stocks, and bonds), and further, 
unlike other comparable investments, death benefits are fully taxed at 
ordinary income rates. Similarly, this commenter expressed a concern 
that annuity advertisements frequently exaggerate the benefits of tax 
deferral by providing charts and examples that rely on unreasonable 
assumptions (such as comparing the tax-deferred value of an annuity to 
the value of a taxable account without reflecting an investor's 
inability to access her investment from a tax-deferred account without 
paying taxes). Finally, this commenter also expressed concern regarding 
the discretion of an insurance company to change key terms, such as 
minimum rates. This commenter suggested that this discretion was 
particularly concerning because, unlike most other investments where 
the issuer is a fiduciary (such as funds or equity investments), RILA 
issuers have no duty to act in the investor's interest when acting 
unilaterally to alter the product by setting or changing rates.
---------------------------------------------------------------------------

    \642\ See Johnson Comment Letter.
---------------------------------------------------------------------------

    This same commenter stated that focusing on RILA marketing 
practices is important because investors may not read an entire 
prospectus and thus may rely on marketing materials for information 
about a RILA's complex features. This commenter, however, suggested 
that RILA issuers should be permitted (or even required) to produce 
fair presentations of performance, which the commenter believed would 
allow investors to see how RILAs operate under real market conditions. 
This commenter agreed that providing fair representations of RILA 
performance is difficult because the rates offered by insurance 
companies are constantly changing but suggested that RILA performance 
presentations could be required to use average cap rates over a 
calendar year, while prohibiting those presentations from using back-
tested index performance or performance of the RILA prior to the 
product's launch. As described above, rule 156 is an interpretive rule 
that provides factors to weigh in considering whether, in the specific 
context of sales literature, a statement involving a material fact is 
or might be misleading for purposes of the Federal securities laws. 
Because rule 156 does not prohibit or permit any particular 
representations or presentation, we disagree with the commenter's 
suggestion that we impose a requirement under rule 156 regarding the 
use of cap rates in providing representations as to historical RILA 
performance.
    After considering these comments, we are adopting the amendments to 
rule 156 as proposed, with the added application to registered MVA 
annuities. As discussed below, these amendments address commenter 
concerns about potentially misleading statements in RILA sales 
literature by providing insurance companies with guidance about the 
contextual analysis to use in determining whether a particular 
representation in non-variable annuity advertising could be materially 
misleading.
    For example, as stated above, commenters expressed concern about 
the potential for investors to be misled in connection with 
representations in RILA marketing materials about a lack of ongoing 
fees. Final rule 156(b)(4) provides that representations about fees or 
expenses associated with an investment in a non-variable annuity could 
be misleading ``because of

[[Page 60045]]

statements or omissions made involving a material fact, including 
situations where portrayals of the fees and expenses associated with an 
investment in the fund or registered non-variable annuity omit 
explanations, qualifications, limitations, or other statements 
necessary or appropriate to make the portrayals not misleading.'' While 
non-variable annuity investors are not typically charged direct ongoing 
fees or expenses, RILAs do typically limit an investor's ability to 
participate in upside performance, and non-variable annuities with 
contract adjustments (including registered MVA annuities) can impose 
implicit costs upon highlighted features such as guaranteed 
benefits.\643\ Thus, in the context of non-variable annuity sales 
literature, under this provision of rule 156, consideration should be 
given about whether representations or portrayals either of a non-
variable annuity's costs or charges (e.g., advertising implying that a 
RILA has low costs or no ongoing charges), or optional benefits that 
are subject to a contract adjustment, would necessitate qualifying 
statements or explanations regarding the costs or tradeoffs to the 
investor to receive an advertised benefit or those generally associated 
with the non-variable annuity.
---------------------------------------------------------------------------

    \643\ Insurance companies may apply a contract adjustment to an 
investor's account when an investor annuitizes or takes advantage of 
benefits like ``free withdrawal'' provisions (that typically permit 
investors to withdraw up to 10% of the contract value each year 
without paying a surrender charge), death benefits, systemic 
withdrawals, and guaranteed benefits. See, e.g., Dodie Kent and 
Ronald Coenen, Jr., The Design and Regulatory Framework of 
Registered Index-Linked Annuities, ALI CLE Conference on Life 
Insurance Products 2023 (``It is important to note that interim 
value adjustments may apply to surrenders and all types of 
`withdrawals,' such as free look payments; annuitization; death 
benefit payments; deductions for third party advisory fees; systemic 
withdrawals; and even income payments under guaranteed benefit 
riders.'').
---------------------------------------------------------------------------

    Similarly, final rule 156(b)(1)(ii)'s extension to non-variable 
annuity sales literature also addresses some of the commenter concerns 
we received regarding RILA features that, when described in marketing 
materials, may require additional context to ensure they are not 
misleading. Final rule 156(b)(1)(ii) provides that a statement in non-
variable annuity sales literature could be misleading because of 
``[t]he absence of explanations, qualifications, limitations or other 
statements necessary or appropriate to make such statement not 
misleading.'' Whether a given explanation, qualification, or limitation 
is necessary or appropriate to make statements in sales literature not 
misleading will depend on the facts and circumstances in each case. The 
examples that follow are areas where an insurance company should 
consider the need for further explanation, qualifications, or 
limitations, but are not intended to suggest that that further 
explanation, qualifications, or limitations are necessary in each case 
in order to make the examples not misleading.
    For example, where a RILA advertisement includes statements 
regarding index returns, under this provision, consideration should be 
given as to whether the insurance company needs to explain the 
difference between a price return index and a total return index, 
including how that difference can affect an investor's returns, or if 
an advertisement describes a RILA as a growth product, whether 
qualification of the statement is necessary in light of relevant RILA 
features, such as the existence and extent of any limitations on upside 
index performance.
    If RILA sales literature discuss these aspects of the contract 
without adequately explaining these limitations or the insurer's 
discretion to alter key features, that omission could make the 
advertisement misleading. For instance, if sales literature advertises 
a particular feature of a RILA's bounded return structure (including, 
e.g., a specified index; an upside feature such as a particular ``cap 
rate'' or ``participation rate''; or a downside feature such as a 
``floor'' or ``buffer'') that is not available for the life of the 
product, under the rule consideration should be given regarding whether 
the statement could be misleading without providing additional context 
as to the insurer's discretion.
    Additionally, under these provisions of final rule 156, insurance 
companies should also consider whether representations that highlight 
downside protections of a RILA (e.g., describing the RILA as a loss 
avoidance vehicle) could also be misleading without qualifying 
explanations or statements, including the context of the cost or 
limitation of those protections (e.g., upside limitations). Insurance 
companies should further consider whether the same analysis would apply 
to representations that accentuate the benefits of customization 
without discussing the trade-offs associated with that customization 
(e.g., long lock-up periods to get the best rates or having to 
experience a contract adjustment when making a change) or do not 
explain that the insurance company has reserved the right to change or 
remove key features of the contract.
    Lastly, final rule 156(b)(2)(i) states that ``[r]epresentations 
about past or future investment performance could be misleading because 
of statements or omissions made involving a material fact, including 
situations where: [p]ortrayals of past income, gain, or growth of 
assets convey an impression of the net investment results achieved by 
an actual or hypothetical investment which would not be justified under 
the circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading.'' In the context of 
non-variable annuity advertising, under this provision, consideration 
should be given to whether illustrations about the operation of a non-
variable annuity or its features could be misleading. This could be the 
case in a RILA advertisement because, for example, it uses assumptions 
(such as limits on gains or index performance that includes dividends, 
whereas the RILA's index does not include dividends) that are not 
currently offered or exceed what could be reasonably anticipated, or 
use ``cherry picked'' data.
    Similarly in the case of RILA and registered MVA annuity 
advertising, with regard to the commenter concern regarding the 
potential for statements that exaggerate the benefits of tax deferral, 
under final rule 156(b)(2)(i) consideration should be given to whether 
portrayals of the tax-deferred value of the annuity, especially where 
this value is compared to the value of a taxable account, should 
reflect the advantages of taxable accounts (e.g., discussing, if 
applicable, whether a taxable account would be taxed at lower capital 
gains rates).\644\ Likewise, given the frequency with which RILA terms 
can change and the sensitivity of a RILA's returns to the 
particularized choices made by individual investors,\645\ including the 
historical performance of a RILA or any particular index-linked option 
itself in an advertisement may be inconsistent with amended rule 156's 
guidance.\646\

[[Page 60046]]

Further, including historical index performance in an advertisement 
also would be misleading if, for example, it suggested that the 
performance shown is predictive of future performance of the index or a 
RILA. On the other hand, using the index's historical performance 
solely to illustrate how a RILA works, and in a fair and balanced way 
(e.g., by showing index performance relative to representative limits 
on gains and losses, as some RILA advertisements currently do) would be 
consistent with final rule 156, assuming those advertisements otherwise 
include appropriate caveats to ensure that the illustrations are not 
misleading and do not suggest that the illustrations show the 
performance of the RILA or a particular index-linked option.
---------------------------------------------------------------------------

    \644\ See Johnson Comment Letter.
    \645\ Registered MVA annuity advertisements do not raise the 
same concerns, as investor returns in a registered MVA are not 
subject to the same range of particularized investor choices, but 
are instead based on a particular fixed rate that is periodically 
reset by the insurance company.
    \646\ Because the terms of a RILA investment, such as limits on 
gains, change frequently, past performance is often irrelevant to 
current investors who are not able to utilize those past rates in 
current market conditions. In addition, to the extent that a RILA is 
using a point-to-point crediting method, that RILA's return to an 
investor would be particularly sensitive to the specific date the 
investor purchased the RILA and when the crediting period ends for 
the index-linked option chosen by the investor. See Proposing 
Release at n.352. This further increases the likelihood of a current 
investor's investment experience deviating from the historical 
performance of a given RILA, even when that RILA had similar terms 
to those currently offered.
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2. Free Writing Prospectuses and Advertisements (Rules 433 and 482)
    In addition to the prohibition against using materially misleading 
communications in connection with the offer or sale of any security, 
Congress has imposed advertising restrictions to the extent that 
certain advertisements are considered prospectuses under the Securities 
Act.\647\ The Commission has stated that Congress imposed these 
restrictions so that investors base their investment decisions on the 
full disclosures contained in the statutory prospectus, which is 
intended to be the primary selling document.\648\ However, these 
advertising restrictions require special considerations for many 
investment companies. Specifically, investment companies are uniquely 
situated in that the only ``product'' of the typical investment company 
is its shares, and ``because it is in continuous registration, any 
advertisement for such a company is a prospectus that is illegal unless 
it complies with statutory requirements.'' \649\ Because of these 
restrictions, investors were unable to learn about the investment 
company itself, as they would about other companies, ``from 
advertisements of its products or policies or from widely disseminated 
annual reports to shareholders or similar publications.'' \650\ In 
recognition of these problems, the Commission adopted specialized 
advertising rules for registered investment companies and business 
development companies (collectively ``funds''), including rule 482, 
which permits funds to provide advertisements and sales literature to 
investors without being accompanied or preceded by a statutory 
prospectus (``prospectus delivery requirements'') by treating such 
advertisements as prospectuses under section 10(b) of the Securities 
Act.\651\ Accordingly, a rule 482 advertisement is a prospectus for 
purposes of potential civil liability under section 12(a)(2) of the 
Securities Act.\652\ Currently, rule 482 is only available to funds, 
which are substantively regulated under the Investment Company Act. 
These substantive regulations provide a range of direct and indirect 
investor protections by, for example, regulating fund structure, 
holdings and operations, and reducing fund complexity and helping 
ensure that fund fees are reasonable in relation to services 
rendered.\653\ Insurance companies offering non-variable annuities, 
like other non-fund issuers, are not subject to these requirements 
under the Investment Company Act.
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    \647\ See, e.g., section 2(a)(10) of the Securities Act 
(defining prospectus): section 5(b)(1) of the Securities Act 
(prohibiting the use of any means or instruments of transportation 
to carry or transmit any prospectus relating to any security with 
respect to which a registration statement under the Securities Act 
has been filed unless such prospectus meets the requirements of 
section 10 of the Securities Act); section 10 of the Securities Act 
(stating information required in prospectus).
    \648\ See, e.g., Advertising by Investment Companies, Investment 
Company Act Release No. 9811 (June 8, 1977) [42 FR30378 (June 14, 
1977)] (``Investment Company Advertising Rules Proposing Release''); 
Amendments to Investment Company Advertising Rules, Investment 
Company Act Release No. 26195 (Sept. 29, 2003) [68 FR 57760 (Oct. 6, 
2003)] (``482 Amendment Adopting Release'').
    \649\ See Investment Company Advertising Rules Proposing 
Release.
    \650\ Id. (stating that these concerns put investment companies 
on a different footing than insurance companies, ``since 
institutions such as . . . insurance companies which compete with 
investment companies for investor interest are not subject to the 
same limitations on their advertising as are investment companies,'' 
such that, absent rule 482's provisions, those limitations could 
restrict the availability to investors of information about all 
relevant investment possibilities).
    \651\ Business development companies are a category of closed-
end investment companies that are not required to register under the 
Investment Company Act. See section 2(a)(48) of the Investment 
Company Act [15 U.S.C. 80a-2(a)(48)]. When the investment company 
advertising rule was first adopted, it applied to advertisements of 
any registered investment company (including closed-end funds) so 
long as the investment company was engaged in a continuous offering, 
i.e., ``is selling or proposing to sell its securities pursuant to a 
registration statement which has been filed under the Act.'' See 
Advertising by Investment Companies, Investment Company Act Release 
No. 10852 (Aug. 31, 1979) [44 FR 52816 (Sep. 10, 1979)] (``1979 
Adopting Release''). The rule was subsequently revised to include 
business development companies and omit the requirement that the 
investment company be engaged in a continuous offering. See Adoption 
of Integrated Disclosure System, Investment Company Act Release No. 
12264 (Mar. 3, 1982) [47 FR 11380 (March 16, 1982)].
    \652\ See Investment Company Advertising Rules Proposing Release 
(citing 15 U.S.C. 771(2)).
    \653\ See, e.g., section 12(d) of the Investment Company Act 
(restricting the ability of registered investment companies to 
invest in the securities of other investment companies); section 
15(c) of the Investment Company Act (requiring directors to request 
and evaluate information reasonably necessary to evaluate the terms 
of advisory contracts); and section 26(f) of the Investment Company 
Act (imposing reasonability requirements regarding the fees and 
charges that may be imposed in connection with variable annuity 
separate accounts).
---------------------------------------------------------------------------

    Rule 482 also requires enhanced disclosures in fund advertisements 
designed to convey balanced information to prospective investors, 
including standardized methodologies that certain funds must use if 
they wish to include performance data in their advertisements.\654\ 
These advertisements also generally are filed with the Financial 
Industry Regulatory Authority (``FINRA''), which has adopted rules 
providing standards for the fund advertising practices of its members 
and established and implemented procedures to review that 
advertising.\655\ FINRA does not currently have rules that expressly 
require similar standards for non-variable annuities. As they are 
offered by registered investment companies, variable annuity 
advertisements are currently subject to rule 482, including the 
requirement to provide standardized performance information to the 
extent that they are providing performance data in their 
advertisements.\656\
---------------------------------------------------------------------------

    \654\ In addition to standardized performance requirements, rule 
482 also mandates certain disclosures and generally prohibits rule 
482 advertisements from being accompanied by an application for 
investment in the investment company. See, e.g., rule 482(b) and 
(c).
    \655\ Section 24(b) of the Investment Company Act [15 U.S.C. 
80a-24(b)] requires the filing with the Commission of ``any 
advertisement, pamphlet, circular, form letter, or other sales 
literature'' for any registered investment company other than a 
closed-end fund. 17 CFR 270.24b-3 (``rule 24b-3'') relieves such 
funds of the obligation under the Investment Company Act to file 
advertisements and other sales materials with the Commission if 
those materials are filed with a national securities association 
(such as FINRA) registered under section 15A of the Securities 
Exchange Act of 1934 [15 U.S.C. 78o] that has adopted rules 
providing standards for the investment company advertising practices 
of its members and has established and implemented procedures to 
review that advertising; see also FINRA Rule 2210.
    \656\ Rule 482(d).
---------------------------------------------------------------------------

    Further, Congress expressly directed the Commission to adopt rules 
that permit registered investment companies to use prospectuses that 
include information the substance of which is not included in the 
statutory prospectus, and that are deemed to be

[[Page 60047]]

permitted by section 10(b) of the Securities Act.\657\ Thus, rule 482 
was amended in 2003 to permit investment company sales literature that 
includes information not included in the statutory prospectus.\658\ 
Congress has not provided a similar direction for issuers other than 
registered investment companies. However, the Commission has used its 
exemptive authority to permit the use of prospectuses that include 
information the substance of which is not included in the statutory 
prospectus for issuers that are not investment companies if the free 
writing prospectus meets the requirements of rules 433 and 17 CFR 
230.164 (``rule 164'').\659\ In addition to permitting free writing 
prospectuses that include information the substance of which is not in 
the statutory prospectus, rule 433 also permits seasoned issuers, that 
is, issuers of offerings registered on Form S-3, and other select 
issuers to use a free writing prospectus that is not subject to the 
prospectus delivery requirements, much like rule 482 permits for fund 
sales literature.\660\ We stated in the Proposing Release that, under 
the proposal, the ability of RILA sales literature to be treated as 
``free writing prospectuses'' would continue to be subject to rule 433 
and rule 164, as well as any other applicable rule that permits a 
communication notwithstanding the ``gun jumping'' provisions of the 
Securities Act.\661\
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    \657\ 15 U.S.C. 80a-24(g); see also National Securities Markets 
Improvement Act of 1996, Public Law 104-290, Section 204.
    \658\ See 482 Amendment Adopting Release at Section II.A.
    \659\ See Securities Offering Reform, Securities Act Release No. 
8591 (Jul. 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (``Securities 
Offering Reform'') at Section III.D.3.b.iii(C)(2)(a). Rule 164 
generally permits the use of a free writing prospectus where an 
eligible user has filed a registration statement, the other 
requirements of rule 164 are met, and the conditions of rule 433 are 
satisfied. See id. at n.212 and accompanying text.
    \660\ RILAs registered on Form S-1 are subject to prospectus 
delivery requirements when using free writing prospectuses pursuant 
to current rule 433.
    \661\ See Proposing Release at n.356.
---------------------------------------------------------------------------

    As explained in the Proposing Release, we determined extending rule 
482 to RILA issuers was not warranted currently. This conclusion 
largely followed from our understanding that the rule's emphasis on 
providing standardized performance data requirements would be 
conceptually difficult to apply to RILAs and inconsistent with current 
RILA advertising practices.\662\ However, we sought comment on these 
questions and acknowledged that circumstances might change in the 
future.
---------------------------------------------------------------------------

    \662\ See Proposing Release n.356 and accompanying text (noting 
that while variable annuity marketing materials frequently utilize 
standardized performance returns, this is not the case with RILA 
advertisements, which typically market RILAs on other bases that are 
less amenable to standardized performance metrics, for example, 
highlighting that these are flexible products whose features can be 
customized to fit a particular investor's needs).
---------------------------------------------------------------------------

    Several commenters suggested that we amend rule 482 to extend its 
provisions to RILAs despite the concerns discussed in the Proposing 
Release.\663\ Some of these commenters suggested that an extension of 
rule 482 to RILAs would remedy what they view as an improper dichotomy 
under the current rule 433 framework that impedes the ability of some 
insurance companies to engage in broad-based advertising for RILA 
offerings.\664\ Specifically, these commenters stated that this 
framework often makes it practically impossible to do broad-based 
advertising (such as television commercials) for RILA offerings 
registered on Form S-1 due to the application of the prospectus 
delivery requirements to those advertisements.\665\ Conversely, non-
variable annuity offerings registered on Form S-3, or variable annuity 
options that can use rule 482, can be broadly advertised in print and 
on television because they are not subject to the prospectus delivery 
requirements. These commenters expressed the view that the purposes 
underlying this different treatment under rule 433 of seasoned issuers 
and well-known seasoned issuers (who can file on Form S-3) as compared 
to the treatment of non-reporting and unseasoned issuers (who must file 
on Form S-1) are not relevant to RILA offerings or the ability of a 
RILA investor to contextualize RILA advertisements.\666\
---------------------------------------------------------------------------

    \663\ See CAI Comment Letter; ACLI Comment Letter; IRI Comment 
Letter; Gainbridge Comment Letter; VIP Working Group Comment Letter.
    \664\ See CAI Comment Letter; Gainbridge Comment Letter; ACLI 
Comment Letter.
    \665\ These considerations also apply to communications 
regarding registered MVA annuities.
    \666\ One of these commenters suggested that offerings of other 
registered annuity and life insurance products, including registered 
MVA annuities, may be similarly situated to RILAs. See CAI Comment 
Letter.
---------------------------------------------------------------------------

    Thus, according to these commenters, amending rule 482 to include 
RILAs would bring regulatory uniformity both between RILAs whose 
offerings have, until this rulemaking, been registered on different 
forms (i.e., Forms S-1 and S-3), and between RILAs and variable annuity 
options, and therefore reduce the burdens and risks that insurance 
companies face in applying the different advertising frameworks to 
their insurance offerings.\667\ Some commenters suggested that not 
extending rule 482 to include RILAs would essentially result in a 
regulatory preference for variable annuity contracts over RILAs by 
perpetuating prospectus delivery requirements for some RILA issuers 
that do not apply to registered variable annuity contracts by virtue of 
their ability to rely on rule 482.\668\ Additionally, one commenter 
suggested that, in addition to being consistent with the Commission's 
approach to revising Form N-4, expanding rule 482 to include RILAs 
would be consistent with congressional intent and that investors would 
benefit from standardizing the regulation of advertising and sales 
literature across RILA and variable annuity products.\669\
---------------------------------------------------------------------------

    \667\ See CAI Comment Letter; Gainbridge Comment Letter; VIP 
Working Group Comment Letter; IRI Comment Letter.
    \668\ See ACLI Comment Letter; Gainbridge Comment Letter.
    \669\ See Gainbridge Comment Letter.
---------------------------------------------------------------------------

    While some commenters acknowledged our concerns about the 
inapplicability of rule 482's standardized performance provisions to 
RILAs, they suggested that these concerns could be addressed either by 
excluding RILAs from those provisions, or subjecting the ability of 
RILA advertisements to use rule 482 to a condition that they not 
contain historical performance data for the RILA or any particular 
index-linked option.\670\ Commenters stated that the mere absence of 
standard performance rules for RILAs should not be a bar to amending 
rule 482, with one commenter observing that closed-end funds may 
advertise using rule 482 even though standard performance rules do not 
exist for those investments.\671\ Commenters also suggested that the 
Commission could exercise regulatory oversight of RILA advertisements 
by conditioning their ability to use rule 482 on review by FINRA or, in 
the alternative, review by the Commission.\672\ One commenter suggested 
that, in addition to such regulatory review, the ability of RILA 
advertisements to use rule 482 could be conditioned upon other 
criteria, such as performance principles that ensure that performance 
presentations are not misleading, or requiring that RILAs

[[Page 60048]]

meet certain standards applicable to variable annuity products, such as 
a requirement that rates and fees be reasonable in relationship to the 
services rendered and risks assumed under the contract.\673\
---------------------------------------------------------------------------

    \670\ See CAI Comment Letter (stating that the Proposing Release 
correctly noted that RILA issuers do not utilize such performance 
metrics in RILA advertisements, so this condition would not be a 
substantive departure from existing practice); IRI Comment Letter; 
Gainbridge Comment Letter.
    \671\ See CAI Comment Letter; ACLI Comment Letter; VIP Working 
Group Comment Letter.
    \672\ See CAI Comment Letter; Gainbridge Comment Letter; VIP 
Working Group Comment Letter.
    \673\ See VIP Working Group Comment Letter. Congress has 
expressly prohibited the sale of any variable annuity contract 
unless the fees and charges deducted under the contract, in the 
aggregate, are reasonable in relation to the services rendered, the 
expenses expected to be incurred, and the risks assumed by the 
insurance company. Congress further requires that insurance 
companies represent this in a variable annuity contract's 
registration statement. 15 U.S.C. 80a-26(f)(2)(A). These provisions 
do not apply to RILAs.
---------------------------------------------------------------------------

    A number of these commenters suggested that if the Commission were 
unwilling to amend rule 482 to include RILA sales literature, in the 
alternative, we should amend rule 433 to allow all RILAs to use free 
writing prospectuses without meeting the prospectus delivery 
requirements in order to make such requirements consistent for all RILA 
issuers without regard to their seasoned status.\674\ One commenter 
stated that, at a minimum, the Commission would need to amend rule 433 
in order to maintain the status quo by explicitly exempting RILA 
offerings that are registered on Form N-4 by issuers who file reports 
pursuant to section 15(d) of the Exchange Act from the prospectus 
delivery requirements.\675\ Absent such an amendment, the rulemaking 
would have the effect of imposing new, universal prospectus delivery 
requirements in connection with RILA marketing materials, even for RILA 
issuers that would otherwise be eligible to rely on rule 433 by virtue 
of registering on Form S-3. This commenter suggested that changing the 
status quo in this way would be unduly restrictive and inconsistent 
with our approach to other securities offerings.
---------------------------------------------------------------------------

    \674\ See CAI Comment Letter; ACLI Comment Letter; Gainbridge 
Comment Letter.
    \675\ See CAI Comment Letter.
---------------------------------------------------------------------------

    Consistent with the proposal, we have determined not to extend rule 
482 to RILA issuers at this time. As discussed, commenters raised 
broader concerns about the impact of the prospectus delivery 
requirements in rule 433 and how they may operate to impede the ability 
of some insurance companies to engage in broad-based advertising for 
RILA offerings. Commenter suggestions that we amend rule 482 to include 
RILA advertising (so that all insurance companies would be permitted 
the ability to provide RILA sales literature to investors without being 
accompanied or preceded by a summary or statutory prospectus), subject 
to certain conditions, would benefit from further consideration, and 
the Commission invites further engagement on these issues.\676\ Factors 
to consider in any future proposal regarding amendments to rule 482 
would include the nature and scope of any applicable conditions, the 
benefits of any such potential conditional expansion of rule 482, and 
the potential risk of misleading investors.
---------------------------------------------------------------------------

    \676\ See supra footnotes 670-673 and accompanying text.
---------------------------------------------------------------------------

    In response to commenters, however, we are, in a modification from 
the proposal, making a technical amendment to rule 433 in order to 
maintain the status quo for insurance companies that can meet that 
rule's conditions to use a free writing prospectus in connection with 
the offering of non-variable annuities without meeting the prospectus 
delivery requirements, notwithstanding their use of Form N-4 going 
forward.\677\ It would not be appropriate to subject non-variable 
annuity offerings to a categorically different regulatory treatment 
than offerings of other seasoned issuers or to deprive those insurance 
companies that are considered seasoned issuers of the ability to rely 
on the provisions of rule 433 to use a free writing prospectus without 
complying with the prospectus delivery requirements.\678\ It is 
therefore necessary and appropriate in the public interest and for the 
protection of investors to amend rule 433 to provide that an insurance 
company may use a free writing prospectus without needing to meet the 
prospectus delivery requirements with respect to those non-variable 
annuity offerings registered on Form N-4 where the issuer would 
otherwise be eligible to use Form S-3 pursuant to that form's General 
Instructions I.B.1, I.B.2, I.C, or I.D.\679\ Consistent with the 
current requirements applicable to these non-variable annuity 
offerings, these free writing prospectuses can be used after a 
registration statement has been filed and may also include information 
the substance of which is not included in the registration 
statement.\680\
---------------------------------------------------------------------------

    \677\ Additionally, to the extent an insurance company otherwise 
meets the requirements of a well-known seasoned issuer under rule 
405, that issuer would be able to rely on rule 422(b)(1)(iii) in 
connection with an offering of non-variable annuities, 
notwithstanding its registration of the offering on Form N-4.
    \678\ While commenters only specifically raised this issue with 
respect to RILAs, by moving registered MVA annuities to Form N-4 as 
well, applying this change to registered MVA annuity offerings is 
necessary to preserve their ability to communicate under rule 433 
for the same reason the change is necessary for RILA communications.
    \679\ See section 10(b) of the Securities Act and final rule 
433(b)(1)(v). We also are amending paragraphs (b)(1)(i) and (ii) of 
the rule to correct citations to Form S-3 and Form F-3.
    \680\ See final rule 433(a) and (b).
---------------------------------------------------------------------------

H. Existing Commission Letters

    Certain Commission letters, or portions thereof, providing 3-13 
Exemptions in connection with the registration of an offering of RILAs 
and registered MVA annuities on Form S-1 will be withdrawn or rescinded 
in light of the change to permit RILAs and registered MVA annuities to 
provide SAP financial statements on final Form N-4 in the same way that 
other insurance companies offering variable annuities are permitted on 
current Form N-4. On the compliance date of the final amendments, some 
letters, or portions thereof, will be moot, superseded, or otherwise 
inconsistent with the final amendments and, therefore, will be 
withdrawn or rescinded.
    Commenters generally supported or stated that they did not oppose 
withdrawing or rescinding these 3-13 Exemptions.\681\ Some commenters 
agreed that the 3-13 Exemptions extended to RILAs would no longer be 
needed in light of the change to permit RILAs to register on Form N-4 
and provide SAP financial statements in the same way that Form N-4 
currently permits other insurance companies registering variable 
annuities to provide financial statements.\682\ One of these commenters 
agreed with a statement in the Proposing Release that the 3-13 
Exemptions previously granted to registered MVA annuities would be 
withdrawn or rescinded to the extent that offerings of those securities 
are permitted to be registered on Form N-4.\683\ Another commenter 
stated that these 3-13 Exemptions should not be withdrawn or rescinded 
until after the final compliance date.\684\ As proposed, the exemptions 
provided in the letters outlined below will not be rescinded or 
withdrawn until the compliance date.
---------------------------------------------------------------------------

    \681\ See CAI Comment Letter; IRI Comment Letter; VIP Working 
Group Comment Letter.
    \682\ CAI Comment Letter; IRI Comment Letter.
    \683\ CAI Comment Letter. See also Proposing Release at Section 
II.G and n.363 (stating that ``if [insurance companies were required 
to use Form N-4 for registered MVAs], 3-13 Exemptions provided in 
connection with registered MVAs would be withdrawn or rescinded for 
the reasons discussed in'' Section II.G of the Proposing Release).
    \684\ VIP Working Group Comment Letter.
---------------------------------------------------------------------------

    We are not withdrawing or rescinding 3-13 Exemptions, or portions 
thereof, providing exemptions from the GAAP financial statement 
requirements with respect to annuity products other than RILAs and 
registered MVA annuities. With respect to RILAs, this is consistent

[[Page 60049]]

with the proposal.\685\ Commenters agreed with this approach.\686\
---------------------------------------------------------------------------

    \685\ See Proposing Release at n.357.
    \686\ CAI Comment Letter; IRI Comment Letter.
---------------------------------------------------------------------------

    On the compliance date of the final amendments, 3-13 Exemptions 
that will be withdrawn or rescinded include all of the 3-13 Exemptions 
listed below to the extent they relate to RILAs and registered MVA 
annuities.

                  Table 9--Existing Commission Letters
------------------------------------------------------------------------
                         Name                                 Date
------------------------------------------------------------------------
Great-West Life & Annuity Insurance Company and Great-         9/28/2018
 West Life & Annuity Insurance Company of New York...
Athene Annuity and Life Company......................          9/28/2018
Allianz Life Insurance Company of North America and            9/28/2018
 Allianz Life Insurance Company of New York..........
MONY Life Insurance Company of America...............           3/7/2019
Lincoln Benefit Life Company.........................          3/15/2019
Symetra Life Insurance Company and First Symetra                8/8/2019
 National Life Insurance Company of New York.........
Forethought Life Insurance Company...................         10/17/2019
Nationwide Life Insurance Company....................         10/17/2019
Minnesota Life Insurance Co..........................          6/11/2020
MEMBERS Life Insurance Co............................          11/6/2020
Transamerica Life Insurance Company and Transamerica           2/11/2021
 Financial Life Insurance Company....................
Midland National Life Insurance Company..............          8/12/2021
Wilton Reassurance Life Company of New York..........          9/30/2021
Union Security Insurance Company.....................          1/11/2022
Protective Life Insurance Company and Protective Life         10/14/2022
 and Annuity Insurance Company.......................
Everlake Life Insurance Company......................         10/21/2022
Fidelity & Guaranty Life Insurance Company and                 3/17/2023
 Fidelity & Guaranty Life Insurance Company of New
 York................................................
Delaware Life Insurance Company and Gainbridge Life            4/28/2023
 Insurance Company...................................
Brighthouse Life Insurance Company of New York.......          9/21/2023
Jackson National Life Insurance Company and Jackson            9/26/2023
 National Life Insurance Company of New York.........
Eagle Life Insurance Company.........................          9/29/2023
Pacific Life Insurance Company and Pacific Life &               3/1/2024
 Annuity Company.....................................
American General Life Insurance Company, The Variable          5/28/2024
 Annuity Life Insurance Company, and The United
 States Life Insurance Company in the City of New
 York................................................
------------------------------------------------------------------------

I. Technical Amendments to Forms N-3 and N-6

    The Commission is adopting as proposed a technical amendment to 
Form N-6 to reflect the correct placement of an amendment to this form 
that the Commission adopted in 2020 in the release titled 
``Facilitating Capital Formation and Expanding Investment Opportunities 
by Improving Access to Capital in Private Markets'' (herein referred to 
as the ``Exempt Offering Framework Adopting Release'').\687\ In that 
release, the Commission adopted, among other amendments, amendments to 
certain instructions associated with the Exhibits items of Form N-4 and 
Form N-6. The amendatory instructions in the Exempt Offering Framework 
Adopting Release erroneously referred to outdated Exhibits items of 
these forms. That is, the amendatory instructions referred to Items 24 
and 26 respectively, instead of Items 27 and 30 respectively (as 
adopted by the Commission in earlier amendments to Forms N-4 and N-6 in 
the VASP Adopting Release).\688\ The Commission received no comments on 
the proposed technical amendments. The final amendments to Form N-4 
correctly reflect the placement of the amendment that the Commission 
adopted in the Exempt Offering Framework Adopting Release in Item 27 of 
the form instead of in Item 24. We are also adopting a technical 
amendment to Item 30 of Form N-6 to correctly reflect the placement of 
the amendment that the Commission adopted in the Exempt Offering 
Framework Adopting Release in this item instead of in Item 26.
---------------------------------------------------------------------------

    \687\ Facilitating Capital Formation and Expanding Investment 
Opportunities by Improving Access to Capital in Private Markets, 
Investment Company Act Release No. 34082 (Nov. 2, 2020) [86 FR 3496 
(Jan. 14, 2021)].
    \688\ See Exempt Offering Framework Adopting Release at 
amendatory instructions 50 and 51; see also VASP Adopting Release at 
Section II.C.4 (Table 6).
---------------------------------------------------------------------------

    In addition, we are adopting technical amendments to the definition 
of ``Summary Prospectus'' in Forms N-3 and N-6 to reflect the lack of 
subparagraphs in rule 498A(a). When these definitions were originally 
adopted, they inadvertently referred to subparagraphs that did not 
appear in rule 498A(a).\689\
---------------------------------------------------------------------------

    \689\ See final rule 498A(a); see also VASP Adopting Release in 
the Text of Rule and Form Amendments. These amendments are 
ministerial, do not make any substantive modifications, and do not 
impose any new substantive recordkeeping or information collection 
requirements.
---------------------------------------------------------------------------

J. Effective and Compliance Dates

    The effective date for all rules and forms associated with the 
final amendments is September 23, 2024, which is 60 days from the date 
of publication of the final amendments in the Federal Register. As 
discussed in more detail below, the compliance date for the final 
amendments will be May 1, 2026, except with respect to rule 156 and the 
technical amendments to Forms N-3 and N-6. We are not providing a 
compliance period for rule 156 and the technical amendments to Forms N-
3 and N-6 and compliance will therefore be required on the effective 
date.
    We proposed a six-month delayed effective date for all amendments 
except for the final Form N-4, amended rule 498A, and technical 
amendments to Form N-6 which we did not propose to delay. Commenters 
generally supported or did not oppose the proposed effective date for 
final Form N-4, final rule 498A, or the technical amendment to Form N-6 
and agreed that this approach was consistent with the RILA Act.\690\ 
However, comments on the proposed 6-month delayed effective date for 
the remaining amendments were mixed. One commenter opposed delaying the 
effectiveness of the rule 485 amendments for six months.\691\ This 
commenter stated that the rule 485 amendments should be effective 
before the calendar year-end of 2024 so that insurance companies could 
file under

[[Page 60050]]

rule 485(a) ahead of their May 1, 2025 annual update. We also received 
a number of comments requesting that we clarify the practical effect of 
having two effective dates.\692\ For example, one commenter asked 
whether final rules implementing the final Form N-4 framework and 
subject to the six-month delayed effective date (e.g., final rules 415, 
485, 497) would nevertheless apply on the effective date to RILAs 
registered on Form N-4.\693\ Specifically, this commenter asked 
whether, as of the effective date, RILAs registered on the final Form 
N-4 would be required to pay registration fees in arrears consistent 
with final rule 456 and final Form 24F-2, file post-effective 
amendments and supplements consistent with final rules 485 and 497; and 
be exempt from three-year refreshes consistent with final rule 415.
---------------------------------------------------------------------------

    \690\ See, e.g., CAI Comment Letter; IRI Comment Letter.
    \691\ See VIP Working Group Comment Letter.
    \692\ See CAI Comment Letter; VIP Working Group Comment Letter.
    \693\ See CAI Comment Letter.
---------------------------------------------------------------------------

    We reasoned in the proposing release that the six-month delayed 
effective date for certain amendments would provide the Commission with 
the necessary time to prepare the EDGAR system to accommodate 
transitioning RILA offerings onto the proposed framework. After further 
consideration and preparation, we have determined that the EDGAR system 
will be ready to accommodate the transition as of the effective date 
and an additional 6-month delayed effective date for certain amendments 
will be unnecessary. A single effective date for all of the amendments 
adopted in this release will provide filers with a simpler timeline 
that reduces confusion about the logistics of filing.
    We proposed a compliance date of one year after publication of the 
final amendments in the Federal Register.\694\ All initial registration 
statements and post-effective amendments that were annual updates to 
effective registration statements on Form N-4 and filed after the 
proposed compliance date under the proposal would have been required to 
comply with the amendments. We also proposed that RILAs that had 
previously registered offerings of securities on Form S-1 or Form S-3 
would file a post-effective amendment to their registration statement 
pursuant to rule 485(a) at the time of their next annual update 
following the compliance date, using final Form N-4.\695\
---------------------------------------------------------------------------

