Registration for Index-Linked Annuities; Amendments to Form N-4 for Index-Linked and Variable Annuities — SEC — US

1 15 U.S.C. 77a et seq.
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 230, 232, 239, and 274
[Release No. 33–11250; 34–98624; IC–
35028; File No. S7–16–23]
RIN 3235–AN30
Registration for Index-Linked
Annuities; Amendments to Form N–4 for Index-Linked and Variable Annuities AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission (‘‘Commission’’) is proposing rule and form amendments to provide a tailored form to register the offerings of registered index-linked annuities (‘‘RILAs’’). Specifically, the Commission is proposing to amend 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 proposing to amend certain filing rules and make other related amendments. These changes would, if adopted, implement the requirements relating to RILAs contained in Division AA, Title I of the Consolidated Appropriations Act, 2023. Further, the Commission is proposing other amendments to Form N–4 that would apply to all issuers that would use that form under the proposal. The Commission is also proposing to apply to RILA advertisements and sales literature a current Commission rule that provides guidance as to when sales literature is materially misleading under the Federal securities laws. The Commission is proposing a technical amendment to Form N–6 to correct an error from a prior Commission rulemaking. Finally, the Commission requests comment as to whether to require the registration of market-value adjustments associated with certain annuities on Form N–4 as well. DATES: Comments should be submitted on or before November 28, 2023. ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments

Use the Commission’s internet
comment form (https://www.sec.gov/ rules/2023/09/rila); or
Send an email to rule-comments@
sec.gov. Please include File Number S7– 16–23 on the subject line. Paper Comments
Send paper comments to Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090.
All submissions should refer to File
Number S7–16–23. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method of submission. The Commission will post all comments on the Commission’s website (https:// www.sec.gov/rules/2023/09/rila). Comments are also available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Operating conditions may limit access to the Commission’s public reference room. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. Retail investors seeking to comment on their experiences with annuities generally and RILAs in particular may want to submit a short Feedback Flyer, available at Appendix D. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission’s website. To ensure direct electronic receipt of such notifications, sign up through the ‘‘Stay Connected’’ option at www.sec.gov to receive notifications by email. A summary of the proposal of not more than 100 words is posted on the Commission’s website (https:// www.sec.gov/rules/2023/09/rila). FOR FURTHER INFORMATION CONTACT:
Christian Corkery, Michael Khalil,
Rachael Hoffman, James Maclean, Amy
Miller, or Laura Harper Powell, 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; Elisabeth Bentzinger or Min Oh, Senior Counsels; Michael Kosoff, Senior Special Counsel, 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 proposing amendments to the following rules and forms:
Commission reference CFR citation
(17 CFR)
Securities Act of 1933 (‘‘Securities Act’’): 1 Rule 156 ................................................................................................................................................................ § 230.156 Rule 172 ................................................................................................................................................................ § 230.172 Rule 405 ................................................................................................................................................................ § 230.405 Rule 415 ................................................................................................................................................................ § 230.415 Rule 424 ................................................................................................................................................................ § 230.424 Rule 456 ................................................................................................................................................................ § 230.456 Rule 457 ................................................................................................................................................................ § 230.457 Rule 485 ................................................................................................................................................................ § 230.485 Rule 497 ................................................................................................................................................................ § 230.497 Rule 498A .............................................................................................................................................................. § 230.498A Regulation S–T:
Rule 313 of Regulation S–T .................................................................................................................................. § 232.313 Rule 405 of Regulation S–T .................................................................................................................................. § 232.405 Forms:
Form N–4 .............................................................................................................................................................. § 239.17b and 274.11c Form N–6 .............................................................................................................................................................. § 239.17c and 274.11d

2 Insurance companies frequently refer to crediting periods as ‘‘investment terms’’ or sometimes simply ‘‘terms.’’ See, e.g., Investor Testing Report on Registered Index Linked Annuities, Office of Investor Advocate Division (‘‘OIAD Report’’) at Section 2, RILAs: Structure of Contracts and Investment Options, Investment Terms. As noted in OIAD’s report, investor testing suggested that investors consistently struggled with this terminology, and a number of participants seemed to equate ‘‘investment term’’ or ‘‘term’’ with the length of the insurance contract rather than the length of the investment product options within the RILA contract, leading them to misunderstand the operation of the RILA. Id. at Section 5, Qualitative Testing, Results from Round 1. In an effort to mitigate that confusion, we have opted to use the term crediting period in this release and in the proposed amendments to Form N–4. The most common crediting periods are one, three, and six years. See id. at Section 3, Overview of the RILA Market and Simulated Performance over Historical Periods, RILA Indexes, Investment Terms, and Insurance Features, Figure 2. 3 Variable annuity contracts and variable life insurance contracts (together, ‘‘variable contracts’’) combine both investment and insurance features. Investors generally allocate their purchase payments to a range of investment options, typically mutual funds which are separately registered and have their own prospectuses. The investor’s account value changes depending on the performance of the investment options selected. Variable annuities allow investors to receive periodic payments for either a definite period (e.g., 20 years), or for an indefinite period (e.g., the life of the investor). 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 and n.8 and accompanying text. 4See LIMRA, ‘‘LIMRA: Record Annuity Sales in 2022 Expected to Continue Into First Quarter 2023,’’ news release, Mar. 8, 2023 (reporting 2022 RILA sales of $41.1 billion), https://www.limra.com/en/ newsroom/news-releases/2023/limra-recordannuity-sales-in-2022-expected-to-continue-intofirst-quarter-2023/ and 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), https:// www.limra.com/en/newsroom/news-releases/2018/ limra-secure-retirement-institute-total-annuitysales-continued-to-decline-in-2017/. 5 Depending on the context, ‘‘RILA’’ is also used in this release to collectively refer to both standalone 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.’’ 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 do not fall within this exemption due, in large part, to the shifting of a significant level of investment risk from the RILA issuer to the investor. RILAs and index-linked option, 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 Division AA, Title I of the Consolidated Appropriations Act, 2023. Commission reference CFR citation (17 CFR) Form 24F–2 ........................................................................................................................................................... § 239.66 and § 274.24
Table of Contents
I. Introduction and Background
A. Typical RILA Features
B. Current Registration Process
C. Evidence of Investor Views and Areas of
Potential Confusion
D. Overview of Proposal
II. Discussion
A. Use of Form N–4
B. Contents of Form N–4
1. Front and Back Cover Pages (Item 1)
2. Key Information Table (Item 3)
3. Principal Disclosure Regarding RILAs
(Items 2, 6, and 17)
4. Principal Risks of Investing in the
Contract (Item 5)
5. Addition of Contract Adjustments and
Other Amendments to Fee and Expense
Disclosures (Items 4, 7, and 22)
6. Information About Contracts With
Index-Linked Options (Item 31A)
7. Other Amendments and Provisions
8. Remaining Form N–4 Items
9. Inline XBRL
C. Option To Use a Summary Prospectus
D. Accounting (Items 16 and 26)
E. 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
F. Materially Misleading Statements in RILA Sales Literature G. Existing Commission Letters H. Registered Market-Value Adjustment Annuities
I. Technical Amendment to Form N–6
J. Compliance Period
K. General Request for Comment From
Retail Investors
III. 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
1. Creating an Entirely New Registration
Form for RILAs
2. Alternatives to Specific Form N–4
Amendments
3. Require the Use of Form N–4 for
Registered MVAs
4. Limiting Scope of Structured Data
Requirements
F. Request for Comment
IV. Paperwork Reduction Act
A. Rule 498A
B. Form N–4
C. Form 24F–2
D. Investment Company Interactive Data E. Request for Comment
V. Regulatory Flexibility Certification
VI. Consideration of Impact on the Economy
Statutory Authority
I. Introduction and Background
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. A RILA is one of several types of annuity contracts offered by insurance companies. 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’’).2 In some cases, insurance companies offer RILAs on a standalone basis with various index-linked investment options (‘‘index-linked options’’) for investors to choose from. In other cases, insurance companies 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’’).3 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. The market for RILAs has grown significantly in recent years, with annual RILA sales of $41.1 billion in 2022 alone, more than tripling since 2017.4 We understand that RILAs are predominantly sold by broker-dealers, although investment advisers may also provide advice on RILAs, and insurance companies also may offer RILAs directly. RILAs are securities for purposes of the Securities Act of 1933 (‘‘Securities Act’’).5 Unlike variable annuity contracts for which the Commission has adopted a specific registration form tailored to those products, insurance companies currently register offerings of RILAs on Securities Act registration

6The registration forms for variable annuity contracts are Form N–3 (for variable annuity separate accounts structured as management companies) and Form N–4 (for variable annuity separate accounts structured as unit investment trusts). 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 over 30 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)]. 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 the majority of variable annuity contracts. 7Public Law 117–328; 136 Stat. 4459 (Dec. 29, 2022). 8Under this proposal, the amended Form N–4 will not register the RILA issuers themselves, only the offering of RILA securities. Unlike separate accounts which register variable annuities, RILA issuers are not investment companies, and thus need not register with the Commission as an investment company as separate accounts do. 9See VASP Adopting Release. 10 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. Forms S–1 or S–3.6 In 2022, Congress enacted Division AA, Title I of the Consolidated Appropriations Act, 2023 (‘‘RILA Act’’), directing the Commission to adopt a new registration form for RILAs within 18 months of enactment.7 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. 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 form, with the goal of ensuring that key information is conveyed in terms that a purchaser is able to understand. If the Commission fails to adopt the form within 18 months of enactment, the RILA Act provides that RILA issuers can begin registering RILA offerings on existing Form N–4. We are proposing to amend Form N– 4 to require RILA issuers to register RILA offerings, including associated features of the RILA such as any contract adjustments, on that form and to tailor the form’s requirements accordingly.8 We also are proposing to amend other rules related to the securities offering process to allow these issuers
to conduct RILA offerings in the same way issuers conduct offerings of variable annuities. Consistent with the RILA Act, these proposed amendments collectively are designed to provide investors disclosures tailored to RILAs and highlight key information about these complex products, building on the Commission’s layered disclosure framework in place for variable annuities. We are also proposing certain amendments to Form N–4 that would apply to offerings of variable annuities, based on our experience with the form since its last amendment and the investor testing conducted in connection with this rulemaking.9 In addition, we are proposing to apply a current Commission rule that provides guidance as to when sales literature is materially misleading under the Federal securities laws to RILA advertisements and sales literature. Finally, we are proposing a technical amendment to Form N–6 to correct an error from a prior Commission rulemaking. A. Typical RILA Features RILAs are complex financial products that are sold to retail investors. The following are 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. These features also are important ones for financial professionals to consider when recommending that an investor purchase a RILA.

