House Panel to Consider Bill That Might Make Hot Annuities Hotter

What You Need to Know

Experts are still deciding whether to call the products RILAs, ILVAs or something else.
The Senate version of H.R. 4865 is S. 3198.
Both RILA bills have bipartisan support.

Congress could soon give issuers, sellers and users of a popular new category of annuities a boost.

The House Financial Services Committee is to meet Wednesday to consider H.R. 4865, the Registration for Index-Linked Annuities Act, at a hearing on stock exchange regulation.

The committee will consider the registered index-linked annuity, or RILA, bill, along with a number of other securities bills and bill drafts, including a securities exchange liability bill and a bill that could support the creation of exchanges designed solely for trading of securities associated with venture capital-backed startups.

If H.R. 4865 is passed and implemented as written, and works as supporters predict, it could streamline federal compliance chores for RILA contracts.

What It Means

Insurers like offering RILAs, because administering RILA programs is relatively affordable, and the fact that they are registered as securities helps an insurer decide just how much investment risk to assume.

Issuer support for the products has pushed sales higher.

Wink, an annuity sales data vendor, says RILA sales increased 20% between the fourth quarter of 2020 and the fourth quarter of 2021, to $10 billion.

H.R. 4865 could lead to further increases in RILA use.

The Insured Retirement Institute has written a letter supporting the bill.

RILA Background

RILA contracts are annuities registered with the SEC as variable insurance products, as well as with state insurance regulators.

Because a RILA contract is registered as a security, the issuer can choose to expose a holder to the risk of loss of account value.

The issuer of a traditional variable annuity packs investment funds that resemble mutual funds inside an annuity. The holder gets an interest rate, or crediting rate, tied partly or wholly to the performance of the investment funds.