    \694\ This compliance period would have applied for all of the 
amendments in the Proposing Release other than the technical 
amendment to Form N-6 discussed in Section II.I.
    \695\ See Proposing Release at n.372 and accompanying text.
---------------------------------------------------------------------------

    Commenters generally supported the proposed timeline or supported 
the proposed timeline except as applied to certain amendments. In 
particular, one commenter stated that the compliance date would allow 
sufficient time for all insurers to prepare for compliance with the 
final amendments, but urged the Commission to modify the approach to 
better accommodate insurance companies currently registering RILA 
offerings on Form S-3.\696\ The Commission proposed that compliance 
would be required in the first annual update after the compliance date 
but, because an annual report on Form 10-K operates as an annual update 
to a registration statement filed on Form S-3 and must be filed before 
an annual update to a registration statement on Form S-1, the commenter 
asserted that this approach would unfairly result in a shorter 
compliance period than that of a Form S-1 registrant (on or before 
December 31, 2025 and May 1, 2026, respectively). The commenter 
suggested that we should not consider these Form 10-Ks annual updates 
for purposes of complying with the final amendments.
---------------------------------------------------------------------------

    \696\ See CAI Comment Letter.
---------------------------------------------------------------------------

    We agree that RILA filers should not have different compliance 
periods based on whether they currently file on Form S-1 or S-3 and did 
not intend to provide different compliance periods based on the 
Securities Act form an insurance company is currently using. We 
therefore are providing a compliance date of May 1, 2026 rather than an 
approach based on the timing of an insurance company's annual update. 
Accordingly, all issuers of non-variable annuities that have previously 
registered offerings of securities on Forms S-1 or Form S-3 will be 
required to file a post-effective amendment to their registration 
statement pursuant to final rule 485(a) that will be effective on or 
before May 1, 2026, using final Form N-4.\697\ Similarly, all initial 
registration statements and post-effective amendments filed on Form N-4 
and effective on or after May 1, 2026 will be required to comply with 
the final amendments. This compliance period is designed to give all 
insurance companies sufficient time to comply with the proposed 
changes, including to update their registration statements; to prepare 
to use final rules 485 and 497 to update their registration statements 
and file prospectuses with the Commission; and to begin paying 
securities registration fees on final Form 24F-2. Nonetheless, issuers 
of non-variable annuities may choose to file on Form N-4 as early as 
the effective date (and will thereafter be required to comply with the 
final amendments).
---------------------------------------------------------------------------

    \697\ A post-effective amendment filed under rule 485(a) [17 CFR 
230.485(a)] generally becomes effective either 60 days or 75 days 
after filing, unless the effective date is accelerated by the 
Commission. Insurance companies registering offerings of non-
variable annuities generally should be able to rely on template 
filing relief, in which case they will not need to file a rule 
485(a) filing for each non-variable annuity. See 485(b)(1)(vii). 
Insurance companies with currently-registered non-variable annuities 
that only issue non-variable annuities and will be using the same 
CIK will be permitted to transition by filing a 485APOS or 485BPOS 
in EDGAR. Both of these submission types allow the entity to keep 
its current Securities Act file number, and both allow the filer to 
obtain new contract IDs and the needed Form N-4 investment company 
type designation in EDGAR. Insurance companies that will be 
acquiring new CIKs for their non-variable annuity offerings will 
need to transition by filing an administrative Form N-4 submission 
(which is only used for EDGAR purposes and is not an official 
filing) under a newly-issued CIK to obtain a new Securities Act file 
number, new contract IDs, and the Form N-4 investment company type 
(which is used for EDGAR purposes only) followed by a 485APOS or 
485BPOS in EDGAR.
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    The Proposing Release stated that, in appropriate circumstances, we 
would consider requests by registrants with respect to existing 
variable annuity contracts to file post-effective amendments pursuant 
to rule 485(b)(1)(vii) when these post-effective amendments make 
conforming changes to comply with the proposed amendments to Form N-
4.\698\ One commenter requested that we allow certain insurance 
companies, on a case-by-case basis, to forgo filing a rule 485(a) post-
effective amendment entirely for insurance companies' stand-alone 
variable annuities on the grounds that the changes necessary to comply 
with the proposal may not be substantive.\699\ After consideration of 
the final amendments to Form N-4, we have concluded it would be 
appropriate for registrants of existing variable annuity contracts that 
are not combination contracts that offer index-linked options or MVA 
options to file post-effective amendments pursuant to rule 485(b) to 
make conforming changes

[[Page 60051]]

to comply with the amendments to Form N-4.
---------------------------------------------------------------------------

    \698\ Proposing Release at text accompanying n.373. A post-
effective amendment filed under rule 485(b) may become effective 
immediately upon filing. A post-effective amendment may be filed 
under rule 485(b) if it is filed for one or more specified purposes, 
including to make nonmaterial changes to the registration statement. 
A post-effective amendment filed for any purpose not specified in 
rule 485(b) generally must be filed pursuant to rule 485(a). Under 
rule 485(b)(1)(vii), the Commission may approve the filing of a 
post-effective amendment to a registration statement under rule 
485(b) for a purpose other than those specifically enumerated in the 
rule. The Commission's staff has been delegated the authority to 
approve registrants' requests under rule 485(b)(1)(vii). 17 CFR 
200.30-5(b-3)(1).
    \699\ See CAI Comment Letter.
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    Commenters were mixed regarding our proposed approach of not having 
a separate Inline XBRL compliance period. One commenter supported the 
proposed approach, stating that service providers are accustomed to 
Inline XBRL requirements and will be able to transition RILAs within 
our proposed compliance period.\700\ Another commenter opposed having 
the same compliance period for the Inline XBRL requirements and the 
other final amendments, stating that RILA issuers without variable 
products will not be familiar with Inline XBRL.\701\
---------------------------------------------------------------------------

    \700\ See XBRL US Comment Letter.
    \701\ See CAI Comment Letter.
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    We are not creating a separate, longer compliance period for filers 
to comply with the Inline XBRL requirements because we have determined 
that compliance by May 1, 2026 is feasible. Insurance companies already 
have experience with Inline XBRL tagging. In this regard, 22 of the 23 
insurers that issue RILAs also offer products that are subject to 
tagging requirements on Forms N-3, N-4, or N-6 or otherwise have 
experience tagging registration statements.\702\ Further, although we 
permitted a phased-in compliance date for Inline XBRL tagging in 
connection with the variable product summary prospectus rulemaking, we 
reasoned in that rulemaking that we could collect better data as a 
result because we could observe the new disclosures and create better 
taxonomies prior to the end of the XBRL compliance period, which in 
turn could lead to more accurate tagging and increased comparability of 
tagged disclosures.\703\ The benefit of additional time is reduced in 
this rulemaking because we already update and release our taxonomies 
annually, which allows us to address any concerns about the quality of 
the tagged data we receive. In light of insurers' existing experience 
with tagging registration statements and our ability to update 
taxonomies, any increase in data quality gained from extending the 
Inline XBRL compliance period to May 2027 would be marginal compared to 
the impact on investors and the Commission from not having tagged data 
until 2027--specifically, reduced comparability, data aggregation, and 
a general ability to synthesize and consume non-variable annuity 
disclosures.
---------------------------------------------------------------------------

    \702\ See Proposing Release at n.472 and accompanying text.
    \703\ See VASP Adopting Release at n.917 and accompanying text.
---------------------------------------------------------------------------

    One commenter stated that registration on Form N-4 should be 
optional for registered MVA annuity offerings that no longer involve 
the issuance of new contracts (i.e., closed blocks).\704\ In the 
alternative, if such ``closed block'' registered MVA annuities were 
required to register on Form N-4, this commenter stated that the 
compliance period should be extended from 12 months to 24 months. As we 
discussed above, we are requiring all registered MVA annuities to 
register on Form N-4.\705\ Providing a single compliance date of May 1, 
2026, however, provides a similar period of time to the commenter's 
suggestion.
---------------------------------------------------------------------------

    \704\ See CAI Comment Letter.
    \705\ See supra Section II.B.
---------------------------------------------------------------------------

    One commenter asked that we clarify whether a registrant can choose 
to comply with only a portion of final Form N-4 prior to the end of the 
compliance period.\706\ For an insurance company that continues to use 
either Form S-1 or Form S-3 for non-variable annuity offerings prior to 
the compliance date, the requirements of those forms and associated 
rules will continue to apply until the insurance company begins using 
Form N-4. An insurance company that uses Form N-4 for non-variable 
annuity offerings must comply with all of the requirements of final 
Form N-4 and associated rules, including, for example, filling fees on 
Form 24F-2, after the effective date, provided that the insurance 
company is not required to comply with Inline XBRL tagging requirements 
until the compliance date. The Commission has taken a similar approach 
in other contexts with respect to early compliance by issuers.\707\
---------------------------------------------------------------------------

    \706\ See VIP Working Group Comment Letter.
    \707\ See VASP Adopting Release at paragraph preceding n.994.
---------------------------------------------------------------------------

    In a change from the proposal, we are not providing a compliance 
period for the amendments to rule 156 after the amended rule is 
effective.\708\ The rule is designed to protect investors by addressing 
practices that could lead to materially misleading sales literature in 
connection with the offer or sale of a security, and historically the 
Commission has not provided a transition period to comply with 
amendments to this rule in light of investor protection concerns 
associated with the dissemination of materially misleading sales 
literature.\709\ Further, we understand that a number of insurance 
companies already comply with rule 156 with respect to their offerings 
of non-variable annuities and so compliance with the rule should not 
impose significant additional burdens.\710\ We are also not providing 
an additional compliance period for technical amendments to Forms N-3 
and N-6, as these amendments entail no compliance burden.
---------------------------------------------------------------------------

    \708\ While the Proposing Release did not specifically discuss a 
compliance period for the proposed amendments to rule 156, we stated 
that the compliance period would apply for all of the amendments in 
the release other than the technical amendments to Form N-6. See 
Proposing Release at n.371.
    \709\ This approach is consistent with our past practice 
regarding the rule's compliance date. See Tailored Shareholder 
Reports Adopting Release at Section II.J.
    \710\ At all times the Federal securities laws prohibit 
materially misleading communications in connection with the offer or 
sale of any security (including non-variable annuity offerings). See 
15 U.S.C. 77q(a); 15 U.S.C. 78j(b); rule 10b-5.
---------------------------------------------------------------------------

    We appreciate that these amendments will result in changes in 
practices for insurance companies, both in updating disclosures and in 
registering contract offerings. The final amendments also could result 
in insurance companies reviewing their sales literature in light of the 
final amendments to rule 156. In considering these changes, insurance 
companies are encouraged to contact the Commission staff with any 
questions they may have about these issues.

III. Other Matters

    Pursuant to the Congressional Review Act,\711\ the Office of 
Information and Regulatory Affairs has designated the final amendments 
as a ``major rule'' as defined by 5 U.S.C. 804(2). If any of the 
provisions of these rules, or the application thereof to any person or 
circumstance, is held to be invalid, such invalidity shall not affect 
other provisions or application of such provisions to other persons or 
circumstances that can be given effect without the invalid provision or 
application.
---------------------------------------------------------------------------

    \711\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

IV. Economic Analysis

A. Introduction

    We are mindful of the costs imposed by, and the benefits obtained 
from, our rules. Section 3(f) of the Exchange Act, section 2(b) of the 
Securities Act, and section 2(c) of the Investment Company Act state 
that when the Commission is engaging in rulemaking under such titles 
and is required to consider or determine whether the action is 
necessary or appropriate in (or, with respect to the Investment Company 
Act, consistent with) the public interest, the Commission shall 
consider whether the action will promote efficiency, competition, and 
capital formation, in addition to the protection of investors. Further, 
section 23(a)(2) of the Exchange Act requires the Commission to 
consider, among other matters, the

[[Page 60052]]

impact such rules would have on competition and states that the 
Commission shall not adopt any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act.
    We are adopting amendments to our rules designed to carry out the 
requirements of Section 101(b) Division AA, Title I of the Consolidated 
Appropriations Act, 2023, to establish a registration form for RILAs. 
The Commission is amending the form currently used by most variable 
annuity separate accounts, Form N-4, to require insurance companies to 
register offerings of RILAs, as well as registered MVA annuities on 
that form as well. To facilitate this amendment, the Commission is also 
amending certain filing rules and making other related amendments to 
Form N-4 that apply to all issuers that use that form. The final 
amendments also require insurance companies to comply with rule 156, a 
current Commission rule that provides guidance as to when sales 
literature is materially misleading under the Federal securities laws 
to RILA and registered MVA annuity advertisements and sales literature.
    While the Commission has developed a set of specific registration 
forms for variable insurance contracts and their issuers, insurance 
companies that offer non-variable annuities cannot use those forms 
because those issuers are not investment companies. Currently, 
insurance companies register the offerings of non-variable annuities on 
the Securities Act registration forms that are typically used to 
register traditional debt or equity offerings, Forms S-1 and S-3. 
Because Forms S-1 and S-3 are not tailored to the particular 
characteristics of non-variable annuities (or indeed insurance products 
more generally), these forms include a number of disclosure 
requirements that may be less material to investors when evaluating an 
insurance product like a RILA or registered MVA annuity and do not 
include line-item requirements mandating specific information that is 
of importance to investors in these products. The inclusion of 
disclosures that are of little relevance to their investors and the 
omission of information that is of importance to their investors limits 
the usefulness of the information investors currently receive about 
RILAs and registered MVA annuities and thus their ability to make 
informed investment decisions. In addition, Forms S-1 and S-3 require 
the use of GAAP financial statements, rather than the SAP financial 
statements that the State insurance regulators require. SAP financial 
statements, which focus on an issuer's ability to meet its obligations 
under its insurance contracts, as regulated by State law, provide 
material information for investors evaluating RILAs and registered MVA 
annuities and assessing an issuer's solvency. For those insurers that 
will be able to include or incorporate SAP financial statements in the 
Form N-4 registration statement, investors will benefit from the lower 
cost burdens on issuers provided by the use of SAP financial 
statements, to the extent that those savings are passed along to 
investors.
    We have considered the potential costs and benefits that will 
result from the final rules in Section IV.C., as well as the potential 
effects on efficiency, competition, and capital formation in Section 
IV.D. Certain potential economic effects of the final amendments will 
stem from the statutory mandate, while others will stem from the 
discretion we are exercising in amending Form N-4, rule 498A, the 
filing and prospectus delivery rules, as well as the communication 
rules applicable to non-variable annuities. We also consider certain 
alternatives to our approach to implementing the statutory mandate, as 
discussed in Section IV.E. Where possible, we have attempted to 
quantify the economic effects. In some cases, however, we are unable to 
quantify the economic effects because we lack the information necessary 
to provide a reasonable and reliable estimate. For example, the final 
amendments could reduce the amount of time and effort investors require 
to make an investment decision. We do not have data on the extent to 
which the final amendments would reduce the amount of time and effort 
investors require to make an investment decision, or the value of that 
time and effort to investors. Also, because the final amendments 
facilitate not only the evaluation and comparison among non-variable 
annuities, but also facilitate the comparison of non-variable annuities 
to other annuity products, we may observe a change in investment in 
annuities. We do not have data that would allow us to estimate the 
extent to which we may observe a change in investment in annuities. 
Nevertheless, as described more fully below, the Commission is 
providing both a qualitative assessment and quantified estimate of the 
economic effects, where feasible. The Commission has sought comment on 
all aspects of the economic analysis, especially any data or 
information that would better enable a quantification of economic 
effects, and the analysis below takes into consideration relevant 
comments received.

B. Baseline

1. Affected Parties
    The final amendments affect issuers of and investors in RILAs, 
issuers of and investors in registered MVA annuities, as well as 
issuers of and investors in variable annuities currently registered on 
Form N-4.
a. The Market for Annuity Products
    As of May 1, 2024, there were 104 RILAs registered with the 
Commission issued by 29 insurance companies.\712\ Among the 104 RILAs, 
60 are stand-alone RILA products, while 44 are products with a RILA 
component. The number of RILAs registered on Form S-1 is 64, while the 
remaining 40 are registered on Form S-3. About 60% of the registered 
RILAs (63 RILAs) report SAP financials, with the remainder (41 RILAs) 
reporting GAAP financials.\713\
---------------------------------------------------------------------------

    \712\ Based on analysis of Forms S-1, S-3 and POS AM filed by 
RILA issuers.
    \713\ EDGAR Database. Certain Commission letters, or portions 
thereof, exempt certain insurance companies from the requirement to 
provide financial statements prepared in accordance with GAAP in 
connection with the registration of an offering of RILAs on Form S-
1. See supra Section II.E.
---------------------------------------------------------------------------

    RILA contracts offer a variety of index-linked options. 
Specifically, RILA contracts offer index-linked options whose returns 
are linked, in part to, indices such as the S&P 500, Russell 2000, and 
NASDAQ-100. RILA contracts offer index-linked options with less well-
known indices and ETFs as well, but with much lower frequency.\714\
---------------------------------------------------------------------------

    \714\ See Proposing Release at Section III.B.1. for more 
details.
---------------------------------------------------------------------------

    As discussed in Section I, index-linked options whose returns are 
based, in part, on the same index may nevertheless have different 
elements that contribute to an investor's returns. Notably, different 
index-linked options whose returns are linked to the same index may 
offer different crediting periods (the set length of time for measuring 
growth of contract value based on the performance of the linked index--
for example, one or three years), crediting methodologies, and buffer 
or floor levels.\715\
---------------------------------------------------------------------------

    \715\ For more details, see Proposing Release at Section 
III.B.1.
---------------------------------------------------------------------------

    The final amendments also affect issuers of and investors in 
registered MVA annuities. As of May 1, 2024, there were 53 registered 
MVA annuities registered with the Commission issued

[[Page 60053]]

by 16 insurance companies.\716\ The number of registered MVA annuities 
registered on Form S-1 is 26, while the remaining 27 are registered on 
Form S-3. A little over one third of the registered MVA annuities (18 
MVA annuities) report SAP financials, with the remainder (35 MVA 
annuities) reporting GAAP financials.
---------------------------------------------------------------------------

    \716\ Based on analysis of Forms S-1, S-3 and POS AM filed by 
RILA issuers.
---------------------------------------------------------------------------

    Table 10 provides information on the dollar amount of RILA sales 
over the past eight years.\717\ RILA sales increased from $7.3 billion 
in 2016 to $47.4 billion in 2023, which represents a 549% increase 
between these seven years.\718\ We do not have access to data on the 
sales of registered MVA annuities.
---------------------------------------------------------------------------

    \717\ Fact Tank: Sales Data, Life Insurance Marketing and 
Research Association, https://www.limra.com/en/newsroom/fact-tank/ 
(using data from the U.S. Individual Annuity Sales surveys for Q4 
for each year from 2016 through 2023).
    \718\ A recent survey of insurers found that 85% of respondents 
believed in 2021 that RILA sales would increase by 10% or more over 
the next three years, 10% believed that RILA sales would increase by 
less than 10%, while 5% believed that RILA sales would remain the 
same over that time period. No respondents indicated that they 
believed RILA sales would decrease. See discussion in Proposing 
Release at Section III.B.1.a.

                                                                Table 10--Sales of RILAs
                                                                      [$ billions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              2016          2017          2018          2019          2020          2021          2022          2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sales of RILAs..........................          7.3           9.0          11.2          17.4          24.1          38.7          41.1          47.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Fact Tank: Sales Data, Life Insurance Marketing and Research Association, https://www.limra.com/en/newsroom/fact-tank/ (using data from the U.S.
  Individual Annuity Sales surveys for Q4 for each year from 2016 through 2023).

    Additionally, the final amendments affect issuers of and investors 
in variable annuities currently registered on Form N-4. As of 2019, 
there were a total of 2,396 unique variable annuity products offered by 
a total of 33 companies.\719\ Net assets totaled $2,018.0 billion. Also 
in 2019, variable annuity sales totaled $98.3 billion.\720\ Of the 
total sales, $62.8 billion (64% of total sales) were annuities within 
qualified plans and $35.5 (36%) were non-qualified annuities.\721\ 
Investors purchased annuities across various distribution channels--
captive agents, $34.5 billion, (35% of total sales); independent 
financial planners/NASD firms, $39.2 billion (40%); banks/credit 
unions, $9.2 billion (9%); wire houses/regional broker-dealers, $12.6 
billion (13%); and direct response, $2.8 billion (3%).\722\
---------------------------------------------------------------------------

    \719\ See Insured Retirement Institute Retirement Fact Book 2020 
(``IRI Fact Book''). In 2018 (the last year for which this 
information is available in the 2020 edition), the total number of 
variable annuity contracts in force was 17.9 million, with an 
average individual contract value of $113,053.
    \720\ Id.
    \721\ Id.
    \722\ Id.
---------------------------------------------------------------------------

b. Issuing Insurance Companies
    The number of insurance companies currently offering securities 
registered as RILAs with the Commission is 29, from 24 insurance 
company complexes. Out of these 29 insurance companies, 20 register 
RILAs on Form S-1, while the remaining 9 use Form S-3.\723\ Insurance 
companies offer, on average, 4.3 RILA contracts, ranging from a maximum 
of 13 RILAs to a minimum of 1 RILA. The top five issuers offer 58 RILAs 
in total, or 56% of the number of existing RILAs.\724\
---------------------------------------------------------------------------

    \723\ As of May 1, 2024. Data obtained from Forms S-1, S-3 and 
POS AM filed by RILA issuers.
    \724\ Calculated using data obtained from Forms S-1, S-3 and POS 
AM filed by RILA issuers, as of May 1, 2024.
---------------------------------------------------------------------------

    The number of insurance companies currently offering registered MVA 
annuities registered with the Commission is 16, from 14 insurance 
company complexes.\725\ Out of the 16 insurance companies, 8 register 
MVA annuities on Form S-1 and 8 register MVA annuities on Form S-
3.\726\ Insurance companies offer, on average, 3.8 registered MVA 
annuity contracts, ranging from a maximum of 8 registered MVA annuity 
contracts to a minimum of 1 registered MVA annuity. The top five 
issuers offer 32 registered MVA annuities in total, or 60 percent of 
the number of existing registered MVA annuities.\727\
---------------------------------------------------------------------------

    \725\ Some of these insurance companies also issue RILAs, or 
annuity contracts offering index-linked options and MVA options. 
There are 38 insurance companies in total that issue RILAs, 
registered MVA annuities, or annuity contracts offering index-linked 
options and MVA options.
    \726\ As of May 1, 2024. Data obtained from Forms S-1, S-3 and 
POS AM filed by MVA annuity issuers.
    \727\ Calculated using data obtained from Forms S-1, S-3 and POS 
AM filed by MVA annuity issuers, as of May 1, 2024
---------------------------------------------------------------------------

c. Investors
    In 2023 there were an estimated 82.3 million individuals aged 45-64 
and 59.3 million individuals aged 65 or older in the United States, 
representing 25 percent and 18 percent of the total population, 
respectively.\728\ The number of individuals aged 65 or older is 
projected to be 63 million (19 percent of the projected population) in 
2025, 76 million (22 percent of the projected population) in 2035, 80 
million (22 percent of the projected population) in 2045, and 85 
million (23 percent of the projected population) in 2055.\729\
---------------------------------------------------------------------------

    \728\ U.S. Census Bureau, Annual Estimates of the Resident 
Population for Selected Age Groups by Sex for the United States: 
Apr. 1, 2020, to July 1, 2023 (NC-EST2023-AGESEX-RES). We do not 
have demographic data on RILA investors. A 2022 survey found that 84 
percent of individual annuity investors purchased their first 
annuity before age 65, including 45% who were between the ages of 50 
and 64 years old. The average age of investors at first purchase of 
an annuity is 51. The average current annuity investor age is 74. 
See The Gallup Organization and Mathew Greenwald & Associates for 
The Committee of Annuity Insurers, Survey of Owners of Individual 
Annuity Contracts (2022), available at https://www.annuity-insurers.org/wp-content/uploads/2023/07/Gallup-Survey-of-Owners-of-Individual-Annuity-Contracts-2022.pdf.
    \729\ Projected Age Groups and Sex Composition of the 
Population: Main Projections Series for the United States, 2023 to 
2100. U.S. Census Bureau, Population Division: Washington, DC.
---------------------------------------------------------------------------

    Individuals may face meaningful burdens (e.g., search costs) when 
trying to identify appropriate investments or savings products. Once 
identified, investors may face additional burdens (e.g., acquiring and 
analyzing large amounts of information) to determine which specific 
investments or saving products among the ones identified allow 
investors to best meet their savings goals.\730\ In addition, financial 
innovation has led to more complex financial products.\731\ As a result 
of the burden associated with identifying appropriate investments, as 
well as the burden of acquiring and analyzing information to choose 
among the set of appropriate investments, investors may choose to limit 
the time and effort (i.e., resources) expended to make investment 
decisions.
---------------------------------------------------------------------------

    \730\ John Y. Campbell et al., Consumer Financial Protection, 25 
J. Econ. Perspectives 91 (2011) (``Campbell et al. Paper''). 
Campbell et al. note that making decisions about financial products 
often requires considerable information on terms and conditions, 
particularly for financial decisions that are undertaken only 
infrequently.
    \731\ See Campbell Paper.
---------------------------------------------------------------------------

    Decision making limitations may be particularly problematic in the 
context

[[Page 60054]]

of saving for retirement because learning from experience is difficult. 
Investing in retirement products is only done infrequently and the 
outcomes of investing decisions are delayed, perhaps for decades, and 
are subject to large random shocks, so that personal experience is slow 
to accumulate and is contaminated by noise. Also, financial innovation 
can reduce the relevance of an investor's prior experiences. For 
example, prior experience investing in investment vehicles with 
unbounded returns would be less relevant for investing in RILAs (which 
have bounded returns) than it would be for investing in variable 
annuities (which have unbounded returns).\732\
---------------------------------------------------------------------------

    \732\ See Campbell et al. Paper. The Campbell et al. Paper 
identifies five aspects of ``financial ignorance'' that may lead to 
poor investor decision making. First, investors may lack 
understanding of basic concepts necessary to make appropriate 
decisions. For example, investors appear to lack an understanding of 
diversification and the tradeoff between risk and return. Second, 
investors may not understand the terms of financial contracts. 
Third, it appears that, rather than using all available historical 
data to form views about future returns on alternative strategies, 
investors rely on their own specific experiences to form an opinion. 
Fourth, individuals appear to not understand their own difficulties 
with financial decision making. Finally, investors appear to not 
understand the incentives faced by other parties and the effect 
these incentives have on their strategic behavior. Other studies 
suggest poor investment decisions may result from investor 
uncertainty and lack of investor familiarity with different assets. 
For example, individuals may invest sub-optimally because 
individuals are unable, given historical experience, to form precise 
estimates of how they expect assets to perform in the future. See, 
e.g., Raymond Kan and Guofu Zhao (2007). Optimal Portfolio Choice 
with Parameter Uncertainty, Journal of Financial and Quantitative 
Analysis, 27(3), 621-656. Rather than being unable to form precise 
estimates of how they expect assets to perform in the future, 
investors may not have, perhaps due to not having the requisite 
experience, the ability to form any expectation about how an asset 
will perform in the future. If investors' ambiguity is great enough, 
they simply may choose not to invest in particular assets. See, 
e.g., David Easley and Maureen O'Hara (2009). Ambiguity and 
Nonparticipation: The Role of Regulation, Review of Financial 
Studies, 22(5), 1817-1843. Finally, investors may make poor 
investment decisions because they choose to overweight investment in 
assets with which they are familiar, and underweight, or exclude, 
investment assets with which they are less familiar. See, e.g., Gur 
Hubberman (2001). Familiarity Breeds Investment, Review of Financial 
Studies, 14(3), 659-680 and Massimo Massa and Andrei Simonov (2006). 
Hedging, Familiarity, and Portfolio Choice, Review of Financial 
Studies, 19(2), 633-685.
---------------------------------------------------------------------------

2. Current Regulatory Requirements
    As discussed in Section I above, non-variable annuities are 
securities for purposes of the Securities Act, and public offerings of 
non-variable annuities, therefore, must be registered with the 
Commission.\733\ Unlike variable annuity contracts for which the 
Commission has adopted a specific registration form tailored to those 
products, insurance companies register non-variable annuity offerings 
on Form S-1 or Form S-3.
---------------------------------------------------------------------------

    \733\ See supra footnote 26 and accompanying text.
---------------------------------------------------------------------------

    Form S-1 is available to any issuer (except foreign governments and 
issuers of asset-backed securities) to register securities for which no 
other registration form is authorized or prescribed. A registration 
statement on Form S-1 contains extensive disclosure about all aspects 
of the issuer's business and financial condition and consists of two 
parts: a prospectus (Part I), and additional information not required 
to be included in the prospectus (Part II), but that is publicly 
available on EDGAR. Form S-1 allows incorporation by reference only on 
a very limited basis. The prospectus must contain financial statements 
meeting the requirements of Regulation S-X, which generally requires 
audited financial statements prepared in accordance with GAAP.\734\ 
Currently, disclosures about non-variable annuity offerings are largely 
unstructured. However, the audited financial statements in the 
prospectus, if prepared in accordance with GAAP, must be tagged in 
Inline XBRL if the Form S-1 contains a price or a price range.\735\ 
Form S-1 must be declared effective by the Commission before any sales 
of the registered securities may be made. The time required for 
Commission review will depend on the number and complexity of 
Commission comments and the issuer's ability to adequately address 
those comments. The issuer must pay the Commission registration fee 
before it files a Form S-1. The amount of the fee is based on the 
proposed maximum aggregate offering price.\736\ The issuer must 
indicate the amount of each type of security being registered and 
calculate the fee payable for each security.
---------------------------------------------------------------------------

    \734\ Certain Commission letters, or portions thereof, exempt 
certain insurance companies from the requirement to provide 
financial statements prepared in accordance with GAAP in connection 
with the registration of an offering of non-variable annuities on 
Form S-1. As discussed in Section IV.B.1.a, 63 RILAs and 18 
registered MVA annuities report SAP financials.
    \735\ See 17 CFR 229.601(b)(101)(i)(B).
    \736\ Generally, Form S-1 (or Form S-3) fees paid for a 
withdrawn registration statement are available to the issuer for use 
with its future registration statements. The amount available for 
use as an offset under rule 429 under the Securities Act equals the 
portion of the filing fee paid that is associated with any unsold 
securities of the same class registered on an earlier registration 
statement. Once a filing fee has been used as an offset, those 
unsold securities on the earlier registration statement are deemed 
deregistered. Non-variable annuities are continuously offered to 
investors, who in many cases are long-term investors that may make 
additional allocations or other investment decisions with respect to 
an investment in a RILA. Because non-variable annuity investors may 
make additional allocations or other investment decisions with 
respect to an investment, unless a prior non-variable annuity 
offering is completely unsold, non-variable annuity issuers may have 
increased difficulty in using filing fees associated with unsold 
securities of a prior offerings.
---------------------------------------------------------------------------

    Form S-3 is a ``short-form'' registration statement under the 
Securities Act that can be used by companies that have been subject to 
reporting obligations under the Exchange Act for at least one year and 
that satisfy certain other requirements.\737\ Reporting obligations 
under the Exchange Act include audited financial statements prepared in 
accordance with GAAP and are structured in Inline XBRL. A registration 
statement on Form S-3 contains extensive disclosure about all aspects 
of the issuer's business and financial condition and consists of two 
parts: a prospectus which includes, either directly or incorporated by 
reference from the issuer's Exchange Act filings, detailed information 
about the issuer (Part I), and additional information not required to 
be included in the prospectus (Part II), but that is publicly available 
on EDGAR.
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    \737\ The issuer must be either organized under U.S. law with 
its principal business operations in the United States or a foreign 
private issuer that reports under the Exchange Act using the 
domestic reporting forms. The issuer must have a class of securities 
registered under section 12(b) or 12(g) of the Exchange Act, or be 
required to file reports under section 15(d) of the Exchange Act. 
The issuer must have been subject to the reporting requirements of 
the Exchange Act and have filed all reports and materials required 
under sections 13, 14, and 15(d) of the Exchange Act for the 12 
calendar months preceding the filing of Form S-3, and, with certain 
exceptions, must have timely filed all such reports and other 
materials required to be filed during the 12 calendar months and any 
portion of a month immediately preceding the filing of the 
registration statement. An issuer that meets all of the requirements 
of Form S-3 and that has a public float of $75 million or more 
(i.e., ``seasoned issuers'') may use Form S-3 to register any 
offering of debt or equity for cash.
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    Registration using Form S-3 offers issuers advantages over 
registration using Form S-1. First, Form S-3 allows significant 
incorporation by reference, which allows for shorter prospectuses and 
makes Form S-3 easier to complete. Also, Form S-3 also allows for 
forward incorporation by reference, eliminating the need to file post-
effective amendments to keep registration statements current.\738\
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    \738\ One commenter noted that it can be more efficient and 
provide a better investor experience to register RILAs on Form S-3 
rather than on Form S-1 because, unlike an S-1 prospectus, due to 
the fact that Form S-3 incorporates by reference company-related 
information from periodic reports filed on Forms 10-K and 10-Q, an 
S-3 prospectus concentrates on disclosures about the features, 
benefits, and risks associated with the RILA contract that is not 
impeded by extensive and irrelevant company-related disclosures. See 
CAI Comment Letter.