Bounded Return Structure. 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 the specified index (e.g., the S&P 500).10 The amount of any positive interest credited will also depend on whether the contract includes provisions such as a ‘‘cap rate’’ or ‘‘participation rate.’’ A cap rate places an upper limit on an investor’s ability to participate in the index’s upside performance directly (e.g., with a current cap rate of 5%, if the index is up 10% at the end of the crediting period, the investor’s contract value will be credited with only 5% positive interest). A ‘‘participation rate’’ sets an investor’s return to some specified percentage of the index’s return (e.g., an 80% participation rate would result in an investor receiving positive interest of 80 cents on the dollar of gains in the index). The contract generally will include one of these limits on how much the insurance company will credit the investor if the performance of the index goes up in value by the end of the crediting period (collectively ‘‘limits on gains’’). Similarly, the contract generally will include terms limiting the investor’s losses to some extent if the performance of the index goes down in value. This might include a ‘‘buffer’’ (which limits the investor’s exposure to losses up to a fixed percentage), or a ‘‘floor’’ (which places a lower limit on the investor’s exposure to loss) (collectively ‘‘limits on losses’’). For example, with a ‘‘buffer’’ of ¥5%, if the index is down 2%, that investor will not lose anything, but if the index is down 7% the investor will lose 2% (the difference between the loss and the buffer rate). With a ‘‘floor’’ of ¥5%, if the index is down 2%, the investor will lose 2%, but if the index is down 7%, the investor will only lose 5%. These limits can be complex and overlapping, and may change at the beginning of each new crediting period, subject to certain minimum guarantees stated in the contract. Over time, the investor’s contract value will increase or decrease, depending on the performance of the index and the particular contract provisions (such as the bounded return structure). 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.
Fees and Expenses. For many
RILAs, the investor pays no direct or explicit ongoing fees and expenses under the RILA, and this is sometimes a feature disclosed in RILA marketing materials. However, the RILA’s bounded return structure requires investors to agree to tradeoffs that come with their own economic costs. In exchange for some protection against losses if the index goes down in value, investors must also agree to contractual provisions limiting the amount of gains they will receive if the index goes up in value. A RILA’s upside limits on gains can reduce an investor’s return in the same way that a direct fee can and can help make the RILA more profitable to the insurance company.
Charges and Penalties for Early
Withdrawals. Investors also can lose significant money if they withdraw their money early from an investment option or from the contract. This can arise in several circumstances. First, a RILA typically will specify a period of time during which a ‘‘surrender charge’’ will apply, for example nine years following an investor’s last premium payment. Typically, this charge is greatest in the first year of the surrender period, decreasing each year until the end of the surrender period. An investor who

11Common methods of calculating this adjustment include prorating the crediting method based on the number of days that have elapsed since the start of the crediting period, employing a market-based formula designed to approximate the present value of the index and/or employing interest-rate-based MVAs to offset certain insurer losses and costs, or some combination of these two. See Clifford E. Kirsch, Variable Annuities and Other Insurance Investment Products (Third Edition 2022) at 29–8, available at https://plus.pli.edu/Details/ Details?start=0&rows=50&fq=%7e2B%7etitle_ id%7e3A282B22%7e240085%7e2229%7e&fq= %7e2B%7eid%7e3A282B22%7e240085-CH29% 7e2229%7e&sort=s_date+desc&origin=title. 12 Id. at 29–13. Under these benefits, RILA investors are permitted to take a certain amount of guaranteed withdrawals from their contract each year without reducing the value of guaranteed withdrawals for future years. These can be a standard feature or an optional rider chosen by an investor. Id. at 29–12. 13See Updated Investor Bulletin: Indexed Annuities, SEC’s Office of Investor Education and Advocacy, July 31, 2020, https://www.sec.gov/oiea/ investor-alerts-and-bulletins/ib_indexedannuities. Staff reports and other staff documents (including those cited herein) represent the views of Commission staff and are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved the content of these documents and, like all staff statements, they have no legal force or effect, do not alter or amend applicable law, and create no new or additional obligations for any person. 14For these and other reasons, insurance companies generally advertise RILAs as a long-term investment. This is similar to the treatment of variable annuities. See VASP Adopting Release at n.14 and accompanying text. 15See, 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’’). 16See Item 9 of Forms S–1 and S–3 and 17 CFR
229.202 (providing specific disclosure requirements
for certain securities such as capital stock, debt, warrants or rights, and directing issuers of other types of securities to include a brief description that is comparable to that required for the specified kinds of securities). 17See 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 infra footnote 20. withdraws money during this period will pay a fee, such as 9% of the amount withdrawn. Second, an insurance company may make an adjustment, either to the investor’s contract value or to the amount paid to the investor, if amounts are withdrawn from an indexlinked option before the end of its crediting period or from the contract before the end of a specified period. For example, when an investor in a RILA chooses a particular index-linked option, the RILA may provide that the index-linked option’s crediting period is one year. If amounts are removed from that index-linked option before the end of this one-year crediting period, typically for any reason, the insurance company will apply an ‘‘interim value adjustment’’ or ‘‘IVA.’’ 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.11 As a result, the investor could lose a significant amount of money, even if the index has a gain at the time of the withdrawal. Similarly, the insurance company might apply a positive or negative ‘‘market value adjustment’’ or ‘‘MVA’’ (collectively with IVAs, a ‘‘contract adjustment’’) to the contract value if the investor partially or fully withdraws amounts from the contract. Contract adjustments could be made 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.12 These adjustments can also negatively impact other values under the contract, such as the surrender value and death benefit. Moreover, these fees and adjustments are not always mutually exclusive. Indeed, under the terms of certain RILA contracts, an investor could experience a decrease in contract value from a negative interim value adjustment and a negative market value adjustment, depending on the timing of the withdrawal, and also pay a surrender charge. 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.13

Changes by Insurer. Crediting
periods for an index-linked option in a RILA contract generally range from one to six years. The insurance company may change or remove key features of index-linked options, such as the cap rates, floors, or even change the index. These changes may often be made at the insurance company’s discretion and renewal provisions can and do change over time. 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. If the same index-linked option is unavailable, the terms of the contract generally provide that the insurance company may place the investor into a more conservative investment option as a default, such as a fixed account or an index-linked option with a 0% floor.
Taxes. Special tax rules generally
apply to RILAs and other annuities, with both tax advantages and potential adverse tax impacts in certain circumstances. For example, assets within a RILA generally grow taxdeferred. As discussed above, however, investors may face a Federal income tax penalty if money is withdrawn before the investor reaches a certain age.14 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. Form N–4’s existing disclosure requirements regarding features of annuities would complement the proposed RILA-specific disclosures, such that the amended Form N–4 would provide investors with key information both about the annuity contract and the associated registered index-linked or variable investment options. B. Current Registration Process The current requirements for issuers offering RILAs and variable annuities differ in many respects, both in terms of the disclosure issuers must provide, and with respect to the registration process. We highlight here some of these key differences. On required disclosure, because the Commission currently does not have a specific registration form for RILAs, insurance companies register the offerings of RILAs on Forms S–1 or S–
3.15 Although specific disclosure
requirements apply for certain securities such as capital stock or debt, the forms’ disclosure requirements are not specifically tailored to particular kinds of securities given the wide range of securities offerings that can be registered on the forms.16 Forms S–1 and S–3 thus do not include specific line-item requirements addressing disclosures about RILAs and their complex features, such as how limits on gains operate or the application of contract adjustments. These forms also require issuers to disclose information about the offering itself as well as extensive information about the registrant issuing the securities that may be less material to a RILA investor than information about the contract’s features. Required information about the registrant includes, for example, management’s discussion and analysis of financial condition and results of operations (‘‘MD&A’’), which requires a narrative discussion of the registrant’s financial statements, and disclosure about executive compensation. Domestic registrants also must include financial statements prepared in accordance with U.S. generally accepted accounting principles (‘‘GAAP’’).17