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[[Page 60055]]

    A Form S-3 filed by a non-WKSI must be declared effective by the 
Commission.\739\ A Form S-3 receives either a full review or a targeted 
review of one or more sections of the registration statement. The time 
to resolve any Commission comments will depend on the number and 
complexity of the Commission's comments. An issuer must pay Commission 
filing fees before it files Form S-3. The amount of the filing fee is 
based on the proposed maximum aggregate offering price.
---------------------------------------------------------------------------

    \739\ Currently, none of the insurance companies that issue non-
variable annuities currently claim status as a well-known seasoned 
issuer. See supra footnote 598.
---------------------------------------------------------------------------

    Under the Federal securities laws applicable to all securities 
(including non-variable annuity offerings), it is unlawful for any 
person to use materially misleading communications in connection with 
the offer or sale of any security.\740\ Rule 156 is an interpretive 
rule that provides factors to be weighed in considering whether a 
statement involving a material fact is or might be misleading in the 
specific context of investment company sales literature, including 
literature relating to the sale of variable annuities.
---------------------------------------------------------------------------

    \740\ See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b-5.
---------------------------------------------------------------------------

    As discussed in Section I above, in 2022 Congress enacted the RILA 
Act directing the Commission to adopt a new registration form for RILAs 
within 18 months of enactment (i.e., the end of June 2024). If the 
Commission fails to adopt the form by the end of June 2024, the RILA 
Act provides that issuers can begin registering the offering of RILAs 
on Form N-4.
3. Market Practice
    Annuities can play a role in helping investors save for retirement 
and receive guaranteed lifetime income during retirement.\741\ There 
are multiple types of annuities available to help investors who have 
different financial goals or tolerances for risk save for retirement: 
fixed annuities (including registered MVA annuities), variable 
annuities, and RILAs. Generally, fixed annuities offer investors 
preservation of their investment by guaranteeing a minimum rate of 
return, but with little opportunity for asset growth. For example, 
during the accumulation phase,\742\ a traditional (i.e., book value) 
fixed annuity offers investors a fixed rate of return (known in 
advance) for a given period of time.\743\ A registered MVA annuity is 
similar to a traditional fixed annuity, but the surrender value is 
subject to a market value adjustment based on interest rate changes. 
Fixed index annuities guarantee a certain rate of return, but also 
provide the potential for (limited) additional returns based on the 
performance of a specified market index.\744\
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    \741\ See IRI Fact Book (arguing that annuities give investors 
the ability to create their own pensions). For example, as also 
discussed in the IRI Fact Book, death benefits provide principal 
protection in the event that an investor dies during a market 
downturn.
    \742\ See id. During the accumulation phase, also called the 
savings phase, capital builds up. In this phase, the investor pays 
premiums into the contract to accumulate assets.
    \743\ Id. The IRI Fact Book also notes that fixed annuities 
involve less investment risk because they offer a guaranteed minimum 
rate of interest. The minimum rate is not affected by fluctuations 
in market interest rates. Also, the surrender value is based on the 
annuity's purchase value plus credited interest, net of any charges. 
Currently, insurance companies with a minimum A.M. Best Insurance 
Ratings of A- offer fixed rate annuities that guarantee between 
3.55% and 5.40% for a three-year period, and between 3.20% and 5.40% 
for a ten-year period. Multi-Year Guarantee Annuities (MYGA), 
Annuity Advantage (accessed Feb. 16, 2024, and filtered by ``State'' 
of ``- All''; ``Min AM Best'' of ``A-''; ``Years'' of ``10''; and 
``Range'' of ``Exact''), available at https://www.annuityadvantage.com/annuity-rates-quotes/multi-year-guarantee-annuities/?rating=4&years=10&pos=300&sort=guarantee_period_yield&limit=all.
    \744\ See id.
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    Variable annuities accumulate savings based on the performance of 
the underlying investment options chosen by an investor. Typically, 
investors are able to choose among investment options that pass on the 
returns of a wide variety of mutual funds such as equity funds, bond 
funds, funds that combine equities and bonds, actively managed funds, 
index funds, domestic funds, and international funds.\745\ Depending on 
the investment options chosen, variable annuities can offer investors 
the greatest opportunity for asset growth, but they also can involve 
the greatest amount of investment-based risk, compared to other types 
of annuities.\746\
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    \745\ Id.
    \746\ Additionally, variable annuities often involve direct 
fees, such as insurance charges, and indirect expenses, including 
management and other fees and expenses associated with the 
underlying mutual funds in which the variable annuity subaccounts 
invest. See IRI Fact Book.
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    RILAs are an index-linked product that can be purchased by 
individual investors as part of both qualified and non-qualified 
retirement accounts.\747\ RILAs combine features of fixed-index 
annuities and variable annuities. RILAs limit or reduce downside risk, 
but also limit upside performance. In exchange for giving up the 
complete protection of principal offered by fixed annuities, a RILA 
investor is potentially afforded greater upside potential than that 
provided by fixed annuities, though typically less than the potential 
upside of investing in the same index within a variable annuity.\748\ 
RILAs allow investors some ability to customize a level of risk with 
which they are comfortable.\749\ Like other annuities, RILAs have an 
accumulation phase followed by a payout phase. The accumulation phase 
is divided into one or more crediting periods.\750\ Also like other 
annuities, after a ``surrender charge'' period (generally, 3 to 10 
years following an investor's last premium payment), investors can 
usually surrender their contract at the end of any crediting period and 
receive full account value.\751\ Investors, however, may lose money if 
they withdraw early from an investment option or, in some RILAs, from 
the contract within a specified period, as explained in Section II.C.6 
above.
---------------------------------------------------------------------------

    \747\ Thorsten Moenig, It's RILA Time: An Introduction to 
Registered Index-Linked Annuities, 89 J. Risk & Ins. 339 (2022) 
(``Moenig Paper'').
    \748\ See IRI Fact Book.
    \749\ Id.
    \750\ Id.
    \751\ Id.
---------------------------------------------------------------------------

    At the end of a crediting period, the issuer credits a RILA 
investor's contract value with ``interest'' (which can be either 
positive or negative) that is based on the performance of a specified 
index, subject to restrictions on the upside, through a cap and/or 
``participation rate,'' as well as some form of downside 
protection.\752\ If the index declines, the credited loss is lessened 
by either a floor (a maximum loss percentage), a buffer (index losses 
are credited to the RILA investor's contract value only when they 
exceed a certain threshold), or a downside participation rate (the loss 
credited to contract value is a certain percentage of the index 
loss).\753\ RILA downside protection mechanisms typically do not change 
over time, whereas issuers may, and likely will, change upside limits 
on gains for both new contracts as well as existing contracts to 
reflect changing market conditions.\754\ If a RILA contract offers 
downside protection in the form of a floor, then the increased 
volatility would expose the issuer to greater downside risk. To offset 
the increased downside risk, an issuer might choose

[[Page 60056]]

to reduce its upside risk by lowering cap rates.\755\ If the RILA 
contract offers downside protection in the form of a buffer, then 
increased volatility would expose the issuer to reduced downside risk. 
The reduced downside risk might cause issuers to increase cap 
rates.\756\
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    \752\ Id.
    \753\ Id. See also Moenig Paper arguing that RILAs are 
structurally similar to fixed-index annuities except that RILAs may 
credit negative returns. A fixed-index annuity can be viewed as a 
special case of a RILA with a floor of 0%. The insurer provides full 
protection on the index return in exchange for a low cap rate 
(commonly between 2% and 4%).
    \754\ See Moenig Paper. One commenter agreed, stating that 
although index-linked options include multiple parts, including an 
index, crediting period, upside crediting feature and rate, downside 
protection feature and rate, and associated fees (as applicable), 
the only ``moving part'' is the upside protection. See CAI Comment 
Letter.
    \755\ Id.
    \756\ Id.
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    Also, unlike variable annuities, most RILAs do not include any 
direct ongoing fees or charges to the investor. Insurance companies, 
however, potentially can benefit from offering RILAs in at least three 
ways.\757\ First, insurance companies can benefit from a favorable 
imbalance between the downside protections that a RILA contract offers, 
and the upside limits the contract offers.\758\ That is, insurance 
companies might benefit to the extent the cost of providing the 
downside protection is less than the value, to the insurance company, 
of the upside limits.\759\ One study estimates an average annual cost 
to investors from the imbalance between the downside protections and 
the upside limits that a RILA contract offers is approximately 0.17% of 
the RILA investment amount.\760\ Similarly, holding constant the other 
terms of the contract, insurance companies can benefit when a RILA 
offers index-linked options whose index for measuring performance is a 
price-based index that does not account for dividend payments. For 
example, if an investor chooses an index-linked option whose 
performance is based, in part, on the S&P 500 Price Return Index, the 
credited return may be based on the point-to-point change in the S&P 
500, which does not include the dividend payments of the underlying 
stocks.\761\ Also, we understand that, generally, insurance companies 
can benefit from offering RILAs by investing RILA proceeds into fixed-
income securities such as corporate bonds, thereby earning a ``credit 
risk premium.'' \762\
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    \757\ One commenter observed, without providing examples, that 
insurance companies utilize a variety of means to produce profit 
from RILAs. See ACLI Comment Letter.
    \758\ See Moenig Paper. One commenter agreed with our 
description, stating that RILAs are ``spread'' products, meaning 
that the issuer's profits are principally embedded in the 
structuring of the product and are not a portion of an overt fee or 
charge. The same commenter noted that there is an inextricable 
relationship between the limits on potential gains and the 
protection from potential losses while also stating that spreads 
cover expenses and compensate the insurer not only for the 
investment elements of the product, but liquidity, protection and 
other insurance features that are bundled together. See CAI Comment 
Letter. Another commenter stated that the amount of market 
participation or upside performance is oftentimes directly related 
to the amount of downside risk the investor wishes to assume. See 
Gainbridge Comment Letter. Also, one commenter noted that 
distribution costs are not recouped through the spread, but through 
explicit surrender charges. See CAI Comment Letter.
    \759\ We understand that insurance companies may use derivative 
securities to closely approximate the insurer's liabilities from a 
RILA contract at the end of each crediting period. See, e.g., Moenig 
Paper and CAI Comment Letter. For example, for a RILA with both a 
floor and a cap, the insurance company can hedge its liability by 
purchasing a call option (with an appropriate strike price given the 
floor) and selling a call (with a higher strike price that is 
dependent on the cap). The insurance company may be able to offer a 
cap such that the proceeds from selling the call with the higher 
strike price exceed the cost of purchasing the call option with the 
lower strike price. For a RILA with a downside buffer (as opposed to 
a floor) and a cap, the process for insurance companies to hedge 
their liabilities is similar, but with a different mix of options. 
In the case of a RILA with a downside buffer and a cap, the 
insurance company could purchase a call option, sell a call option 
(with a higher strike price), and sell a put option (with a lower 
strike price, as appropriate given the downside buffer). In this 
case, the insurance company might be able to offer a cap such that 
the proceeds from selling the call and the put exceed the cost of 
the call option with the lower of the two strike prices. One 
commenter stated that insurance companies set downside protections 
and upside limits such that a favorable imbalance between the two 
does not exist. See CAI Comment Letter. Another commenter stated 
that RILAs are intended to produce revenue for insurance companies 
sufficient to cover the cost of doing business. See ACLI Comment 
Letter.
    \760\ See Moenig Paper; Public Filings on EDGAR. Staff examined 
24 one-year term rates linked to the S&P 500 index, Nasdaq 100 
index, Russell 2000 index, and MSCI EAFE and found results consist 
with the 0.17% estimate of the Moenig Paper. See discussion in 
Proposing Release, Section III.B.3.
    \761\ See Moenig Paper. The Moenig Paper provides the following 
example: assuming insurance companies hold the underlying 
securities, if stock prices rise by 7% on average over the crediting 
period, in addition to paying 2% in dividends, then the RILA account 
would be credited 7%, even though investors in the underlying stocks 
would earn a 9% return. When insurance companies rely on derivative 
securities, omitting dividend payments can also benefit insurers by 
reducing the cost of providing a given amount of downside protection 
(e.g., through lower option prices). Comment letters were mixed 
regarding whether insurance companies benefit when a RILA offers 
index-linked options whose index for measuring performance is a 
price-based index. One commenter noted that insurance companies do 
not earn or keep any dividends paid by the companies whose 
securities comprise an index because insurance companies invest in 
derivatives, rather the underlying securities themselves. The same 
commenter also noted that while it is true that using a price return 
index lowers options costs for insurance companies, those lower 
costs are passed along to RILA investors in the form of greater 
participation in upside performance. See CAI Comment Letter. Other 
commenters offered an opposing view. For example, one commenter 
stated that the biggest ``drag,'' and benefit to the insurance 
company, on RILAs and all indexed annuities is the use of a price 
return index instead of a total return index. In particular, the 
commenter stated that the insurance company, in essence, gets the 
total return on its investments and passes along the lower price 
return, keeping the difference. See Johnson Comment Letter. Another 
commenter suggested that the use of price return indices misleads 
investors regarding RILA performance. See Lee Comment Letter.
    \762\ We understand that insurance companies can similarly 
benefit from offering registered MVA annuities to the extent 
insurance companies' investment yields exceed interest credited to 
investors. One commenter stated that insurance companies do not 
benefit from the entire credit risk premium when offering RILAs. The 
commenter stated that much of the credit risk premium is used to 
pass additional value to customers via greater participation in 
upside performance. See CAI Comment Letter.
---------------------------------------------------------------------------

    While most RILAs do not include any explicit ongoing fees or 
charges to the investor, RILAs typically have charges for early or mid-
term withdrawals. As discussed in Section II.C.3.b, charges for early 
or mid-term withdrawals could include surrender charges and contract 
adjustments.
    RILAs differ from other annuity contracts in other ways as well. 
Variable annuities involve a direct investment of premiums into 
subaccount(s) that correspond to one, or more, of many mutual funds. 
RILA premiums, on the other hand, are not directly invested into the 
assets of the underlying index, and typically investors can only choose 
among index-linked options whose returns are based on a small number of 
mainstream indexes.\763\ In terms of the returns an investor 
experiences, the issuer of a variable annuity has no contractual 
obligations to fund such returns, in that premiums are directly 
invested into subaccounts which in turn are invested in shares of 
underlying portfolio companies. On the other hand, the RILA issuer does 
have contractual obligations relating to the returns an investor 
experiences, taking into account RILA contracts' bounded return 
structures, because the RILA premiums are not directly invested in the 
assets of the underlying index. These obligations are short-term (i.e., 
they are limited to the crediting period of the index-linked option the 
investor selects, which is usually one, two, three, or six years) and 
tied to the performance of a common index, so that issuers can hedge 
the embedded liabilities accurately through the financial markets.\764\
---------------------------------------------------------------------------

    \763\ See Moenig Paper.
    \764\ Id.
---------------------------------------------------------------------------

    Like RILAs, registered MVA annuities have an accumulation phase 
divided into one or more crediting periods followed by a payout phase. 
Also like RILAs, registered MVA annuities apply contract adjustments 
upon withdrawals prior to term maturity. Unlike RILAs, however, 
registered MVA annuities' credited interest is not linked to the 
performance of an index. Registered MVA annuities offer a rate of 
return that is determined by the insurance company for a set period, 
subject to a specified minimum.\765\ At the end of the period, the 
insurance company may

[[Page 60057]]

offer a new rate for the next period.\766\ Like RILAs, generally 
registered MVA annuities typically do not impose direct fees on the 
investor, other than surrender charges. Instead, insurance companies 
can benefit from the difference between what the insurance companies 
expects to earn on the proceeds from registered MVA annuity sales and 
what the insurance company has committed to paying out (i.e., the 
``spread'').\767\
---------------------------------------------------------------------------

    \765\ See IRI Fact Book.
    \766\ Id. Generally, registered MVA annuities specify a minimum 
credited interest rate for the lifetime of the contract.
    \767\ See IRI Fact Book.
---------------------------------------------------------------------------

    Additionally, non-variable annuities and variable annuities differ 
with respect to their use of proceeds. As discussed in Section II.C.5, 
variable annuity proceeds are held in separate accounts insulated from 
the insurance company's general account and, therefore, are insulated 
from the issuer's general account creditors. Variable annuity proceeds 
in unitized sub-accounts must be invested as the investor chooses and 
returns are credited to the account directly. On the other hand, 
contract values, benefits, and guarantees provided by non-variable 
annuities are paid out of assets held in the insurance company's 
general account or a non-unitized separate account, and may not be 
insulated from the claims of the insurer's general creditors (and thus 
subject to the insurance company's claims-paying ability).
    Also, non-variable annuity proceeds can be invested as the issuer 
sees fit. We understand that insurance companies are able to invest 
RILA proceeds in derivative securities that closely approximate the 
issuer's liabilities from RILA contracts.\768\ In doing so, insurance 
companies are able to hedge away their risk at a low cost. Further, we 
understand that insurance companies can invest remaining proceeds into 
fixed-income securities (e.g., corporate bonds) that allow them to earn 
a ``credit risk premium.'' \769\ The credit risk premium can be an 
important source of benefits to RILA issuers.\770\
---------------------------------------------------------------------------

    \768\ See Moenig Paper. One commenter noted that investments 
supporting RILA contracts are not generally specifically earmarked 
to a contract, but rather are managed based on the insurer's 
aggregate reserves supporting all its RILA contracts. See CAI 
Comment Letter.
    \769\ Id.
    \770\ Id. One commenter noted that insurance companies do not 
benefit from the entire credit risk premium, stating that ``Much of 
this credit risk premium is used to pass additional value to 
customers via greater participation in upside performance.'' See CAI 
Comment Letter.
---------------------------------------------------------------------------

C. Benefits and Costs

1. Benefits
a. Use of Form N-4
    Unlike variable annuity offerings that are registered on Form N-4, 
insurance companies register non-variable annuity offerings on Forms S-
1 or S-3. Forms S-1 and S-3 include a number of disclosure requirements 
that are specific to the insurance company issuing the non-variable 
annuity that the Commission does not require in the registration 
statements for offerings of variable annuities.
    The final amendments require that insurance companies use Form N-4 
to register the offering of RILAs and registered MVA annuities and we 
are adapting Form N-4 for that purpose.\771\ Because it is an existing 
form, non-variable annuity issuers and investors are familiar with Form 
N-4. As a result of expanding the scope of Form N-4 to address non-
variable annuities, non-variable annuity offerings will be registered 
on the same form as variable annuities. Requiring insurance companies 
to register non-variable annuity offerings on Form N-4 leverages 
insurance-product specific disclosure requirements reflected in the 
form and also makes use of the summary prospectus layered disclosure 
framework the Commission adopted in 2020 for variable annuities.
---------------------------------------------------------------------------

    \771\ See Form N-4, proposed General Instruction B.1. Commenters 
broadly supported this element of the proposal. See discussion in 
supra Section II.A.
---------------------------------------------------------------------------

    The following sections discuss the specific benefits deriving from 
the contents and requirements of the form in detail. In addition to 
these benefits, expanding the scope of Form N-4 to include RILAs and 
registered MVA annuities will benefit investors by making it easier for 
them to evaluate and compare non-variable annuities, and also to 
compare other annuity products with non-variable annuities. For 
example, investors may require less effort to evaluate and compare 
annuity products that register using the same form and may find the 
focus of Form N-4 on insurance-product specific information helpful in 
evaluating and comparing these annuity products. Additionally, 
investors in combination contracts will benefit by receiving one 
prospectus that describes the entire contract and available investment 
options, rather than two prospectuses that separately describe variable 
and non-variable options (and that repeat information about contract 
features that variable- and non-variable annuity contracts have in 
common). To the extent that investors require less effort to evaluate 
and compare these annuity products, investors may be more likely to 
make decisions that better align with their investment goals. 
Commenters broadly agreed that the proposed amendments to Form N-4 
would provide RILA investors with more meaningful and helpful 
disclosures as compared to the more generic disclosures required on 
Forms S-1 and S-3.\772\
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    \772\ See discussion in supra Section II.A. With respect to 
issuers that already provide the same or similar disclosures on 
Forms S-1 or S-3 as are required by the final amendments, the 
benefits of disclosure of that same information may be mitigated.
---------------------------------------------------------------------------

    One commenter, who agreed with the Commission's proposal to amend 
Form N-4 to include existing disclosures for registered MVA annuities 
that are filed on Form S-1 or S-3, requested that MVA issuers be 
permitted to continue to register MVA contracts no longer offered for 
sale to new investors on Form S-1 or S-3.\773\ The commenter went on to 
state that the costs of transitioning a closed block of MVAs from Form 
S-1 or S-3 to Form N-4 could ``significantly outweigh the benefits.'' 
\774\ We disagree with the commenter's statement that the costs of 
transitioning a closed block of MVAs from Form S-1 or S-3 to Form N-4 
could significantly outweigh the benefits. By requiring rather than 
permitting insurance companies to register all MVA annuities on Form N-
4, investors will benefit by having access to more tailored and 
comparable information necessary to make informed investment 
decisions.\775\ For registered offerings of closed block registered MVA 
annuities, tailored disclosures will benefit investors when making 
additional investments in the contract or deciding how to reallocate 
their existing investment at the expiration of the MVA period.
---------------------------------------------------------------------------

    \773\ See CAI Comment Letter.
    \774\ See id. See also IRI Comment Letter (stating that 
transitioning registered MVA annuities that are no longer offered or 
sold to new investors to Form N-4 would be unnecessary.)
    \775\ See discussion in supra Section II.B.
---------------------------------------------------------------------------

b. Contents of Form N-4
    The final amendments are designed to help investors make informed 
investment decisions regarding the annuity products that are registered 
on Form N-4. The registration process on Form N-4 uses a layered 
disclosure approach designed to provide investors with key information 
relating to the contract's terms, benefits, and risks in a concise and 
reader-friendly presentation, with access to more detailed information 
for those investors who want it. Providing investors with key 
information is particularly

[[Page 60058]]

important in the context of annuity contracts such as RILAs, registered 
MVA annuities, and variable annuities because their structures are 
typically more complex than other types of investment products commonly 
sold to retail investors.
    In particular, the final amendments update the contents of Form N-4 
to specifically address non-variable annuities, including by: (1) 
amending the form's general instructions; (2) amending the requirements 
for front and back cover pages; (3) updating the Key Information Table 
(or ``KIT''); (4) providing new principal disclosures regarding non-
variable annuity investment options; and (5) providing for new contract 
adjustment and fee disclosures. The final amendments also include 
certain other technical and conforming amendments to Form N-4 and 
related rules designed to accommodate the inclusion of non-variable 
annuity offerings on that form as well as requiring the insurance 
company to provide disclosure in response to the remaining items on 
Form N-4 to the extent applicable.\776\
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    \776\ The technical amendments to Forms N-3 and N-6 discussed in 
Section II.I have no economic effects.
---------------------------------------------------------------------------

General Instructions
    The final amendments require RILA and registered MVA annuity 
offerings registered on Form N-4 to comply with the general 
instructions of that form, including requirements related to: (1) using 
document design techniques that promote effective communication; (2) 
organizing information to make it easier for investors to understand; 
(3) including information in the prospectus or SAI not otherwise 
required so long as the additional information is not incomplete, 
inaccurate, or misleading, and does not obscure or impede understanding 
of the information that is required; (4) requiring Form N-4 filers to 
define special terms used in the prospectus in any presentation that 
clearly conveys meaning to investors; (5) allowing insurance companies 
to describe multiple contracts that are essentially identical in a 
single prospectus; (6) making available the dates of both the 
prospectus and SAI; (7) providing an interactive data file related to 
certain information on the form; (8) requiring insurance companies to 
include active hyperlinks, or other means of facilitating access that 
leads directly to the relevant website, for an electronic version of 
the prospectus; and (9) the use of incorporation by reference. The 
general instructions are designed to require clear and consistent 
disclosure to investors about annuity contracts currently registered on 
the form and to make clear how filers must prepare and file their 
registration statements.
    One commenter stated that the proposed amendments would delete the 
last sentence of General Instruction C.3.(a), which states that 
information required in the KIT or the overview section need not be 
repeated elsewhere in the prospectus. That commenter stated that 
excessive repetition adds to the length of the prospectus without any 
commensurate value to investors.\777\ The final form amendments take 
commenter concerns into account and address areas where the discussion 
of the same or similar topics in multiple locations could be limited 
while continuing to promote the goal of highlighting key information 
about non-variable annuities and enhancing understanding of non-
variable annuity features and risks.\778\ Also, the final amendments, 
like the proposal, incorporate layered disclosure. The use of layered 
disclosure means that the disclosure requirements necessarily address 
particular topics in more than one location in the registration 
statement. Where this occurs, the disclosure requirements intentionally 
include summary disclosure in the first ``layer,'' and additional 
details building on the summary in the second ``layer.''
---------------------------------------------------------------------------

    \777\ See CAI Comment Letter.
    \778\ See discussion of comments related to repetition informing 
the final amendments in Section I.D.2.
---------------------------------------------------------------------------

    Clear disclosure benefits investors by making it easier for 
investors to evaluate and compare offerings. Concise and decision-
useful disclosures can help facilitate the investment decision-making 
process. Also, the presentation of information in a consistent manner 
will facilitate not only the evaluation and comparison among RILA and 
registered MVA annuity offerings, but also will facilitate the 
comparison of non-variable annuities to other annuity products.\779\ 
Further, certain investors, while aware of variable annuities, simply 
may not be aware of RILAs or registered MVA annuities as investment 
options. Presentation of information in a consistent manner on Form N-4 
could increase investor awareness of non-variable annuities as an 
investment option.
---------------------------------------------------------------------------

    \779\ The consistent presentation of information also could 
facilitate information collection by third parties such as 
investment advisers and data aggregators who could then, in turn, 
provide information to investors.
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Front and Back Cover Pages
    The final amendments make certain changes to information currently 
required on the front and back pages of a prospectus for all 
registrants on Form N-4. Like variable annuities registered on Form N-
4, RILAs and registered MVA annuities are required to present certain 
information on the front and back cover pages of the prospectus. The 
final amendments require several new cover page disclosures for all 
Form N-4 issuers. One set of changes provides additional information 
distinguishing among the investment options available in the annuities 
registering on Form N-4 and cross-reference the prospectus appendix 
that provides additional information about each option. These changes 
could help investors better understand what investment options are 
available under the contract, in an easily identifiable location. Some 
commenters suggested that the proposed cover page disclosures were too 
voluminous given the purpose of the front cover page and could cut 
against the form's layered disclosure approach, thereby reducing the 
benefits to investors.\780\ The number of specific features and risks 
highlighted on the cover page is driven by the complex nature of the 
non-variable annuity being registered. Further, because these points 
are generalized on the cover page but discussed in more detail later in 
the prospectus, they are consistent with the concept of layered 
disclosure.
---------------------------------------------------------------------------

    \780\ See discussion in supra Section II.C.1.
---------------------------------------------------------------------------

    Some commenters also raised concerns about specific required front 
and back cover disclosures.\781\ Generally, the disclosures highlight 
risks that are particularly prevalent in non-variable annuities. These 
new disclosures should benefit investors by putting them on notice of 
key considerations at the outset, helping investors make informed 
decisions.
---------------------------------------------------------------------------

    \781\ See discussion in supra Section II.C.1.
---------------------------------------------------------------------------

Key Information Table
    As required for current Form N-4 issuers, the final amendments 
require RILA and registered MVA annuity issuers to provide a Key 
Information Table in their registration statements. The KIT includes a 
summary of five areas: (1) fees, expenses, and adjustments; (2) risks; 
(3) restrictions; (4) taxes; and (5) conflicts of interest. The KIT is 
important summary disclosure for investors that is included in the 
prospectus, and the final amendments to the KIT requirements are 
intended to highlight important considerations related to non-variable 
annuities, including certain unique and/or opaque aspects of non-
variable

[[Page 60059]]

annuities.\782\ Consistent with our layered disclosure approach for 
variable annuities registered on Form N-4, non-variable annuity issuers 
are required to provide cross-references in the KIT to the location in 
the statutory prospectus where the subject matter is described in 
greater detail. Certain of the amended KIT requirements apply to all 
Form N-4 issuers. In particular, in a change from the current KIT 
requirements for Form N-4 issuers, the final amendments require that 
responses to various line items be presented in a Q&A format.\783\ Some 
commenters stated that the format requirement would reduce the benefits 
of the KIT because it may reduce comparability and because answers 
provided may not always be concise.\784\ As discussed above, because 
the KIT disclosures as amended continue to be brief, we anticipate that 
any negative effect that the Q&A format may have on comparability or 
conciseness will be limited.\785\ In addition, as stated in the 
Proposing Release, the Q&A format should improve investor comprehension 
of variable and non-variable annuities and contract adjustment-specific 
topics based on the results of our quantitative investor testing.\786\
---------------------------------------------------------------------------

    \782\ Many of the summary points presented in the KIT are 
discussed in greater detail in other parts of the form. In this way, 
the KIT is an integral part of the layered disclosure approach the 
Commission traditionally has taken with annuity products. To ensure 
that the KIT serves this function effectively, final rule will 
delete Form N-4's general instruction stating that where the 
discussion of information required by the Overview of the Contract 
(currently Item 3) or KIT (currently Item 2) also responds to the 
disclosure requirements in other items of the prospectus, 
registrants need not include additional disclosure in the prospectus 
that repeats the information disclosed in the Overview of the 
Contract or the KIT. See supra footnote 163 and accompanying text.
    \783\ Currently, such format is suggested but not required. See 
Form N-4, General Instruction C.3.(c).
    \784\ See ACLI Comment Letter; CAI Comment Letter.
    \785\ See discussion in supra Section II.C.3.a.
    \786\ See supra footnote 160.
---------------------------------------------------------------------------

    In a change for all Form N-4 issuers, the final amendments change 
the order in which the KIT appears relative to the Overview of the 
Contract disclosures in the prospectus. We received one comment on this 
aspect of the proposal. The commenter stated that the repetition of 
information required in the Overview of the Contract and KIT would 
reduce the benefits of the KIT.\787\ We disagree that covering the same 
topics in the Overview of the Contract and the KIT would reduce the 
benefits of the KIT. The disclosure is included in both locations to 
allow the reader to understand the contract at a high level (in the 
Overview of the Contract), as well as key features and risks of the 
annuity whose offering is being registered (in the KIT). Further, KIT 
requirements that address the same topic in different contexts may aid 
investor understanding of complex disclosure, and this approach is 
consistent with a layered disclosure approach.
---------------------------------------------------------------------------

    \787\ See discussion in supra Section II.C.2.
---------------------------------------------------------------------------

    Overall, the final KIT requirements (like the KIT requirements for 
variable annuities prior to these amendments) are designed to provide a 
brief description of key facts about RILAs and registered MVA annuities 
in a specific sequence and in a standardized presentation that is 
designed to be easy to read and navigate. A standardized presentation 
that is designed to be easy to read and navigate benefits investors by 
making it easier for investors to evaluate and compare non-variable 
annuity offerings. Also, the standardized presentation of information 
could facilitate not only the evaluation and comparison among non-
variable annuity offerings, but also could facilitate the comparison of 
RILAs and registered MVA annuities to other annuity products.
Principal Disclosure Regarding Index-Linked or MVA Options
    The final amendments to Form N-4 require disclosures that will 
provide investors with information about all annuities whose offerings 
are registered on Form N-4 as well as with specific information about 
RILAs and registered MVA annuities and non-variable options under the 
contract. With regard to Form N-4 issuers generally, the final 
amendments require registrants to disclose market risk, early 
withdrawal risk, contract benefits risk, insurance company risk, and 
the risk of contract changes. With regard to specific information about 
non-variable annuities, the final amendments include requirements 
related to: (1) information about non-variable annuities generally and 
an overview of certain key elements of any index-linked option offered 
under the contract; (2) a more in-depth description of any index-linked 
investment options available under the contract; (3) the inclusion of 
an appendix that consolidates certain summary information related to 
any index-linked options and fixed options available under the contract 
(which will accompany similar information about variable options 
offered under a ``combination'' contract); and (4) certain principal 
risk disclosures relating to investing in the non-variable annuity 
contract that the prospectus describes.
    The final requirements are designed to provide additional 
information regarding the risk of investing in Form N-4 products 
generally, as well as the unique aspects of non-variable annuities and 
certain summary and detailed information about index-linked options 
available under a non-variable annuity contract. The information should 
benefit investors by making it easier for investors to evaluate and 
compare variable and non-variable annuity products registered on Form 
N-4. The required disclosure relating to index-linked and fixed options 
available under a contract should benefit investors by facilitating the 
comparison of these investment options to other investment options 
available under the contract, as well as to investment options that 
other non-variable annuity contracts offer.
    The final amendments permit insurance companies to disclose current 
upside rates in the prospectus either by disclosing the information 
directly in the prospectus, as proposed, or by including a website 
address where the current upside rates can be found and incorporating 
by reference the information on the website into the prospectus.\788\ 
Investors likely will find it more efficient to obtain current upside 
rates on the insurer's website identified in the prospectus than to 
review a potentially high number of prospectus supplements. It also 
will be familiar to many investors because this is the approach that 
many RILA investors currently use to obtain information about current 
upside rates. Moreover, allowing insurance companies to disclose 
current upside rates on a website and to incorporate this information 
by reference into the prospectus also will retain prospectus and 
registration statement liability, and ready accessibility of 
information that is a core aspect of the RILA offering. It will also 
accommodate RILA issuers' practice of changing current upside rates in 
response to market conditions. Because the approach we are adopting is 
consistent with current practice, we anticipate that all insurance 
companies will choose to use the website posting approach to disclose 
current upside rates instead of disclosing such information directly in 
the prospectus. To the extent the approach we are adopting is 
consistent with current practice, the benefits discussed above would be 
reduced.
---------------------------------------------------------------------------

    \788\ Final Form N-4, Instruction 1 to Item 6(d)(2)(ii)(B).
---------------------------------------------------------------------------

Addition of Contract Adjustments and Other Amendments to Fee and 
Expense Disclosures
    RILA and registered MVA annuity investors have the ability to 
withdraw or transfer their money before the end of a

[[Page 60060]]

crediting period. If amounts are removed from an index-linked option 
before the end of a crediting period, typically an insurance company 
will apply an IVA to the investor's contract value. The IVA, which 
adjusts the contract value based on a formula, typically changes with 
market conditions throughout the crediting period and may adjust daily. 
Similarly, a positive or negative market value adjustment could apply 
if amounts are partially or fully withdrawn from the contract or from 
an MVA option before the end of a specified period. These contract 
adjustments, whose calculation varies by insurance company, may have a 
positive or negative effect on the value of the contract.
    The final amendments to Form N-4 require specific disclosures with 
respect to contract adjustments. Currently, Form N-4 requires variable 
annuity registrants to provide comprehensive information on the fees 
and expenses that investors will pay when buying, owning, and 
surrendering a contract, including expenses paid each year during the 
time the investor owns the contract. Although RILAs and registered MVA 
annuities typically do not charge the explicit fees and expenses common 
to variable annuities, they do typically utilize contract adjustments. 
Since negative adjustments may result in substantial costs to 
investors, it is important to include a detailed description of 
contract adjustments in the registration statement.
    Specifically, the final amendments expand current disclosure 
requirements to address contract adjustments that could affect 
investors' contract value when buying, owning, and surrendering or 
making withdrawals from an investment option. The final amendments also 
require certain other specific disclosures about contract adjustments, 
such as requiring disclosures about the maximum potential loss that an 
investor could experience in connection with a negative contract 
adjustment.
    Some commenters opposed certain changes to Item 4 and Item 7, 
arguing that the changes would mischaracterize the nature or magnitude 
of the quantities being disclosed, thereby reducing the benefits of the 
disclosures to investors.\789\ The required disclosures help ensure 
that investors have access, in one place, to full disclosure regarding 
the economic consequences of withdrawing money from an index option or 
the contract. These disclosures will benefit investors by enabling them 
to better evaluate the costs of purchasing and owning annuity 
contracts, including non-variable annuities. In addition, these 
disclosures can make less-informed investors aware of non-variable 
annuities' unique characteristics, which could increase investor 
understanding of non-variable annuities as an investing option.
---------------------------------------------------------------------------

    \789\ See discussion in supra Section II.C.6.
---------------------------------------------------------------------------

    Some commenters on the proposal raised concerns about the inclusion 
of the maximum potential loss as part of the fee table disclosure 
requirements in Item 4, stating that contract adjustments do not 
reflect fees.\790\ One commenter further stated that characterizing 
contract adjustments as a fee or charge is confusing.\791\ The final 
amendments clarify the exposition within Item 4 by presenting 
information related to the maximum potential contract adjustment in a 
separate ``adjustments'' table. Further, the description of the new 
table makes it clear that these contract adjustments are in addition, 
and thus distinct, from fees. As a result, the revised disclosure 
should mitigate the concerns raise by commenters on the proposal. At 
the same time, addressing contract adjustments in the Item 4 
disclosure--and clearly distinguishing them from fees--will alert an 
investor to the possibility of experiencing a contract adjustment, in 
addition to paying certain fees, if the investor removes money 
prematurely from an index-linked option or an MVA option, or the 
contract.\792\ Therefore, including this information in Item 4 could 
benefit some investors by allowing them to more easily consider the 
economic consequences of removing amounts from an investment option 
before the end of a crediting period.
---------------------------------------------------------------------------

    \790\ See, e.g., CAI Comment Letter; VIP Working Group Comment 
Letter; Gainbridge Comment Letter.
    \791\ See CAI Comment Letter (stating that characterizing 
maximum potential loss due to a negative contract adjustment as a 
fee or charge is ``inaccurate and far more confusing than 
informative'').
    \792\ Additional information regarding contract adjustments also 
is available to investors in other parts of the prospectus where 
those adjustments are discussed in greater detail. See, e.g., Items 
5, 6, 7, 12, 22, and 31A.
---------------------------------------------------------------------------

Other Amendments to Form N-4
    The final amendments include certain other amendments to Form N-4 
and related rules designed to accommodate the inclusion of RILA and 
registered MVA annuity offerings on Form N-4. These include amendments 
to Form N-4's facing sheet, definitions, exhibit list, and required 
representations, as well as amendments to certain Securities Act rules. 
Because these other amendments to Form N-4 and related rules are 
designed to accommodate the inclusion of non-variable annuity offerings 
on Form N-4, the benefits that could accrue as a result of these other 
amendments are those that result from RILA issuers registering 
offerings on Form N-4 rather than Form S-1 or Form S-3. For example, 
amending Form N-4 and related rules to accommodate the inclusion of 
non-variable annuity offerings on Form N-4 benefits investors because 
Form N-4 should make it easier for investors to evaluate and compare 
non-variable annuities, and also to compare other annuity products with 
non-variable annuities.
    The final amendments also amend Form N-4's required exhibits list 
to add new Item 27(p) for all issuers, which requires the filing of any 
power of attorney included pursuant to rule 483(b). While this exhibit 
is already required to be filed with a Form N-4 registration statement 
under rule 483(b), practices differ regarding the placement of a 
required power of attorney exhibit within the exhibit list. This 
amendment will benefit investors in comparing these exhibits for all 
annuity products whose offerings are registered using Form N-4 by 
standardizing the location of these exhibits in the registration 
statement. Facilitating the comparison of annuity products could 
benefit investors by helping them to invest in non-variable annuities 
in a manner that is consistent with their overall financial needs and 
objectives.\793\
---------------------------------------------------------------------------

    \793\ We did not receive any comments on the proposed amendments 
to Item 27.
---------------------------------------------------------------------------

    The final amendments also add new Item 31A in Form N-4 to require 
census-type information regarding non-variable annuities offered in 
connection with the applicable registration statement. Under this new 
item, insurance companies have to provide information regarding any 
non-variable annuity offered through the registration statement, as of 
the most recent calendar year-end, including (1) the name of each 
contract; (2) the number of contracts outstanding; (3) the total value 
of investor allocations attributable to index-linked or fixed options; 
(4) the number of contracts sold during the prior calendar year; (5) 
the gross premiums received during the prior calendar year; (6) the 
amount of contract value redeemed during the prior calendar year; and 
(7) whether the contract is a combination contract.
    One commenter stated that the information in Item 31A would not be 
useful to investors in making investment decisions and would require 
insurance companies to publicly reveal ``private and confidential'' 
information that could be used by competitors. We

[[Page 60061]]

disagree with the comment suggesting this information to be disclosed 
will result in private and confidential information being disclosed 
that will aid competitors.\794\ The information that will be reported 
would complement the parallel census-type information that is currently 
required to be reported annually on Form N-CEN by registered unit 
investment trusts offering variable annuities. Moreover, information 
that insurance companies will report in response to Item 31A will be 
aggregated at the contract level, which reduces the possibility that 
any confidential or private information would be disclosed. The 
information in new Item 31A will help the Commission and staff in 
identifying trends in insurance companies' offerings of RILAs and 
registered MVA annuities by providing a more complete understanding of 
the marketplace for annuity securities. A more complete understanding 
of the marketplace for annuity securities will benefit investors by 
helping us carry out regulatory responsibilities, including monitoring 
risk and trends, formulating policy and guidance, and reviewing 
registration statements.
---------------------------------------------------------------------------

    \794\ See discussion in supra Section II.C.7.
---------------------------------------------------------------------------

    The final amendments also amend Item 34 of Form N-4 to require 
insurance companies to include two specific undertakings in their 
registration statements on Form N-4: (1) to file, during any period in 
which offers or sales are made, through a post-effective amendment to 
their registration statement, any prospectus required by section 
10(a)(3) of the Securities Act and; (2) that, for the purposes of 
determining liability under the Securities Act, each post-effective 
amendment shall be deemed to be a new registration statement relating 
to the securities offered therein, and the offering of such securities 
at that time shall be deemed to be the initial bona fide offering 
thereof. These undertakings are the same as two undertakings insurance 
companies were required to provide in registration statements 
registered on Forms S-1 or S-3. It remains appropriate for insurance 
companies to continue to furnish these representations concerning post-
effective amendments to a registration statement as, under the final 
amendments, non-variable annuities may be continuously offered on a 
registration statement for an indefinite amount of time.\795\
---------------------------------------------------------------------------

    \795\ We did not receive any comments on the proposed amendments 
to Item 34.
---------------------------------------------------------------------------

Remaining Items
    The final amendments require RILA and MVA annuity issuers to 
provide disclosure in response to the remaining items on Form N-4 to 
the extent applicable. These are items that we have previously 
determined are relevant in the context of variable annuity offerings. 
Requiring RILA and MVA annuity filers to provide disclosure in response 
to the remaining items on Form N-4 to the extent applicable will help 
ensure that comparable information is provided in a standardized, 
consistent manner for all filers using Form N-4.
    Standardized, consistent disclosure of comparable information 
benefits investors by making it easier for investors to evaluate and 
compare RILA and registered MVA annuity offerings. Also, the 
presentation of information in a standardized, consistent manner across 
all filers using Form N-4 will facilitate not only the evaluation and 
comparison among non-variable annuities, but also the comparison of 
non-variable annuities to variable annuities. Further, certain 
investors, while aware of variable annuities, simply may not be aware 
of RILAs and registered MVA annuities as investment options. 
Presentation of information in a standardized, consistent manner on 
Form N-4 could increase investor awareness of RILAs and registered MVA 
annuities as investing options. Facilitating the comparison of annuity 
products could benefit investors by helping them to invest in non-
variable annuities in a manner that is consistent with their overall 
financial needs and objectives.
Inline XBRL
    The final amendments require many of the newly added disclosures on 
Form N-4 to be structured (i.e., tagged) in Inline XBRL, a structured, 
machine-readable data language.\796\ In addition, RILA and registered 
MVA annuity issuers will have to tag those prospectus disclosures that 
Form N-4 currently requires to be tagged.
---------------------------------------------------------------------------

    \796\ See supra section II.B.11.
---------------------------------------------------------------------------

    As discussed in Section II.C.10., one commenter stated that the 
Inline XBRL requirements would be beneficial to all investors because 
they would facilitate access to data about non-variable annuities in a 
structured, machine-readable format.\797\ Some commenters stated that 
tagging the newly added disclosures on Form N-4 would benefit investors 
by highlighting key elements of a RILA, allowing ``investors and their 
investment professionals (as well as data aggregators, financial 
analysts, and other data users) to efficiently analyze and compare 
information about available contracts.'' \798\ However, one commenter 
stated Inline XBRL has little value for investment companies and 
insurance products.\799\
---------------------------------------------------------------------------