18According to Form N–CEN filings received through March 23, 2023, there were 419 variable annuity separate accounts registered as unit investment trusts (‘‘UITs’’) in 2022. 19The Commission has long sought to tailor disclosures for annuity products. See Registration Forms for Insurance Company Separate Accounts, Investment Company Act Release No. 13689 (Dec. 23, 1983) [49 FR 614 (Jan. 5, 1984)] (‘‘Form[] N–4 would permit shorter and simpler prospectuses than are required under current practice, . . . by incorporating many of the reduced disclosure requirements of Form N–1A. Separate account disclosure requirements that experience has shown are unnecessary also would be eliminated, as well as certain disclosure requirements that are holdovers from the requirements applicable to nonseparate account unit investment trust.’’); Registration Form Used By Open-End Management Investment Companies, Investment Company Act Release No. 12927 (Dec. 27, 1982) [48 FR 813 (Jan. 7, 1983)] (‘‘In order to shorten and simplify the prospectus for mutual funds, the Commission has concluded that it is necessary to eliminate certain types of information from the prospectus, so that only matters of fundamental importance to most mutual fund investors will be included in the prospectus’’). 20See, e.g., Instruction 1 to Item 31(b) in Form N– 3 and Instruction 1 to Item 26(b) in Form N–4. In addition, although Form S–1 requires GAAP financial statements, exemptions have been granted pursuant to 17 CFR 210.3–13 that permit insurance companies to substitute SAP financials in lieu of GAAP financials when registering RILAs on Form S–1 in 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) (‘‘F&G Life Letter’’). 21Section 6(b)(1) of the Securities Act [15 U.S.C. 77f(b)(1)]. Certain ‘‘well-known seasoned issuers’’ or ‘‘WKSIs’’ can use a different registration process than what is described here. See generally Securities Offering Reform, Investment Company Act Release No. 26993 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (‘‘Offering Reform Release’’). None of the insurance companies offering RILAs are WKSIs, however, and we generally do not anticipate that RILA issuers will meet the conditions to operate as a WKSI. We therefore do not generally discuss the WKSI registration process in this release. Even if a RILA issuer were to qualify as a WKSI, the Securities Act rules that provide a streamlined offering process for WKSIs generally would be inapplicable to RILA offerings on Form N–4, as proposed. For example, although a WKSI can file an automatic shelf registration statement, this would not be applicable under the proposal because Form N–4 does not permit a
shelf registration statement and an automatic shelf registration statement must be filed on Forms S–3, F–3, or N–2. See rule 405 (definition of ‘‘automatic shelf registration statement’’). As another example, WKSIs are permitted to use the ‘‘pay-as-you-go’’ method of paying securities registration fees, but the registration fees for RILA offerings would be paid annually in arrears under the proposal. See 17 CFR 230.456(b). 22Section 10(a)(3) of the Securities Act provides that when a prospectus is used more than nine months after the effective date of the registration statement, the information contained therein shall be as of a date not more than sixteen months prior to such use. 15 U.S.C. 77j. 23See Section 8(c) of the Securities Act [15 U.S.C. 77h(c)] and 17 CFR 230.462 (‘‘rule 462’’). 24An issuer filing a registration statement on Form S–3 will incorporate by reference information in reports under the Exchange Act filed after the registration statement has become effective, including the issuer’s annual report on Form 10– K. Accordingly, certain information required to be included in the prospectus may be included directly in the prospectus or included in an Exchange Act report that is incorporated by reference into the prospectus. 25See rule 405(b) of Regulation S–T. 26See 17 CFR 270.24f–2 (‘‘rule 24f–2’’). Most variable annuities, in contrast, are registered on Form N–4.18 This form is designed for variable annuities and has disclosure requirements tailored to these investments. Providing investors with key information in a readerfriendly format is particularly important in the context of variable annuity contracts because their structure is complex. Accordingly, Form N–4’s disclosure requirements are designed to provide investors with key information relating to a variable contract’s provisions, benefits, and risks in a concise and reader-friendly presentation, along with targeted information about the insurance company and the offering. Form N–4’s disclosure requirements thus focus more on the specific features of variable annuities than on the issuing insurance company. This presentation is designed to highlight the most important information for an investor in a variable annuity, so that the only matters included in the prospectus are those for which there is a substantial likelihood that a reasonable investor would consider them important in deciding whether to invest.19 This focus on the provisions of the variable contract itself, rather than certain details about the operation of the insurance company, reflects that a variable annuity contract is not a direct investment in the capital stock or debt of the insurance company, but rather a contract with the insurance company under which the investor’s exposure to the insurance company generally is limited to the company’s ability to honor any guarantees associated with the contract. In addition, rule 498A together with Form N–4 implements 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. 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.20 With respect to the registration process, insurance companies registering an offering of RILA securities are required under the Securities Act to pay a registration fee to the Commission at the time of filing a registration statement.21 This means that they pay registration fees at the time they register the offer and sale of the securities, regardless of when (or if) they sell them. The registration statement for the RILA offering also must include current financial information, including any annual update required by section 10(a)(3) of the Securities Act.22 An insurance company registering a RILA offering on Form S–1 must provide any
section 10(a)(3) update to the
registration statement by filing a posteffective amendment which must be declared effective, typically by the staff acting pursuant to delegated authority.23 If the offering is registered on Form S– 3, the insurance company’s annual report on Form 10–K containing audited financial statements will operate as a post-effective amendment to the registration statement for purposes of
section 10(a)(3).24 The insurance
company is required to provide a complete set of its financial statements, certain schedules, and executive compensation disclosures in a structured data format using Inline XRBL, but is not otherwise required to provide other information in the registration statement as structured data.25 Insurance companies offering RILAs also are not required to deliver prospectuses to investors because they can rely on the Commission’s ‘‘access equals delivery’’ framework in rule 172, although in practice we understand that insurance companies typically deliver prospectuses to accompany or precede other communications. When an insurance company registers a variable annuity separate account on Form N–4, in contrast, it pays registration fees based on the net issuance of securities, no later than 90 days after each fiscal year end.26 The insurance company can update its registration statement to include updated financial information required by section 10(a)(3) by filing an immediately effective post-effective amendment under rule 485. These

27OIAD’s qualitative testing consisted of two rounds of in-depth hour-long interviews with twenty participants, using a semi-structured, openended format so that participants could express their reactions and beliefs, regardless of whether they are accurate, in order to assess the reasoning of a sampling of investors regarding RILA products, and their reactions to potential RILA disclosures. See OIAD Report at Section 5, Qualitative Testing, Methods. 28OIAD Report at Section 1, Introduction and Executive Summary. 29See OIAD Report at Section 5, Qualitative Testing, Methods. 30Several participants in Round 2 were ‘‘significantly more sophisticated than the average investor,’’ with some having worked in a financial field or had over $1 million in retirement assets, and these participants also ‘‘struggled to correctly apply the concepts discussed in the KIT.’’ OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 31See OIAD Report at Section 5, Qualitative Testing, Results from Round 1. As noted above, supra footnote 2, to alleviate the confusion generated by ‘‘investment term,’’ we use the term ‘‘crediting period’’ in this release and in the proposed amendments to Form N–4. 32See, e.g., OIAD Report at Section 5, Qualitative Testing, Results from Round 1. 33See OIAD at Section 5, Qualitative Testing, Results from Round 1. 34OIAD Report at Section 5, Qualitative Testing, Results from Round 1. 35OIAD Report at Section 5, Qualitative Testing, Results from Round 1. 36OIAD Report at Section 5, Qualitative Testing, Results from Round 1. However, OIAD’s report also notes that in the second round of testing, many participants did not understand that RILAs are intended as a retirement savings vehicle, and that there may be tax penalties for withdrawal prior to age 591⁄2. See id., Results from Round 2. Similarly, only 12.6% of participants in the quantitative testing correctly identified that RILAs are investing vehicles that are intended purely as retirement savings vehicles. Id., Section 6, Quantitative Testing, Results, Summary of Quantitative Testing. 37OIAD Report at Section 5, Qualitative Testing, Results from Round 1. 38OIAD Report at Section 5, Qualitative Testing, Results from Round 1. 39OIAD Report at Section 5, Qualitative Testing, Results from Round 1. provisions together are designed to allow insurance companies to efficiently conduct continuous offerings of variable annuities. The insurance company also must structure certain key information in Inline XBRL to enhance the utility of that information to investors and must deliver a prospectus to investors because the ‘‘access equals delivery’’ framework in rule 172 is not available for variable annuities.
C. Evidence of Investor Views and Areas
of Potential Confusion
Consistent with the RILA Act, the
Commission received feedback on individuals’ comprehension and views on RILA disclosure through investor testing. Specifically, we received feedback through qualitative investor testing interviews, as well as quantitative testing designed to assess whether the design of certain hypothetical RILA disclosure provided to participants affects their comprehension of the disclosed information. Each of these aspects of investor testing was designed by the Commission’s Office of the Investor Advocate (‘‘OIAD’’). As described in more detail in section II.B below, this feedback helped us to identify areas of Form N–4 that we propose to amend to help ensure that a RILA purchaser receives key information that the purchaser is able to understand. 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.27 These interviews aimed to generate hypotheses about certain content areas in RILA disclosure— specifically, disclosure that could appear in select rows of the ‘‘Key Information Table’’ (or ‘‘KIT’’) in RILA registration statements, as discussed below—that may cause confusion and lead to impediments to investor understanding of key information.28 These interviews concentrated on assessing: (1) potential RILA disclosure, focusing on a hypothetical KIT, for areas of confusion or misunderstanding; and (2) participants’ mental models regarding the way RILA products function, including potential benefits, drawbacks, and risks of a RILA investment. The interviews also included hypothetical scenarios.29 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 KIT disclosure.30 With regard to the first round specifically, 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.31 For example, many participants mistakenly conflated ‘‘investment term’’ with the length of the entire insurance contract, leading them incorrectly to conclude that they could avoid any fees or charges if they liquidated their investment at the end of an initial oneyear investment period.32 Participants often did not appear to understand that there are multiple aspects of a typical RILA contract that could negatively affect an investor’s contract value or the amounts an investor could withdraw from the contract (e.g., the fact that a withdrawal could be subject to a surrender charge, interim value adjustment, and tax penalty).33 Some participants expressed that a
chart or graph would be useful to help them understand certain information presented about a RILA contract, such as surrender periods or how the contract’s bounded return structure would function.34 Additionally, some participants indicated they would need more specific information—besides the information in the hypothetical KIT rows shared with them—to evaluate the appropriateness of a RILA.35 While first-round 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. This was demonstrated in participants’ responses to sample scenarios, where the interview facilitator presented facts about a hypothetical investor’s background, and participants were asked to provide their opinions about whether a RILA contract would be an appropriate investment option for those investors and discuss their reasoning. For instance, participants in the firstround interviews could generally identify that a RILA contract could present particular risks for individuals without a long time horizon.36 On the other hand, as noted above, these participants often identified only a single charge or penalty that would apply even in scenarios where, for example, a surrender charge, early withdrawal tax penalty, and interim value adjustment might all apply.37 Some participants were able to identify that a RILA contract could be appropriate for an individual in light of factors such as desire to protect against losses in the stock market, taking into account considerations such as age, investment time horizon, and other sources of liquid funds.38 Some interview participants also demonstrated that they could use the KIT disclosure to discern quickly that they would not be interested in purchasing a RILA contract, for example because of liquidity needs or relatively short investment time horizons.39 Commission staff used this feedback to update sample KIT disclosure in between qualitative interview rounds. In particular, in the second round, sample