    \797\ XBRL US Comment Letter.
    \798\ CAI Comment Letter. See XBRL US Comment Letter; see also 
infra footnote 449 and accompanying text.
    \799\ Johnson Comment Letter.
---------------------------------------------------------------------------

    Inline XBRL has value for companies and insurance products, 
investors, investment professionals, and third parties such as data 
aggregators, financial analysts and other data users because it will 
make the tagged disclosures more readily accessible for aggregation, 
comparison, filtering, and other analysis. The Inline XBRL requirement 
will facilitate access to data about non-variable annuities, which 
could improve investor understanding of the disclosed information and 
indirectly benefit insurance companies.\800\ For example, the data 
tagging could allow third parties such as financial data aggregators to 
efficiently compare and otherwise process the disclosed information 
into analyses accessible to investors. This could benefit insurance 
companies and non-variable annuity issuers by increasing investor 
understanding of non-variable annuities as an investment option, or 
make investors aware of RILAs' and registered MVA annuities' unique 
characteristics that may be appropriate for their particular situation. 
Additionally, an Inline XBRL requirement will enable other analyses 
that could directly benefit insurance companies, such as the ability to 
compare/redline disclosures automatically against the same disclosures 
in other periods, or perform targeted searches and redline comparisons 
of specific disclosure items, rather than performing such assessments 
on an unstructured

[[Page 60062]]

document.\801\ Accordingly, for Form N-4 filers, Inline XBRL can 
enhance the efficiency of review, yield savings in time and cost of 
preparing machine-readable data, and potentially enhance the quality of 
the data over other machine-readable standards as certain errors will 
be easier to identify and correct because the data is also human-
readable.\802\
---------------------------------------------------------------------------

    \800\ It has been observed XBRL requirements improve investor 
understanding for public operating company financial statement 
disclosures. See, e.g., Birt, J., Muthusamy, K. & P. Bir, XBRL and 
the Qualitative Characteristics of Useful Financial Information, 30 
Account. Res. J. 107 (2017) (finding ``financial information 
presented with XBRL tagging is significantly more relevant, 
understandable and comparable to non-professional investors''); 
Cahan, S.F. et al., The roles of XBRL and processed XBRL in 10-K 
readability, J. Bus. Fin. Account. (2021) (finding 10-K file size 
reduces readability before XBRL's adoption since 2012, but increases 
readability after XBRL adoption, indicating ``more XBRL data 
improves users' understanding of the financial statements''); 
Efendi, J., Park, J.D. & C. Subramaniam, Does the XBRL Reporting 
Format Provide Incremental Information Value? A Study Using XBRL 
Disclosures During the Voluntary Filing Program, 52 Abacus 259 
(2016) (finding XBRL filings have larger relative informational 
value than HTML filings).
    \801\ While these studies were not done within the insurance 
company context, it has been observed that XBRL requirements improve 
firm disclosures and decision making. See Olivia Berkman, XBRL: What 
are the Benefits, FEI Daily (Aug. 29, 2019), https://www.financialexecutives.org/FEI-Daily/August-2019/XBRL-What-are-the-Benefits.aspx (noting in an interview with a public company's chief 
financial officer that the company is able to ``search through XBRL 
filings to find similar companies within [its] industry that have 
had to present certain similar [disclosures] in the past,'' which 
has helped the company ``craft[ ] [its] disclosures to make sure 
that [the company is] complying with the spirit of GAAP and 
providing the information that [the company is] supposed to be 
providing''); see also Hyun Woong (Daniel) Chang, et al., The Effect 
of iXBRL Formatted Financial Statements on the Effectiveness of 
Managers' Decisions when Making Inter-Firm Comparisons. J. Info. 
Sys. (2020) (finding ``iXBRL filings facilitate information search 
and information match by allowing users to view XBRL data in HTML 
filings,'' and ``managers make more effective decisions when 
presented with financial information formatted in iXBRL (XBRL)'').
    \802\ See VASP Adopting Release at Section II.D (articulating 
similar benefits for tagging variable annuities).
---------------------------------------------------------------------------

c. Option to Use a Summary Prospectus
    The final amendments to rule 498A permit non-variable annuity 
issuers, as well as issuers of ``combination contracts'' offering a 
combination of index-linked options and variable options, to use a 
summary prospectus to satisfy statutory prospectus delivery 
obligations. Investors will continue to have access to the non-variable 
annuity statutory prospectus and other information about the non-
variable annuity contract online, with paper or electronic copies of 
this information upon request. The current summary prospectus rule for 
variable contracts uses a layered disclosure approach designed to 
provide investors directly with key information relating to the 
contract's terms, benefits, and risks in a concise and reader-friendly 
presentation, with more detailed information available elsewhere. The 
final amendments to rule 498A broaden the scope of the rule to expand 
the layered disclosure approach to non-variable annuity contracts.\803\
---------------------------------------------------------------------------

    \803\ Some commenters questioned the inclusion of certain items. 
See discussion in supra Section II.D.
---------------------------------------------------------------------------

    As discussed in Section II.D above, the final amendments to rule 
498A involve the use of two distinct types of summary prospectuses for 
non-variable annuity contracts, employing the same approach the rule 
currently uses for variable contracts. An ``initial summary 
prospectus,'' covering contracts offered to new investors, will include 
certain key information about the contract's most salient features, 
benefits, and risks, presented in plain English in a standardized 
order. The rule amendments also require ``updating summary 
prospectuses'' to be provided to existing investors in non-variable 
annuity contracts. The updating summary prospectus includes a brief 
description of certain changes to the contract that occurred during the 
previous year, as well as a subset of the information required to 
appear in the initial summary prospectus. Certain key information about 
the index-linked options that the contract offers as investment options 
will be provided in both the initial summary prospectus and updating 
summary prospectus.
    The final amendments create a choice for insurance companies. 
Insurance companies may meet their prospectus delivery obligations by 
providing the statutory prospectus, or by providing a summary 
prospectus and making statutory prospectuses and other required 
documents available online. Those insurance companies that expect to 
benefit by providing summary prospectuses would choose to rely on the 
final amendments to meet their prospectus delivery obligations. For 
example, as discussed in Section II.F.3, we understand that non-
variable annuity issuers typically deliver prospectuses to accompany or 
precede other communications, such as annuity applications. It is 
possible that providing layered disclosure through a summary contract 
prospectus regime (including costs of delivering initial summary and 
updating summary prospectuses and making statutory prospectuses and 
other documents available online) could result in reduced costs for 
issuers.\804\ Conversely, those insurance companies that do not expect 
to benefit from this optional prospectus delivery regime would choose 
to continue to provide statutory prospectuses to investors.
---------------------------------------------------------------------------

    \804\ See VASP Adopting Release. In the VASP Adopting Release we 
estimate that printing and mailing expenses are $0.18 less for 
initial and updating summary prospectuses than for statutory 
prospectuses. Because we understand RILA prospectuses to not be as 
long as variable annuity prospectuses, we would expect savings among 
RILA issuers to be less than the VASP Adopting Release savings, but 
we do not have a basis for believing savings for RILA issuers will 
be of an order of magnitude less than the VASP Adopting Release 
savings. We therefore believe savings for RILA issuers will be 
between approximately $.02 and $.18. We estimate the internal cost 
time of online posting of contract documents to be $772. See infra 
Table 11.
---------------------------------------------------------------------------

    If insurance companies choose to meet their prospectus delivery 
obligations by delivering summary prospectuses to investors, with other 
documents available online, investors will then have a choice as well. 
Under the layered disclosure framework we are adopting for non-variable 
annuities, investors will receive information in the form of a summary 
prospectus, with more detailed information available online if the 
investor chooses to access it.\805\ Thus, investors can continue to 
review the statutory prospectuses by accessing them online, or they may 
request paper or electronic delivery of statutory prospectuses on an ad 
hoc basis. Alternatively, investors may choose only to consult the 
summary prospectuses. Further, if investors want to rely on some 
combination of summary and statutory prospectuses to receive 
information about the contract, that choice is available to them as 
well. Given the Commission's experience administering the optional 
summary prospectus regime for variable annuities, we expect a majority 
of non-variable annuity issuers will choose to use summary 
prospectuses. Thus, we expect that the vast majority of investors will 
have the option to use both summary prospectuses and statutory 
prospectuses in their decision-making, in whatever proportion investors 
think is best for their preferences.
---------------------------------------------------------------------------

    \805\ During investor testing, several participants felt they 
would need information beyond the information contained in the KIT 
to make a decision about a RILA. See OIAD Investor Testing Report at 
Section 5, Qualitative Testing, Results from Round 1.
---------------------------------------------------------------------------

    The presentation required for the initial summary prospectus may 
reduce the investor effort required to compare non-variable annuity 
contracts, to consider different index-linked options that RILAs offer, 
or to compare non-variable annuity contracts with each other and with 
variable annuity contracts, when an investor considers a new 
investment. Information provided in a concise, user-friendly 
presentation could allow investors to compare information across 
contracts and as a result, may lead investors to make decisions that 
better align with their investment goals.\806\
---------------------------------------------------------------------------

    \806\ Research suggests that individuals are generally able to 
make more efficient decisions when they have comparative information 
that allows them to assess relevant trade-offs. See, e.g., 
Christopher K. Hsee et al., (1999). Preference Reversals Between 
Joint and Separate Evaluations of Options: A Review and Theoretical 
Analysis, Psychological Bulletin, 125(5), 576-90; see also Samuel B. 
Bonsall & Brian P. Miller, The Impact of Narrative Disclosure 
Readability on Bond Ratings and the Cost of Debt, 22 Rev. Acct. 
Stud. 608 (2017) and Alistair Lawrence, Individual Investors and 
Financial Disclosure, 56 J. ACCT. & ECON. 130 (2013) (finding that 
shorter and more focused disclosures could be more effective at 
increasing investor understanding than longer, more complex 
disclosures). Consistent with these findings, other empirical 
evidence suggests that disclosure simplification may benefit 
consumers of disclosed information. See, e.g., Sumit Agarwal, et 
al., Regulating Consumer Financial Products: Evidence from Credit 
Cards Nat'l Bureau of Econ. Rsch (working paper no. 19484, Sept. 28, 
2013, last revised Mar. 29, 2023), available at https://ssrn.com/abstract=2332556 (finding that a series of requirements in the 
Credit Card Accountability Responsibility and Disclosure Act (CARD 
Act), including several provisions designed to promote simplified 
disclosure, have produced substantial decreases in both over-limit 
fees and late fees, thus saving U.S. credit card users $12.6 billion 
annually).

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[[Page 60063]]

    Initial Summary Prospectus. Should insurance companies issuing non-
variable annuities choose to use summary prospectuses, investors may 
benefit in a number of ways.\807\ The initial summary prospectus for 
non-variable annuities will be limited to describing only the contract 
and features currently available under the statutory prospectus. This 
focus could make more salient the features and risks of a non-variable 
annuity, thereby facilitating investors' evaluation of those features 
and risks.
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    \807\ Some investors may prefer to read statutory prospectuses, 
and therefore, the advantages associated with summary disclosure, as 
described in this section, may not apply to those investors. The 
statutory prospectus will, under the final amendments, be available 
online and in paper or electronic format upon request.
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    The final amendments require a standardized presentation for non-
variable annuity initial summary prospectuses to require certain 
disclosure items that will be most relevant to investors to appear at 
the beginning of the initial summary prospectus, followed by 
supplemental information. An initial summary prospectus must contain 
the information required by the rule, and only that information, in the 
order specified by the rule.\808\ The information is required to appear 
in the same order, and under relevant corresponding headings, as the 
rule specifies. The required presentation could also facilitate 
comparisons of different non-variable annuity contracts, as well as 
comparisons between non-variable annuity contracts and variable 
annuities.
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    \808\ Rule 498A(b)(5).
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    Standardized, consistent disclosure of comparable information 
benefits investors by making it easier for investors to evaluate and 
compare non-variable offerings. Also, the presentation of information 
in a standardized, consistent manner will facilitate not only the 
evaluation and comparison among non-variable offerings, but also will 
facilitate the comparison of non-variable annuities to other variable 
annuities. Further, certain investors, while aware of variable 
annuities, simply may not be aware of RILAs and registered MVA 
annuities as investment options. Presentation of information in a 
standardized, consistent manner in an initial summary prospectus could 
increase investor awareness of RILAs and registered MVA annuities as 
investing options.
    In addition, given the time required to review a statutory 
prospectus, non-variable annuity investors may benefit from summary 
prospectuses because they offer a shorter alternative to statutory 
prospectus disclosure. There is evidence that suggests that consumers 
benefit from summary disclosures.\809\ Within the specific context of 
investing, there is evidence from related contexts that suggests that 
summary prospectuses allow investors to spend less time and effort to 
arrive at the same portfolio decision as if they had relied on a 
statutory prospectus.\810\ This research is consistent with the 2012 
Financial Literacy Study, which showed that at least certain investors 
favor a layered approach to disclosure with the use, wherever possible, 
of summary documents containing key information about an investment 
product or service.\811\
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    \809\ There is evidence that the summarization of key 
information is useful to consumers. See, e.g., Sumit Agarwal et al., 
Regulating Consumer Financial Products: Evidence from Credit Cards 
(NBER Working Paper No. 19484, rev. 2014), available at https://www.nber.org/papers/w19484. The authors find that a series of 
requirements in the CARD Act, including provisions designed to 
promote simplified disclosure, has produced decreases in both over-
limit and late fees, saving US credit card users $20.8 billion 
annually; see also Robert L. Clark, Jennifer A. Maki & Melinda 
Sandler Morrill, Can Simple Informational Nudges Increase Employee 
Participation in a 401(k) Plan? 80 S. Econ. J. 677 (2014). The 
authors find that a flyer with simplified information about an 
employer's 401(k) plan, and about the value of contributions 
compounding over a career, had a significant effect on participation 
rates.
    \810\ See John Beshears et al., How Does Simplified Disclosure 
Affect Individuals' Mutual Funds Choices? in Explorations in the 
Economics of Aging 75 (David A. Wise ed., 2010) (``Beshears 
Paper''), available at https://scholar.harvard.edu/laibson/publications/how-does-simplified-disclosure-affect-individuals-mutual-fund-choices. We note, however, that while the authors find 
evidence that investors spend less time making their investment 
decision when they are able to use summary prospectuses, there is no 
evidence that the quality of their investment decisions is improved. 
In particular, ``On the positive side, the Summary Prospectus 
reduces the amount of time spent on the investment decision without 
adversely affecting portfolio quality. On the negative side, the 
Summary Prospectus does not change, let alone improve, portfolio 
choices. Hence, simpler disclosure does not appear to be a useful 
channel for making mutual fund investors more sophisticated . . .'' 
Id. at 13 (manuscript page).
    \811\ See 2012 Financial Literacy Study.
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    Also, investors allocate their attention selectively,\812\ and the 
sheer volume of disclosure in a statutory prospectus may discourage 
some investors from reading contract statutory prospectuses. The 
observations of a telephone survey conducted on behalf of the 
Commission with respect to mutual fund statutory prospectuses (which 
are typically shorter than variable contract statutory prospectuses, 
and shorter than non-variable annuity statutory prospectuses are 
expected to be under the proposal) are consistent with the view that 
the volume of disclosure may discourage investors from reading 
statutory prospectuses.\813\ That survey observed that many mutual fund 
investors do not read statutory prospectuses because they are long, 
complicated, and hard to understand. Responses to investor surveys in 
other contexts, also suggest that shareholders may be more likely to 
read more concise shareholder reports.\814\
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    \812\ See George Loewenstein, Cass R. Sunstein & Russell Golman. 
(2014) Disclosure Psychology Changes Everything, 6 Ann. Rev. Econ. 
391 (2014).
    \813\ Prior to the Commission's 2009 adoption of mutual fund 
summary prospectus rules, the Commission engaged a consultant to 
conduct focus group interviews and a telephone survey concerning 
investors' views and opinions about various disclosure documents 
filed by companies, including mutual funds. During this process, 
investors participating in focus groups were asked questions about a 
hypothetical Summary Prospectus. Investors participating in the 
telephone survey were asked questions relating to several disclosure 
documents, including mutual fund prospectuses. See Abt SBI, Inc., 
Final Report: Focus Groups on a Summary Mutual Fund Prospectus (May 
2008), available at https://www.sec.gov/comments/s7-28-07/s72807-142.pdf. Although the results from the investor testing reflect 
stated investor preferences, they do not provide us with information 
with respect to the extent to which RILA investors would actually be 
more likely to read a RILA summary prospectus relative to a 
statutory prospectus.
    \814\ See Tailored Shareholder Reports Adopting Release.
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    To the extent summary prospectuses increase readership of non-
variable annuity contract disclosures, they could improve the quality 
and efficiency of portfolio allocations made on the basis of disclosed 
information for those investors who otherwise will not have read the 
statutory prospectus.
    The required presentation for the initial summary prospectus may 
also reduce the investor effort required to compare non-variable 
annuity contracts, to consider different index-linked options that a 
RILA offers, or to compare non-variable annuity contracts with each 
other and with variable annuity contracts, when an investor considers a 
new investment. Information provided

[[Page 60064]]

in a concise, user-friendly presentation could allow investors to 
compare information across contracts and as a result, may lead 
investors to make decisions that better align with their investment 
goals.\815\ For example, the final amendments require insurance 
companies to distill certain key product information into tables, which 
could facilitate comparison across different products.
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    \815\ See infra footnote 806.
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    Further, the final framework for non-variable annuity contract 
summary and statutory prospectuses also includes design elements to 
facilitate investor use. In particular, the final amendments include 
requirements for linking both within the electronic version of a 
contract statutory prospectus and between the electronic versions of 
the contract statutory prospectus and the contract summary prospectus. 
The linking requirement will permit investors who use the electronic 
versions of contract prospectuses to quickly navigate between related 
sections within the contract statutory prospectus and back and forth 
between related sections of the contract summary prospectus and the 
contract statutory prospectus. Further, the final amendments also 
require that investors either be able to view the definition of each 
special term used in an online summary prospectus upon command, or to 
move directly back and forth between each special term and the 
corresponding entry in any glossary or list of definitions that the 
summary prospectus includes. This requirement will facilitate 
understanding of terms that may be confusing or unfamiliar among 
investors viewing the documents online.
    Updating Summary Prospectus. As under current rule 498A, we are not 
requiring that RILA and registered MVA annuity issuers send an updated 
initial summary prospectus to investors each year. Instead, any non-
variable annuity issuer that relies on rule 498A will send an updating 
summary prospectus, which will provide a brief description of certain 
changes with respect to the contract that occurred within the prior 
year.\816\ The updating summary prospectus will also include certain of 
the information required in the initial summary prospectus that we 
consider most relevant to investors when considering additional 
investment decisions.\817\ Further, updating summary prospectuses for 
non-variable annuity contracts, like initial summary prospectuses, will 
include specific disclosure items appearing in a prescribed order, 
under relevant corresponding headings.\818\ An updating summary 
prospectus for a non-variable annuity contract will have to contain the 
information required by the rule, and only that information, in the 
order specified by the rule.
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    \816\ Rule 498A(c)(1).
    \817\ See Table 8.
    \818\ Rule 498A(c)(6).
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    The updating summary prospectus for RILAs and registered MVA 
annuities will have many of the same benefits for investors associated 
with the initial summary prospectus discussed above, with respect to 
presenting key information in an easier and less time-consuming manner 
for investors. Specifically, because many terms of the non-variable 
annuity contract do not change from year-to-year, the contract 
statutory prospectus may contain large amounts of disclosure that is 
duplicative of disclosure that the investor has previously received. 
Those changes that do occur may be important to investors, but the 
disclosure about these changes could be difficult for the investor to 
identify given the volume of prospectus disclosure that investors would 
otherwise receive, and the current lack of a requirement to identify 
new or changed information.
    Under the final amendments, the updating summary prospectus will 
include a concise description of important changes affecting the 
statutory prospectus disclosure relating to certain topics that 
occurred within the prior year--namely: (1) the availability of 
investment options under the contract, (2) the overview of the 
contract, (3) the KIT, (4) certain information about fees, (5) benefits 
available under the contract, (6) purchases and contract value, and (7) 
surrenders and withdrawals. These are topics that are most likely to 
entail contract changes and, for the reasons previously noted, are the 
types of contract changes most likely to be important to investors 
because they affect how investors evaluate non-variable annuity 
contracts and are relevant to investors when considering whether to 
continue in the existing option (if available) or transfer funds to a 
different option. The updating summary prospectus, if used by issuers 
to satisfy their prospectus delivery obligations, will likely reduce 
the burden on investors and increase their understanding of their 
contract by highlighting certain changes to the contract made during 
the previous year, while forgoing the repetition of most information 
that had remained unchanged.
d. Use of Statutory Accounting
    The final amendments permit RILA and registered MVA annuity issuers 
to provide financial statements on amended Form N-4 in the same way 
that insurance companies currently provide financial statements on that 
form.\819\ As a result of this change, the financial statements filed 
in connection with a registration statement that relates to the 
offering of either of these securities may be prepared in SAP to the 
same extent as currently permitted for insurance companies' financial 
statements filed on that form. We expect this approach to appropriately 
recognize the cost burdens if we were to require GAAP financial 
statements in cases where the insurance company is not otherwise 
required to prepare financial information in accordance with GAAP. In 
addition, SAP financial statements, which focus on an issuer's ability 
to meet its obligations under its insurance contracts, as regulated by 
State law, provide material information for investors evaluating RILAs 
and registered MVA annuities. As a result, permitting insurance 
companies to provide SAP financial statements when registering the 
offering of a RILA or registered MVA annuity to the same extent as they 
can in connection with variable annuities on Form N-4 will be 
consistent with maintaining investor protection. Also, investors could 
benefit to the extent the reduced cost burdens provided by SAP 
financial statements are passed along to investors.
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    \819\ Certain Commission letters, or portions thereof, exempt 
certain insurance companies from the requirement to provide 
financial statements prepared in accordance with GAAP in connection 
with the registration of an offering of RILAs on Form S-1. As 
discussed in Section III.B.1.a, among RILA contracts that are 
currently registered with the Commission, 47 RILAs report SAP 
financials and 43 RILAs report GAAP financials. Comments received on 
this aspect of the proposal are discussed in Section II.E.
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    The final amendments also require insurance companies registering 
non-variable annuities to provide information relating to changes in 
and disagreements with accountants on accounting and financial 
disclosure as detailed in 17 CFR 229.304 (``Item 304 of Regulation S-
K''). Further, insurance companies will be required to provide as an 
exhibit any letter from the insurance company's former independent 
accountant regarding its concurrence or disagreement with the 
statements made by the insurance company in the registration statement 
concerning the resignation or dismissal as the insurance company's 
principal accountant. These items are currently provided by RILAs and 
registered MVA

[[Page 60065]]

annuities on Forms S-1, 8-K, and 10-K, as applicable, and are designed 
to address the practice of ``opinion shopping'' for an auditor willing 
to support a proposed accounting treatment designed to help a company 
achieve its reporting objectives even though that treatment might 
frustrate reliable reporting.\820\ Because the requirements for Form N-
4 filers under the final amendments are the same as for Form S-1, Form 
8-K, and Form 10-K filers currently, we do not expect any additional 
benefits from the requirement to provide information relating to 
changes in and disagreements with accountants on accounting and 
financial disclosure.
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    \820\ See Disclosure Amendments to Regulation S-K, Form 8-K and 
Schedule 14A; see also Form S-1, Item 11(i).
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e. Filing Rules
    Fee Payment Method and Amendments to Form 24F-2. The final filing 
rules require RILA and registered MVA annuity issuers to pay 
registration fees for using the same method that other filers on Form 
N-4 currently use.\821\ Issuers registering the offerings of non-
variable annuities on amended Form N-4 are deemed to be registering an 
indeterminate amount of non-variable annuities upon effectiveness of 
the registration statement. These issuers will then be required to pay 
registration fees annually based on their net sales of these 
securities, no later than 90 days after the issuer's fiscal year ends, 
on the form that is used by current Form N-4 filers to pay registration 
fees (Form 24F-2). The final filing rule further specifies the 
calculation method for paying non-variable annuity registration fees, 
consistent with the fee calculation methodology that applies to current 
Form N-4 filers. The final filing rule also indicates when issuers can 
take credits for non-variable annuity redemptions that pre-date their 
use of that form and when expiring annuity contracts are rolled over 
into a new crediting period as well as other minor technical 
amendments.
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    \821\ Some commenters had specific recommendations on how we 
could modify Form 24F-2. See discussion in supra Section II.F.1.
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    The final filing rules will provide benefits to insurance 
companies. Registering an indeterminate amount of securities benefits 
insurance companies by eliminating the risk that a non-variable annuity 
issuer may inadvertently oversell securities with respect to a 
registration statement on Form N-4. The payment of fees on an annual 
net basis furthermore should lead to a reduction in overall filing fees 
relating to non-variable annuities. For example, insurance companies 
will no longer pay fees on registered, but unsold, securities. To the 
extent that there are cost savings for issuers, some of those savings 
may potentially be passed on to investors.
    Post-Effective Amendments and Prospectus Supplements. As discussed 
in Section II.F.2, the final amendments require RILA and registered MVA 
annuity issuers to use the same framework for filing post-effective 
amendments to the registration statement as is currently used by other 
filers on Form N-4. First, the final amendments amend rule 485 under 
the Securities Act to require non-variable annuity issuers to use that 
rule when amending non-variable annuity registration statements on Form 
N-4. Requiring non-variable annuity issuers to use rule 485 when 
amending non-variable annuity registration statements on Form N-4 
permits non-variable annuity issuers to file post-effective amendments 
that become automatically effective under rule 485(a) after a specified 
period of time after the filing or, in certain enumerated 
circumstances, immediately effective under rule 485(b). Issuers may 
benefit to the extent automatic effectiveness allows issuers to tap 
favorable windows of opportunity in the non-variable annuity market, to 
structure terms of non-variable annuities on a real-time basis to 
accommodate investor demand, and to determine or change the plan of 
distribution in response to changing market conditions.
    Second, the final amendments require RILA and registered MVA 
annuity issuers to apply rule 497 under the Securities Act when 
appropriate to file non-variable annuity prospectuses and prospectus 
supplements with the Commission. Under the final amendments, a non-
variable annuity issuer is required to file every prospectus relating 
to a non-variable annuity offering that varies in form from a 
previously filed prospectus before it is first used. This approach--
rather than requiring filing only if the issuer makes substantive 
changes from or additions to a previously-filed prospectus--may benefit 
both investors and issuers. The requirement that insurance companies 
file every prospectus that varies in form from a previously filed 
prospectus before it is first used could facilitate investor evaluation 
and comparison by making publicly available the most timely information 
currently available to investors. We expect this benefit to be minimal, 
however, because rule 424 under the Securities Act requires non-
variable annuity issuers only to file prospectuses that contain 
substantive changes. Prospectuses required to be filed under rule 497 
that will not be required to file under rule 424, then, will be 
prospectuses updated with minor, non-substantive changes and likely of 
limited informational benefit to investors.
    Issuers may benefit from applying rule 497 as well. The final 
amendments facilitate a uniform post-effective amendment and prospectus 
filing framework for all Form N-4 filers, which will provide insurance 
companies with more consistent filing requirements across similar 
products. This, in turn, could benefit insurance companies by making it 
easier to execute such offerings and may decrease compliance costs.
    As discussed above, certain issuers use a short-form registration 
statement on Form S-3, which requires less information than Form S-1 
and allows for significant incorporation by reference. Certain issuers 
also can rely on rule 430B under the Securities Act to omit certain 
information from the ``base'' prospectus when the registration 
statement becomes effective and later provide that information in a 
subsequent Exchange Act report (forward) incorporated by reference, a 
prospectus supplement, or a post-effective amendment. Issuers 
registering annuity product offerings on Form N-4, on the other hand, 
have limited ability to incorporate information by reference into their 
registration statements and cannot forward incorporate information from 
subsequently filed Exchange Act reports. Issuers registering annuity 
product offerings on Form N-4 also cannot rely on rule 430B to omit 
certain information from the base prospectus. Under the final 
amendments, then, non-variable annuity investors will generally have 
all the information available in one location (other than current 
rates, which will be permitted to be incorporated by reference from a 
website) rather than needing to separately access the information on a 
website or request the incorporated materials. As a result, costs to 
investors for assembling and assimilating necessary information could 
decrease, with a potentially stronger effect for investors that may not 
have the technical capabilities or monetary resources to search 
efficiently through multiple information sources.
f. Materially Misleading Statements in RILA Sales Literature
    We are amending rule 156 to make its provisions applicable to RILA 
and registered MVA annuity sales literature. Rule 156 is an 
interpretive rule that provides factors to be weighed in considering 
whether a statement

[[Page 60066]]

involving a material fact is or might be misleading in the specific 
context of investment company sales literature, including literature 
relating to the sale of variable annuities. The final amendments to 
rule 156 indicate that whether a statement involving a material fact is 
misleading in non-variable annuity sales literature will depend on an 
evaluation of the context in which it is made, with the rule providing 
non-exhaustive factors to guide in this determination.
    For example, rule 156(b)(1)(ii) provides that a statement could be 
misleading because of the absence of explanations, qualifications, 
limitations or other statements necessary or appropriate to make such 
statement not misleading. Under this provision, where made applicable 
to non-variable annuity sales literature, consideration should be given 
about whether an advertisement will be materially misleading if it 
markets the investment as a growth investment, a loss-avoidance 
vehicle, or a customizable product in the absence of qualifying 
explanations or statements. Similarly, under the provision, where made 
applicable to non-variable annuity sales literature, consideration 
should be given about whether an advertisement will be materially 
misleading if sales literature advertises a particular feature of the 
product's bounded return structure that is not available for the life 
of the product without providing additional context as to the issuer's 
discretion to make changes.
    Further, rule 156(b)(4), prior to these amendments, provided that 
representations about fees or expenses associated with an investment in 
a fund could be misleading because of statements or omissions made 
involving a material fact, including situations where portrayals of the 
fees and expenses associated with an investment in the fund omit 
explanations, qualifications, limitations, or other statements 
necessary or appropriate to make the portrayals not misleading. The 
final amendments change this provision to also address representations 
about the fees or expenses associated with a non-variable annuity 
contract and provide guidance about the contextual analysis to use in 
determining whether a particular representation in a non-variable 
annuity advertising could be materially misleading. As discussed in 
Section II.G.1., when complying with this provision in the context of 
non-variable annuity sales literature, under final rule 156(b)(4), 
insurance companies are prompted to consider whether representations or 
portrayals either of a non-variable annuity's costs or charges, or 
optional benefits that are subject to a contract adjustment, would 
necessitate qualifying statements or explanations regarding the 
economic costs to the investor to receive an advertised benefit or 
those generally associated with the non-variable annuity.
    Also, rule 156(b)(2)(i) states that representations about past or 
future investment performance could be misleading because of statements 
or omissions made involving a material fact. This includes situations 
where portrayals of past income, gain, or growth of assets convey an 
impression of the net investment results achieved by an actual or 
hypothetical investment which would not be justified under the 
circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading. Under the provision, 
where made applicable to non-variable annuity sales literature, 
consideration should be given about whether illustrations about the 
operation of a non-variable annuity or its features could be misleading 
because, for example, they use assumptions that are not currently 
offered or exceed what could be reasonably anticipated or use ``cherry 
picked'' data.
    By reducing the potential for misleading or fraudulent statements 
in non-variable annuity sales literature, applying rule 156 to RILAs 
and registered MVA annuities provides investors with protections and 
helps ensure that investors receive the information necessary to make 
informed decisions about these products. Ensuring that investors 
receive the information necessary to make informed decisions could 
benefit investors by facilitating investor evaluation of RILAs and 
registered MVA annuities as well as investor comparison of non-variable 
annuities to other annuity products.
    We are also making a technical amendment to rule 433 to maintain 
the status quo for insurance companies that can meet that rule's 
conditions to use a free writing prospectus in connection with the 
offering of non-variable annuities without meeting the prospectus 
delivery requirements, notwithstanding their use of Form N-4 going 
forward. Absent such an amendment, the rulemaking would have the effect 
of imposing new, universal prospectus delivery requirements in 
connection with RILA marketing materials, even for RILA issuers that 
would otherwise be eligible to rely on rule 433 by virtue of 
registering on Form S-3. Because the technical amendment to rule 433 
maintains the status quo for insurance companies that can meet the 
rule's conditions to use a free writing prospectus in connection with 
the offering of non-variable annuities without the prospectus delivery 
requirements, we do not believe this amendment to rule 433 will create 
additional economic effects.
2. Costs
    The final amendments will likely lead to certain additional costs 
for insurance companies registering non-variable annuities. These costs 
will likely vary across insurance companies, depending on their 
existing lines of business. Costs may also vary depending on the extent 
to which insurance companies will, as a result of the final amendments, 
create prospectuses that vary in form from previously filed 
prospectuses and the frequency of certain events, such as changes in 
accountants and disagreements with accountants on accounting and 
financial disclosure. Generally, the costs will be lower for insurance 
companies that currently offer products that register on Form N-4, for 
those insurance companies that do not change or remove key features of 
non-variable annuities frequently, and for those insurance companies 
that do not experience changes in, and disagreements with, accountants 
on accounting and financial disclosure. The costs of the final 
amendments may also be mitigated to the extent that insurance companies 
already provide the same or similar disclosures on Forms S-1 and S-3, 
8-K, and 10-K, as applicable, as are required by the final amendments.
    The costs to insurance companies will be composed of both direct 
compliance costs and indirect costs. Direct costs for insurance 
companies will consist of internal costs (for compliance attorneys and 
other non-legal staff, such as computer programmers, to prepare and 
review the required disclosure) and external costs (including filing 
fees, outside legal and accounting fees, as well as any costs 
associated with outsourcing all or a portion of the Form N-4 filing 
responsibilities to a filing agent, software consultant, or other 
third-party service provider).
    The final amendments could lead to certain costs for investors as 
well. Direct costs that will be incurred by the insurance companies in 
coming into compliance with the final amendments ultimately may be 
passed on to investors. Investors also may bear costs associated with 
certain final amendments such as the change in filing rules as well as 
an insurance companies' option to use a summary prospectus.

[[Page 60067]]

a. Direct Costs
    Form N-4. The direct costs associated with the final amendments 
will be most significant for the first Form N-4 registration statement 
that an insurance company will be required to prepare and file because 
the insurance company will need to familiarize itself with the new 
registration form and may need to configure its systems to efficiently 
gather the required information. In subsequent periods, we anticipate 
that insurance companies will incur significantly lower costs because 
much of the work involved in the initial registration statement 
preparation and filing is non-recurring and because of efficiencies 
realized from system configuration and reporting automation efforts 
accounted for in the initial filing period. The costs associated with 
preparing and filing a new registration statement (on Form N-4 as 
opposed to Forms S-1/S-3) will be lower to the extent an insurance 
company already has experience and systems in place to prepare and file 
registration statements on Form N-4 (e.g., because the insurance 
company currently offers variable annuities whose offerings are 
registered on Form N-4).
    Under the final amendments, insurance companies will register non-
variable and variable annuity contract offerings on final Form N-4. In 
addition, the Commission is adopting other amendments to Form N-4 that 
will apply to all issuers that use that form.\822\ We estimate the 
average cost of the final amendments for Form N-4 to be around $200,000 
per contract per year.\823\
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    \822\ For example, compared to the current Form N-4, the final 
amendments switch the order of the Key Information Table and 
Overview of the Contract items, require issuers to present 
information in the KIT in a Q&A format, and require more specific 
principal risk disclosures.
    \823\ The $200,000 estimate is based on the following 
calculations: $159,600 (blended hourly rate for compliance attorney 
and senior programmer at $420 for 380 hours) + $40,000 (costs for 
external services) [ap] $200,000. Salaries for estimates presented 
in this section are derived from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified to account for an 
1,800-hour work-year and inflation, and multiplied by 5.35 to 
account for bonuses, firm size, employee benefits and overhead. See 
Table 12 (with relevant details about estimates in footnotes 2-5). 
This estimate assumes that the annual cost per contract is the same 
regardless of whether a contract is first registered or whether the 
issuer files a post-effective amendment. We anticipate that the cost 
of filing post-effective amendments (see Table 13) will be lower 
than the cost of initial filings. As a result, this estimate is 
conservative.
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    Insurance companies will also incur compliance costs to tag many of 
the newly required Form N-4 disclosures (as well as those prospectus 
disclosures that Form N-4 currently requires to be tagged) in Inline 
XBRL. Various XBRL and Inline XBRL preparation solutions have been 
developed and used by operating companies and investment companies to 
fulfill their structuring requirements, and some evidence suggests 
that, for smaller operating companies, XBRL compliance costs have 
decreased over time.\824\ To the extent these insurance companies 
comply with Inline XBRL requirements internally rather than outsourcing 
to an external service provider, they may already be familiar with 
Inline XBRL software and may be able to leverage existing Inline XBRL 
preparation processes and/or expertise in complying with the new 
tagging requirements. This will limit the compliance costs arising from 
the new tagging requirements for these issuers to only those costs 
related to selecting additional Inline XBRL tags for those new 
disclosures to be tagged, and reviewing the tags selected for those 
disclosures. We estimate the average annual cost for XBRL compliance 
will be around $500 for each current N-4 filer, which is already 
familiar with structured disclosure in the context of Form N-4, and 
around $2,400 for each non-variable annuity issuer, which would newly 
file Form N-4.\825\ However, 32 of the 38 insurers that issue RILAs and 
registered MVA annuities also offer variable products registered on 
Forms N-3, N-4, or N-6, all of which are currently structured, or 
otherwise have experience tagging registration statements, which would 
reduce the cost to these issuers compared to our estimate.\826\
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    \824\ An AICPA survey of 1,032 public operating companies with 
$75 million or less in market capitalization in 2018 found an 
average cost of $5,850 per year, a median cost of $2,500 per year, 
and a maximum cost of $51,500 per year for fully outsourced XBRL 
creation and filing, representing a 45% decline in average cost and 
a 69% decline in median cost since 2014. See AICPA, XBRL Costs for 
Small Companies Have Declined 45% since 2014 (2018), available at 
https://us.aicpa.org/content/dam/aicpa/interestareas/frc/accountingfinancialreporting/xbrl/downloadabledocuments/xbrl-costs-for-small-companies.pdf. Note that this survey was limited to small 
operating companies. Additionally, a NASDAQ survey of 151 listed 
issuers and other respondents in 2018 found an average XBRL 
compliance cost of $20,000 per quarter, a median XBRL compliance 
cost of $7,500 per quarter, and a maximum XBRL compliance cost of 
$350,000 per quarter in XBRL costs per quarter. See Letter from 
Nasdaq, Inc. (Mar. 21, 2019); Request for Comment on Earnings 
Releases and Quarterly Reports, Securities Act Release No. 10588 
(Dec. 18, 2018) [83 FR 65601 (Dec. 21, 2018)].
    \825\ The $500 estimate is based on the following calculations: 
$406 (blended hourly rate for compliance attorney and senior 
programmer at $406 for 1 hours) + $50 (costs for external services) 
[ap] $500. The $2,400 estimate is based on the following 
calculations: $1,624 (blended hourly rate for compliance attorney 
and senior programmer at $406 for 4 hours) + $700 (costs for 
external services) [ap] $2,300. See Table 16 (with relevant details 
about estimates in footnotes 2-9).
    \826\ Based on analysis of Forms S-1, S-3, and POS AM filed by 
RILA issuers as of May 2024. See also infra footnote 867.
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    Option to Use a Summary Prospectus. Issuers will benefit from the 
option to use a summary prospectus to the extent that providing layered 
disclosure through a summary prospectus regime (including costs of 
producing and delivering initial summary and updating summary 
prospectuses and of making statutory prospectuses, and other documents 
available online) is less expensive than providing statutory 
prospectuses to new investors and updated statutory prospectuses to 
existing investors annually. Insurance companies choosing to provide 
summary prospectuses will bear a one-time cost of preparing both the 
initial summary prospectus and the updating summary prospectus, as well 
as costs associated with preparing updated versions the updating 
summary prospectus in the future on at least an annual basis.\827\ We 
estimate the average annual cost to prepare initial and updating 
summary prospectuses to be around $2,600 for each separate account 
registrant, who use rule 498A currently, and around $13,000 for each 
insurance company that issues non-variable annuities.\828\
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    \827\ The final amendments require insurance companies to use 
Form N-4 for registered MVA annuities and, as is the case with non-
variable annuities and variable annuities, allowing registered MVA 
annuities the option to use a summary prospectus. As a result, 
additional insurance companies may opt to use summary prospectuses 
in connection with registering offerings compared to the proposal.
    \828\ The $2,600 estimate is based on the following 
calculations: hourly rate for compliance attorney at $425 for 6 
hours [ap] $2,600. The $13,000 estimate is based on the following 
calculations: $7,512 (blended hourly rate for compliance attorney 
and intermediate accountant at $313 for 24 hours) + $897 (hourly 
rate for webmaster at $299 for 3 hours) + $5,000 (costs for external 
services) [ap] $13,000. This estimate includes the cost to include 
inter-and intra-document linking and special terms definitions. In 
addition, we estimate that non-variable annuity issuers will incur 
printing and mailing costs of approximately $1,500 per registrant 
for initial summary prospectuses and approximately $12,000 per 
registrant for updating summary prospectuses. (Separate account 
registrants already incur these printing and mailing costs under the 
baseline.) See Table 11 (with relevant details about estimates in 
footnotes 2-9).
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    Insurance companies that choose to provide summary prospectuses are 
required to make statutory prospectuses and other materials available 
online. We estimate the average annual cost to comply with the final 
website posting requirements of the rule to be around $900 for each 
insurance company that

[[Page 60068]]

issues non-variable annuities.\829\ However, some of these costs may 
have already been incurred by issuers of contracts offering variable 
options as well as non-variable annuities.
---------------------------------------------------------------------------

    \829\ The $900 estimate is based on the following calculations: 
hourly rate for webmaster at $299 for 3 hours. See Table 11 (with 
relevant details about estimates in footnotes 2-9).
---------------------------------------------------------------------------

    Filing the Prospectus. As discussed in Section II.F, insurance 
companies registering offerings of RILAs and registered MVA annuities 
follow different processes to file prospectuses than current Form N-4 
filers. For example, a RILA issuer is required to file a prospectus 
only if the issuer makes substantive changes or additions to a 
previously-filed prospectus, whereas current Form N-4 filers are 
required to file every prospectus that varies from any previously-filed 
prospectus. Accordingly, under the final amendments, a non-variable 
annuity issuer is required to file every prospectus relating to a non-
variable annuity offering that varies in form from a previously filed 
prospectus before it is first used. This requirement could increase the 
number of prospectuses required to be filed by non-variable annuities 
which could, in turn, increase costs for issuers.\830\ One commenter 
stated that the proposed rule would require RILA issuers to include the 
current rate in the prospectus on the day it goes effective and 
subsequently update such rates through the proposed 497 RILA rate-
setting regime.\831\ The commenter stated further that the requirement 
would be a significant change, and added expense, for RILA issuers, 
particularly companies that change current rates frequently. The 
commenter provided an example from a member firm suggesting that the 
member firm would need to file 432 supplements each year. The commenter 
did not provide an estimate of the cost of providing a supplement. As 
discussed further in Section II.C.4.a, certain commenters suggested 
that current upside rates should be posted online instead of included 
directly in the prospectus. After considering comments, we have 
determined to permit insurance companies to disclose current upside 
rates in the prospectus either by disclosing the information directly 
in the prospectus, as proposed, or by including a website address where 
the current upside rates can be found and incorporating by reference 
the information on the website into the prospectus. Additionally, all 
upside rate information for the prior calendar year must be filed 
annually with the Commission in a structured data format in response to 
Item 31A of Form N-4. Because the approach we are adopting is largely 
consistent with current practice, we anticipate that insurance 
companies will not incur significant additional costs.
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    \830\ The potential increase in cost could be greater for Form 
S-3 filers than for Form S-1 filers. Form S-3 requires less 
information than Form S-1. Also, Form S-1 allows incorporation by 
reference only on a very limited basis. Form S-3 allows for forward 
incorporation by reference. Form S-3 filers may need to produce 
incrementally more information to file on Form N-4 than Form S-1 
filers. Transitioning to Form N-4 could be more expensive for Form 
S-3 filers than for Form S-1 filers, as a result.
    \831\ See CAI Comment Letter.
---------------------------------------------------------------------------

    Securities Registration Fees. Insurance companies registering 
offerings of RILAs and registered MVA annuities will be required to pay 
securities registration fees relating to non-variable annuity offerings 
in arrears annually by filing Form 24F-2. Like Form N-4, insurance 
companies will need to familiarize themselves with the new form and may 
need to configure their systems to efficiently gather the required 
information. We estimate the average annual cost of this requirement to 
be around $1,200 for each insurance company that issues non-variable 
annuities.\832\
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    \832\ The $1,200 estimate is based on the following 
calculations: $246 (rate for compliance clerk at $82 for 3 hours) + 
$938 (rate for programmer at $316 for 3 hours) [ap] $1,200. See 
Table 15.
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    Materially Misleading Statements in Non-Variable Annuity Sales 
Literature. The final amendments make the provisions of rule 156 
applicable to non-variable annuity sales literature. The cost of the 
final amendments includes the direct cost of analyzing advertising 
materials in light of the guidance rule 156 provides. Insurance 
companies may review and approve advertisements beyond what occurs 
currently, particularly because determining whether a statement 
involving a material fact is misleading in non-variable annuity sales 
literature will depend on an evaluation of the context in which it is 
made. We expect some of these costs to be borne in the first year after 
adoption of the final amendments. That is, these costs will be 
transition costs and not sustained beyond the first year. We estimate 
that the transition costs associated with the advertising rule 
amendments will be around $5,800 per advertisement.\833\ Also, ongoing 
sales literature activity may require internal review and approval of 
advertisements. We estimate that the costs associated with ongoing 
sales literature activity will be around $1,900 annually per 
advertisement.\834\ These costs will be borne by insurance companies 
that issue and advertise non-variable annuities and third parties who 
prepare these advertisements.
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    \833\ See Tailored Shareholder Reports for Mutual Funds and 
Exchange-Traded Funds; Fee Information in Investment Company 
Advertisements adopting release at n.744. However, these costs may 
be lower to the extent the advertisement at issue is less complex.
    \834\ See Tailored Shareholder Reports for Mutual Funds and 
Exchange-Traded Funds; Fee Information in Investment Company 
Advertisements adopting release at n.745. However, these costs may 
be lower to the extent the advertisement at issue is less complex or 
higher if it is more complex.
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b. Indirect Costs
    Form N-4. While the prospectuses and other registration statement 
disclosure required by the final amendments will likely facilitate 
investor evaluation and comparison of non-variable annuities, investors 
could experience certain transition costs, and some investors may 
experience other ongoing costs. Transition costs will include the costs 
of the inconvenience to some investors of adapting to the new materials 
and to the changes in the presentation of information. Investors will 
also bear a one-time cost of the inconvenience of adjusting to the 
changes in the disclosures they receive. These costs are likely to be 
relatively lower for investors with less experience investing in non-
variable annuities who are accustomed to existing non-variable annuity 
practices. Also, one commenter stated that while the proposed rule 
would facilitate comparison of non-variable annuities and variable 
annuities (both registered on Form N-4), the proposed rule would result 
in inconsistency in the disclosure of non-variable annuities and 
similar life insurance product offerings (that are not registered on 
Form N-4).\835\ However, investors only would bear any associated cost 
to the extent investors consider life insurance products to be 
substitutes for non-variable and variable annuities. Generally, 
investors may treat variable life insurance products as supplements to 
their non-variable and variable annuity investments, rather than as 
substitutes.\836\ As a result, we do not believe this cost, to the 
extent it exists, would be meaningful for investors.
---------------------------------------------------------------------------

    \835\ See CAI Comment Letter.
    \836\ The Insured Retirement Institute states that ``The cash 
value available in a whole life policy can be used to supplement 
retirement income.'' For example, ``A whole life insurance policy 
can be used to soften the effects of a down market by allowing 
investors to either withdraw cash or take a loan from the life 
policy and avoid drawing down their other retirement savings at the 
least opportune time.'' See IRI Fact Book.
---------------------------------------------------------------------------

    Option to Use a Summary Prospectus. While we expect that, should 
insurance companies opt to use summary

[[Page 60069]]

prospectuses, the majority of investors will benefit from their 
disclosures, certain investors may incur costs. For example, although 
research indicates that investors generally prefer to receive summary 
disclosures, there may be non-variable annuity investors who prefer to 
rely on statutory prospectuses when making investment decisions. While 
non-variable annuity statutory prospectuses will continue to be 
available online and in paper or electronic copy upon request, access 
to those statutory prospectuses will require investors to take 
additional steps, imposing some burden. For example, investors choosing 
to access the statutory prospectus online rather than requesting a 
paper copy will need to manually enter a hyperlink from a paper 
updating summary prospectus or click on a link to a website containing 
the statutory prospectus. To the extent that internet access and use 
among non-variable annuity investors is not universal, those investors 
without home internet access might experience a reduction in their 
ability to access statutory prospectus information quickly and 
easily.\837\ Even for those investors with home internet access, there 
may be some resistance to taking the additional step of accessing the 
statutory prospectus online.
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    \837\ According to the most recent U.S. census data, 
approximately 85% of U.S. households had some form of broadband 
internet access in their home in 2018, and 92% had a computer (e.g., 
desktop, laptop, tablet or smartphone). See Michael Martin, Computer 
and internet Usage in the United States: 2018, U.S. Census Bureau 
(Apr. 21, 2021), available at https://www.census.gov/library/publications/2021/acs/acs-49.html; see also Pew Research Center, 
internet/Broadband Fact Sheet (Apr. 7, 2021), available at https://www.pewresearch.org/internet/fact-sheet/internet-broadband/ 
(``Today, 93% of American adults use the internet.'' and ``Today, 
roughly three-quarters of American adults have broadband internet 
service at home.''); see also Ani Petrosyan, internet Usage in the 
United States--Statistics & Facts, Statista (Aug. 31, 2023), 
available at https://www.statista.com/topics/2237/internet-usage-in-the-united-states/#topicOverview (``Today, over 90 percent of 
Americans have access to the internet'').
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    Use of Statutory Accounting Principles. The final amendments permit 
RILA and registered MVA annuity issuers to provide financial statements 
on amended Form N-4 in the same way that insurance companies currently 
do on Form N-4. One consequence of this change will be that the 
financial statements filed in connection with a non-variable annuity 
registration statement could be prepared in SAP to the same extent as 
currently permitted for insurance companies' financial statements filed 
on that form. The final amendments create a choice for certain 
insurance companies. They may prepare their financial statements for 
use in a registration statement in SAP, or they may prepare their 
financial statements for use in a registration statement in GAAP. Those 
insurance companies that expect to benefit from preparing their 
financial statements for use in a registration statement in SAP (e.g., 
through reduced costs) will choose SAP.\838\ Those insurance companies 
that do not expect to benefit from the option to prepare their 
financial statements for use in registration statement in SAP will 
continue to prepare their financial statements for use in a 
registration statement in GAAP. Because the final amendments will 
create the option, but not the obligation, to prepare their financial 
statements for use in a registration statement in SAP, we do not 
believe this provision of the final amendments will create additional 
costs.
---------------------------------------------------------------------------

    \838\ Some commenters stated that permitting the use of SAP 
financials would reduce the burdens on many insurance companies 
offering or seeking to offer RILAs. See supra footnote 568.
---------------------------------------------------------------------------

    Filing and Prospectus Delivery Rules. As discussed in Section II.F, 
when a non-variable annuity issuer seeks to amend a non-variable 
annuity registration statement on Form S-1, the issuer must file a 
post-effective amendment that is typically declared effective by 
Commission staff acting pursuant to delegated authority on such date as 
the Commission may determine. To the extent that investors previously 
benefited from the Commission staff's review of these filings before 
they become effective, allowing filings of non-variable annuity 
offerings to become automatically effective may eliminate such reviews 
and, as a result, possibly increase the costs to investors. However, 
issuers will still face liability under the Federal securities laws for 
registration statement disclosures (e.g., sections 12 and 17 of the 
Securities Act and section 10(b) and rule 10b-5 under the Exchange 
Act), which may ameliorate the potential costs associated with reduced 
staff review. Moreover, rule 485 only permits updates to become 
immediately effective in limited, enumerated circumstances, in order to 
provide an opportunity for staff review for all other changes.
    Materially Misleading Statements in RILA Sales Literature. While 
reducing the potential for misleading or fraudulent statements in non-
variable annuity sales literature will provide investors with 
protections and help ensure that investors receive the information 
necessary to make informed decisions about these products, investors 
could bear the costs of these amendments through increased expenses 
that issuers would incur to implement the final amendments. 
Alternatively, if the cost of compliance with these final amendments is 
significant, some non-variable annuity issuers might reduce advertising 
to lower the extra costs of compliance. If this occurs, investors who 
would otherwise rely on advertisements to make investment decisions 
about non-variable annuities or compare non-variable annuities with 
other investment products might have less complete information for 
these purposes.

D. Effects on Efficiency, Competition, and Capital Formation

    Efficiency. To investors, the costs of purchasing a non-variable 
annuity are more than just the dollar cost of the contract and include 
the value of an individual's time spent evaluating the contract and its 
various aspects. Further, for those investors who do not gain a full 
understanding of the contract, there could be a cost stemming from a 
potential mismatch between an investor's goals and the purchased 
contract. Depending on the size of an individual's potential purchase, 
certain of these additional costs could be considerable in comparison 
to the monetary costs associated with a contract purchase and could 
discourage investors from considering non-variable annuities even in 
circumstances where investment in a non-variable annuity would be 
beneficial.
    For their part, insurance companies only supply RILAs and 
registered MVA annuities to the extent they expect the benefits derived 
from providing the contracts to be greater than the costs of supplying 
the contract. For issuers, costs include not only those costs 
associated with producing and servicing non-variable annuities, but 
also those costs associated with meeting various statutory and 
regulatory obligations.
    These costs borne by both insurance companies and individuals are 
examples of market ``frictions.'' Market frictions have the effect of 
reducing the benefits from (i.e., the efficiency of) contracting 
between market participants.\839\ Rules that reduce costs for 
investors, issuers, or both, reduce market frictions and potentially 
enhance the benefits from contracting between market participants. By 
facilitating investor evaluation and comparison of RILAs and registered 
MVA annuities as well as facilitating the comparison of non-variable 
annuities to other annuity contracts, the final amendments could reduce 
frictions for investors. Requiring

[[Page 60070]]

insurance companies to use a single registration form and filing 
process for all non-variable annuities as well as all variable annuity 
separate accounts that are structured as unit investment trusts, as 
well as allowing non-variable annuity issuers to provide financial 
statements on amended Form N-4 in the same way that insurance companies 
currently do on Form N-4, may also reduce certain compliance burdens 
for insurance companies. In addition, requiring non-variable annuity 
issuers to tag certain key information in Inline XBRL will enable 
investors, third-party information providers, Commission staff, and 
other data users to capture and analyze that information more quickly 
and efficiently than is possible when the same information is provided 
solely in a static, text-based format.
---------------------------------------------------------------------------

    \839\ If market frictions are sufficiently large, market 
frictions can eliminate exchange altogether.
---------------------------------------------------------------------------

    These increases in efficiency could lead investors to save more 
appropriately to meet their retirement goals. For example, for existing 
non-variable annuity investors the final amendments may increase the 
likelihood that investors choose to invest more or less money in non-
variable annuities in a manner that is consistent with their overall 
financial needs and objectives--a level that may be higher or lower 
than current levels. Similarly, the final amendments may lead existing 
investors to choose to allocate their money into different investment 
options that the non-variable annuity offers, or different non-variable 
annuities (or other insurance products like variable annuities) that 
best meet their needs.\840\ The final amendments also could help 
promote investment in non-variable annuities by investors who currently 
do not invest in non-variable annuities, to the extent such investments 
are appropriate for them. Finally, access to clearer information about 
the contract provisions may reduce the chances that an investor makes 
mid-crediting period withdrawals or transfers or surrenders a non-
variable annuities when the costs of doing so do not justify the 
benefits.
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    \840\ One commenter stated that extending the relief provided by 
Form N-4 to issuers of RILA contracts will enable more insurance 
companies to enter the RILA market, which will increase market 
competition and the choices available to investors among products 
for retirement and other long-term purposes. See CAI Comment Letter. 
Increased choice in the future could benefit investors to the extent 
increased choices allow investors to allocate their money into 
different investments that better match their overall financial 
needs and objectives.
---------------------------------------------------------------------------

    Competition. If the final amendments increase efficiency of 
exchange in the non-variable annuity market, then we may observe a 
change in investment in non-variable annuities. For example, if there 
are individuals who currently do not invest in non-variable annuities 
(or invest less than they would have) because the costs other than the 
price of the contract are too high (including the effort to gain 
sufficient understanding of the product) or they are not aware of non-
variable annuities as an investment, then to the extent the final 
amendments lower those costs or make investors more aware of non-
variable annuities, we will expect to observe more investors entering 
the non-variable annuity market (i.e., there could be an increase in 
demand for non-variable annuities). Conversely, there may be non-
variable annuity investors who, because of the burden, choose not to 
read statutory prospectuses. To the extent those investors are more 
likely to read summary prospectuses, those investors may decide, as a 
result, that other investments or products are better suited to their 
investment goals. This could result in fewer investments in non-
variable annuities (i.e., there could be a decrease in demand for non-
variable annuities).
    As stated in the Proposing Release, if there are insurance 
companies who limited their participation in the non-variable annuity 
market prior to the final amendments as a result of the requirement to 
register non-variable annuity offerings on Form S-1 or Form S-3 or 
because of the costs of current prospectus delivery requirements, those 
insurance companies might increase participation in the non-variable 
annuity market (i.e., there could be an increase the supply of non-
variable annuities) as a result of the final amendments.\841\ 
Commenters agreed with this assessment in the context of the proposal 
for RILAs, and provided comments that could similarly apply to 
registered MVA annuities. For example, several commenters noted that 
the ability of RILA issuers to provide financial statements on final 
Form N-4 in the same way that insurance companies currently do on Form 
N-4 would facilitate new entrants to, and enhanced competition in, the 
RILA marketplace.\842\ More generally, one commenter stated that Forms 
S-1 and S-3 are not well-suited for insurance products and, as a 
result, the use of Form S-1 and S-3 has impeded the entry of new 
issuers to the RILA marketplace.
---------------------------------------------------------------------------

    \841\ See Proposing Release at Section III.D.
    \842\ See, e.g., IRI Comment Letter; Gainbridge Comment Letter; 
CAI Comment Letter.
---------------------------------------------------------------------------

    While stating that certain provisions of the proposed rule would 
promote market competition, this commenter did express concern--
specific to RILAs--that the proposed requirement to disclose a 
guaranteed minimum limit on index losses for the life of the contract 
for each index-linked option would unreasonably constrain insurance 
companies from offering competitive upside rates or even certain 
classes of index-linked options altogether and might have an 
inadvertent chilling effect on product innovation and, in turn, 
investor choice.\843\ As discussed in Section II.C.1, we are modifying 
the disclosure requirement to reflect the fact that not all non-
variable annuities provide minimum guaranteed limits on index loss for 
the life of the contract. By clarifying that disclosure of minimum 
guaranteed limits on index loss for the life of the contract is not 
intended to require insurance companies to establish such minimums, the 
adopted change mitigates the commenter's concern. To the extent that 
competition in a market is related to the size of the market, the net 
effect of these potential changes in investor demand for, and issuer 
supply of, non-variable annuities might affect competition in the non-
variable annuity market.
---------------------------------------------------------------------------

    \843\ See CAI Comment Letter.
---------------------------------------------------------------------------

    The final amendments might also affect competition by requiring 
that information about non-variable annuities be presented in a 
concise, user-friendly way, which could allow investors to compare 
information across products. Requiring non-variable annuity issuers to 
tag certain key information in Inline XBRL could further facilitate 
comparisons of information across registrants by making it easier for 
investors (directly or through third-party data aggregators) to extract 
and aggregate information through automated means for analysis and 
comparison, which could increase competition among non-variable annuity 
issuers for investor capital. For example, the final amendments require 
issuers to distill certain key product information into tables. The 
presentation of this information in a table facilitates evaluation 
among different non-variable annuities as well as comparison to 
variable annuities. Greater comparison among different non-variable 
annuities as well as comparison to variable annuities could lead to 
greater competition. Furthermore, by reducing the costs associated with 
aggregating data across non-variable annuities, the final Inline XBRL 
requirement could reduce barriers to entry for third-party data 
aggregators and induce competition among firms that supply information 
about non-variable annuities to investors, including other third-party 
aggregators and sales agents. Accordingly, we do

[[Page 60071]]

not anticipate that the costs associated with Form N-4 tagging will be 
significant enough to deter insurance companies from entering the 
market for RILAs and registered MVA annuities. As such, we do not 
expect that the new and modified tagging requirements will decrease 
competition in the market for RILAs and registered MVA annuities.\844\
---------------------------------------------------------------------------

    \844\ See also infra Section III.D.
---------------------------------------------------------------------------

    The effect on competition between insurance companies could be 
limited, however, to the extent non-variable annuity investors rely on 
an agent to help them select their non-variable annuity contract and 
the investment options under the contract and do not have access to 
broad comparisons across different non-variable annuities (or among 
different investment options that non-variable annuities offer) at the 
time of sale.\845\ Agents generally only provide their customers with a 
subset of all non-variable annuities available in the general 
marketplace. Thus, while the product information in summary 
prospectuses will facilitate comparison across products offered by the 
agent, the effect will likely be limited to the agent's set of products 
rather than to the broader market.
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    \845\ We do not have data on the extent to which investors rely 
on agents when purchasing RILAs. In 2019, $95.5 billion of total 
variable annuity sales of $98.3 billion (97%) were through a 
distribution channel involving an agent (see IRI Fact Book). If 
investors rely on agents when purchasing RILAs to the same extent 
they do when purchasing variable annuities, then the vast majority 
of RILA investors rely on agents when purchasing RILAs.
---------------------------------------------------------------------------

    Capital Formation. As discussed in connection with the potential 
effects of the final amendments on competition, if the final amendments 
increase the efficiency of exchange in the non-variable annuity market, 
then we may observe a change in investment in non-variable annuities. 
As discussed in Section IV.B.3, unlike variable annuities that involve 
a direct investment of premiums into one or more mutual funds, which in 
turn invest in underlying securities, non-variable annuity premiums are 
not directly invested into equity securities, but are typically 
invested into derivative securities or fixed-income securities such as 
corporate bonds. To the extent that an increase or decrease in the 
demand for non-variable annuities is not driven by investors 
substituting either away from, or into, variable annuities or other 
investment vehicles as an alternative, we would not expect changing 
demand for non-variable annuities to have any effect on the underlying 
securities. An increase or decrease in the demand for non-variable 
annuities could, however, increase or decrease the demand for fixed-
income securities such as corporate bonds by insurance companies. To 
the extent the final amendments would cause investors to either 
substitute away from, or into, variable annuities or another investment 
that entail investment in underlying funds (which, in turn, invest in a 
portfolio of securities), there could be an effect on capital 
formation. If investors substitute away from variable annuities or 
other investment vehicles into non-variable annuities, there could be a 
reduction in the demand for the underlying securities and, by 
extension, a reduction in capital formation. If investors substitute 
away from non-variable annuities and into variable annuities or other 
investment vehicles, there could be an increase in the demand for the 
underlying securities. To the extent issuers invest non-variable 
annuity proceeds into fixed-income securities such as corporate bonds, 
there could be an increase in the demand for those securities.
    The final Inline XBRL requirements could increase the efficiency of 
capital formation to the extent that making disclosures available in a 
structured format reduces some of the information barriers that make it 
costly for non-variable annuity issuers to find appropriate sources of 
new investors. Smaller issuers may benefit more from enhanced exposure 
to investors. If tagging certain disclosures in a structured format 
increases the availability, or reduces the cost, of collecting and 
analyzing key information about non-variable annuities, smaller non-
variable annuity issuers may benefit from improved coverage by third-
party information providers and data aggregators.

E. Reasonable Alternatives Considered

1. Creating an Entirely New Registration Form for RILAs
    The final amendments require the registration of RILA offerings on 
Form N-4. As an alternative, we considered requiring insurance 
companies to register RILA offerings on an entirely new form. Most 
variable annuities use Form N-4, which has disclosure requirements 
tailored to these investments that provide investors with key 
information about a variable annuity's terms, benefits, and risks, 
along with information about the insurance company and the offering. 
Currently, insurance companies register RILA offerings on Forms S-1 or 
S-3, which allow registering general debt or equity offerings. Forms S-
1 and S-3 require issuers to disclose not only information about the 
offering itself, but also extensive information about the registrant 
issuing the securities. In addition, registrants must include financial 
statements prepared in accordance with GAAP, unless an exemption has 
been granted pursuant to 17 CFR 210.3-13 that permits an insurance 
company to substitute SAP financials for GAAP financials. Form N-4, on 
the other hand, allows insurance companies to file financial statements 
prepared in accordance with SAP if they do not otherwise prepare GAAP 
financial statements.
    A completely new registration form for RILA offerings could 
negatively affect investors' ability to compare different RILAs with 
variable annuities that register on Form N-4 (including contracts that 
offer index-linked options along with other investment options such as 
variable options or fixed investment options). Furthermore, given that 
we are amending Form N-4 to add information to capture aspects specific 
to RILAs, but many of the current form requirements are relevant to the 
registration of RILA offerings, a completely new and separate form for 
RILAs would not offer much (if any) benefit to investors in terms of 
new information compared to the final amendments to Form N-4. Since 
most variable annuity issuers already use Form N-4 to register their 
securities, and many RILA contracts are offered as ``combination'' 
contracts, the amended Form N-4 will efficiently provide investors with 
product-specific information about these combination contracts. As a 
result, investors will be able to compare annuity products, and the 
investment options that these products offer, with less time and 
effort.\846\ To the extent that investors use less time and effort to 
compare annuity products and their underlying investment options, 
investors may be more likely to make decisions that align better with 
their investment goals.
---------------------------------------------------------------------------

    \846\ See CAI Comment Letter.
---------------------------------------------------------------------------

    Requiring RILA offerings to be registered on Form N-4 rather than 
on an entirely new form will also be more efficient for insurance 
companies since they will generally follow the same procedures they 
already use for the registration of variable annuities.\847\ Using Form 
N-4 to register variable annuities and RILA offerings will also be less 
costly for insurance companies than using Form N-4 for variable 
annuities and a completely new form for RILAs since registrants are 
already familiar with Form N-4. It also will be less costly because, if 
RILA offerings had to be registered on a form other than

[[Page 60072]]

Form N-4, combination contracts offering variable options and index-
linked options would have to use two separate registration forms.
---------------------------------------------------------------------------

    \847\ Id.
---------------------------------------------------------------------------

    The Commission will also benefit from using Form N-4 for RILAs 
because the disclosure requirements for variable annuities and RILAs 
will be located in one form only, and registration statements for these 
products will be subject to the same filing and review processes.\848\ 
This will reduce the use of resources by Commission staff needed to 
review the registration statements of RILAs and variable annuities.
---------------------------------------------------------------------------

    \848\ Id.
---------------------------------------------------------------------------

2. Alternatives to Specific Form N-4 Amendments
    The Commission is making amendments to Form N-4 so that insurance 
companies are required to register non-variable annuity offerings using 
that form. While the substance of many of the requirements in Form N-4 
does not change from the current version of the form, we are updating 
some items to include disclosures specifically tailored to non-variable 
annuities. In certain limited circumstances, we have changed the 
disclosure requirements provided on the form for all filers, including 
those registering variable annuities.
    As an alternative, we could have required more or less tailoring of 
the form for non-variable annuities. A larger number of amendments 
tailored to non-variable annuities than the number we adopted would be 
more costly for insurance companies registering non-variable annuity 
offerings because insurance companies that offer combination contracts 
(or that otherwise register variable annuities on Form N-4) would have 
to make more changes to their disclosure. For example, we could have 
required insurance companies to provide a diagram in the KIT to 
illustrate surrender charges and contract adjustments during different 
time periods of the contract, or illustrations showing how caps, 
floors, and/or buffers could affect an investor's returns across 
different market scenarios.
    Also, we could have required insurance companies to provide 
information related to the economic tradeoffs associated with index-
linked options. For example, we could have required RILA issuers to 
compare a hypothetical investment in the index-linked option to the 
value, or cost, of a combination of (i) derivatives that would provide 
the index-linked option's investment exposure; (ii) a fixed-income 
component; and (iii) the standard insurance features offered with the 
index-linked option, similar to the analysis conducted by the staff in 
the Proposing Release.\849\ In such a comparison, we could either have 
required that the insurance company use the hypothetical investment 
discounted by the rate of interest the insurance company is crediting, 
or would credit, on fixed annuities with a term equal to the duration 
of the crediting periods of the index-linked option, or we could have 
required the insurance company to use the value of a risk-free zero-
coupon bond with a time to maturity equal to the crediting period of 
the index-linked option. We also considered requiring additional 
disclosure related to the setting of early withdrawal charges or 
penalties and their impact on such a comparison of hypothetical 
investments. For example, we could have required the calculation of a 
disclosure to explicitly include the impact of early withdrawal charges 
or penalties on the liquidity of the investment. We could also have 
required more prominent placement of these features on marketing or 
other materials, or we could have required a comparison of these 
features to potential benefits of the RILA to clarify for investors 
possible trade-offs.
---------------------------------------------------------------------------

    \849\ See Proposing Release at III.B.3., describing the staff 
analysis and the similar study conducted in the Moenig paper.
---------------------------------------------------------------------------

    Conversely, a smaller number of amendments tailored to non-variable 
annuities than the number we are adopting would be less costly for 
insurance companies. Since insurance companies already use Form N-4 to 
register variable annuities, and most non-variable annuity issuers 
offer variable annuities registered on Form N-4, the costs of complying 
with the disclosure requirements of the amended form will not be 
substantial.
    The amendments to Form N-4 will promote investor understanding of 
non-variable annuity contracts by presenting information in a clear and 
concise manner. We are not adopting a larger number of amendments 
tailored to non-variable annuities because they may add too much, or 
less relevant, information, which may overwhelm investors who may not 
have the time or capacity to process all the information.\850\ \851\ We 
are also not adopting only a subset of amendments tailored to non-
variable annuities, as compared with the final rule, because they could 
result in less investor understanding relative to the understanding 
resulting from the final amendments.
---------------------------------------------------------------------------

    \850\ See, e.g., Julie R. Agnew and Lisa R. Szykman (2005). 
Asset Allocation and Information Overload: The Influence of 
Information Display, Asset Choice, and Investor Experience, Journal 
of Behavioral Finance, 6(2), 57-70, and Alejandro Bernales, Marcela 
Valenzuela and Ilknur Zer (2023). Effects of Information Overload on 
Financial Markets: How Much Is Too Much? International Finance 
Discussion Papers 1372, Washington: Board of Governors of the 
Federal Reserve System.
    \851\ Some commenters stated that the disclosure of the economic 
tradeoffs associated with index-linked options would be irrelevant, 
and even confusing and misleading, to investors. See IRI Comment 
Letter; CAI Comment Letter.
---------------------------------------------------------------------------

3. Limiting Scope of Structured Data Requirements
    The adopted rule requires many of the newly added disclosures on 
Form N-4 to be tagged in Inline XBRL, in addition to those prospectus 
disclosures that Form N-4 currently requires to be tagged. 
Alternatively, the Commission could have limited the tagging 
requirement to only those disclosures being added to Items of Form N-4 
that are already tagged in Inline XBRL. Under this alternative, 
disclosures relating to: the overview of the contract; the description 
of the Insurance company, registered separate account, and investment 
options; charges; purchases and contract value; purchase of securities 
being offered; disagreements with and changes to accountants; 
information about contracts with index-linked options and fixed options 
subject to a contract adjustment; and fee representations and 
undertakings would not be tagged.
    Limiting the scope of tagging requirements in this manner would 
result in reduced compliance burdens for insurance companies, which 
would be required to apply fewer tags to their disclosures on Form N-4 
filings. However, the alternative would also remove the informational 
benefits associated with making those disclosures available in a 
machine-readable manner. Furthermore, because Form N-4 filers already 
have Inline XBRL tagging obligations with respect to certain of the 
form's disclosure requirements, the burden reductions resulting from 
such an alternative would be limited. Therefore, we are not excluding 
the newly added disclosures on Form N-4 from the Inline XBRL tagging 
requirements.

V. Paperwork Reduction Act

    We are amending several rules and forms that will modify the 
registration, offering, and communications processes for non-variable 
annuities under the Securities Act. We also are amending Form N-4 and 
related rules that will apply to all issuers of that form.\852\ The

[[Page 60073]]

amendments will implement the requirements relating to non-variable 
annuities in the RILA Act. The amendments will have an impact on the 
current collections of information burdens under the Paperwork 
Reduction Act of 1995 (``PRA'') of the following rules and forms: Rule 
498A, Form N-4, Investment Company Interactive Data, and Form 24F-2. 
The titles for the existing collections of information are: (1) ``Rule 
498A Summary Prospectus for Variable Annuity and Variable Life 
Insurance Contracts'' (OMB Control No. 3235-0765), which we are 
retitling to ``Rule 498A Summary Prospectus for Variable and Non-
Variable Annuity and Variable Life Insurance Contracts;'' (2) ``Form N-
4, Registration Statement of Separate Accounts Organized as Unit 
Investment Trust'' (OMB Control No. 3235-0318), which we are retitling 
to ``Form N-4, Registration Statement of Separate Accounts Organized as 
Unit Investment Trust or of Index-Linked Annuity Contracts;'' (3) 
``Annual Notice of Securities Sold Pursuant to Rule 24f-2.'' (OMB 
Control No. 3235-0456), which we are retitling to ``Annual Notice of 
Securities Sold Pursuant to 17 CFR 270.24f-2 or 230.456(e);'' and (4) 
``Investment Company Interactive Data'' (OMB Control No. 3235-0642).
---------------------------------------------------------------------------

    \852\ We are amending rules 485 and 497 of Regulation C (OMB 
Control No. 3235-0074), which describes the procedures to be 
followed in preparing and filing registration statements with the 
Commission, and rule 405 of Regulation S-T (OMB Control No. 3235-
0424), which specifies the requirements that govern the electronic 
submission of documents. The amendments will require insurance 
companies that issue non-variable annuities to tag specified 
information in registration statements filed on Form N-4 or post-
effective amendments thereto, as well as in forms of prospectuses 
filed pursuant to rule 497(c) or 497(e) under the Securities Act 
that include information that varies from the registration statement 
using Inline XBRL. These burdens are included in our estimates for 
the Investment Company Interactive Data collection of information 
discussed in section V.D below.
---------------------------------------------------------------------------

    The Commission published notice soliciting comments on the 
collection of information requirements in the Proposing Release and 
submitted the proposed collections of information to OMB for review and 
approval in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid OMB control number. While the Commission received no comments 
specifically addressing the estimated PRA burdens and costs that the 
Proposing Release described, the Commission did receive comments 
discussing the burdens of implementing certain aspects of the proposal. 
We discuss those comments below, along with discussing updated 
estimates of the collection of information burdens associated with the 
final amendments. We also discuss below the collection of information 
burdens associated with amendments to rule 498A and Investment Company 
Interactive Data, as well as Forms N-4 and 24F-2, which are filed with 
the Commission and are not kept confidential. A description of the 
amendments, including the need for the information and its use, as well 
as a description of the likely respondents, can be found in Section II 
above, and a discussion of the economic effects of the amendments can 
be found in Section III above.