40See OIAD Report at Section 5, Qualitative Testing, Results from Round 1, and Appendix C. 41See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 42See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 43See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 44See OIAD Report at Section 5, Qualitative Testing, Results from Round 1, and Results from Round 2. 45See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 46See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 47See OIAD Report at Section 5, Qualitative Testing, Results from Round 2. 48OIAD Report at Section 6, Quantitative Testing. 49OIAD Report at Section 6, Quantitative Testing, Methods. 50OIAD Report at Section 6, Quantitative Testing, Study Design and Overview. 51OIAD Report at Section 6, Quantitative Testing, Summary of Quantitative Testing. 52OIAD Report at Section 6, Quantitative Testing, Comprehension Measures. 53OIAD Report at Section 6, Quantitative Testing, Results. 54OIAD Report at Section 6, Quantitative Testing, Results, Table 6. 55OIAD Report at Section 6, Quantitative Testing, Results. 56OIAD Report at Section 6, Quantitative Testing, Results. 57See OAID Report at Section 6, Quantitative Testing, Results, Subgroup Analysis, Investor Status. 58See OIAD Report at Section 6, Quantitative Testing, Results, Subgroup Analysis, Investor Status. KITs were modified to include: (1) the phrase ‘‘investment term’’ rather than ‘‘term,’’ (2) a table to show how investment term interacts with contract length, (3) graphics to provide more information about RILA loss limitation features such as floors and buffers, and (4) expanded links to additional information to indicate that more information could be available.40 Following these changes, participants demonstrated modestly improved comprehension in certain limited areas. For example, the sample KIT disclosure used in the second-round of qualitative testing emphasized that contract adjustments can substantially reduce the value of an investment if investors withdraw money before the end of an investment term. Participants who viewed this modified disclosure had greater success in identifying the potential financial impact of this feature, with some expressing concern about the potential magnitude of the contract adjustment.41 Additionally, some second-round participants who viewed the KIT contract adjustment disclosure also asked for more specific information about how the adjustment is calculated, which suggests that layered disclosure might be useful for these concepts.42 Even though these participants were unable to define certain terms relevant to contract adjustments (e.g., interim value adjustment), most second-round participants seemed to understand that RILAs are not a short-term investment and should only be used if an investor will not need to make early withdrawals.43 The second round of testing also introduced a table in the sample
KIT disclosure that attempted to help illustrate how fees were charged over the surrender period of the contract, the difference between the investment term (i.e., the crediting period) and the contract length, and how the surrender charge and potential contract adjustments could vary over different time frames.44 Nonetheless, participants in the second round of testing still had difficulty distinguishing between surrender charges and contract adjustments or understanding that both can apply cumulatively to reduce an investor’s contract value in cases of early withdrawal.45 Most participants in the second round of testing also continued to struggle with the mechanics of ‘‘buffers,’’ despite the inclusion of graphics in the hypothetical KITs designed to illustrate how buffers work.46 There were a number of areas where participants wanted information that was not part of the KIT rows being tested, such as the specific index-linked options available under the contract, and some participants with more investing experience wanted information about past returns on the RILA, as well as additional information on fees and charges—particularly regarding caps on gains and other bounded return features—in order to understand the ways in which insurance companies profit from RILAs.47 Following the qualitative interviews, OIAD conducted quantitative testing designed to assess comprehension of key concepts about RILAs and the extent to which the organization of disclosures affected participants’ comprehension of the disclosed information.48 Approximately 2,500 participants completed OIAD’s quantitative testing study, which was fielded over an eight-day period and targeted groups who were more likely to have some experience with financial products.49 Participants received focused portions of a hypothetical KIT to test disclosures. For example, participants were randomly assigned to one of two formats for the sample KIT disclosure, one with a Q&A format and one with a statement-based format.50 Overall, the results of OIAD’s quantitative testing suggest that most investors experience challenges in understanding RILAs.51 This round of testing reviewed overall comprehension of participants as well as whether participants were able to assess four sub-scores: (1) appropriateness of RILAs for investors based on their characteristics, (2) how a RILA works, (3) how the charges and penalties associated with RILAs affect liquidity, and (4) the insurance protections offered by RILAs.52 Across all participants, the average percentage of questions scored correct was 58%, which, while higher than the expected score for people randomly guessing (50%), was lower relative to what might be considered a well-informed purchaser of a RILA product.53 However, the results of the sub-scores varied, specifically 57% for appropriateness, 49% for how a RILA works, 57% for insurance, and 62% for liquidity.54 Comprehension varied depending on the particular concept tested. For example, 80.7%
of participants were able to correctly identify that RILA investors cannot access their money whenever they need it at no cost, suggesting that the tested disclosures were sufficient to put participants on notice to the potential for contract adjustments and surrender charges.55 Conversely, only 12.6% of participants correctly identified that RILAs are intended purely as retirement savings vehicles, rather than a product appropriate for other, shorter-term investing goals (e.g., education and home purchasing), suggesting continued investor confusion on this topic.56 Additionally, participants in the quantitative testing were classified into three groups based on their experience with investing. Not surprisingly, increased investment experience correlated with greater overall comprehension, with non-investors (those with no existing investments) averaging slightly less than 50% correct,
11.7 percentage points lower than the
average for the group with the most investment experience.57 The Q&A KIT format demonstrated a statistically significant, albeit quantitatively small, improvement over the non-Q&A KIT format, particularly with regard to the non-investor group, who saw a 5.7 percentage points increase in comprehension in connection with the Q&A format with regard to overall comprehension.58 Overall, investor testing successfully identified a range of barriers to investor understanding of RILAs and associated disclosures. However, with the few

59See infra section II.K; Appendix D.
60See 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. 61See, 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’’). Feedback in comment letters generally showed that retail investors prefer concise, layered disclosure and feel overwhelmed by the volume of information they currently receive. Multiple comment letters reflected a preference for shorter summary disclosures, with additional information available online or upon request. See, e.g., Comment Letter of C. Scott (July 26, 2018) (expressing preference for shorter summary disclosures, and suggesting disclosures ‘‘trim the fat and replace the text-heavy disclosures with something that is clear, succinct, and transparent’’); Comment Letter of Helena Krus (July 29, 2018) (noting a preference to receive shorter summary disclosures, with additional information available online or upon request, and suggesting that the option should be available for all documents over 5 pages). 62See supra footnote 61; see also, e.g., SEC Staff, Study Regarding Financial Literacy Among Investors (Aug. 2012). The key information that investors found useful and relevant before purchasing an investment product includes information on fees and expenses, investment performance, principal risks, and investment objectives. With respect to the presentation of disclosure, the study indicates that investors preferred disclosures being ‘‘written in clear, concise, understandable language, using bullet points, tables, charts, and/or graphs.’’ Materials relating to this study, including the staff’s report, are available at http://www.investor.gov/ publications-research-studies/sec-research. 63See OIAD Report at Section 6, Quantitative Testing, Summary of Quantitative Testing. exceptions noted above, variations in disclosures did not result in significant improvements in investor comprehension in the investor testing. Accordingly, while OIAD’s investor testing has been successful in identifying specific areas of investor confusion regarding RILAs, those results were largely inconclusive in terms of determining specific disclosures that are relatively more successful in addressing the identified confusion. We have incorporated those results in our design of the proposed Form N–4 amendments, endeavoring to give particular attention to areas of identified investor confusion while leveraging existing disclosure requirements. Because investor testing did not, for the most part, provide persuasive evidence of superior disclosures, we are proposing to largely utilize the existing Form N–4 disclosures which have been developed over time, and with which staff, investors, and RILA issuers
are already familiar. Building upon these existing disclosures has additional benefits, because combination contracts offering both variable and index-linked options will be required to comply with Form N–4, making it more efficient to build on the form’s requirements for both types of investment options. We seek comment throughout this release on specific areas for improvement that can aid investor comprehension. Further, we are requesting specific input from the retail investor community, through a short Feedback Flyer, relating to their experiences with annuities generally and RILAs specifically.59 Further, in addition to investor testing focused specifically on sample RILA disclosure, our proposal—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.60 The Commission has historically received feedback showing that investors generally prefer concise, layered disclosure.61 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.62 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 our proposal’s approach to RILA disclosure. D. Overview of Proposal We are proposing to modernize and enhance the registration and disclosure framework for RILAs by adapting the existing registration and disclosure framework that is familiar to investors and issuers for variable annuity separate accounts to accommodate RILAs.