A. Rule 498A

    We are amending rule 498A to permit insurance companies registering 
offerings of non-variable annuities, as well as issuers of 
``combination contracts'' offering a combination of variable and non-
variable options, to use a summary prospectus to satisfy statutory 
prospectus delivery obligations. Consistent with current rule 498A, the 
use of summary prospectuses for non-variable annuities will be 
voluntary, but the rule's requirements will be mandatory for issuers 
that elect to send or give a summary prospectus in reliance upon rule 
498A. We also are making certain amendments to Form N-4 that will 
affect the variable annuity summary prospectuses currently provided to 
investors. The amendments to rule 498A are part of a layered disclosure 
approach that is designed to provide investors with a summary 
prospectus to help them make informed investment decisions regarding 
non-variable annuities, as discussed in more detail above. These 
amendments will result in a change in our current estimate of the 
burdens associated with this collection of information, specifically to 
account for these additional requirements for issuers that use rule 
498A currently and to add non-variable annuities to the estimates.
    The respondents to these collections of information will be 
insurance companies registering offerings of non-variable annuities and 
registered variable annuity separate accounts. The information provided 
under rule 498A will not be kept confidential.
    The Commission did not receive public comments regarding the PRA 
estimates for rule 498A in the Proposing Release. Commenters that 
discussed rule 498A voiced support for the proposal to extend rule 498A 
to non-variable annuities.\853\ As discussed above, in a change from 
the proposal, we are requiring insurance companies to use Form N-4 to 
register offerings of registered MVA annuities and, as is the case with 
non-variable annuities and variable annuities, allowing issuers of 
registered MVA annuities the option to use a summary prospectus. We 
have adjusted our numbers to account for the potential that additional 
insurance companies will opt to use summary prospectuses in connection 
with offerings of registered MVA annuities.
---------------------------------------------------------------------------

    \853\ See CAI Comment Letter.
---------------------------------------------------------------------------

    In our most recent Paperwork Reduction Act submission for Rule 
498A, we estimated for rule 498A a total aggregate annual hour burden 
of 7,634 hours, and a total aggregate annual external cost burden of 
$9,094,866.\854\ We have historically estimated the paperwork burden of 
rule 498A based on the number of variable annuity and variable life 
insurance separate account registrants, and our estimates of the 
updated burden resulting from the final amendments are similarly based 
on the number of non-variable annuity issuers.\855\ We estimate that 
there are 38 insurance companies that issue RILAs, registered MVA 
annuities, or annuity contracts offering index-linked options and MVA 
options, and that there are 416 separate account registrants on current 
Form N-4 that would be impacted by the proposed amendments.\856\ The 
summary prospectus is voluntary, so the percentage of non-variable 
annuity issuers that will choose to utilize it is uncertain. Given this 
uncertainty, we have assumed that insurance companies will choose to 
use a summary prospectus for 90% of all non-variable annuities, which 
is the same as our current estimate for variable annuity separate 
accounts. The table below summarizes our PRA initial and ongoing annual 
burden estimates associated with the final amendments to rule 498A.
---------------------------------------------------------------------------

    \854\ On January 9, 2024, the Office of Management and Budget 
approved this collection of information estimate for rule 498A. The 
Proposing Release discussed a prior burden estimate, which the 
Office of Management and Budget approved on November 13, 2020. See 
Proposing Release at n.494.
    \855\ VASP Adopting Release at Section V.E.
    \856\ The non-variable annuity issuer estimate is based on a 
review of non-variable annuity registration statements filed with 
the Commission as of May 2024. See supra footnote 725. The estimate 
of variable annuity separate accounts is based on Form N-CEN data as 
of December 31, 2023. The Office of Management and Budget approved 
the burden estimate for rule 498A on January 9, 2024.

[[Page 60074]]



                                       Table 11--Rule 498A--PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                  Internal        Internal                                            Annual
                                   initial     annual  burden      Wage rate      Internal  time   external cost
                                burden hours        hours                             costs           burden
----------------------------------------------------------------------------------------------------------------
                                               PROPOSED ESTIMATES
----------------------------------------------------------------------------------------------------------------
                                          Separate Account Registrants
----------------------------------------------------------------------------------------------------------------
Proposed Amendments..........               9               6  $425 (compliance           $2,550  ..............
                                                                attorney).
Number of registrants........  ..............           x 419  ................            x 419  ..............
Total annual burden..........  ..............           2,514  ................       $1,068,450  ..............
Use of summary prospectus....  ..............           x 90%  ................            x 90%  ..............
Total new annual burden for    ..............        2,262.60  ................         $961,605  ..............
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                                                RILA Registrants
----------------------------------------------------------------------------------------------------------------
Preparation and filing of                  40           24.67  $313 (blended           $7,709.38          $5,000
 Initial Summary Prospectus/                                    rate).
 Updating Summary Prospectus.
Online Posting of Contract                  2            2.67  $289 (webmaster)          $771.63  ..............
 Documents.
Total burden per registrant..  ..............           27.34  ................         8,481.01          $5,000
Number of registrants........  ..............            x 90  ................             x 90            x 90
Total annual burden..........  ..............        2,460.60  ................      $763,290.90        $405,000
Use of summary prospectus....  ..............           x 90%  ................            x 90%           x 90%
Total new annual burden for    ..............        2,214.54  ................      $686,961.81        $364,500
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                         PROPOSED ESTIMATES FOR PRINTING AND MAILING BY RILA REGISTRANTS
----------------------------------------------------------------------------------------------------------------
Initial Summary Prospectus......................................................................        $120,000
Updating Summary Prospectus.....................................................................      $1,048,000
Total annual burden.............................................................................      $1,168,000
Use of summary prospectus.......................................................................           x 90%
Total new annual burden for Reliance on Rule 498A...............................................      $1,051,200
----------------------------------------------------------------------------------------------------------------
                                        Total Proposed Estimated Burdens
----------------------------------------------------------------------------------------------------------------
                                  Responses     Internal hour                     Internal hour    External cost
                                                  estimate                        cost estimate      estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual                  676          14,688  ................       $3,900,193     $11,559,420
 burden estimates.
Aggregate proposed additional            + 83      + 4,477.14  ................   + 1,648,566.81    + $1,415,700
 annual burden estimates.
Revised aggregate annual                = 759     = 19,165.14  ................   = 5,548,759.81   = $12,975,120
 burden estimates.
----------------------------------------------------------------------------------------------------------------
                                  Internal        Internal       Wage rate \1\    Internal time       Annual
                               initial burden   annual burden                         costs        external cost
                                    hours           hours                                             burden
----------------------------------------------------------------------------------------------------------------
                                                 FINAL ESTIMATES
----------------------------------------------------------------------------------------------------------------
                                          Separate Account Registrants
----------------------------------------------------------------------------------------------------------------
Final Amendments.............               9           \2\ 6  $425 (compliance           $2,550  ..............
                                                                attorney).
Number of separate account     ..............       \3\ x 416  ................            x 416  ..............
 registrants.
Total annual burden..........  ..............           2,496  ................       $1,060,800  ..............
Use of summary prospectus....  ..............           x 90%  ................            x 90%  ..............
Total new annual burden for    ..............           2,246  ................         $954,720  ..............
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                                        Non-Variable Annuity Registrants
----------------------------------------------------------------------------------------------------------------
Preparation and filing of                  40          \4\ 24  \5\ $313                   $7,512      \6\ $5,000
 Initial Summary Prospectus/                                    (blended rate).
 Updating Summary Prospectus.
Online Posting of Contract                  2           \7\ 3  $299 (webmaster)             $897  ..............
 Documents.
Total burden per registrant..  ..............              27  ................           $8,409          $5,000
Number of non-variable         ..............        \8\ x 38  ................             x 38            x 38
 annuity issuers.
Total annual burden..........  ..............            1026  ................         $319,542        $190,000
Use of summary prospectus....  ..............           x 90%  ................            x 90%           x 90%
Total new annual burden for    ..............             923  ................         $287,588        $171,000
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                FINAL ESTIMATES FOR PRINTING AND MAILING BY NON-VARIABLE ANNUITY REGISTRANTS \9\
----------------------------------------------------------------------------------------------------------------
Initial Summary Prospectus......................................................................         $57,000
Updating Summary Prospectus.....................................................................        $456,000
Total annual burden.............................................................................        $513,000
Use of summary prospectus.......................................................................           x 90%
Total new annual burden for Reliance on Rule 498A...............................................        $461,700
----------------------------------------------------------------------------------------------------------------
                                          Total Final Estimated Burdens
----------------------------------------------------------------------------------------------------------------
                                  Responses     Internal hour                     Internal hour    External cost
                                                  estimate                        cost estimate      estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual                  663           7,634  ................       $2,337,471      $9,094,866
 burden estimates.
Aggregate proposed additional            + 35  + 3,169 (2,246  ................     + $1,242,308      + $632,700
 annual burden estimates.                              + 923)                        ($954,720 +     ($171,000 +
                                                                                       $287,588)       $461,700)

[[Page 60075]]

 
Revised aggregate annual                = 698        = 10,803  ................     = $3,579,779    = $9,727,566
 burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ The Commission's estimates of the relevant wage rates are based on salary information for the securities
  industry compiled by the Securities Industry and Financial Markets Association's Office Salaries in the
  Securities Industry 2013. The estimated wage figures are modified by Commission staff to account for an 1,800-
  hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and
  adjusted to account for the effects of inflation. See Securities Industry and Financial Markets Association,
  Report on Management & Professional Earnings in the Securities Industry 2013 (as adjusted to account for
  inflation, the ``SIFMA Wage Report'').
\2\ Internal annual burden hours represents initial burden estimates annualized over a three-year period (9
  hours/3 = 3 hours) plus 3 hours of ongoing annual burden hours.
\3\ Estimate is based on a review of Form N-CEN reports through December 31, 2023. In its most recently approved
  PRA submission, the Commission estimated that 419 registrants on Form N-4 would be subject to the information
  collection burden under current rule 498A. For the estimated burden of the amendments to rule 498A, we have
  taken into account updated data regarding the number of registrants on Form N-4.
\4\ Represents initial burden estimates annualized over a three-year period plus 11 hours of ongoing annual
  burden hours ((40 hours/3 = approximately 13 hours) + 11 hours = approximately 24 hours).
\5\ Represents a blended wage rate of a compliance attorney ($425 per hour) and an intermediate accountant ($200
  per hour). $313 is based on the following calculation: ($425 + $200)/2 = $313 rounded to the nearest whole
  dollar.
\6\ We estimate that each insurance company that chooses to rely on rule 498A with regards to a non-variable
  annuity will incur a one-time collective external cost burden of $10,000 per registration statement to prepare
  both a new initial summary prospectus and a new updating summary prospectus for offerings on Form N-4. We also
  estimate an on-going collective burden of $2,500 per registration statement during each subsequent year to
  prepare updates to these materials. The three-year average cost of these estimates is $5,000.
\7\ Represents initial burden estimates annualized over a three-year period plus two hours of ongoing annual
  burden hours ((2 hours/3 = approximately 1 hour) + 2 hours = approximately 3 hours).
\8\ This estimate is based on the number of insurance companies issuing non-variable annuities. See supra
  footnote 725. The proposal reflected an estimate of the number of RILA s, as opposed to the number of
  insurance companies issuing RILAs. We have updated this approach to better reflect the way that the burden for
  rule 498A has historically been calculated (reflecting the number of variable annuity separate accounts
  relying on rule 498A--thus, reflecting the registrants that rely on the rule, not the number of contracts with
  summary prospectuses under the rule).
\9\ Costs associated with printing and mailing for separate account registrants are already accounted for in the
  currently approved burdens for rule 498A. Estimates for non-variable annuity issuers printing and mailing
  costs are based on the currently approved burdens for printing and mailing costs under rule 498A
  (approximately $1,500 per registrant for initial summary prospectuses and approximately $12,000 per registrant
  for updating summary prospectuses).
\10\ The estimated number of new responses is based on the total of the number of non-variable annuity responses
  under the proposed amendments (38 responses) and the difference between the number of responses for registered
  separate accounts under the current aggregate annual burden estimate (419 responses) and the final additional
  annual burden estimates (416 responses). (38 non-variable annuity issuer responses subtracted by 3 registered
  separate account responses).

B. Form N-4

    Under the final amendments, insurance companies will register non-
variable and variable annuity contract offerings on Form N-4, as 
amended, to address the features and risks of non-variable annuities, 
including RILAs and registered MVA annuities. In addition, we are 
adopting other amendments to Form N-4 that will apply to all issuers 
that use that form. For example, the final amendments will switch the 
order of the Key Information Table and Overview of the Contract items, 
require issuers to present information in the KIT in a Q&A format, and 
to require more specific principal risk disclosures. These amendments 
will result in a change in our current estimate of the burdens 
associated with this collection of information, specifically to account 
for these additional requirements for issuers that use Form N-4 
currently and to add non-variable annuities to the estimates.
    The Commission received no comments specifically addressing the 
estimated PRA burdens for the proposed amendments to Form N-4. Rather, 
as discussed above, the Commission received comments supporting the 
ability of non-variable annuities to register on Form N-4.\857\ Those 
commenters generally suggested that the current burdens on insurance 
companies that register non-variable annuities on Form S-1 or S-3 may 
be lessened by having such contracts register on Form N-4.\858\
---------------------------------------------------------------------------

    \857\ See supra sections II.A. and II.B.
    \858\ Id.
---------------------------------------------------------------------------

    As discussed in the proposal, Form N-4 generally imposes two types 
of reporting burdens on issuers that use the form: (1) the burden of 
preparing and filing the initial registration statement; and (2) the 
burden of preparing and filing post-effective amendments to a 
previously effective registration statement. In our most recent 
Paperwork Reduction Act submission for Form N-4, we estimated for Form 
N-4 a total aggregate annual hour burden of 292,487 hours, and a total 
aggregate annual external cost burden of $33,348,866.\859\ Compliance 
with the disclosure requirements of Form N-4 is mandatory, and the 
responses to the disclosure requirements will not be kept confidential. 
The respondents to these collections of information will be non-
variable annuity issuers and registered variable annuity separate 
accounts. The purpose of the information collection requirements on 
Form N-4 is to meet the filing and disclosure requirements of the 
Securities Act and Investment Company Act, as applicable, and to 
provide investors with information necessary to evaluate an investment 
in an offering of securities registered on the form.
---------------------------------------------------------------------------

    \859\ On Oct. 26, 2021, the Office of Management and Budget 
approved without change this burden estimate.
---------------------------------------------------------------------------

    At proposal, we presented our information collection estimates by 
the product type that would be registered on Form N-4. Our proposed 
information collection estimates addressed RILAs and the initial 
burdens that a RILA issuer would incur to register a non-variable 
annuity on Form N-4 and file post-effective amendments; these estimates 
were the majority of the burden associated with the proposed amendments 
to rule 498A. We also included information collection estimates that 
would apply to variable annuity issuers that currently register their 
offerings on Form N-4, which were more incremental in nature. For each 
of these proposed information collection estimates--those associated 
with RILAs and those associated with variable annuities--we based our 
proposed information collection estimates on average burdens that we 
anticipated issuers would incur.
    We are adopting amendments that require not only issuers of 
variable annuities and RILAs, as proposed, to register offerings of 
these annuity products on Form N-4, but also require issuers of 
registered MVA annuities to register offerings of these annuities on 
Form N-4. Accordingly, our final information collection estimates 
reflect these additional registrants as well as updated data since the 
proposal.

[[Page 60076]]

Specifically, our final information collection estimates reflect that 
the number of entities and responses have been modified from the 
proposal to include issuers of registered MVA annuities, and also to 
reflect that the estimated number post-effective amendments filed by 
issuers of variable annuities have declined from January 1, 2021 to 
December 31, 2023.
    Our final information collection estimates reflect that our per-
entity and per-response estimates have not changed from our proposed 
information collection estimates. This is because we received no 
comments specifically addressing the estimated PRA burdens for the 
proposed amendments to Form N-4, and also we do not anticipate that any 
of the changes from the proposal we are adopting will make any 
substantive modifications to the per-entity and per-response estimates 
or impose any additional substantive recordkeeping or information 
collection requirements within the meaning of the PRA compared to the 
proposal. Our final information collection estimates, like our proposed 
information collection estimates, are based on average burdens that we 
anticipate issuers will incur in registering annuity offerings and 
filing post-effective amendments on Form N-4. For ease of 
administration and in a change from the proposed approach to 
calculating these estimates, our final information collection estimates 
do not separately address the Form N-4 burdens that issuers of 
different types of annuities (e.g., RILAs, registered MVA annuities, 
variable annuities) would incur. Instead, the final estimates include 
average estimates that any Form N-4 issuer would incur.
    We estimate that there will be 1,235 responses that will be subject 
to collection of information requirements under the final amendments to 
Form N-4.\860\ The tables below summarize our PRA initial and ongoing 
annual burden estimates associated with the final amendments to Form N-
4.
---------------------------------------------------------------------------

    \860\ This includes the number of initial filings plus post-
effective amendments that we estimate below. See Table 14. Certain 
disclosure required by Form N-4 may not be applicable to insurance 
companies that register the offerings of non-variable annuities. 
Further, insurance companies that register RILA contracts, may post 
the current limit on index gains for each index-linked option on a 
website. For the ease of administering this collection, the 
information collection estimates are average estimates reflecting 
that different registrants could, in practice, incur different 
burdens regarding the Form N-4 disclosure requirements depending on 
the type of product being registered. For both variable and non-
variable annuity registrants, this estimate is based on a review of 
annuity registration statements filed with the Commission from 
January 1, 2021 through December 31, 2023.

                                                    Table 12--Form N-4 Initial Filings--PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Internal        Internal                                                                 Annual
                                                      initial     annual  burden               Wage rate                 Internal time    external  cost
                                                   burden hours        hours                                                 costs            burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   PROPOSED ESTIMATES
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Separate Account Registrants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Amendments.............................              12              14  $406 (blended rate for compliance               $5,684  ..............
                                                                                   attorney and senior programmer).
Estimated number of annual responses............  ..............            x 42  ..................................                x 42  ..............
Total new annual burden.........................  ..............             588  ..................................            $238,728  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      RILA Issuers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed amendments to Form N-4.................             300          390.89  $406 (blended rate for compliance          $158,701.34         $40,000
                                                                                   attorney and senior programmer).
Website availability requirement................  ..............             0.5  $286 (webmaster)..................                $143  ..............
Estimated number of annual responses............  ..............            x 20  ..................................                x 20            x 20
Total new annual burden.........................  ..............        7,827.80  ..................................       $3,176,886.80        $800,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Total Proposed Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Responses     Internal hour                                      Internal hour cost   External cost
                                                                     estimate                                              estimate          estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.......              30           8,427  ..................................          $2,494,716        $754,740
Aggregate proposed additional annual burden                 + 32      + 8,416.80  ..................................     + $3,416,614.80      + $800,000
 estimates.
Revised aggregate annual burden estimates.......            = 62     = 16,843.80  ..................................     = $5,911,330.80    = $1,554,740
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 FINAL ESTIMATED BURDENS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Internal        Internal                Wage rate \2\            Internal time cost      Annual
                                                  initial burden   annual burden                                                           external cost
                                                       hours         hours \1\                                                                burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Final Amendments to Form N-4 \3\................             300         \3\ 380  $420 (blended rate for compliance             $159,600     \6\ $40,000
                                                                                   attorney and senior programmer)
                                                                                   \5\.
Estimated number of annual responses \6\........  ..............           x 101  ..................................               x 101           x 101
Total estimated annual new burden...............  ..............          38,380  ..................................         $16,119,600      $4,040,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Final Total Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Responses     Internal hour                                      Internal hour cost   External cost
                                                                     estimate                                              estimate          estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.......              30           8,427  ..................................          $2,494,716        $754,740
Aggregate additional annual burden estimate 7 8.            + 71        + 29,953  ..................................       + $13,624,884    + $3,285,260
Revised aggregate annual burden estimates.......           = 101        = 38,380  ..................................       = $16,119,600    = $4,040,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:

[[Page 60077]]

 
\1\ This estimate includes the initial burden estimates annualized over a three-year period, plus the estimate of ongoing annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage figures are modified by Commission
  staff to account for an 1,800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and adjusted to
  account for the effects of inflation.
\3\ This estimated burden applies to an issuer of any annuity registered on Form N-4.
\4\ The final estimate includes the initial burden estimates annualized over a three-year period (300 hours/3 = 100 hours), plus 280 hours of ongoing
  annual burden hours (the estimate of ongoing internal hours associated with post-effective amendments (which will be filed in the year following an
  initial registration statement), as referenced in Table 13 infra). The final amendments will permit issuers of RILA contracts to incorporate
  information about current contract limits on gains by reference into their prospectuses from a website. See Item final Form N-4, Item 6. Because this
  incorporation by reference approach is permitted but not required, burdens associated with this permissible website disclosure are reflected in the
  burden estimate for the final amendments to Form N-4. For purposes of this information collection, we estimate that 100% of issuers of RILAs would
  incur burdens associated with website disclosure.
\5\ The $420 wage rate reflects current estimates of the blended hourly rate for an in-house compliance attorney ($440) and a senior programmer ($399).
  $420 is based on the following calculation: ($440 + $399)/2 = $420 rounded to the nearest whole dollar.
\6\ We estimate that the external cost to prepare and file an initial registration statement on Form N-4 is $40,000 per filing. This estimate is based
  on the currently approved external cost estimate for Form N-4 filings, adjusted to reflect staff experience of the costs associated with drafting and
  filing a registration statement on Form N-4, such as the cost of outside legal services.
\7\ The estimate of the annual number of registration statements filed on Form N-4 is based on the average annual number of annuity filings (variable
  annuity, RILA, and registered MVA annuities) received by the Commission over the past three years (Jan. 1, 2021 to Dec. 31, 2023) on Forms N-4, S-1,
  and S-3. In its most recently approved PRA submission, the Commission estimated that insurance companies that issue variable annuities will make
  approximately 30 initial registration statement filings per year. For the estimated burden of the amendments to Form N-4, we have taken into account
  updated data regarding the number of initial annuity filings on Forms N-4, S-1 and S-3.
\8\ The estimated number of new responses, 71 responses, is based on the total of the number of responses under the final amendments, 101 responses,
  less 30 responses which represents the number of responses for registered separate accounts under the current aggregate annual burden estimate.
  Similarly, the estimated additional internal hours figure reflects the total estimated annual new burden (38,380 hours) and subtracts the current
  internal hour estimate (8,427 hours) to avoid double counting the current burden that is applicable to registered separate accounts; the estimated
  additional internal hour cost figure reflects the total estimated annual new internal hour cost estimate ($16,119,600) and subtracts the current
  internal hour cost estimate ($2,494,716) to avoid double counting current internal hour cost applicable to registered separate accounts; and the
  estimated additional external cost figure reflects the total estimated annual new external cost ($4,040,000) and subtracts the current external cost
  estimate ($754,740) to avoid double counting current external costs applicable to registered separate accounts.


                       Table 13--Form N-4 Post-Effective Amendment Filings--PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                  Internal        Internal                                            Annual
                                   initial     annual  burden     Wage rate       Internal time    external cost
                                burden hours        hours                             costs           burden
----------------------------------------------------------------------------------------------------------------
                                               PROPOSED ESTIMATES
----------------------------------------------------------------------------------------------------------------
                                          Separate Account Registrants
----------------------------------------------------------------------------------------------------------------
Proposed Amendments..........              12               6  $406 (blended              $2,436  ..............
                                                                rate for
                                                                compliance
                                                                attorney and
                                                                senior
                                                                programmer).
Estimated number of annual     ..............         x 1,016  ...............           x 1,016  ..............
 responses.
Total new annual burden......  ..............           6,096  ...............        $2,474,976  ..............
----------------------------------------------------------------------------------------------------------------
                                                  RILA Issuers
----------------------------------------------------------------------------------------------------------------
Proposed amendments to Form N-            210          279.95  $406 (blended         $113,659.70         $24,000
 4.                                                             rate for
                                                                compliance
                                                                attorney and
                                                                senior
                                                                programmer).
Website availability           ..............             0.5  $286                         $143  ..............
 requirement.                                                   (webmaster).
Estimated number of annual     ..............            x 90  ...............              x 90            x 90
 responses.
Total new annual burden......  ..............       25,240.50  ...............        10,242,243      $2,160,000
----------------------------------------------------------------------------------------------------------------
                                                  Total Burdens
----------------------------------------------------------------------------------------------------------------
                                    Responses   Internal hour                      Internal hour   External cost
                                                     estimate                      cost estimate        estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual                1,366       + 284,060  ...............       $84,100,454   + $32,594,126
 burden estimates.
Aggregate proposed additional            -260     + 31,336.50  ...............     + $12,717,219    + $2,160,000
 annual burden estimates.
Revised aggregate annual              = 1,106    = 315,369.50  ...............      = 96,817,673   = $34,754,126
 burden estimates.
----------------------------------------------------------------------------------------------------------------
                                             FINAL ESTIMATED BURDENS
----------------------------------------------------------------------------------------------------------------
                                     Internal        Internal  Wage rate \1\..          Internal          Annual
                               initial burden   annual burden                         time costs        external
                                        hours           hours                                        cost burden
----------------------------------------------------------------------------------------------------------------
Final Amendments to Form N-4              210         2 3 280  $420 (blended            $117,600     \5\ $24,000
 \2\.                                                           rate for
                                                                compliance
                                                                attorney and
                                                                senior
                                                                programmer)
                                                                \4\.
Estimated number of annual     ..............         x 1,164  ...............           x 1,164         x 1,164
 responses \5\.
Total new annual burden......  ..............         325,920  ...............      $136,886,400     $27,936,000
----------------------------------------------------------------------------------------------------------------
                                               FINAL TOTAL BURDENS
----------------------------------------------------------------------------------------------------------------
                                    Responses   Internal hour                      Internal hour   External cost
                                                     estimate                           estimate        estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual                1,366         284,060  ...............       $84,100,454     $32,594,126
 burden estimates.
Aggregate additional annual              -202        + 41,860  ...............     + $52,785,946     $-4,658,126
 burden estimates \6\.
Revised aggregate annual              = 1,164       = 325,920  ...............    = $136,886,400   = $27,936,000
 burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage
  figures are modified by Commission staff to account for an 1,800-hour work-year and multiplied by 5.35 to
  account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of
  inflation.
\2\ This estimated burden applies to an issuer of any annuity registered on Form N-4.

[[Page 60078]]

 
\3\ The final estimate includes the initial burden estimates annualized over a three-year period, plus 208 hours
  of ongoing annual burden hours ((210 hours/3 = 70 hours ) + 208 hours = 278 hours (rounded up to 280 hours)).
  The ongoing annual burden is estimated to be equal to the currently approved ongoing annual burden for initial
  filings on Form N-4 plus an addition 2 hours of ongoing annual burden hours. The final amendments will permit
  issuers of RILA contracts to incorporate information about current contract limits on gains by reference into
  their prospectuses from their website. See final Form N-4, Item 6. Because this incorporation by reference
  approach is permitted but not required, burdens associated with this permissible website disclosure
  requirement are reflected in the burden estimate for the final amendments to Form N-4. For purposes of this
  information collection, we estimate that 100% of issuers of RILAs would incur burdens associated with website
  disclosure.
\4\ The $420 wage rate reflects current estimates of the blended hourly rate for an in-house compliance attorney
  ($440) and a senior programmer ($399). $420 is based on the following calculation: ($440 + $399)/2 = $420
  rounded to the nearest whole dollar.
\5\ We estimate that the external cost to prepare and file a post-effective registration statement on Form N-4
  is approximately $24,000 per filing.
\6\ The estimate of the average annual number of post-effective amendments to annuity filings (variable annuity,
  RILA, and registered MVA annuities) received by the Commission over the past three years (Jan. 1, 2021 to Dec.
  31, 2023) on Forms N-4, S-1, and S-3. In its most recently approved PRA submission, the Commission estimated
  that insurance companies that issue variable annuities will make approximately 1,336 post-effective amendments
  per year. For the estimated burden of the amendments to Form N-4, we have taken into account updated data
  regarding the number of post-effective amendments for annuities on Forms N-4, S-1 and S-3. The estimate of
  annual the annual number of post-effective amendments to annuity filings reflects that the average number of
  post-effective amendments filed by separate account registrants with the Commission has declined over the past
  three years. See infra note 6.
\7\ The aggregate final additional annual burden estimate reflects that the average number of post-effective
  amendments over the past three years (Jan. 1, 2021 to Dec. 31, 2023) by separate account registrants (1,088)
  has declined from the current aggregate annual burden estimate (1,366). The aggregate additional burden
  estimate takes 1,088 (the average number of post-effective amendments over the past three years by separate
  account registrant) and deducts 1,366 (the current aggregate burden estimate) which equals -278 and then adds
  75 (the average number of post-effective amendments filed by insurance companies that issue RILA and
  registered MVA contracts over the past three years) which equals -202, as adjusted for rounding. Similarly,
  the estimated additional internal hours figure reflects the total estimated annual new burden (325,920) and
  subtracts the current internal hour estimate (284,060) to avoid double counting the current burden that is
  applicable to registered separate accounts; the estimated additional internal hour cost figure reflects the
  total estimated annual new internal hour cost estimate ($137,061,000) and subtracts the current internal hour
  cost estimate ($84,100,454) to avoid double counting current internal hour cost applicable to registered
  separate accounts; and the estimated additional external cost figure reflects the total estimated annual new
  external cost ($27,936,000) and subtracts the current external cost estimate ($32,594,126) to avoid double
  counting current external costs applicable to registered separate accounts.


                                 Table 14--Form N-4 Total Burden--PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                                               Internal
                                               Responses     annual burden     Internal time     Annual external
                                                               hours \1\         costs \2\         cost burden
----------------------------------------------------------------------------------------------------------------
                                   TOTAL BURDEN ESTIMATES INCLUDING AMENDMENTS
----------------------------------------------------------------------------------------------------------------
                                               Proposed Estimates
----------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.           1,366         292,487         $86,595,170       $33,348,866
Aggregate proposed additional annual                  -228     + 39,753.30    + $16,133,833.80      + $2,914,740
 burden estimates.........................
Revised proposed aggregate annual burden           = 1,168    = 332,240.30      = $102,729,004     = $36,263,606
 hours....................................
----------------------------------------------------------------------------------------------------------------
                                                 Final Estimates
----------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.           1,366         292,487         $86,595,170       $33,348,866
Aggregate final additional annual burden          \3\ -131      \4\ 71,813     \5\ $66,410,830   \6\ $-1,372,886
 estimates................................
Revised aggregate annual burden hours.....           1,235         364,300        $153,006,000       $31,975,980
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ This estimate includes the initial burden estimates annualized over a three-year period.
\2\ This estimate is based on the Commission's estimates of relevant wage rates based on the SIFMA Wage Report.
  The estimated wage figures are modified by Commission staff to account for an 1,800-hour work-year and
  multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and adjusted to account for
  the effects of inflation. The particular wage rates that were considered are discussed in Table 12 and Table
  13 above.
\3\ The aggregate final additional annual burden estimates reflect that the average number of post-effective
  amendments over the past three years (Jan. 1, 2021 to Dec. 31, 2023) by separate account registrants (1,088)
  has declined from the current aggregate annual burden estimate (1,366). The aggregate final additional annual
  burden estimate for responses adds 71 (the aggregate annual additional burden estimate for initial
  registration statements) and -202 (the aggregate annual additional burden estimate for post-effective
  amendments) = -131.
\4\ The aggregate final additional annual burden estimate for the internal annual burden hours adds 29,953 (the
  aggregate annual additional burden estimate for initial registration statements) and 41,860 (the aggregate
  annual additional burden estimate for post-effective amendments) = 71,813.
\5\ The aggregate final additional annual burden estimate for internal time costs adds $13,624,884 (the
  aggregate annual additional burden estimate for initial registration statements) and $52,785,946 (the
  aggregate annual additional burden estimate for post-effective amendments) = $66,410,830.
\6\ The aggregate final additional annual burden estimate for the annual external cost burden adds $3,285,260
  (the aggregate annual additional burden estimate for initial registration statements) and $-4,658,126 (the
  aggregate annual additional burden estimate for post-effective amendments) = $-1,372,886.

C. Form 24F-2

    Under the amendments, insurance companies will be required to pay 
applicable securities registration fees relating to non-variable 
annuities in arrears on Form 24F-2. Consistent with the other elements 
of this rulemaking, these amendments are designed to require insurance 
companies to use the same framework to pay securities registration fees 
for non-variable annuities that they do for variable annuities. Form 
24F-2 is the annual notice of securities sold by certain funds that 
accompanies the payment of registration fees with respect to the 
securities sold during the fiscal year, net of securities redeemed or 
repurchased during the year. Compliance with Form 24F-2 is mandatory. 
Responses to this form are not kept confidential.
    The Commission did not receive public comments regarding the PRA 
estimates for Form 24F-2 in the Proposing Release. Commenters generally 
supported the proposal to require insurance companies to pay fees in 
arrears on Form 24F-2 and did not indicate that they found this fee 
payment method burdensome.\861\ As discussed above, in a change from 
the proposal, we are requiring insurance companies to pay fees for 
registered MVA annuities via Form 24F-2. We have adjusted our numbers 
to account for the fact that more insurance companies than originally 
anticipated will pay fees with Form 24F-2.
---------------------------------------------------------------------------

    \861\ See CAI Comment Letter; IRI Comment Letter; Gainbridge 
Comment Letter.
---------------------------------------------------------------------------

    In our most recent Paperwork Reduction Act submission for Form 24F-
2, we estimated for Form 24F-2 a total aggregate annual hour burden of 
20,464 hours, and a total aggregate annual external cost burden of 
$0.\862\ The likely respondents to the proposed amendments will include 
non-variable annuity issuers and current Form 24F-2 filers, which open-
end investment companies, unit investment trusts, registered closed-end 
investment companies that make periodic repurchase offers under 17 CFR 
270.23c-3, and face-amount certificate companies. We estimate that 38 
non-variable annuity issuers will be subject to these final amendments 
and will file

[[Page 60079]]

one Form 24F-2 filing each per year.\863\ The table below summarizes 
our PRA initial and ongoing annual burden estimates associated with the 
final amendments to Form 24F-2.
---------------------------------------------------------------------------

    \862\ On April 17, 2024, the Office of Management and Budget 
approved this burden estimate. Before that, the Office of Management 
and Budget approved a burden estimate for Form 24F-2 on November 13, 
2020. The 2020 OMB-approved burden estimate was cited in the 
Proposing Release.
    \863\ This estimate is based on a review of non-variable annuity 
registration statements filed with the Commission as of May 2024. 
See supra footnote 725. We do not believe that the amendments to 
Form 24F-2 will affect the estimated burdens associated with current 
Form 24F-2 filers. We have not amended the currently approved 
burdens for current Form 24F-2 filers with more recent data for the 
purposes of this PRA estimate.

                                       Table 15--Form 24F-2--PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                 Internal        Internal
                                  initial     annual  burden     Wage rate      Internal time   Annual external
                               burden hours        hours                            costs         cost burden
----------------------------------------------------------------------------------------------------------------
                                               PROPOSED ESTIMATES
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form                 3               3  $82 (compliance            $246                 $0
 24F-2.                                                        clerk).
Submission in a structured                 3               3  $316                       $948                 $0
 data format.                                                  (programmer).
Total annual burden per       ..............               6  ...............          $1,194  .................
 response.
Number of annual responses..  ..............            x 90  ...............            x 90               x 90
Total new annual burden.....  ..............             540  ...............        $107,460                 $0
----------------------------------------------------------------------------------------------------------------
                              TOTAL ESTIMATED PROPOSED BURDENS INCLUDING AMENDMENTS
----------------------------------------------------------------------------------------------------------------
                                   Responses        Internal                    Internal time    Annual external
                                                      annual                            costs        cost burden
                                                burden hours
----------------------------------------------------------------------------------------------------------------
Current aggregate annual               6,794          27,176  ...............      $4,633,508                 $0
 burden.
Aggregate proposed                      + 90           + 540  ...............      + $107,460               + $0
 additional annual burden
 estimates.
Revised aggregate burden             = 6,884        = 27,716  ...............    = $4,140,968               = $0
 estimates.
----------------------------------------------------------------------------------------------------------------
                                    Internal        Internal  Wage rate \2\..   Internal time    Annual external
                              initial burden   annual burden                            costs        cost burden
                                       hours           hours
----------------------------------------------------------------------------------------------------------------
                                                 FINAL ESTIMATES
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form                 3           \1\ 3  $82 (compliance            $246                 $0
 24F-2.                                                        clerk) \2\.
Submission in a structured                 3           \1\ 3  $316                       $948                 $0
 data format.                                                  (programmer)
                                                               \2\.
Total annual burden per       ..............               6  ...............          $1,194  .................
 response.
Number of annual responses    ..............            x 38  ...............            x 38  .................
 \3\.
Total new annual burden.....  ..............             228  ...............         $45,372                 $0
----------------------------------------------------------------------------------------------------------------
                               TOTAL ESTIMATED FINAL BURDENS INCLUDING AMENDMENTS
----------------------------------------------------------------------------------------------------------------
                                   Responses        Internal                    Internal time    Annual external
                                                      annual                            costs        cost burden
                                                burden hours
----------------------------------------------------------------------------------------------------------------
Current aggregate annual               5,116          20,464  ...............      $4,072,336                 $0
 burden.
Aggregate final additional              + 38           + 228  ...............       + $45,372               + $0
 annual burden estimates.
Revised aggregate final              = 5,154        = 20,692  ...............    = $4,117,708               = $0
 burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ The estimate includes the initial burden estimates annualized over a three-year period (3 hours/3 = 1 hour),
  plus 2 hours of ongoing annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage
  figures are modified by Commission staff to account for an 1,800-hour work-year and multiplied by 5.35 to
  account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of
  inflation.
\3\ This estimate is based on the number of insurance companies issuing non-variable annuities. See supra
  footnote 725. The proposal reflected an estimate of the number of RILAs, as opposed to the number of insurance
  companies issuing RILAs. We have updated this approach to better reflect the way that the burden for Form 24F-
  2 has historically been calculated.