Use of Form N–4. We are proposing
to amend Form N–4 so that issuers seeking to register the offering of RILAs must use that form. To accommodate this, we are also proposing amendments to that form that specifically address the features and risks of RILAs. For example, we are proposing amendments to the form’s ‘‘Key Information Table’’ that highlight key features of RILAs that should be disclosed so that investors may determine whether a RILA is an appropriate investment for them. In particular, the KIT highlights key features of a RILA contract that may be substantially different from the features of investment products investors may be more familiar with, and that investor testing suggests may not be readily apparent to investors. Further, because the insurance company would register the offering of a RILA on Form N–4 under the proposal, it would be subject to the requirements in the form related to financial statements, including the form instruction that currently permits variable annuity issuers to file insurance company SAP financial statements in certain circumstances.
Form N–4 Amendments for All
Issuers. In addition to adding RILAs to Form N–4, we are also proposing amendments to the form that would be applicable to offerings of variable annuities. These proposed 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. For example, one takeaway from investor testing was that the complicated jargon of RILA contracts was a consistent impediment to investor comprehension of KIT disclosures.63 To address this confusion, we are proposing to switch the order of the Key Information Table and Overview of the Contract items to introduce investors earlier to the terminology and concepts underlying annuity contracts, in the hopes that this context will improve investor comprehension of KIT disclosures. Because variable annuities are also complicated investment products, we are proposing to switch the order for these products as well, so that variable annuity investors also have the benefit of this additional context.
Summary Prospectus. Consistent
with the inclusion of RILAs on Form N– 4, we are proposing to permit RILA issuers to make use of the summary prospectus framework available to variable annuity registrants on Form N– 4.
Updates to the Filing Rules. To
accommodate RILA registrations on
Form N–4, we are proposing to require RILA issuers to pay fees in arrears on Form 24F–2 and we are proposing amendments to address RILAs in the rules that variable annuities use to file post-effective amendments and to update prospectuses.
Materially Misleading Statements in
Sales Literature. The proposed amendments would require RILA issuers to comply with rule 156, which provides guidance as to when sales literature is materially misleading under the Federal securities laws. Our proposal, if adopted, would implement the RILA Act’s mandate.

64See proposed General Instruction B.1 of Form N–4. Form N–4, as we propose to amend it, would provide that Form N–4 is ‘‘to be used by insurance companies to register index-linked annuity contracts under the Securities Act of 1933.’’ Insurance companies therefore would not be permitted to register RILA offerings on Forms S–1 or S–3, as they do today. 65 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 supra footnote 6. 66See infra section II.B.3(c). 67Based on an informal Commission staff review of RILA filings on the EDGAR system as of May 2, 2023. 68See infra sections I.C and II.E. 69See also infra section II.E.3 (discussing proposed changes to rule 172).
II. Discussion
A. Use of Form N–4
We propose to require insurance companies to use Form N–4 to register the offering of RILAs, as well as amendments to the form to require disclosures specific for these securities.64 As discussed above, the registration forms currently used by RILA issuers do not include line-item disclosure requirements addressing the unique aspects of RILAs, like limits on gains or the application of contract adjustments. They also require information about the issuer, such as MD&A, that may be less important to annuity investors, given that they are not making a direct investment in the insurance company, and that the Commission has not determined to require for variable annuities. Conversely, most variable annuity issuers already use Form N–4 to register their securities and the form is designed to provide investors with productspecific information about annuity contracts.65 Requiring insurance companies to register RILA offerings on Form N–4 therefore leverages the form’s existing insurance-product specific disclosure requirements, including disclosure requirements that help effectuate the relatively new summary prospectus layered disclosure framework the Commission adopted in 2020 for variable contracts. With the RILA-specific disclosures we are proposing to add to Form N–4, we intend that the form will provide investors with the information necessary to make informed decisions about RILAs. Including RILAs on Form N–4 also could provide further benefits to investors by facilitating not only investor comparison among RILAs, but also the comparison of index-linked options to variable options in the same annuity contract. For example, investors would be able to review summary information of all the available investment options of an annuity contract—index-linked options, variable options, and fixed options—and compare these options in one place in the prospectus appendix required by Form N–4.66 Currently, we understand that approximately 44% of the RILAs offered in the marketplace are offered as index-linked options through combination products.67 Registering the offerings of RILAs on Form N–4, rather than a new or different form, also would be more efficient for insurance companies and Commission staff. In this regard, insurance companies would benefit from using a single form, with tailored disclosure requirements, to register the offerings of both RILAs and combination contracts with indexlinked options. In addition, many of the insurance companies issuing RILAs also issue variable annuity contracts and therefore are familiar with the requirements of Form N–4. Using Form N–4 for RILAs also would be efficient for our staff because the disclosure requirements for variable contracts and RILAs would be consolidated in one place. Further, because Congress has authorized RILA issuers to use Form N– 4 if the Commission fails to adopt a registration form for RILAs within 18 months of the RILA Act’s enactment, we believe that requiring insurance companies to use
the form is consistent with congressional intent. Requiring insurance companies to register RILA offerings on Form N–4 under the proposal would result in changes to RILA disclosure, in that they would have to comply with the current Form N–4 disclosure requirements in addition to the proposed new RILAspecific disclosure requirements. While Form N–4 contains some of the issuerand offering-specific disclosures required by Forms S–1 and S–3, it does not contain them all. Specifically, Form N–4 does not include many of the disclosures relating to the mechanics of the offering (e.g., use of proceeds, dilution, etc.); offering participants other than the issuer, such as selling securities holders; and certain details of the issuer (e.g., descriptions of property, executive compensation, etc.). These disclosures may be more useful to an investor considering an investment in the capital stock or debt securities of the insurance company rather than an investment in a RILA issued by the insurance company. Unlike an investor in the insurance company itself, a RILA investor’s direct investment exposure to the insurance company is limited to the insurance company’s claims-paying ability, which also is supported by State insurance regulations and supervision designed to ensure that insurance companies are able to satisfy their obligations under their insurance contracts. Requiring insurance companies to register RILA offerings on Form N–4 would leverage that form’s annuity-focused requirements to ensure that investors receive those disclosures that would be the most important in the RILA context. To accommodate the offering of RILAs on Form N–4 and to provide a consistent framework for all offerings registered on the form, we are proposing, as discussed in more detail below, changes to certain rules and requirements such that RILA issuers would be subject to the same process requirements as variable annuities.68 For example, similar to the current offering processes for issuers of variable annuities, insurance companies registering RILA offerings would be permitted to use a streamlined summary prospectus and required to pay fees to register their securities annually rather than at the time of filing a registration statement.69 These changes would provide efficiencies for insurance companies and Commission staff in establishing consistent requirements for offerings registered on Form N–4. It would, however, result in some tradeoffs for RILA issuers. For example, insurance companies currently registering RILA offerings on Form S–3 would lose the ability to update their registration statement by incorporating by reference their annual report but would be able to update their registration statement annually with an immediately effective amendment. On balance, and as discussed in more detail throughout this release, requiring insurance companies registering RILA offerings to follow the offering processes proposed in this release should result in efficiencies for
insurance companies and our staff. We anticipate that requiring RILA offerings to be registered on Form N–4 will also benefit investors by leveraging the form’s annuityspecific disclosure requirements and extending the variable annuity summary prospectus to RILAs. Having a common registration form also should make it easier for investors deciding between an investment in a RILA or a variable annuity to compare the offerings. We request comment on the proposed requirement to register RILA offerings on Form N–4.

As proposed, should we require
RILA issuers to use Form N–4? Is another existing registration form more

70Some proposed changes entail a nonsubstantive 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 flagged in the following table but are instead discussed in section II.B.7 supra. appropriate for RILAs? If so, which registration form and why?
2. Given that any existing registration
form would require RILA-specific amendments, should the Commission instead develop a new form specifically for RILAs?
3. Is it appropriate to require an
annuity that offers different types of investment options (e.g., variable options as well as index-linked options) to address these different types of investment options on the same registration form? Would requiring different registration forms for annuities offering different types of investment options be more or less efficient for insurance companies that offer variable annuities, RILAs, and combination contracts?
4. Is there any information currently
required by Forms S–1 or S–3 that we should also require RILA issuers to disclose?
5. Would requiring RILAs to follow
the same filing and other process requirements as variable annuities (such as requirements for paying registration fees, and the ability to use a summary prospectus) be efficient for insurance companies because they could use the same processes to pay registration fees and update registration statements for variable annuities, RILAs, and combination contracts?
6. Do commenters believe that there
are any disclosures from Forms S–1 and S–3 we are not including in the proposed Form N–4, particularly the MD&A and executive compensation disclosures, that could be of material relevance to RILA investors? If so, please explain their relevance to RILA investors.
7. Do commenters agree with our
estimate that approximately 44% of
RILA securities offered in the marketplace are offered as index-linked options through combination products? If not, what percentage do commenters think more accurately reflects RILA securities offered as index-linked options through combination products, and what is the basis for this estimate?
8. Should Form N–4, as amended, be
the only form that insurance companies could use to register RILA offerings? Should we permit the continued use of Forms S–1 and S–3 in addition to the amended Form N–4? Would this be appropriate, given that RILA issuers can already use those forms? How would we ensure that investors receive the information necessary to make informed decisions through use of those forms, including the benefit of the proposed RILA-specific disclosure requirements informed by investor testing?
9. Do commenters expect that any
RILA issuers will meet the conditions to operate as a WKSI, and if so, what is the basis for this expectation?
10. Do commenters agree that
leveraging Form N–4’s annuity specific disclosure requirements and summary prospectus regime would benefit investors? Would registering RILA offerings on Form N–4 make it easier for RILA investors to compare RILA offering with variable annuity offerings? Are there any other potential benefits or disadvantages to investors in registering RILA offerings on Form N–4 as compared to other forms? B. Contents of Form N–4 As proposed, many items of current Form N–4 would apply to RILAs. We are also proposing updates to Form N– 4 to include disclosures specific to RILAs. In certain circumstances, we propose changing the disclosures provided on the form that would apply to both RILAs and variable annuities. The chart in Table 1 below outlines these items and any substantive changes we are proposing.70 We discuss these changes in more detail in the sections that follow.
TABLE 1—OVERVIEW OF PROPOSED FORM N–4
Item Description Substantive changes Discussion Prospectus (Part A) 1 ....................... Front and Back Cover Pages Adding new legends and other standardized disclosures applicable to all issuers.
Section II.B.1.
2 ....................... Overview of the Contract ....... New RILA-specific disclosures; moving order of appearance up.
Section II.B.3(a).
3 ....................... Key Information ...................... New RILA-specific disclosures; changing to a question-andanswer format; moving order of appearance down; change discussion of restrictions on optional benefits to cover all benefits.
Section II.B.2.
4 ....................... Fee Table ............................... New contract adjustment disclosure ....................................... Section II.B.5. 5 ....................... Principal Risks of Investing in the Contract. Providing more detailed disclosures applicable to all issuers Section II.B.4. 6 ....................... Description of the Insurance Company, Registered Separate Account, and Investment Options. New RILA-specific disclosures and one new item regarding variable options.
Section II.B.3(a).
7 ....................... Charges .................................. New disclosures related to contract adjustments ................... Section II.B.5. 8 ....................... General Description of Contracts. No substantive change ............................................................ Section II.B.8(b). 9 ....................... Annuity Period ........................ No substantive change ............................................................ Section II.B.8(b). 10 ..................... Benefits Available Under the Contract. No substantive change ............................................................ Section II.B.8(b). 11 ..................... Purchases and Contract Value. No substantive change ............................................................ Section II.B.8(b). 12 ..................... Surrenders and Withdrawals .. No substantive change ............................................................ Section II.B.8(b). 13 ..................... Loans ...................................... No substantive change ............................................................ Section II.B.8(b). 14 ..................... Taxes ...................................... No substantive change ............................................................ Section II.B.8(b). 15 ..................... Legal Proceedings .................. No substantive change ............................................................ Section II.B.8(c). 16 ..................... Financial Statements .............. No substantive change (but see Item 26) ............................... Section II.D.

71One change specific to this legend would be to indicate whether the insurance company will apply a contract adjustment on any money returned during this period. Contract adjustments are a defining element of a RILA, but can apply in other circumstances. Nonetheless, given the context of this legend, we believe that it is important for investors to know whether they will be subject to this charge if they elect to have their money returned. See supra sections II.B.5 (discussing contract adjustments generally) and II.F (discussing that it could be materially misleading to advertise that investors can receive their money back during a period of time without indicating that a contract adjustment could apply).
TABLE 1—OVERVIEW OF PROPOSED FORM N–4—Continued
Item Description Substantive changes Discussion 17 ..................... Investment Options Available Under the Contract. New RILA-specific disclosures ................................................ Section II.B.3(b). Statement of Additional Information (Part B) 18 ..................... Cover Page and Table of Contents. No substantive change ............................................................ Section II.B.8(b). 19 ..................... General Information and History. No substantive change ............................................................ Section II.B.8(c). 20 ..................... Non-Principal Risks of Investing in the Contract. No substantive change ............................................................ Section II.B.8(b). 21 ..................... Services .................................. No substantive change ............................................................ Section II.B.8(b). 22 ..................... Purchase of Securities Being Offered. New disclosure of specific contract adjustment information ... Section II.B.5. 23 ..................... Underwriters ........................... No substantive change ............................................................ Section II.B.8(c). 24 ..................... Calculation of Performance Data. Clarifying only applies to variable options .............................. Section II.B.7. 25 ..................... Annuity Payments .................. No substantive change ............................................................ Section II.B.8(b). 26 ..................... Financial Statements .............. Providing that RILA issuers can use the relevant instructions and adding requirements relating to changes in and disagreements with accountants for RILAs.
Section II.D.
Other Information (Part C)
27 ..................... Exhibits ................................... Adding power of attorney for all issuers and accountant letters for RILA issuers as exhibits.
Section II.B.7(d).
28 ..................... Directors and Officers of the Insurance Company. No substantive change ............................................................ Section II.B.8(c). 29 ..................... Persons Controlled or Under Common Control with the Insurance Company or the Registrant. No substantive change ............................................................ Section II.B.8(c). 30 ..................... Indemnification ....................... No substantive change ............................................................ Section II.B.8(c). 31 ..................... Principal Underwriters ............ No substantive change ............................................................ Section II.B.8(c). 31A ................... Information about contracts with Index-Linked Options. New disclosure of RILA specific information .......................... Section II.B.6. 32 ..................... Location of Accounts and Records. No substantive change ............................................................ Section II.B.7. 33 ..................... Management Services ............ No substantive change ............................................................ Section II.B.8(b). 34 ..................... Fee Representation and Undertakings. Adding new RILA undertakings ............................................... Section II.B.7(d).

Front and Back Cover Pages (Item 1)
We propose to require RILA issuers to include the information Form N–4 currently requires on the front and back cover pages of the prospectus. Currently, issuers 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.71 The table below outlines these existing disclosures that RILAs would be required to include if applicable.
TABLE 2—EXISTING INFORMATION REQUIRED BY ITEM 1 OF FORM N–4
[With proposed adjustments]
Item No. Disclosure Cover
Identifying Information
Item 1(a)(2) ..................................... Insurance company’s name ................................................................... Front. Item 1(a)(3) ..................................... Types of contracts offered (e.g., group, individual, etc.) ....................... Front. Item 1(a)(4) ..................................... Name and class of contract ................................................................... Front. Item 1(a)(9) ..................................... Date of prospectus ................................................................................ Front. Item 1(b)(4) ..................................... EDGAR identifier number ...................................................................... Back.

72See proposed Item 1(a)(5) of Form N–4. 73See proposed Item 1(a) of Form N–4.
TABLE 2—EXISTING INFORMATION REQUIRED BY ITEM 1 OF FORM N–4—Continued
[With proposed adjustments]
Item No. Disclosure Cover
Legends
Item 1(a)(10) ................................... Statement that the 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)). Front. Item 1(a)(11) ................................... Statement that additional information about the contract is available on Investor.gov. Front. Item 1(a)(12) ................................... A legend that states that if you are a new investor, you may cancel your contract within 10 days of receiving it with some details about the operation of this process. Front. Other Information Item 1(b)(1) ..................................... Statement that the SAI contains additional information, that it is available to investors, and how investors may obtain the SAI or make inquiries about their contracts. Back. Item 1(b)(2) ..................................... Statement about whether and from where information is incorporated by reference. Back. In addition, we are proposing to add several new disclosures to the cover
page to accommodate RILAs. The first
proposed amendment would require the insurance company to identify the types of investment options offered under the contract and cross-reference the prospectus appendix that provides additional information about each option.72 Given the addition of investment options beyond variable options to the form, this would help investors better understand what investment options are available under the contract. The other proposed amendments to the cover page would require additional new disclosures that highlight RILAs’ complexities and certain associated risks. These include RILA’s limitation on gains and potential for loss, that they are not short-term investments, and that payments under the contract are subject to the insurance company’s financial strength and claims-paying ability. The proposed legends would require issuers to include statements on the front cover disclosing the following:
(1) The contract is a complex investment and involves risks, including the potential loss of principal; (2) For contracts that include indexlinked options, a prominent statement that the insurance company limits the amount the investor can earn, the potential for investment loss could be significantly greater than the potential for investment gain, an investor could lose a significant amount of money if the index declines in value, and a prominent statement disclosing 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; (3) The contract is not a short-term investment and is not appropriate for an investor who needs ready access to cash, and withdrawals could result in surrender charges, negative contract adjustments, taxes, and tax penalties as applicable with a prominent statement of the maximum potential loss resulting from a contract adjustment, if applicable; and (4) The insurance company’s obligations under the contract are subject to its financial strength and claims paying ability.73 This cover page disclosure is designed to put an investor on notice of these key considerations to help the investor make informed decisions. While these proposed additional disclosures are important for investors in RILAs, they are also relevant in many cases to investors in variable annuities. For example, while RILAs are complex investments, variable annuities are complex as well. Variable annuities, like RILAs, also are not short-term investments. As a result, we are proposing to apply the proposed new disclosures to all Form N–4 issuers to ensure that investors in both RILAs and variable annuities receive appropriate disclosures. We request comment on the requirement of RILAs to include the information in Item 1 of Form N–4 on their registration statement and the inclusion of new legends for all Form N–4 filers, as applicable, on the front cover of the registration statement.
11. Would the new legends be
effective in helping investors make informed decisions with regards to RILAs? Do commenters agree that it is appropriate to require the legends for variable annuities? Are the disclosures in the Overview of the Contract, Key Information Table, and elsewhere in the prospectus—as discussed later in this release—sufficient such that these legends are not necessary? Conversely, are legends effective in alerting investors to key concepts for a RILA or variable annuity on the cover page of the prospectus? Are there additional legends that are appropriate in light of the complexity of RILAs and variable annuities? For example, should a legend be required that specifically discloses a contract’s upside limitation, such as due to a participation rate or cap rate?
12. Are there any examples or
illustrations of how RILAs operate that we should require on the front or back cover pages? Are examples or illustrations more effective communication tools than legends on the cover page of the prospectus? Should examples or illustrations be provided in addition to legends?
13. Is there any other information we
should require on the front or back cover pages?