D. Investment Company Interactive Data

    The Investment Company Interactive Data collection of information 
references current requirements for certain registered investment 
companies and BDCs to submit to the Commission in Inline XBRL certain 
information provided in response to specified form and rule 
requirements included in their registration statements and Exchange Act 
reports. We are amending Form N-4, as well as rule 405 of Regulation S-
T, that will require certain new structured data reporting requirements 
for insurance companies that register offerings of non-variable 
annuities.\864\ The amendments will require insurance companies that 
issue non-variable annuities to tag specified information in 
registration statements filed on Form N-4 or post-effective amendments 
thereto, as well as in forms of prospectuses filed pursuant to rule 
497(c) or 497(e) under the Securities Act that include information that 
varies from the registration statement using Inline XBRL.\865\ The 
purpose of the information collection is to make information regarding 
non-variable annuities and variable annuities easier for investors to 
analyze and to help automate regulatory filings and business 
information processing, and to improve consistency across all types of 
investment products offered on Form N-4 with respect to the 
accessibility of information they provide to the market.
---------------------------------------------------------------------------

    \864\ The Investment Company Interactive Data collection of 
information do not impose any separate burden aside from that 
described in our discussion of the burden estimates for this 
collection of information.
    \865\ See supra Section II.C.10.
---------------------------------------------------------------------------

    Insurance companies that use Form N-4 to register variable 
annuities are currently required to tag certain registration statement 
disclosure items using Inline XBRL.\866\ For the insurance companies 
that will now be registering non-variable annuities, including 
registered MVA annuities, on Form N-4, our amended data tagging 
requirements would represent new burdens. Nevertheless, non-variable 
annuity issuers generally do have prior experience submitting filings 
to the Commission in Inline XBRL. The vast majority of insurance 
companies that

[[Page 60080]]

currently register non-variable annuities on Forms S-1 and S-3 also 
separately file Form N-4 to register variable annuities and variable 
life insurance products or currently tag their non-variable annuity 
registration statements and are thus familiar with the current Form N-4 
tagging requirements.\867\ In addition, insurance companies that 
register non-variable annuities on Forms S-1 and S-3 that file GAAP 
financial statements must tag them using Inline XBRL.\868\ Given this 
prior experience, we do not expect the tagging requirements to be as 
burdensome to many insurance companies that issue non-variable 
annuities as it will be for issuers that will be going through the 
Inline XBRL tagging and submission process for the first time.
---------------------------------------------------------------------------

    \866\ See General Instruction C.3(h) of current Form N-4. As 
discussed above, some of the amended items will also require certain 
variable annuity issuers to provide a few additional disclosures, 
which though relatively minor, will also have to be tagged.
    \867\ Based on analysis of Forms S-1, S-3, and POS AM filed by 
insurance companies that issue non-variable annuities, 32 of the 38 
insurance companies that issue RILAs and registered MVA annuities 
also offer variable products registered on Forms N-3, N-4, or N-6, 
all of which are currently structured, or otherwise have experience 
tagging registration statements.
    \868\ See Inline XBRL Filing of Tagged Data, Securities Act 
Release No. 10514 (June 28, 2018) [83 FR 40846 (Aug. 16, 2018)].
---------------------------------------------------------------------------

    The Commission did not receive public comments regarding the PRA 
estimates associated with the Investment Company Interactive Data 
requirements in the Proposing Release. Commenters who referenced this 
aspect of our proposal did not mention the hourly or monetary cost 
burden of the interactive data requirement.\869\ As discussed above, in 
a change from the proposal, we are requiring insurance companies that 
offer registered MVA annuities to use amended Form N-4, which includes 
additional interactive data requirements. However, as mentioned above, 
insurance companies that issue registered MVA annuities currently do so 
with Form S-1 or S-3, which also have structuring requirements, thereby 
reducing the likelihood that these insurance companies will lack 
familiarity with structured data requirements. We are updating our 
estimated number of insurance companies and related filings that likely 
would be impacted by the amended interactive data requirements on Form 
N-4 to accommodate the requirement that registered MVA annuities use 
the form. The Commission recognizes that certain RILAs and registered 
MVA annuities will be subject to different interactive data 
requirements given that they will be subject to different aspects of 
Form N-4 and its accompanying disclosure requirements. Although certain 
structured disclosure requirements in Form N-4 might not be applicable 
to some contracts, depending on the type of annuity being registered, 
the information collection estimates are average estimates reflecting 
that different filers could in practice incur different burdens 
relating to the Form N-4 disclosure requirements that are applicable to 
particular annuities.
---------------------------------------------------------------------------

    \869\ See supra footnote 496 and accompanying text.
---------------------------------------------------------------------------

    In our most recent Paperwork Reduction Act submission for the 
Investment Company Interactive Data collection of information, we 
estimated a total annual hour burden of 327,571 hours, and a total 
annual external cost burden of $16,791,000.\870\ Compliance with the 
interactive data requirements is mandatory, and the responses will not 
be confidential.
---------------------------------------------------------------------------

    \870\ This estimate is based on the last time the PRA renewal 
for the Investment Company Interactive Data information collection 
was approved, on January 23, 2024. See ICR Reference No. 202212-
3235-007, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202212-3235-007.
---------------------------------------------------------------------------

    The table below summarizes our PRA estimates for the burdens 
associated with the tagging requirements that would apply to non-
variable annuities that file with the Commission on Form N-4.

                          Table 16--Investment Company Interactive Data--PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                 Internal        Internal
                              initial burden   annual burden     Wage rate      Internal time   Annual external
                                   hours           hours                            costs         cost burden
----------------------------------------------------------------------------------------------------------------
                                                Proposed Burdens
----------------------------------------------------------------------------------------------------------------
Proposed disclosures for                   1               1  $406 (blended              $406                $50
 current N-4 filers.                                           rate for
                                                               compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of current N-4 filers  ..............           x 400  ...............           x 400              x 400
Total proposed new burden     ..............             400  ...............        $162,400            $20,000
 estimates for current N-4
 filers.
Proposed Form N-4                          9               4  $406 (blended            $1,624               $700
 disclosures for RILAs.                                        rate for
                                                               compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of RILAs.............  ..............            x 90  ...............            x 90               x 90
Total proposed new burden     ..............             360  ...............        $146,160            $63,000
 estimates for RILAs.
Total proposed new aggregate  ..............             760  ...............        $308,560            $63,000
 annual burden.
----------------------------------------------------------------------------------------------------------------
                              Total Proposed Estimated Burdens Including Amendments
----------------------------------------------------------------------------------------------------------------
                                 Responses     Internal hour                    Internal hour    External cost
                                                 estimate                       cost estimate       estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual              14,702         323,724  ...............     $27,066,240        $16,041,450
 burden estimates.
Proposed additional annual              + 90           + 760  ...............      + $308,560          + $63,000
 burdens.
Revised aggregate annual              14,792         324,484  ...............     $27,374,800        $16,124,450
 burden estimates.
----------------------------------------------------------------------------------------------------------------
                                             Final Estimated Burdens
----------------------------------------------------------------------------------------------------------------
                                 Internal        Internal      Wage rate \2\    Internal time   Annual external
                              initial burden   annual burden                        costs         cost burden
                                   hours         hours \1\
----------------------------------------------------------------------------------------------------------------
Final disclosures for                      1           \4\ 1  $406 (blended              $406            \5\ $50
 current N-4 filers \3\.                                       rate for
                                                               compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of current N-4 filers  ..............           x 416  ...............           x 416              x 416
 \6\.
Total final new burden        ..............             416  ...............        $168,896            $20,800
 estimates for current N-4
 filers.

[[Page 60081]]

 
Final Form N-4 disclosures                 9     \8\ 4 hours  $406 (blended            $1,624           \9\ $700
 for non-variable annuity                                      rate for
 issuers \7\.                                                  compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of non-variable        ..............       \11\ x 38  ...............            x 38               x 38
 annuity issuers \10\.
Total final new burden        ..............             152  ...............         $61,712            $26,600
 estimates for non-variable
 annuity issuers.
Total final new aggregate     ..............        \12\ 568  ...............   \13\ $230,608       \14\ $47,400
 annual burden.
----------------------------------------------------------------------------------------------------------------
                               Total Final Estimated Burdens Including Amendments
----------------------------------------------------------------------------------------------------------------
                                 Responses     Internal hour                    Internal hour    External cost
                                                 estimate                       cost estimate       estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual              15,498         327,571  ...............     $28,628,918        $16,791,000
 burden estimates.
Final additional annual                 + 38           + 568  ...............      + $230,608          + $47,400
 burdens.
Revised final aggregate               15,536         328,139  ...............     $28,859,526        $16,838,400
 annual burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The PRA estimates assume that the types of professionals that will be involved in complying with the new
  interactive data requirements. The Commission's estimates of the relevant wage rates are based on the SIFMA
  Wage Report. The $406 wage rate reflects current estimates of the blended hourly rate for an in-house
  compliance attorney ($425) and a senior programmer ($386). $406 is based on the following calculation: ($425 +
  $386)/2 = $406. This estimate represents the average burden for a filer on Form N-4 that is currently subject
  to interactive data requirements.
\3\ Estimated incremental burden for a variable annuity Form N-4 filer that is subject to the form's current
  interactive data requirements.
\4\ Includes initial burden estimates annualized over a three-year period, plus 0.67 hour of ongoing annual
  burden hours. The estimate of 1 hour is based on the following calculation: ((1 initial hour/3) + 0.67 hour of
  additional ongoing burden hours) = 1 hour.
\5\ Estimated incremental external cost for Form N-4 variable annuity registrants that already submit certain
  information using Inline XBRL.
\6\ Based on a review of Form N-CEN reports through December 31, 2023, we estimate that 416 variable annuity
  registrants file on Form N-4.
\7\ Estimated average burden for a RILA that files on Form N-4 that is currently subject to interactive data
  requirements on other Commission forms.
\8\ Includes initial burden estimates annualized over a three-year period, plus 1 hour of ongoing annual
  burdens. The estimate of 4 hours is based on the following calculation: ((9 initial hours/3 = 3 hours) + 1
  hour of additional ongoing burden hours) = 4 hours.
\9\ We estimate an incremental external cost for RILAs that would be newly filing on Form N-4 of $700 to reflect
  one-time compliance and initial set-up costs. This estimate is based on past estimates of costs--including
  costs of outside legal services and other service providers--relating to issuers that are newly required to
  submit certain disclosures in Inline XBRL format. Because RILAs are currently subject to Inline XBRL tagging
  requirements on other forms, we do not estimate any burdens related to one-time costs associated with becoming
  familiar with structured data requirements (e.g., the acquisition of new software or the services of
  consultants).
\10\ This estimate is based on the number of insurance companies issuing non-variable annuities. See supra
  footnote 725. The proposal reflected an estimate of the number of RILAs, as opposed to the number of insurance
  companies issuing RILAs. We have updated this approach to better reflect the way that the burden for
  Investment Company Interactive Data has historically been calculated.
\11\ In connection with variable and non-variable annuity products, insurance companies only need to tag filings
  for annuities that are offered to new investors. See VASP Adopting Release at Section II.D. As a result, many
  non-variable annuity issuers do not--and will not--need to tag their disclosures because their annuities are
  no longer offered to new investors. Here, because we are not distinguishing between filings associated with
  annuities offered to new investors and those that are not, we likely are over-estimating the burden.
\12\ 568 hours = 416 hours + 152 hours.
\13\ $230,608 internal time cost = $168,896 + $61,712.
\14\ $47,400 annual external cost = $20,800 + $26,600.

VI. Regulatory Flexibility Act Certification

    The Commission certified, pursuant to section 605(b) of the 
Regulatory Flexibility Act of 1980 (``Regulatory Flexibility Act'') 
\871\ that, if adopted, the proposed amendments to Forms N-4 and 24F-2, 
rules 313 and 405 of Regulation S-T, and rules 156, 172, 405, 415, 424, 
456, 457, 485, 497, and 498A under the Securities Act, would not, if 
adopted, have a significant economic impact on a substantial number of 
small entities. The Commission included this certification in Section V 
of the Proposing Release. Commenters did not respond to the 
Commission's requests for comment regarding the Commission's 
certification, and we continue to believe that there will not be a 
significant economic impact of the amendments on a substantial number 
of small entities. As discussed in the Proposing Release, RILA issuers 
are not investment companies and based on a review of EDGAR filings of 
existing RILA issuers, we do not expect any RILA issuers will be 
treated as small entities.\872\ Similarly, while the analysis is 
different for existing N-4 filers (i.e., variable annuity issuers) 
because the insurance company separate accounts registering variable 
annuities are deemed to be investment companies, we expect few, if any, 
separate account to be treated as small entities.\873\
---------------------------------------------------------------------------

    \871\ 5 U.S.C. 605(b).
    \872\ For purposes of the Securities Act and the Regulatory 
Flexibility Act, generally, an issuer, other than an investment 
company, will be considered a small entity if it has net assets of 
$5 million or less as of the end of its most recent fiscal year, and 
the issuer's offering does not exceed $5 million. 5 U.S.C. 601 
(defining ``small entity'' to mean ``small business,'' ``small 
organization,'' or ``small governmental jurisdiction''); 17 CFR 
230.157 (defining ``small business'' or ``small organization'' under 
the Securities Act for purposes of the Regulatory Flexibility Act).
    \873\ Generally, for purposes of the Investment Company Act and 
the Regulatory Flexibility Act, an investment company is a small 
entity if, together with other investment companies in the same 
group of related investment companies, it has net assets of $50 
million or less as of the end of its most recent fiscal year. 17 CFR 
270.0-10(a). Because State law generally treats separate account 
assets as the property of the sponsoring insurance company, rule 0-
10 aggregates each separate account's assets with the assets of the 
sponsoring insurance company, together with assets held in other 
sponsored separate accounts. 17 CFR 270.0-10(b).
---------------------------------------------------------------------------

    While the final amendments include some modifications to the 
Commission's proposal, we do not believe that these modifications alter 
the basis upon which the certification in the Proposing Release was 
made. With regard to the specific changes from the proposal regarding 
registered MVA annuities, we do not believe these modifications alter 
the basis upon which the certification in the Proposing Release was 
made either, as we do not expect any insurance companies that issue 
registered MVA annuities to be treated as small entities. Similarly, 
because we do not expect any insurance companies that issue registered 
MVA annuities or RILAs to be treated as small entities, and the 
amendments to rule 433 will affect only a subset of those insurance 
companies, the amendments to rule 433 do not change the basis upon 
which the certification in the Proposing Release was made. Accordingly, 
we certify that

[[Page 60082]]

the final amendments will not have a significant impact on a 
substantial number of small entities.

Statutory Authority

    The amendments contained in this Release are being adopted under 
the authority set forth in the Securities Act, particularly sections 6, 
7, 8, 10, 19, and 28 thereof [15 U.S.C. 77a et seq.]; the Exchange Act, 
particularly sections 3, 4, 10, 12, 13, 14, 15, 17, 23, 35A, and 36 
thereof [15 U.S.C. 78a et seq.]; the Investment Company Act, 
particularly, Sections 8, 30, and 38 thereof, and the RILA Act, 
particularly section 101 thereof [Pub. L. 117-328, div. AA, title I, 
136 Stat. 4459 (2022)].

List of Subjects

17 CFR Part 230

    Advertising, Confidential business information, Investment 
companies, Reporting and recordkeeping requirements, Securities.

17 CFR Part 232

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Securities.

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Rule and Form Amendments

    For reasons set forth in the preamble, we are amending title 17, 
chapter II of the Code of Federal Regulations as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *
    Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48 
Stat. 78, 79, 81, and 85, as amended (15 U.S.C. 77f, 77h, 77j, 77s).
    Sec. 230.457 also issued under secs. 6 and 7, 15 U.S.C. 77f and 
77g.
* * * * *

0
2. Revise Sec.  230.156 to read as follows:


Sec.  230.156  Investment company and registered non-variable annuity 
sales literature.

    (a) Under the Federal securities laws, including section 17(a) of 
the Securities Act of 1933 (15 U.S.C. 77q(a)) and section 10(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and Sec.  240.10b-5 
of this chapter (Rule 10b-5) thereunder, it is unlawful for any person, 
directly or indirectly, by the use of any means or instrumentality of 
interstate commerce or of the mails, to use sales literature which is 
materially misleading in connection with the offer or sale of 
registered non-variable annuity securities or securities issued by an 
investment company. Under these provisions, sales literature is 
materially misleading if it:
    (1) Contains an untrue statement of a material fact; or
    (2) Omits to state a material fact necessary in order to make a 
statement made, in the light of the circumstances of its use, not 
misleading.
    (b) Whether or not a particular description, representation, 
illustration, or other statement involving a material fact is 
misleading depends on evaluation of the context in which it is made. In 
considering whether a particular statement involving a material fact is 
or might be misleading, weight should be given to all pertinent 
factors, including, but not limited to, those listed below.
    (1) A statement could be misleading because of:
    (i) Other statements being made in connection with the offer of 
sale or sale of the securities in question;
    (ii) The absence of explanations, qualifications, limitations or 
other statements necessary or appropriate to make such statement not 
misleading; or
    (iii) General economic or financial conditions or circumstances.
    (2) Representations about past or future investment performance 
could be misleading because of statements or omissions made involving a 
material fact, including situations where:
    (i) Portrayals of past income, gain, or growth of assets convey an 
impression of the net investment results achieved by an actual or 
hypothetical investment which would not be justified under the 
circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading; and
    (ii) Representations, whether express or implied, about future 
investment performance, including:
    (A) Representations, as to security of capital, possible future 
gains or income, or expenses associated with an investment;
    (B) Representations implying that future gains or income may be 
inferred from or predicted based on past investment performance; or
    (C) Portrayals of past performance, made in a manner which would 
imply that gains or income realized in the past would be repeated in 
the future.
    (3) A statement involving a material fact about the characteristics 
or attributes of an investment company or registered non-variable 
annuity could be misleading because of:
    (i) Statements about possible benefits connected with or resulting 
from services to be provided or methods of operation which do not give 
equal prominence to discussion of any risks or limitations associated 
therewith;
    (ii) Exaggerated or unsubstantiated claims about management skill 
or techniques, characteristics of the investment company or registered 
non-variable annuity or an investment in such company or securities, 
services, security of investment or funds, effects of government 
supervision, or other attributes; and
    (iii) Unwarranted or incompletely explained comparisons to other 
investment vehicles or to indexes.
    (4) Representations about the fees or expenses associated with an 
investment in the fund or registered non-variable annuity could be 
misleading because of statements or omissions made involving a material 
fact, including situations where portrayals of the fees and expenses 
associated with an investment in the fund or registered non-variable 
annuity omit explanations, qualifications, limitations, or other 
statements necessary or appropriate to make the portrayals not 
misleading.
    (c) For purposes of this section, the term sales literature shall 
be deemed to include any communication (whether in writing, by radio, 
or by television) used by any person to offer to sell or induce the 
sale of securities of any investment company or registered non-variable 
annuity. Communications between issuers, underwriters and dealers are 
included in this definition of sales literature if such communications, 
or the information contained therein, can be reasonably expected to be 
communicated to prospective investors in the offer or sale of 
securities or are designed to be employed in either written or oral 
form in the offer or sale of securities.
    (d) Nothing in this section may be construed to prevent a business 
development company or a registered closed-end investment company from

[[Page 60083]]

qualifying for an exemption under Sec.  230.168 or Sec.  230.169.

0
3. Amend Sec.  230.172 by revising paragraph (d) to read as follows:


Sec.  230.172  Delivery of prospectuses.

* * * * *
    (d) Exclusions. This section shall not apply to any:
    (1) Offering of any investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a 
registered closed-end investment company;
    (2) A business combination transaction as defined in Sec.  
230.165(f)(1);
    (3) Offering registered on Form S-8 (Sec.  239.16b of this 
chapter); or
    (4) Offering of any registered non-variable annuity securities.

0
4. Amend Sec.  230.405 by adding in alphabetical order definitions for 
``Form available solely to investment companies registered under the 
Investment Company Act of 1940,'' ``Registered index-linked annuity,'' 
``Registered market value adjustment annuity,'' and ``Registered non-
variable annuity'' to read as follows:


Sec.  230.405  Definitions of terms.

* * * * *
    Form available solely to investment companies registered under the 
Investment Company Act of 1940. A form available solely to investment 
companies registered under the Investment Company Act of 1940 includes 
the form used to register the offering of securities of a registered 
non-variable annuity for purposes of the Securities Act of 1933.
* * * * *
    Registered index-linked annuity. The term registered index-linked 
annuity means an annuity or an option available under an annuity:
    (1) That is deemed a security;
    (2) That is offered or sold in a registered offering;
    (3) That is issued by an insurance company that is the subject to 
the supervision of either the insurance commissioner or bank 
commissioner of any State or any agency or officer performing like 
functions as such commissioner;
    (4) That is not issued by an investment company; and
    (5) Whose contract value, either during the accumulation period or 
after annuitization or both, will earn positive or negative interest 
based, in part, on the performance of any index, rate, or benchmark.
* * * * *
    Registered market value adjustment annuity. The term registered 
market value adjustment annuity means an annuity or an option available 
under an annuity, that is not a registered index-linked annuity, and:
    (1) That is deemed a security;
    (2) That is offered or sold in a registered offering;
    (3) That is issued by an insurance company that is subject to the 
supervision of either the insurance commissioner or bank commissioner 
of any State or any agency or officer performing like functions as such 
commissioner;
    (4) That is not issued by an investment company; and
    (5) Whose contract value may reflect a positive or negative 
adjustment (based on calculations using a predetermined formula, a 
change in interest rates, or some other factor or benchmark) if amounts 
are withdrawn before the end of a specified period.
* * * * *
    Registered non-variable annuity. The term registered non-variable 
annuity means any registered index-linked annuity or registered market 
value adjustment annuity.
* * * * *

0
5. Amend Sec.  230.415 by revising paragraph (b) to read as follows:


Sec.  230.415  Delayed or continuous offering and sale of securities.

* * * * *
    (b) This section shall not apply to any registration statement 
pertaining to a registered non-variable annuity, securities issued by a 
face-amount certificate company, or redeemable securities issued by an 
open-end management company or unit investment trust under the 
Investment Company Act of 1940 or any registration statement filed by 
any foreign government or political subdivision thereof.

0
6. Amend Sec.  230.424 by revising paragraph (f) to read as follows:


Sec.  230.424  Filing of prospectuses, number of copies.

* * * * *
    (f) This section shall not apply with respect to prospectuses of an 
investment company registered under the Investment Company Act of 1940 
(other than a registered closed-end investment company) or prospectuses 
that pertain to a registered non-variable annuity. References to ``form 
of prospectus'' in paragraphs (a), (b), and (c) of this section shall 
be deemed also to refer to the form of Statement of Additional 
Information.
* * * * *

0
7. Amend Sec.  230.433 by revising paragraph (b)(1) as follows:


Sec.  230.433  Conditions to permissible post-filing free writing 
prospectuses.

* * * * *
    (b) * * *
    (1) Eligibility and prospectus conditions for seasoned issuers, 
well-known seasoned issuers, and offerings of registered non-variable 
annuity securities. Subject to the provisions of Rule 164(e), (f), and 
(g), the issuer or any other offering participant may use a free 
writing prospectus in the following offerings after a registration 
statement relating to the offering has been filed that includes a 
prospectus that, other than by reason of this section or Rule 431, 
satisfies the requirements of section 10 of the Act:
    (i) Offerings of securities registered on Form S-3 (Sec.  239.13 of 
this chapter) pursuant to General Instruction I.B.1, I.B.2, I.C., or 
I.D. thereof or on Form SF-3 (Sec.  239.45 of this chapter) or on Form 
N-2 (Sec. Sec.  239.14 and 274.11a-1 of this chapter) pursuant to 
General Instruction A.2 with respect to the same transactions;
    (ii) Offerings of securities registered on Form F-3 (Sec.  239.33 
of this chapter) pursuant to General Instruction I.A.5, I.B.1, I.B.2, 
or I.C. thereof;
    (iii) Any other offering not excluded from reliance on this section 
and Rule 164 of securities of a well-known seasoned issuer;
    (iv) Any other offering not excluded from reliance on this section 
and Rule 164 of securities of an issuer eligible to use Form S-3 or 
Form F-3 for primary offerings pursuant to General Instruction I.B.1 of 
such Forms or an issuer eligible to use General Instruction A.2 of Form 
N-2 to register a primary offering described in General Instruction 
I.B.1 of Form S-3; and
    (v) Offerings of registered non-variable annuity securities 
registered on Form N-4 (Sec.  239.17b of this chapter) where the issuer 
would otherwise be eligible to use Form S-3 (Sec.  239.13 of this 
chapter) pursuant to General Instruction I.B.1, I.B.2, I.C, or I.D.
* * * * *

0
8. Amend Sec.  230.456 by adding paragraph (e) to read as follows:


Sec.  230.456  Date of filing; timing of fee payment.

* * * * *
    (e)(1) Notwithstanding paragraph (a) of this section, where a 
registration statement relates to an offering of registered non-
variable annuity securities, an issuer shall be deemed to register an 
offering of an indeterminate amount of such securities and shall, not 
later than 90 days after the end of any fiscal year during which it has 
publicly offered such securities, pay a

[[Page 60084]]

registration fee to the Commission calculated in accordance with Sec.  
230.457(u) (Rule 457(u)) and file Form 24F-2 (referenced in 17 CFR 
274.24) with the Commission.
    Instruction 1 to paragraph (e)(1): To determine the date on which 
the registration fee must be paid, the first day of the 90-day period 
is the first calendar day of the fiscal year following the fiscal year 
for which the registration fee is to be paid. If the last day of the 
90-day period falls on a Saturday, Sunday, or Federal holiday, the 
registration fee is due on the first business day thereafter.
    (2) When registering an offering of an indeterminate amount of 
registered non-variable annuity securities pursuant to paragraph (e)(1) 
of this section, the securities sold will be considered registered, for 
purposes of section 6(a) of the Act, if the registration fee has been 
paid and the issuer has filed a Form 24F-2 filing pursuant to paragraph 
(e)(1) of this section not later than the end of the 90-day period.
    (3) A registration statement filed in accordance with the 
registration fee payment provisions of paragraph (e)(1) of this section 
will be considered filed as to the securities identified in the 
registration statement for purposes of this section and section 5 of 
the Act when it is received by the Commission, if it complies with all 
other requirements under the Act, including this part.
    (4) For purposes of this section, if an issuer ceases operations, 
the date the issuer ceases operations will be deemed to be the end of 
its fiscal year. In the case of a liquidation, merger, or sale of all 
or substantially all of the assets (``merger'') of the issuer, the 
issuer will be deemed to have ceased operations for the purposes of 
this section on the date the merger is consummated; provided, however, 
that in the case of a merger of an issuer or a series of an issuer 
(``Predecessor'') with another issuer or a series of an issuer 
(``Successor''), the Predecessor will not be deemed to have ceased 
operations and the Successor will assume the obligations, fees, and 
redemption credits of the Predecessor incurred pursuant to this section 
if the Successor:
    (i) Had no assets or liabilities, other than nominal assets or 
liabilities, and no operating history immediately prior to the merger;
    (ii) Acquired substantially all of the assets and assumed 
substantially all of the liabilities and obligations of the 
Predecessor; and
    (iii) The merger is not designed to result in the Predecessor 
merging with, or substantially all of its assets being acquired by, an 
issuer (or a series of an issuer) that would not meet the conditions of 
paragraph (e)(4)(i) of this section.
    (5) An issuer paying the fee required by paragraph (e)(1) of this 
section or any portion thereof more than 90 days after the end of the 
fiscal year of the issuer shall pay to the Commission interest on 
unpaid amounts, calculated based on the interest rate in effect at the 
time of the interest payment by reference to the ``current value of 
funds rate'' on the Treasury Department's Bureau of Fiscal Service 
internet site at https://fiscal.treasury.gov/, or by calling (202) 874-
6995, and using the following formula: I = (X) (Y) (Z/365), where: I = 
Amount of interest due; X = Amount of registration fee due; Y = 
Applicable interest rate, expressed as a fraction; Z = Number of days 
by which the registration fee payment is late. The payment of interest 
pursuant to this paragraph (e)(5) shall not preclude the Commission 
from bringing an action to enforce the requirements of this paragraph 
(e).
    (6) An immaterial or unintentional failure to comply with a 
requirement of this paragraph (e) will not result in a violation of 
section 6(a) of the Act (15 U.S.C. 77f(a)), so long as:
    (i) A good faith and reasonable effort was made to comply with the 
requirement; and
    (ii) In the case of a late payment of a registration fee, the 
issuer pays the registration fee and any interest due thereon as soon 
as practicable after discovery of the failure to pay the registration 
fee.

0
9. Amend Sec.  230.457 by revising paragraph (u) to read as follows:


Sec.  230.457  Computation of fee.

* * * * *
    (u) Where an issuer elects or is required to register an offering 
of an indeterminate amount of exchange-traded vehicle securities in 
accordance with Sec.  230.456(d) (Rule 456(d)) or registered non-
variable annuity securities in accordance with Sec.  230.456(e) (Rule 
456(e)), the registration fee is to be calculated in the following 
manner:
    (1) Determine the aggregate sale price of such securities sold 
during the fiscal year.
    (2) Determine the sum of:
    (i) The aggregate redemption or repurchase price of such securities 
redeemed or repurchased during the fiscal year; and
    (ii) The aggregate redemption or repurchase price of such 
securities redeemed or repurchased during a prior fiscal year that were 
not used previously to reduce registration fees payable to the 
Commission, if the prior fiscal year ended no earlier than August 1, 
2021 in the case of exchange traded vehicle securities, or September 
23, 2024 in the case of registered non-variable annuity securities.
    (3) Subtract the amount in paragraph (u)(2) of this section from 
the amount in paragraph (u)(1) of this section. If the resulting amount 
is positive, the amount is the net sales amount. If the resulting 
amount is negative, it is the amount of redemption credits available 
for use in future years to offset sales.
    (4) The registration fee is calculated by multiplying the net sales 
amount by the fee payment rate in effect on the date of the fee 
payment. If the issuer determines that it had net redemptions or 
repurchases for the fiscal year, no registration fee is due.

0
10. Amend Sec.  230.485 by revising the section heading and paragraphs 
(a)(1) and (b) introductory text to read as follows:


Sec.  230.485  Effective date of post-effective amendments filed by 
certain registered investment companies or issuers offering registered 
non-variable annuities.

    (a) * * *
    (1) Except as otherwise provided in this section, a post-effective 
amendment to a registration statement filed by a registered open-end 
management investment company, unit investment trust or, separate 
account as defined in section 2(a)(37) of the Investment Company Act of 
1940 [15 U.S.C. 80a-2(a)(37)] or to register an offering of a 
registered non-variable annuity securities shall become effective on 
the sixtieth day after the filing thereof, or a later date designated 
by the registrant on the facing sheet of the amendment, which date 
shall be no later than eighty days after the date on which the 
amendment is filed.
* * * * *
    (b) Immediate effectiveness. Except as otherwise provided in this 
section, a post-effective amendment to a registration statement filed 
by a registered open-end management investment company, unit investment 
trust or separate account as defined in section 2(a)(37) of the 
Investment Company Act of 1940 [15 U.S.C. 80a-2(a)(37)] or to register 
an offering of a registered non-variable annuity securities shall 
become effective on the date upon which it is filed with the 
Commission, or a later date designated by the registrant on the facing 
sheet of the amendment, which date shall be not later than thirty days 
after the date on which the amendment is filed, except that a post-
effective amendment

[[Page 60085]]

including a designation of a new effective date pursuant to paragraph 
(b)(1)(iii) of this section shall become effective on the new effective 
date designated therein, Provided, that the following conditions are 
met:
* * * * *

0
11. Amend Sec.  230.497 by revising the section heading and paragraphs 
(c) and (e) to read as follows:


Sec.  230.497  Filing of investment company or registered non-variable 
annuity prospectuses--number of copies

* * * * *
    (c) For investment companies filing on Sec. Sec.  239.15A and 
274.11A of this chapter (Form N-1A), Sec. Sec.  239.17a and 274.11b of 
this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this chapter 
(Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter (Form N-
6), or an offering of registered non-variable annuities being filed on 
Form N-4, within five days after the effective date of a registration 
statement or the commencement of a public offering after the effective 
date of a registration statement, whichever occurs later, 10 copies of 
each form of prospectus and form of Statement of Additional Information 
used after the effective date in connection with such offering shall be 
filed with the Commission in the exact form in which it was used. 
Investment companies filing on Forms N-1A, N-3, N-4, or N-6 and issuers 
of registered non-variable annuities filing on Form N-4 must, if 
applicable pursuant to General Instruction C.3.(g) of Form N-1A, 
General Instruction C.3.(h) of Form N-3, General Instruction C.3.(h) of 
Form N-4, or General Instruction C.3.(h) of Form N-6, submit an 
Interactive Data File (as defined in Sec.  232.11 of this chapter).
* * * * *
    (e) For investment companies filing on Sec. Sec.  239.15A and 
274.11A of this chapter (Form N-1A), Sec. Sec.  239.17a and 274.11b of 
this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this chapter 
(Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter (Form N-
6), or an offering of registered non-variable annuities being filed on 
Form N-4, after the effective date of a registration statement, no 
prospectus that purports to comply with Section 10 of the Act (15 
U.S.C. 77j) or Statement of Additional Information that varies from any 
form of prospectus or form of Statement of Additional Information filed 
pursuant to paragraph (c) of this section shall be used until five 
copies thereof have been filed with, or mailed for filing to the 
Commission. Investment companies filing on Forms N-1A, N-3, N-4, or N-6 
and issuers of registered non-variable annuities filing on Form N-4 
must, if applicable pursuant to General Instruction C.3.(g) of Form N-
1A, General Instruction C.3.(h) of Form N-3, General Instruction 
C.3.(h) of Form N-4, or General Instruction C.3.(h) of Form N-6, submit 
an Interactive Data File (as defined in Sec.  232.11 of this chapter).
* * * * *

0
12. Revise Sec.  230.498A to read as follows:


Sec.  230.498A  Summary prospectuses for separate accounts offering 
variable annuity and variable life insurance contracts and for offering 
registered non-variable annuity contracts.

    (a) Definitions. For purposes of this section:
    Class means a class of a Contract that varies principally with 
respect to distribution-related fees and expenses.
    Contract means a Variable Annuity Contract, a Variable Life 
Insurance Contract, a RILA Contract, or a Registered Market Value 
Adjustment Annuity Contract as defined in this section, respectively, 
as well as any Contract that offers a combination of Index-Linked 
Options, Variable Options, and/or Fixed Options (including Fixed 
Options subject to a Contract Adjustment).
    Contract Adjustment means a positive or negative adjustment made to 
the value of the Contract by the Insurance Company if amounts are 
withdrawn from an Investment Option or from the Contract before the end 
of a specified period. This adjustment may be based on calculations 
using a predetermined formula, or a change in interest rates, or some 
other factor or benchmark.
    Fixed Option means an Investment Option under a Contract pursuant 
to which the value of the Contract (for a Form N-3 or Form N-4 
Registrant, either during an accumulation period or after 
annuitization, or both) will earn interest at a rate specified by the 
Company, subject to a minimum guaranteed rate under the Contract. The 
term Fixed Option includes Fixed Options that are subject to a Contract 
Adjustment.
    Index-Linked Option means an Investment Option offered under a 
Contract, pursuant to which the value of the Contract, either during an 
accumulation period or after annuitization, or both, will earn positive 
or negative interest based, in part, on the performance of a specified 
index, rate, or benchmark (such as a registered exchange-traded fund 
that tracks an index).
    Initial Summary Prospectus means the initial summary prospectus 
described in paragraph (b) of this section.
    Insurance Company means the insurance company issuing the Contract, 
which company is subject to State supervision. The Insurance Company 
may also be the depositor or sponsor of any Registered Separate Account 
in which the Contract participates.
    Investment Option means a Fixed Option, an Index-Linked Option, 
and/or a Variable Option, as applicable.
    Portfolio Company means any company in which a Registrant on Form 
N-4 or Form N-6 invests and which may be selected as a Variable Option 
by the investor.
    Portfolio Company Prospectus means the Statutory Prospectus of a 
Portfolio Company and a summary prospectus of a Portfolio Company 
permitted by Sec.  230.498.
    Registered Market Value Adjustment Annuity Contract means a 
registered market value adjustment annuity contract, any portion 
thereof, or any unit of interest or participation therein, issued by an 
Insurance Company.
    Registered Separate Account means a separate account (as defined in 
section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) that has 
an effective registration statement on Sec. Sec.  239.17a and 274.11b 
of this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this 
chapter (Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter 
(Form N-6) and that has a current prospectus that satisfies the 
requirements of section 10(a) of the Act (15 U.S.C. 77j(a)).
    Registrant means, as applicable, a Registered Separate Account or 
the Insurance Company.
    RILA Contract means any registered index-linked annuity contract, 
any portion thereof, or any unit of interest or participation therein, 
issued by an Insurance Company, that offers Index-Linked Options.
    Statement of Additional Information means the statement of 
additional information required by Part B of Form N-1A, Form N-3, Form 
N-4, or Form N-6.
    Statutory Prospectus means a prospectus that satisfies the 
requirements of section 10(a) of the Act (15 U.S.C. 77j(a)).
    Summary Prospectus refers to both the Initial Summary Prospectus 
and the Updating Summary Prospectus.
    Updating Summary Prospectus means the updating summary prospectus 
described in paragraph (c) of this section.

[[Page 60086]]

    Variable Annuity Contract means any accumulation contract or 
annuity contract, any portion thereof, or any unit of interest or 
participation therein, issued by an Insurance Company, pursuant to 
which the value of the contract, either during an accumulation period 
or after annuitization, or both, varies according to the investment 
experience of a Portfolio Company.
    Variable Life Insurance Contract means a life insurance contract, 
issued by an Insurance Company, that provides for death benefits and 
cash values that may vary with the investment performance of any 
separate account.
    Variable Option means:
    (i) In the context of a Registrant on Form N-4 or Form N-6, an 
Investment Option under any Contract pursuant to which the value of the 
Contract (for a Form N-4 Registrant, either during an accumulation 
period or after annuitization, or both) varies according to the 
investment experience of a Portfolio Company;
    (ii) In the context of a Registrant on Form N-3, any portfolio of 
investments in which a Registrant on Form N-3 invests and which may be 
selected as an option by the investor.
    (b) General Requirements for Initial Summary Prospectus. An Initial 
Summary Prospectus that complies with this paragraph (b) will be deemed 
to be a prospectus that is authorized under section 10(b) of the Act 
(15 U.S.C. 77j(b)) and section 24(g) of the Investment Company Act (15 
U.S.C. 80a-24(g)) for the purposes of section 5(b)(1) of the Act (15 
U.S.C. 77e(b)(1)).
    (1) Scope of Initial Summary Prospectus. An Initial Summary 
Prospectus may only describe a single Contract (but may describe more 
than one Class of the Contract) currently offered by the Registrant 
under the Statutory Prospectus to which the Initial Summary Prospectus 
relates.
    (2) Cover Page or Beginning of Initial Summary Prospectus. Include 
on the front cover page or the beginning of the Initial Summary 
Prospectus:
    (i) The Insurance Company's name;
    (ii) The name of the Contract, and the Class or Classes if any, to 
which the Initial Summary Prospectus relates;
    (iii) A statement identifying the document as a ``Summary 
Prospectus for New Investors'';
    (iv) The approximate date of the first use of the Initial Summary 
Prospectus;
    (v) The following legend, which for Initial Summary Prospectuses of 
Contracts registered on Form N-4 would be included along with the 
statements described in Item 1(a)(6) through (8) of Form N-4:
    This Summary Prospectus summarizes key features of the [Contract].
    Before you invest, you should also review the prospectus for the 
[Contract], which contains more information about the [Contract's] 
features, benefits, and risks. You can find this document and other 
information about the [Contract] online at [___]. You can also obtain 
this information at no cost by calling [___] or by sending an email 
request to [___].
    You may cancel your [Contract] within 10 days of receiving it 
without paying fees or penalties [although we will apply the Contract 
Adjustment]. In some States, this cancellation period may be longer. 
Upon cancellation, you will receive either a full refund of the amount 
you paid with your application or your total contract value. You should 
review the prospectus, or consult with your investment professional, 
for additional information about the specific cancellation terms that 
apply.
    Additional information about certain investment products, including 
[type of Contract], has been prepared by the Securities and Exchange 
Commission's staff and is available at Investor.gov.
    (A) A Registrant may modify the legend so long as the modified 
legend contains comparable information.
    (B) The legend must provide a website address, other than the 
address of the Commission's electronic filing system; toll-free 
telephone number; and email address that investors can use to obtain 
the Statutory Prospectus and other materials, request other information 
about the Contract, and make investor inquiries. The website address 
must be specific enough to lead investors directly to the Statutory 
Prospectus and other materials that are required to be accessible under 
paragraph (h)(1) of this section, rather than to the home page or other 
section of the website on which the materials are posted. The website 
could be a central site with prominent links to each document. The 
legend may indicate, if applicable, that the Statutory Prospectus and 
other information are available from a financial intermediary (such as 
a broker-dealer) through which the Contract may be purchased or sold. 
If a Registered Separate Account that has an effective registration 
statement on Form N-3 relies on Sec.  270.30e-3 of this chapter to 
transmit a report, the legend must also include the website address 
required by Sec.  270.30e-3(c)(1)(iii) of this chapter if different 
from the website address required by this paragraph (b)(2)(v)(B).
    (C) The paragraph of the legend regarding cancellation of the 
Contract may be omitted if not applicable. If this paragraph is 
included in the legend, the paragraph must be presented in a manner 
reasonably calculated to draw investor attention to that paragraph.
    (D) The legend may include instructions describing how a 
shareholder can elect to receive prospectuses or other documents and 
communications by electronic delivery.
    (vi) For a RILA Contract and any Contract that offers Index-Linked 
Options along with other Investment Options, the statement required by 
rule 481(b)(1) under the Securities Act [17 CFR 230.481(b)(1)].
    (3) Back Cover Page or Last Page of Initial Summary Prospectus. (i) 
If a Registrant incorporates any information by reference into the 
Summary Prospectus, include a legend identifying the type of document 
(e.g., Statutory Prospectus) from which the information is incorporated 
and the date of the document. If a Registrant incorporates by reference 
a part of a document, the legend must clearly identify the part by 
page, paragraph, caption, or otherwise. If information is incorporated 
from a source other than the Statutory Prospectus, the legend must 
explain that the incorporated information may be obtained, free of 
charge, in the same manner as the Statutory Prospectus.
    (ii) Include on the bottom of the back cover page or the last page 
of the Initial Summary Prospectus the EDGAR contract identifier for the 
contract in type size smaller than that generally used in the 
prospectus (e.g., 8-point modern type).
    (4) Table of Contents. An Initial Summary Prospectus may include a 
table of contents meeting the requirements of Sec.  230.481(c).
    (5) Contents of Initial Summary Prospectus. An Initial Summary 
Prospectus must contain the information required by this paragraph 
(b)(5) with respect to the applicable registration form, and only the 
information required by this paragraph (b)(5), in the order provided in 
paragraphs (b)(5)(i) through (ix) of this section, except that, for an 
Initial Summary Prospectus related to a Contract registered on Form N-
4, provide the information provided in paragraph (b)(5)(ii) before the 
information provided by paragraph (b)(5)(i).
    (i) Under the heading ``Important Information You Should Consider 
About the [Contract],'' the information required by Item 2 of Form N-3, 
Item 3 of Form N-4, or Item 2 of Form N-6.
    (ii) Under the heading ``Overview of the [Contract],'' the 
information required by Item 3 of Form N-3, Item 2 of Form N-4, or Item 
3 of Form N-6.