74See VASP Adopting Release at section II.A.1.c.ii; see also infra section II.C. 75See, e.g., OIAD 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 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). 76See proposed instruction 1 to Item 3 of Form N–4. 77Proposed instruction 1(d) to Item 3 of Form N– 4. 78For 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 Report at
Section 6, Quantitative Testing, Subgroup Analysis,
Investor Status. The report noted a 5.7 percentage point effect of the Q&A KIT structure on overall comprehension for ‘‘non-investors’’. Id. 79The Commission’s proposed Q&A format is consistent with previous rulemaking experience. See Form CRS Relationship Summary; Amendments to Form ADV, Investor Act Release No. 5247 (June 5, 2019) [84 FR 33492 (June 12, 2019)] (adopting question-and-answer format in response to feedback from surveys and studies and commenters who noted that ‘‘the question-andanswer format is a more effective design for consumer disclosures because it focuses on questions to which a consumer wants answers and allows a consumer to skim quickly and understand where to get more information.’’). The proposed format is also supported by prior surveys and studies to help design effective disclosures to retail investors. See, e.g., Angela A. Hung, et al., RAND Corporation, Investor Testing of Form CRS Relationship Study (2018), available at https:// www.sec.gov/about/offices/investorad/investortesting-form-crs-relationship-summary.pdf, at p. 23 (reporting that about 60% of respondents favored a question-and-answer format over the sample relationship summary format presented in the survey); Kleimann Communication Group, Inc., Report on Development and Testing of Model Client Relationship Summary, Presented to AARP and Certified Financial Planner Board of Standards, Inc. (Dec. 5, 2018), available at https://www.sec.gov/ comments/s7-07-18/s70718-4729850-176771.pdf, at p. 4 (‘‘Readers ask questions when they read, especially of functional documents. . . . For good design, we want to build upon this tendency by identifying key questions investors should or are likely to ask and featuring them prominently in the text, thus easing the cognitive task for readers. As a result, we used questions in the headings to introduce each section’s major topic.’’); Susan Kleimann, Making Disclosures Work for Consumers, Presentation to the SEC’s Investor Advisory Committee (June 14, 2018), available at https:// www.sec.gov/spotlight/investor-advisorycommittee-2012/iac061418-slides-by-susankleimann.pdf (encouraging the use of question-andanswer format, the use of headings to make structure clear, and a strong design grid to organize elements, among other disclosure design principles, to promote readability), cited in VASP Adopting Release at n.112 and accompanying text. See also Office of Investor Education and Assistance, U.S. Securities and Exchange Commission, A Plain English Handbook (Aug. 1998) (‘‘You can make complex information more understandable by giving your readers an example using one investor. This technique explains why ‘question and answer’ formats often succeed when a narrative abstraction fails.’’). 80The current instructions to Form N–4 require that, notwithstanding 17 CFR 230.421(a), the KIT, Overview, and Fee Table must be disclosed in numerical order. General instruction C.3(a) of Form N–4. The proposal would change this
instruction to reflect the change in order.
2. Key Information Table (Item 3)
RILA issuers, like variable annuities issuers currently, would be required to provide a Key Information Table in their registration statements under the proposal. We also are proposing amendments to the KIT’s disclosure requirements to address key RILA features, as well as other amendments that would apply to all Form N–4 issuers. The KIT provides summary prospectus disclosure, including a brief description of key facts about a variable annuity in a specific sequence and in a standardized presentation.74 Specifically, the KIT currently includes a summary of five topic areas: (1) fees and expenses; (2) risks; (3) restrictions; (4) taxes; and (5) conflicts of interest. The KIT functions as an integral part of the layered disclosure approach in Form N–4 by identifying key considerations upfront, with more detail to follow later in the prospectus. The proposed amendments to the KIT, which are informed by investor testing, are intended to build on this framework and highlight important considerations related to RILAs, 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.75 Form N–4 currently prescribes format requirements for the KIT to enhance the readability and comparability of the disclosure that also would apply to RILA offerings under the proposal.76 Specifically, RILA issuers would be required to disclose the required 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 otherwise provided. Consistent with the form’s current requirements, RILA issuers, however, would 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. RILA issuers also would be required to provide crossreferences to the location in the statutory prospectus where the subject matter is described in greater detail, either accessed by direct electronic link or through equivalent methods or technologies, as required for variable annuity KIT disclosure. Consistent with current requirements, RILA issuers would include these cross-references adjacent to the relevant disclosure, either within the table row, or presented in an additional table column. As currently is required, all disclosures for the KIT should be short and succinct, consistent with the limitations of a tabular presentation. We are proposing three modifications that would apply to registration statements both for RILAs and for 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 proposing to require issuers to present the information in the KIT in a questionand-answer (‘‘Q&A’’) format.77 As a result of this change, the various line items of the KIT would be rephrased as questions (e.g., ‘‘Are there charges for early withdrawals?’’ instead of ‘‘Charges for Early Withdrawals’’). The instructions would further require that, unless the context otherwise requires, issuers should begin the response with a ‘‘Yes’’ or ‘‘No’’ in bold text when answering a question presented in a given row of the KIT. Consistent with the directional results of the quantitative investor testing, we anticipate that the Q&A format may improve investor comprehension of RILA-specific topics. Because the effect of the Q&A KIT structure on overall comprehension was larger for noninvestors than independent investors, this format may particularly improve comprehension for less-experienced investors.78 We also expect that rephrasing the current line items in a Q&A format would more clearly convey the importance of the KIT information to help RILA and variable annuity investors make informed investment decisions.79 Second, we propose to change the order in which the KIT (current Item 2) appears relative to the Overview of the Contract (current Item 3) disclosures.80 The Overview of the Contract disclosures provide general information about the contract and important context about the information summarized in the KIT. Based on our observations of investor testing, we believe RILA investors may generally benefit from more context to understand

81See, e.g., OIAD Report at Section 5, Qualitative Testing, Results from Round 1, Summary of Qualitative Testing, Section 6, Quantitative Testing, Summary of Quantitative Testing. 82See, e.g., OIAD Report at Section 5, Qualitative Testing, Summary of Qualitative Testing, Section 6 and 7 Quantitative Testing, Summary of Quantitative Testing, Section 7, Conclusions, Summary of Findings. 83See, e.g., proposed Item 2(b)(2) of Form N–4. 84 General Instruction C.3.(a) of Form N–4. 85See instruction 1(b) to Item 2 of Form N–4. 86See Item 5 of Form N–4; 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 crossreferenced by registrants to reduce repetition that might otherwise occur if the same principal risks are repeated in different sections of the prospectus.’’). 87See, e.g., OIAD Report at Section 5, Qualitative Testing, Results from Round 1, Results from Round 2. 88Proposed instruction 2(a) to Item 3 of Form N– 4. the KIT disclosures. For example, interview participants generally found certain RILA-specific terminology confusing, such as ‘‘index,’’ ‘‘investment term,’’ ‘‘interim value adjustment,’’ and ‘‘buffer.’’ 81 Further, investor testing indicated that investors had difficulty in understanding the basic features and concepts of RILA contracts.82 The proposed Overview of the Contract disclosures would require descriptions and examples to help investors understand these RILA features and provide a basis for better understanding the issues flagged by the KIT disclosures.83 Thus, based on investor testing, we propose to change the location of the KIT so that it appears after (rather than before) the Overview of the Contract section. Placing the Overview of the Contract section first may similarly provide context of the issues flagged in variable annuity KITs. Third, we propose to 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.84 In administering Form N–4, we have observed that this instruction has led to confusion on the
part of registrants. For example, while
both the KIT and Item 5 require disclosures about principal risks, the KIT expressly contemplates that more detailed information will be repeated later in the prospectus, specifically requiring registrants to provide crossreferences to the more detailed prospectus discussion.85 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.86 Moreover, the layered disclosure framework requires a degree of repetition to ensure both that the KIT contains key disclosures and that the detailed sections that follow contain all of the key information about the given topic. We believe this is particularly important for RILAs in light of the challenges our investor testing suggests investors have in understanding these products. This way, investors will see the key risks regardless of whether they review targeted sections of the prospectus. The proposed overall format of the KIT is depicted below:
TABLE 3—PROPOSED KEY INFORMATION TABLE
Fees and Expenses:
Are There Charges 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? Is There Any Chance the Insurance Company Won’t Pay Amounts Due to Me Under the Contract? Restrictions:
Are There Restrictions on the Investment Options?
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) Fees and Expenses
RILA contracts typically have implicit fees, expenses, and charges for early or mid-term withdrawals that can be confusing or surprising to investors, as observed in our investor testing.87 We anticipate that investors would benefit from tailored disclosure about certain unique features of a RILA contract’s fee and expense structure as described below to help them make informed decisions. Early Withdrawal Charges. As RILAs may have surrender charges, we propose to require RILA issuers to provide the existing KIT surrender charge disclosure in this first line item under the ‘‘Fees and Expenses’’ heading so that RILA 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).88 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 proposing to require that offerings of both variable annuities and RILAs 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. We also are proposing to require specific disclosure on contract adjustments, which can result in investor losses if the investor withdraws