[[Page 60087]]

    (iii) Under the heading ``Standard Death Benefits,'' the 
information required by Item 10(a) of Form N-6.
    (iv) Under the heading ``Benefits Available Under the [Contract],'' 
the information required by Item 11(a) of Form N-3 or Item 10(a) of 
Form N-4. Under the heading ``Other Benefits Available Under the 
[Contract],'' the information required by Item 11(a) of Form N-6.
    (v) Under the heading ``Buying the [Contract],'' the information 
required by Item 12(a) of Form N-3, Item 11(a) of Form N-4, or Item 
9(a) through (c) of Form N-6.
    (vi) Under the heading ``How Your [Contract] Can Lapse,'' the 
information required by Item 14(a) through (c) of Form N-6.
    (vii) Under the heading ``Making Withdrawals: Accessing the Money 
in Your [Contract],'' the information required by Item 13(a) of Form N-
3, Item 12(a) of Form N-4, or Item 12(a) of Form N-6.
    (viii) Under the heading ``Additional Information About Fees,'' the 
information required by Item 4 of Form N-3, Item 4 of Form N-4, or Item 
4 of Form N-6.
    (ix) Under the heading ``Appendix: [Portfolio Companies][Investment 
Options] Available Under the Contract,'' include as an appendix the 
information required by Item 18 of Form N-3, Item 17 of Form N-4, or 
Item 18 of Form N-6. Alternatively, an Initial Summary Prospectus for a 
Contract registered on Form N-3 may include the information required by 
Item 19 of Form N-3, under the heading ``Additional Information About 
Investment Options Available Under the Contract.''
    (c) General Requirements for Updating Summary Prospectus. An 
Updating Summary Prospectus that complies with this paragraph (c) will 
be deemed to be a prospectus that is authorized under section 10(b) of 
the Act (15 U.S.C. 77j(b)) and section 24(g) of the Investment Company 
Act (15 U.S.C. 80a-24(g)) for the purposes of section 5(b)(1) of the 
Act (15 U.S.C. 77e(b)(1)).
    (1) Use of Updating Summary Prospectus. A Registrant may only use 
an Updating Summary Prospectus if the Registrant uses an Initial 
Summary Prospectus for each currently offered Contract described under 
the Statutory Prospectus to which the Updating Summary Prospectus 
relates.
    (2) Scope of Updating Summary Prospectus. An Updating Summary 
Prospectus may describe one or more Contracts (and more than one Class) 
described under the Statutory Prospectus to which the Updating Summary 
Prospectus relates.
    (3) Cover Page or Beginning of Updating Summary Prospectus. Include 
on the front cover page or at the beginning of the Updating Summary 
Prospectus:
    (i) The Insurance Company's name;
    (ii) The name of the Contract(s) and the Class or Classes, if any, 
to which the Updating Summary Prospectus relates;
    (iii) A statement identifying the document as an ``Updating Summary 
Prospectus'';
    (iv) The approximate date of the first use of the Updating Summary 
Prospectus; and
    (v) The following legend, which must meet the requirements of 
paragraphs (b)(2)(v)(A), (B), and (D) of this section, as applicable, 
and for Updating Summary Prospectuses of Contracts registered on Form 
N-4 would be included along with the statements described in Item 
1(a)(6) through (8) of Form N-4:
    The prospectus for the [Contract] contains more information about 
the [Contract], including its features, benefits, and risks. You can 
find the current prospectus and other information about the [Contract] 
online at [___]. You can also obtain this information at no cost by 
calling [___] or by sending an email request to [___].
    Additional information about certain investment products, including 
[type of Contract], has been prepared by the Securities and Exchange 
Commission's staff and is available at Investor.gov.
    (vi) For a RILA Contract and any Contract that offers Index-Linked 
Options along with other Investment Options, the statement required by 
rule 481(b)(1) under the Securities Act [17 CFR 230.481(b)(1)].
    (4) Back Cover Page or Last Page of Updating Summary Prospectus. 
Include on the bottom of the back cover page or the last page of the 
Updating Summary Prospectus:
    (i) The legend required by paragraph (b)(3)(i) of this section; and
    (ii) The EDGAR contract identifier(s) for each contract in type 
size smaller than that generally used in the prospectus (e.g., 8-point 
modern type).
    (5) Table of Contents. An Updating Summary Prospectus may include a 
table of contents meeting the requirements of Sec.  230.481(c).
    (6) Contents of Updating Summary Prospectus. An Updating Summary 
Prospectus must contain the information required by this paragraph 
(c)(6) with respect to the applicable registration form, in the order 
provided in paragraphs (c)(6)(i) through (iv) of this section.
    (i) If any changes have been made with respect to the Contract 
after the date of the most recent Updating Summary Prospectus or 
Statutory Prospectus that was sent or given to investors with respect 
to the availability of Investment Options (for Registrants on Form N-3 
and Form N-4) or Portfolio Companies (for Registrants on Form N-6) 
under the Contract (including, for RILA Contracts, a change to any of 
the features of the Index-Linked Options disclosed in the table that 
Item 17(b)(1) of Form N-4 requires, and for Contracts that offer Fixed 
Options, a change to any of the features of the Fixed Options disclosed 
in the table that Item 17(c) of Form N-4 requires), or the disclosure 
that the Registrant included in response to Item 2 (Key Information), 
Item 3 (Overview of the Contract), Item 4 (Fee Table), Item 11 
(Benefits Available Under the Contract), Item 12 (Purchases and 
Contract Value), or Item 13 (Surrenders and Withdrawals) of Form N-3; 
Item 2 (Overview of the Contract), Item 3 (Key Information), Item 4 
(Fee Table), Item 10 (Benefits Available Under the Contract), Item 11 
(Purchases and Contract Value), or Item 12 (Surrenders and Withdrawals) 
of Form N-4; and Item 2 (Key Information), Item 3 (Overview of the 
Contract), Item 4 (Fee Table), Item 9 (Premiums), Item 10 (Standard 
Death Benefits), Item 11 (Other Benefits Available Under the Contract), 
Item 12 (Surrenders and Withdrawals), or Item 14 (Lapse and 
Reinstatement) of Form N-6, include the following as applicable, under 
the heading ``Updated Information About Your [Contract]'':
    (A) The following legend: ``The information in this Updating 
Summary Prospectus is a summary of certain [Contract] features that 
have changed since the Updating Summary Prospectus dated [date]. This 
may not reflect all of the changes that have occurred since you entered 
into your [Contract].''
    (B) As applicable, provide a concise description of each change 
specified in paragraph (c)(6)(i) of this section. Provide enough detail 
to allow investors to understand the change and how it will affect 
investors, including indicating whether the change only applies to 
certain Contracts described in the Updating Summary Prospectus.
    (ii) In addition to the changes specified in paragraph (c)(6)(i) of 
this section, a Registrant may provide a concise description of any 
other information relevant to the Contract within the time period that 
paragraph (c)(6)(i) of this section specifies, under the heading 
``Updated Information

[[Page 60088]]

About Your [Contract].'' Any additional information included pursuant 
to this paragraph (c)(6)(ii) should not, by its nature, quantity, or 
manner of presentation, obscure or impede understanding of the 
information that paragraph (c)(6)(i) of this section requires.
    (iii) Under the heading ``Important Information You Should Consider 
About the [Contract],'' provide the information required by Item 2 of 
Form N-3, Item 3 of Form N-4, or Item 2 of Form N-6.
    (iv) Under the heading ``Appendix: [Portfolio Companies][Investment 
Options] Available Under the [Contract],'' include as an appendix the 
information required by Item 18 of Form N-3, Item 17 of Form N-4, or 
Item 18 of Form N-6. Alternatively, an Updating Summary Prospectus for 
a Contract registered on Form N-3 may include, under the heading 
``Additional Information About [Investment Options] Available Under the 
[Contract],'' the information required by Item 19 of Form N-3.
    (d) Incorporation by Reference into a Summary Prospectus. (1) 
Except as provided by paragraph (d)(2) of this section, information may 
not be incorporated by reference into a Summary Prospectus. Information 
that is incorporated by reference into a Summary Prospectus in 
accordance with paragraph (d)(2) of this section need not be sent or 
given with the Summary Prospectus.
    (2) A Registrant may incorporate by reference into a Summary 
Prospectus any or all of the information contained in the Registrant's 
Statutory Prospectus and Statement of Additional Information, and any 
information from the Registrant's reports under Sec.  270.30e-1 of this 
chapter that the Registrant has incorporated by reference into the 
Registrant's Statutory Prospectus, provided that:
    (i) The conditions of paragraphs (b)(2)(v)(B), (c)(3)(v), and (h) 
of this section are met;
    (ii) A Registrant may not incorporate by reference into a Summary 
Prospectus information that paragraphs (b) and (c) of this section 
require to be included in an Initial Summary Prospectus or Updating 
Summary Prospectus, respectively; and
    (iii) Information that is permitted to be incorporated by reference 
into the Summary Prospectus may be incorporated by reference into the 
Summary Prospectus only by reference to the specific document that 
contains the information, not by reference to another document that 
incorporates such information by reference.
    (3) For purposes of Sec.  230.159, information is conveyed to a 
person not later than the time that a Summary Prospectus is received by 
the person if the information is incorporated by reference into the 
Summary Prospectus in accordance with paragraph (d)(2) of this section.
    (e) Terms used in the Summary Prospectus. Define special terms used 
in the Initial Summary Prospectus and Updating Summary Prospectus using 
any presentation style that clearly conveys their meaning to investors, 
such as the use of a glossary or list of definitions.
    (f) Transfer of the Contract Security. Any obligation under section 
5(b)(2) of the Act (15 U.S.C. 77e(b)(2)) to have a Statutory Prospectus 
precede or accompany the carrying or delivery of a Contract security in 
an offering registered on Form N-3, Form N-4, or Form N-6 is satisfied 
if:
    (1) A Summary Prospectus is sent or given no later than the time of 
the carrying or delivery of the Contract security (an Initial Summary 
Prospectus in the case of a purchase of a new Contract, or an Updating 
Summary Prospectus in the case of additional purchase payments in an 
existing Contract);
    (2) The Summary Prospectus is not bound together with any materials 
except Portfolio Company Prospectuses for Portfolio Companies available 
as Variable Options under the Contract, provided that:
    (i) All of the Portfolio Companies are available as investment 
options to the person to whom such documents are sent or given; and
    (ii) A table of contents identifying each Portfolio Company 
Prospectus that is bound together, and the page number on which each 
document is found, is included at the beginning or immediately 
following a cover page of the bound materials.
    (3) The Summary Prospectus that is sent or given satisfies the 
requirements of paragraph (b) or (c) of this section, as applicable, at 
the time of the carrying or delivery of the Contract security; and
    (4) The conditions set forth in paragraph (h) of this section are 
satisfied.
    (g) Sending Communications. A communication relating to an offering 
registered on Form N-3, Form N-4, or Form N-6 sent or given after the 
effective date of a Contract's registration statement (other than a 
prospectus permitted or required under section 10 of the Act) shall not 
be deemed a prospectus under section 2(a)(10) of the Act (15 U.S.C. 
77b(a)(10)) if:
    (1) It is proved that prior to or at the same time with such 
communication a Summary Prospectus was sent or given to the person to 
whom the communication was made;
    (2) The Summary Prospectus is not bound together with any 
materials, except as permitted by paragraph (f)(2) of this section;
    (3) The Summary Prospectus that was sent or given satisfies the 
requirements of paragraph (b) or (c) of this section, as applicable, at 
the time of such communication; and
    (4) The conditions set forth in paragraph (h) of this section are 
satisfied.
    (h) Availability of the Statutory Prospectus and Certain Other 
Documents. (1) The current Initial Summary Prospectus, Updating Summary 
Prospectus, Statutory Prospectus, Statement of Additional Information, 
and in the case of a Registrant on Form N-3, the Registrant's most 
recent annual and semi-annual reports to shareholders under Sec.  
270.30e-1 of this chapter, are publicly accessible, free of charge, at 
the website address specified on the cover page or beginning of the 
Summary Prospectuses, on or before the time that the Summary 
Prospectuses are sent or given and current versions of those documents 
remain on the website through the date that is at least 90 days after:
    (i) In the case of reliance on paragraph (f) of this section, the 
date that the Contract security is carried or delivered; or
    (ii) In the case of reliance on paragraph (g) of this section, the 
date that the communication is sent or given.
    (2) The materials that are accessible in accordance with paragraph 
(h)(1) of this section must be presented on the website in a format, or 
formats, that:
    (i) Are human-readable and capable of being printed on paper in 
human-readable format;
    (ii) Permit persons accessing the Statutory Prospectus or Statement 
of Additional Information for the Contract to move directly back and 
forth between each section heading in a table of contents of such 
document and the section of the document referenced in that section 
heading; provided that, in the case of the Statutory Prospectus, the 
table of contents is either required by Sec.  230.481(c) or contains 
the same section headings as the table of contents required by Sec.  
230.481(c); and
    (iii) Permit persons accessing a Summary Prospectus to move 
directly back and forth between:
    (A) Each section of the Summary Prospectus and any section of the 
Statutory Prospectus and Contract

[[Page 60089]]

Statement of Additional Information that provides additional detail 
concerning that section of the Summary Prospectus; or
    (B) Links located at both the beginning and end of the Summary 
Prospectus, or that remain continuously visible to persons accessing 
the Summary Prospectus, and tables of contents of both the Statutory 
Prospectus and the Contract Statement of Additional Information that 
meet the requirements of paragraph (h)(2)(ii) of this section.
    (iv) Permit persons accessing the Summary Prospectus to view the 
definition of each special term used in the Summary Prospectus (as 
required by paragraph (e) of this section) upon command (e.g., by 
moving or ``hovering'' the computer's pointer or mouse over the term, 
or selecting the term on a mobile device); or permits persons accessing 
the Contract Summary Prospectus to move directly back and forth between 
each special term and the corresponding entry in any glossary or list 
of definitions in the Contract Summary Prospectus (as described in 
paragraph (e) of this section).
    (3) Persons accessing the materials specified in paragraph (h)(1) 
of this section must be able to permanently retain, free of charge, an 
electronic version of such materials in a format, or formats, that meet 
each of the requirements of paragraphs (h)(2)(i) and (ii) of this 
section.
    (4) The conditions set forth in paragraphs (h)(1) through (3) of 
this section shall be deemed to be met, notwithstanding the fact that 
the materials specified in paragraph (h)(1) of this section are not 
available for a time in the manner required by paragraphs (h)(1) 
through (3) of this section, provided that:
    (i) The Registrant has reasonable procedures in place to ensure 
that the specified materials are available in the manner required by 
paragraphs (h)(1) through (3) of this section; and
    (ii) The Registrant takes prompt action to ensure that the 
specified documents become available in the manner required by 
paragraphs (h) through (3) of this section, as soon as practicable 
following the earlier of the time at which it knows or reasonably 
should have known that the documents are not available in the manner 
required by paragraphs (h)(1) through (3) of this section.
    (i) Other Requirements (1) Delivery upon request. If paragraph (f) 
or (g) of this section is relied on with respect to a Contract, the 
Registrant (or a financial intermediary through which the Contract may 
be purchased) must send, at no cost to the requestor and by U.S. first 
class mail or other reasonably prompt means, a paper copy of the 
Contract Statutory Prospectus, Contract Statement of Additional 
Information, and in the case of a Registrant on Form N-3, the 
Registrant's most recent annual and semi-annual reports to shareholders 
under Sec.  270.30e-1 of this chapter, to any person requesting such a 
copy within three business days after receiving a request for a paper 
copy. If paragraph (f) or (g) of this section is relied on with respect 
to a Contract, the Registrant (or a financial intermediary through 
which Contract may be purchased) must send, at no cost to the 
requestor, and by email, an electronic copy of any of the documents 
listed in this paragraph (i)(1) to any person requesting a copy of such 
document within three business days after receiving a request for an 
electronic copy. The requirement to send an electronic copy of a 
document may be satisfied by sending a direct link to the online 
document; provided that a current version of the document is directly 
accessible through the link from the time that the email is sent 
through the date that is six months after the date that the email is 
sent and the email explains both how long the link will remain useable 
and that, if the recipient desires to retain a copy of the document, he 
or she should access and save the document.
    (2) Greater prominence. If paragraph (f) or (g) of this section is 
relied on with respect to a Contract, the Summary Prospectus shall be 
given greater prominence than any materials that accompany the Summary 
Prospectus.
    (3) Convenient for reading and printing. If paragraph (f) or (g) of 
this section is relied on with respect to a Contract:
    (i) The materials that are accessible in accordance with paragraph 
(h)(1) of this section must be presented on the website in a format, or 
formats, that are convenient for both reading online and printing on 
paper; and
    (ii) Persons accessing the materials that are accessible in 
accordance with paragraph (h)(1) of this section must be able to 
permanently retain, free of charge, an electronic version of such 
materials in a format, or formats, that are convenient for both reading 
online and printing on paper.
    (4) Website addresses. If paragraph (f) or (g) of this section is 
relied on with respect to a Contract, any website address that is 
included in an electronic version of the Summary Prospectus must 
include an active hyperlink or provide another means of facilitating 
access through equivalent methods or technologies that lead directly to 
the relevant website address. This paragraph (i)(4) does not apply to 
electronic versions of a Summary Prospectus that are filed on the EDGAR 
system.
    (5) Compliance with this paragraph (i) not a condition to reliance 
on paragraph (f) or (g) of this section. Compliance with this paragraph 
(i) is not a condition to the ability to rely on paragraph (f) or (g) 
of this section with respect to a Contract, and failure to comply with 
this paragraph (i) does not negate the ability to rely on paragraph (f) 
or (g) of this section.
    (j) Portfolio Company Prospectuses--(1) Transfer of the Portfolio 
Company security. Any obligation under section 5(b)(2) of the Act to 
have a Statutory Prospectus precede or accompany the carrying or 
delivery of a Portfolio Company security is satisfied if, and 
information contained in the documents referenced in paragraph 
(j)(1)(ii) of this section is conveyed for purposes of Sec.  230.159 
when:
    (i) An Initial Summary Prospectus is used for each currently 
offered Contract described under the related registration statement;
    (ii) A summary prospectus is used for the Portfolio Company (if the 
Portfolio Company is registered on Form N-1A); and
    (iii) The current summary prospectus, Statutory Prospectus, 
Statement of Additional Information, and most recent annual and semi-
annual reports to shareholders under Sec.  270.30e-1 of this chapter 
for the Portfolio Company are publicly accessible, free of charge, at 
the same website address referenced in paragraph (h)(1) of this 
section, and are accessible under the conditions set forth in 
paragraphs (h)(1), (h)(2)(i) and (ii), and (h)(3) and (4) of this 
section, with respect to the availability of documents relating to the 
Contract.
    (2) Communications. Any communication relating to a Portfolio 
Company (other than a prospectus permitted or required under section 10 
of the Act) shall not be deemed a prospectus under section 2(a)(10) of 
the Act (15 U.S.C. 77b(a)(10)) if the conditions set forth in paragraph 
(j)(1) of this section are satisfied.
    (3) Other requirements. The materials referenced in paragraph 
(j)(1)(iii) of this section must be delivered upon request, presented, 
and able to be retained under the conditions set forth in paragraphs 
(i)(1) and (3) of this section. Compliance with this paragraph (j)(3) 
is not a condition to the ability to rely on paragraph (j)(1) or (2) of 
this section, and failure to comply with this paragraph (j)(3) does not 
negate the

[[Page 60090]]

ability to rely on paragraph (j)(1) or (2) of this section.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
13. The general authority citation for part 232 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78n-1, 78o(d), 78w(a), 78ll, 80a-
6(c), 80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *

0
14. Amend Sec.  232.313 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  232.313  Identification of investment company type and series 
and/or class (or contract).

    (a) Registered investment companies, business development 
companies, and offerings of registered non-variable annuities must 
indicate their investment company type, based on whether the 
registrant's last effective registration statement or amendment (other 
than a merger/proxy filing on Form N-14 (Sec.  239.23 of this chapter) 
was filed on Form N-1 (Sec. Sec.  239.15 and 274.11 of this chapter), 
Form N-1A (Sec. Sec.  239.15A and 274.11A of this chapter), Form N-2 
(Sec. Sec.  239.14 and 274.11a-1 of this chapter), Form N-3 (Sec. Sec.  
239.17A and 274.11b of this chapter), Form N-4 (Sec. Sec.  239.17b and 
274.11c of this chapter), Form N-5 (Sec. Sec.  239.24 and 274.5 of this 
chapter), Form N-6 (Sec. Sec.  239.17c and 274.11d of this chapter), 
Form S-1 (Sec.  239.11 of this chapter), Form S-3 (Sec.  239.13 of this 
chapter), or Form S-6 (Sec.  239.16 of this chapter) in those EDGAR 
submissions identified in the EDGAR Filer Manual.
    (b) Registered investment companies or offerings of registered non-
variable annuities whose last effective registration statement or 
amendment (other than a merger/proxy filing on Form N-14 (Sec.  239.23 
of this chapter) was filed on Form N-1A (Sec. Sec.  239.15A and 274.11A 
of this chapter), Form N-3 (Sec. Sec.  239.17A and 274.11b of this 
chapter), Form N-4 (Sec. Sec.  239.17b and 274.11c of this chapter), or 
Form N-6 (Sec. Sec.  239.17c and 274.11d of this chapter) must, under 
the procedures set forth in the EDGAR Filer Manual:
    (1) Provide electronically, and keep current, information 
concerning their existing and new series and/or classes (or contracts, 
in the case of separate accounts), including series and/or class 
(contract) name and ticker symbol, if any, and be issued series and/or 
class (or contract) identification numbers;
    (2) Deactivate for EDGAR purposes any series and/or class (or 
contract, in the case of separate accounts) that are no longer offered, 
go out of existence, or deregister following the last filing for that 
series and/or class (or contract, in the case of separate accounts), 
but the registrant must not deactivate the last remaining series unless 
the registrant deregisters; and
    (3) For those EDGAR submissions identified in the EDGAR Filer 
Manual, include all series and/or class (or contract) identifiers of 
each series and/or class (or contract) on behalf of which the filing is 
made.
* * * * *

0
15. Amend Sec.  232.405 by revising paragraphs (a)(3), (b)(1), (b)(2), 
and Note 1 to the section to read as follows:


Sec.  232.405  Interactive Data File Submissions.

* * * * *
    (a) * * *
    (3) Be submitted using Inline XBRL:
    (i) If the electronic filer is not a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered non-variable annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 230.405), a 
business development company as defined in Section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), a clearing agency that provides a 
central matching service, or is subject to Sec. Sec.  242.800 through 
242.835 (Regulation SE), and is not within one of the categories 
specified in paragraph (f)(1)(i) of this section, as partly embedded 
into a filing with the remainder simultaneously submitted as an exhibit 
to:
    (A) A filing that contains the disclosure this section requires to 
be tagged; or
    (B) An amendment to a filing that contains the disclosure this 
section requires to be tagged if the amendment is filed no more than 30 
days after the earlier of the due date or filing date of the filing and 
the Interactive Data File is the first Interactive Data File the 
electronic filer submits; or
    (ii) If the electronic filer is a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account (as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered non-variable annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 230.405), a 
business development company as defined in Section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), a clearing agency that provides a 
central matching service, or is subject to Sec. Sec.  242.800 through 
242.835 (Regulation SE), and is not within one of the categories 
specified in paragraph (f)(1)(ii) of this section, as partly embedded 
into a filing with the remainder simultaneously submitted as an exhibit 
to a filing that contains the disclosure this section requires to be 
tagged; and
* * * * *
    (b) * * *
    (1) If the electronic filer is not a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account (as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered non-variable annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 230.405), a 
business development company as defined in Section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), or a clearing agency that provides a 
central matching service, an Interactive Data File must consist of only 
a complete set of information for all periods required to be presented 
in the corresponding data in the Related Official Filing, no more and 
no less, from all of the following categories:
    (i) The complete set of the electronic filer's financial statements 
(which includes the face of the financial statements and all 
footnotes);
    (ii) As applicable, all schedules set forth in Article 6A of 
Regulation S-X (Sec. Sec.  210.6A-01-210.6A-05) and Article 12 of 
Regulation S-X (Sec. Sec.  210.12-01-210.12-29), and all schedules 
prepared by plans in accordance with the financial reporting 
requirements of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1001 et seq.) and filed with the Commission on Form 11-K (Sec.  
249.311); and
    (iii) The disclosure set forth in paragraph (b)(4) of this section.
    Note to paragraph (b)(1): It is not permissible for the Interactive 
Data File to present only partial face financial statements, such as by 
excluding

[[Page 60091]]

comparative financial information for prior periods.
    (2) If the electronic filer is an open-end management investment 
company registered under the Investment Company Act of 1940, a separate 
account (as defined in Section 2(a)(14) of the Securities Act) 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a registered non-variable annuity issuer as defined in Rule 405 
under the Securities Act (17 CFR 230.405), a unit investment trust as 
defined in Section 4(2) of the Investment Company Act of 1940 (15 
U.S.C. 80a-4), or a clearing agency that provides a central matching 
service, an Interactive Data File must consist of only a complete set 
of information for all periods required to be presented in the 
corresponding data in the Related Official Filing, no more and no less, 
from the information set forth in:
    (i) Items 2, 3, and 4 of Sec. Sec.  239.15A and 274.11A of this 
chapter (Form N-1A), as well as any information provided in response to 
Item 27A(b)-(h) of Form N-1A included in any report to shareholders 
filed on Sec. Sec.  249.331 and 274.128 of this chapter (Form N-CSR);
    (ii) Items 2, 4, 5, 11, 18 and 19 of Sec. Sec.  239.17a and 274.11b 
of this chapter (Form N-3);
    (iii) Items 2(b)(2), 2(d), 3, 4, 5, 6(a) (instruction), 6(d), 6(e), 
7(e), 10, 17, 26(c), or 31A of Sec. Sec.  239.17b and 274.11c of this 
chapter (Form N-4);
    (iv) Items 2, 4, 5, 10, 11, and 18 of Sec. Sec.  239.17c and 
274.11d of this chapter (Form N-6);
    (v) Any disclosure provided in response to Item 18 of Sec. Sec.  
249.331 and 274.128 of this chapter (Form N-CSR), or
    (vi) Item 11 of Sec.  274.12 of this chapter (Form N-8B-2) pursuant 
to Instruction 2, including to the extent required by Sec.  239.16 of 
this chapter (Form S-6); as applicable.
* * * * *
    Note 1 to Sec.  232.405: Section 229.601(b)(101) of this chapter 
(Item 601(b)(101) of Regulation S-K) specifies the circumstances under 
which an Interactive Data File must be submitted and the circumstances 
under which it is permitted to be submitted, with respect to Sec. Sec.  
239.11 (Form S-1), 239.13 (Form S-3), 239.25 (Form S-4), 239.18 (Form 
S-11), 239.31 (Form F-1), 239.33 (Form F-3), 239.34 (Form F-4), 249.310 
(Form 10-K), 249.308a (Form 10-Q), and 249.308 (Form 8-K) of this 
chapter. General Instruction F of Sec.  249.311 of this chapter (Form 
11-K) specifies the circumstances under which an Interactive Data File 
must be submitted, and the 556 circumstances under which it is 
permitted to be submitted, with respect to Form 11-K. Paragraph (101) 
of Part II--Information not Required to be Delivered to Offerees or 
Purchasers of Sec.  239.40 of this chapter (Form F-10) specifies the 
circumstances under which an Interactive Data File must be submitted 
and the circumstances under which it is permitted to be submitted, with 
respect to Form F-10. Paragraph 101 of the Instructions as to Exhibits 
of Sec.  249.220f of this chapter (Form 20-F) specifies the 
circumstances under which an Interactive Data File must be submitted 
and the circumstances under which it is permitted to be submitted, with 
respect to Form 20-F. Paragraph B.(15) of the General Instructions to 
Sec.  249.240f of this chapter (Form 40-F) and Paragraph C.(6) of the 
General Instructions to Sec.  249.306 of this chapter (Form 6-K) 
specify the circumstances under which an Interactive Data File must be 
submitted and the circumstances under which it is permitted to be 
submitted, with respect to Sec. Sec.  249.240f (Form 40-F) and 249.306 
(Form 6-K) of this chapter. Section 240.17Ad-27(d) of this chapter 
(Rule 17Ad27(d) under the Exchange Act) specifies the circumstances 
under which an Interactive Data File must be submitted with respect to 
the reports required under Rule 17Ad-27. Note D.5 of Sec.  240.14a-101 
of this chapter (Schedule 14A) and Item 1 of Sec.  240.14c-101 of this 
chapter (Schedule 14C) specify the circumstances under which an 
Interactive Data File must be submitted with respect to Schedules 14A 
and 14C. General Instruction L of Sec.  240.14d-100 of this chapter 
(Schedule TO) specifies the circumstances under which an Interactive 
Data File must be submitted with respect to Schedule TO. Section 
240.13a-21 of this chapter (Rule 13a-21 under the Exchange Act) and 
General Instruction I to Sec.  249.333 of this chapter (Form F-SR) 
specify the circumstances under which an Interactive Data File must be 
submitted, with respect to Form F-SR. Sec. Sec.  242.829 and 242.831 of 
this chapter (Rules 829 and 831 of Regulation SE) and the Registration 
Instructions to Sec.  249.1701 of this chapter (Form SBSEF), as 
applicable, specify 557 the circumstances under which an Interactive 
Data File must be submitted with respect to filings made under 
Regulation SE. Item 601(b)(101) of Regulation S-K, paragraph (101) of 
Part II--Information not Required to be Delivered to Offerees or 
Purchasers of Form F-10, paragraph 101 of the Instructions as to 
Exhibits of Form 20-F, paragraph B.(15) of the General Instructions to 
Form 40-F, and paragraph C.(6) of the General Instructions to Form 6-K 
all prohibit submission of an Interactive Data File by an issuer that 
prepares its financial statements in accordance with Sec. Sec.  210.6-
01 through 210.6-10 of this chapter (Article 6 of Regulation S-X). For 
an issuer that is a management investment company or separate account 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a registered non-variable annuity issuer as defined in Rule 405 
under the Securities Act (17 CFR 230.405), a business development 
company as defined in Section 2(a)(48) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(48)), or a unit investment trust as defined in 
Section 4(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-4), 
General Instruction C.3.(g) of Form N-1A (Sec. Sec.  239.15A and 
274.11A of this chapter), General Instruction I of Form N-2 (Sec. Sec.  
239.14 and 274.11a-1 of this chapter), General Instruction C.3.(h) of 
Form N-3 (Sec. Sec.  239.17a and 274.11b of this chapter), General 
Instruction C.3.(h) of Form N-4 (Sec. Sec.  239.17b and 274.11c of this 
chapter), General Instruction C.3.(h) of Form N-6 (Sec. Sec.  239.17c 
and 274.11d of this chapter), General Instruction 2.(l) of Form N-8B-2 
(Sec.  274.12 of this chapter), General Instruction 5 of Sec.  239.16 
of this chapter (Form S-6), and General Instruction C.4 of Sec. Sec.  
249.331 and 274.128 of this chapter (Form N-CSR), specify when 
electronic filers are required or permitted to submit an Interactive 
Data File (Sec.  232.11), as further described in note 1 to this 
section and General Instruction C.4 of Form N-CSR (Sec. Sec.  249.331 
and 274.128 of this chapter), as applicable, specifies the 
circumstances under which an Interactive Data File must be submitted.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
16. The general authority citation for part 239 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-
3, 77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 
78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 
80a-26, 80a-29, 80a-30, 80a-37; and sec. 71003 and sec. 84001, Pub. 
L. 114-94, 129 Stat. 1321, unless otherwise noted.
* * * * *

0
17: Revise Form N-3 (referenced in Sec. Sec.  239.17a and 274.11b).

    Note: Form N-3 is attached as Appendix B to this document. Form 
N-3 does not appear in the Code of Federal Regulations.


0
18. Revise Form N-4 (referenced in Sec. Sec.  239.17b and 274.11c).


[[Page 60092]]


    Note:  Form N-4 is attached as Appendix A to this document. Form 
N-4 does not appear in the Code of Federal Regulations.


0
19. Revise Form N-6 (referenced in Sec. Sec.  239.17c and 274.11d).

    Note:  Form N-6 is attached as Appendix C to this document. Form 
N-6 will not appear in the Code of Federal Regulations.


0
20. Add Sec.  239.66 to read as follows:


Sec.  239.66  Form 24F-2, annual filing of securities sold pursuant to 
registration of certain investment company securities and registered 
non-variable annuities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, unit investment 
trusts, and registered non-variable annuities pursuant to Sec. Sec.  
230.456, 230.457, or 270.24f-2 of this chapter for reporting securities 
sold during the fiscal year.

0
21. Revise Form 24F-2 (referenced in Sec. Sec.  239.66 and 274.24).

    Note:  Form 24F-2 is attached as Appendix D to this document. 
Form 24F-2 will not appear in the Code of Federal Regulations.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
22. The authority citation for part 274 continues to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78n-1, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and sec. 939A, 
Pub. L. 111-203, 124 Stat. 1376, unless otherwise noted.
* * * * *

0
23. Revise Sec.  274.24 to read as follows:


Sec.  274.24  Form 24F-2, annual filing of securities sold pursuant to 
registration of certain investment company securities and registered 
non-variable annuities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, unit investment 
trusts, and registered non-variable annuities pursuant to Sec. Sec.  
230.456, 230.457, or 270.24f-2 of this chapter for reporting securities 
sold during the fiscal year.

    By the Commission.

    Dated: July 1, 2024.
Vanessa A. Countryman,
Secretary.

    Note:  The following appendices will not appear in the Code of 
Federal Regulations.

BILLING CODE 8011-01-P

Appendix A--Form N-4

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BILLING CODE 8011-01-C

Appendix B--Form N-3

Form N-3

* * * * *

GENERAL INSTRUCTIONS

A. Definitions

* * * * *
    ``Summary Prospectus'' has the meaning provided by paragraph (a) 
of rule 498A under the Securities Act [17 CFR 230.498A(a)].

Appendix C--Form N-6

Form N-6

* * * * *

GENERAL INSTRUCTIONS

A. Definitions

* * * * *
    ``Summary Prospectus'' has the meaning provided by paragraph (a) 
of rule 498A under the Securities Act [17 CFR 230.498A(a)].
* * * * *
    Item 30. Exhibits
* * * * *

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    Instructions.
* * * * *
    3. The Registrant may redact specific provisions or terms of 
exhibits required to be filed by paragraphs (g) and (j) of this Item 
if the Registrant customarily and actually treats that information 
as private. If it does so, the Registrant should mark the exhibit 
index to indicate that portions of the exhibit have been omitted and 
include a prominent statement on the first page of the redacted 
exhibit that certain identified information has been excluded from 
the exhibit because it is both not material and the type that the 
Registrant treats as private or confidential. The Registrant also 
must include brackets indicating where the information is omitted 
from the filed version of the exhibit.
    If requested by the Commission or its staff, the Registrant must 
promptly provide on a supplemental basis an unredacted copy of the 
exhibit and its materiality and privacy or confidentiality analyses. 
Upon evaluation of the Registrant's supplemental materials, the 
Commission or its staff may require the Registrant to amend its 
filing to include in the exhibit any previously redacted information 
that is not adequately supported by the Registrant's analyses. The 
Registrant may request confidential treatment of the supplemental 
material submitted under this Instruction 3 pursuant to rule 83 of 
the Commission's Organizational Rules [17 CFR 200.83] while it is in 
the possession of the Commission or its staff. After completing its 
review of the supplemental information, the Commission or its staff 
will return or destroy it, if the Registrant complies with the 
procedures outlined in rule 418 under the Securities Act [17 CFR 
230.418].
* * * * *

Appendix D--Form 24F-2

BILLING CODE 8011-01-P

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[FR Doc. 2024-14925 Filed 7-23-24; 8:45 am]
BILLING CODE 8011-01-C