89As noted above, 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. 90Proposed instruction 2(b) to Item 3 of Form N– 4. 91See instruction 2(c) to Item 2 of Form N–4. 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). 92See VASP Adopting Release at section II.A.1.c.ii.(i), n.144 and accompanying text; see also Item 4 of Form N–4. 93See VASP Adopting Release at section II.A.1.c.ii.(i), n.147 and accompanying text. 94See proposed instruction 2(c) to Item 3 of Form N–4. 95See proposed instruction 2(c)(i)(G) to Item 3 of Form N–4. 96Proposed instruction 2(c)(iii) to Item 3 of Form N–4. 97See proposed Instruction 2(c)(ii)(A) to Item 3 of Form N–4. Currently, this legend only refers to surrender charges, not negative contract adjustments. money from an index-linked option, or withdraws money from the RILA entirely before the end of a specified period.89 Specifically, if the contract includes contract adjustments, the insurance company would be required to include a statement that if all or a portion of account value is removed from an index-linked option or from the contract before the expiration of a specified period, the insurance company will apply a contract adjustment, which may be negative. Similar to the disclosures relating to surrender charges, this statement would include the maximum potential loss (as a percentage of the investment) resulting from a negative adjustment (e.g., ‘‘[y]ou could lose up to XX% of your investment due to the contract adjustment’’). The insurance company also would be required to provide an example of the maximum negative adjustment that could be applied (in dollars) assuming a $100,000 investment (e.g., ‘‘[i]f you allocate $100,000 to an investment option with a 3-year crediting period and later withdraw the entire amount before the 3 years have ended, you could lose up to $90,000 of your investment. This loss will be greater if you also have to pay a surrender charge, taxes, and tax penalties.’’).
We also propose to require the insurance company to 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. Transaction Charges. The second line item in the ‘‘Fees and Expenses’’ section of the proposed amended KIT, ‘‘Are there transaction charges?,’’ would 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 loads, charges for transferring cash value between investment options, etc.).90 This line item is designed to provide a simple narrative description to alert investors that surrender charges and contract adjustments are not the only transaction charges they could pay. We are proposing to require RILA issuers to provide this disclosure. Ongoing Fees and Expenses. The third line item in the ‘‘Fees and Expenses’’
section, ‘‘Are there ongoing fees and
expenses?,’’ is designed to alert investors that they also 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.91 The minimum and maximum annual fee
table is designed to consolidate the
more detailed information in the Fee
Table that appears later in the
prospectus, in order to minimize the need for investors to perform complex calculations to understand the fees they will pay.92 The lowest and highest annual cost table is designed to provide investors with a high-level cost illustration that will give investors a tool to understand the basic cost framework of the contract.93 We are proposing to require RILA issuers to provide this disclosure.94 We also are proposing to require that where a contract imposes limits on gains on the amount an investor can earn on an index-linked option, insurance companies disclose that they impose these limits on gains and that they serve as an implicit ongoing fee.95 In other words, as a result of limits on gains imposed under a contract, an investor is sacrificing the potential for investment gains that exceed the cap or other limit on upside performance. Specifically, insurance companies would prominently state that they impose an implicit ongoing fee on index-linked options by limiting, through the use of a cap, participation rate, or some other rate or measure, the amount an investor can earn on an index-linked option. Further, insurance companies would state that imposing this limit helps the insurance company make a profit on the index-linked option, and that, in return for accepting this limit on index gains, an investor will receive some protection from index losses. This disclosure would be required to precede the minimum and maximum annual fee table. If the contract offers an index-linked option subject to limits on gains but does not impose any explicit ongoing fees or expenses under the contract, and thus there would be no need to include the minimum and maximum annual fee and lowest and highest cost tables, the insurance company would include this disclosure in lieu of such tables.96 Where there are no explicit ongoing fees, minimum and maximum annual fee and cost tables showing zero fees could mislead investors because an index-linked option imposing limits on gains has implicit fees inherent in limiting upside index participation. Lastly in this line item, we propose to revise the last sentence in the required legend in the lowest and highest annual cost table to include the underlined 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.’’ 97 This would further alert investors to the cost impact of a contract adjustment if they withdraw money early. (b) Risks Risk of Loss. Under the first line item in the amended KIT under the heading ‘‘Risks,’’ ‘‘Is there a risk of loss from poor performance?,’’ we would, as required by an existing instruction in the form, require RILA issuers to state that an investor can lose money by investing in the contract. RILAs, like variable annuities, are subject to the risk of investment loss. We also are proposing to amend this instruction 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 minimum guaranteed limit on index loss provided under the

98See proposed Instruction 3(a) to Item 3 of Form N–4.
99See proposed instruction 3(b) to Item 3 of Form N–4.
100 VASP Adopting Release at the text accompanying n.170. 101See proposed instruction 3(c) to Item 3 of Form N–4. 102See proposed instruction 3(c)(A) to Item 3 of Form N–4. 103See proposed instruction 3(c)(B) to Item 3 of Form N–4. 104See VASP Adopting Release at section II.A.1.c.ii.(ii); see also proposed Instruction 3(d) to Item 2 of Form N–4 (‘‘State 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 IndexLinked Options), guarantees, or benefits are subject to the claims-paying ability of the Insurance Company.’’). 105See proposed instruction 3(d); see also infra
section II.B.7(b) (discussing changes of Form N–4’s
defined terms, including replacing ‘‘depositor’’ with ‘‘insurance company,’’ to facilitate inclusion of RILAs on the form). 106See proposed instruction 4(a) to Item 3 of Form N–4. 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 would also clarify 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.7. contract.98 For example, with a guaranteed buffer of ¥10%, a registrant would disclose that investors could lose up to 90% of their investment in an index-linked option due to poor index performance even with the loss limitation feature. This amendment is designed to make clear to investors investing in an index-linked option that they can still lose money even though index-linked options typically include features designed to limit investment loss. Short-Term Investment. The second line item under the Risks heading, ‘‘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 RILAs and we therefore would require RILA issuers to make the same disclosure.99 We also are proposing to amend this item to require issuers of RILAs and variable annuities 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 index-linked option or the contract before a specified period may also result in a negative contract adjustment and loss of positive index performance. These disclosures are designed to make clear to investors some of the key reasons why these investments are not short-term investments. These disclosures are particularly important for an investor considering a RILA in light of the potential negative consequences if the investor withdraws money early from a particular index-linked option or the contract. We are not limiting these disclosures to contracts with indexlinked options, however, because these disclosures may be equally material for a variable annuity. To further illustrate that index-linked options are not shortterm investments even though they may have a short crediting period, we also propose new risk disclosure for indexlinked options that would require issuers offering such investment 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. 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.100 Currently, the KIT therefore 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 proposing conforming changes to the required statement to refer to index-linked options now that RILAs are included on Form N–4.101 We also are proposing to require the insurance company to provide additional information about any indexlinked options offered under the contract to highlight how the insurance company limits the investor’s participation in gains and losses of the index. For the risk of limited upside, the insurance company would 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%, the insurance company will credit the investor 4% in interest at the end of the term), and (3) prominently state that this may result in the investor earning less than the index’s return.102 For the risk of limited protection in the case of market decline, the insurance company would 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), (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’’), and (3) prominently state that even after limiting a negative index return, investors could still lose up to XX% of their investment.103 The disclosure in this row of the KIT is designed to highlight that each investment option, including an indexlinked option, will have unique risks. The proposed disclosure on indexlinked options would highlight one of the central economic tradeoffs indexlinked options present: 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. Insurance Company Risks. The fourth line item under the Risk heading, ‘‘Is there any chance the insurance company won’t pay amounts due to me under the contract?,’’ is meant to alert investors 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.104 Form N–4 therefore currently requires the insurance company to include a statement to this effect in this row of the KIT and either to provide the insurance company’s financial strength ratings or state, if applicable, that they are available upon request. We propose to require a RILA issuer to provide the same statement, with a conforming change to include index-linked options as an obligation of the insurance company.105 (c) Restrictions Investments. We propose to require RILA issuers to include the disclosure required by the first line item under the heading ‘‘Restrictions,’’ ‘‘Are there limits on the Investment Options?’’ This current item would be modified 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.106 As these limitations can exist for RILAs, we propose to require RILA issuers to make

107See proposed instruction 4(b) to Item 3 of Form N–4. Similarly, we are proposing a change to the discussion in the overview of the contract item about contract features that would broaden that discussion to cover both optional and standard contract benefits. See proposed Item 2(c) of Form N–4. 108See proposed instruction 5 to Item 3 of Form N–4. 109See proposed instruction 6(a) to Item 3 of Form N–4. 110See VASP Adopting Release at section II.A.1.c.ii.(v). 111See proposed instruction 6(b) to Item 3 of Form N–4; see also infra section II.B.7. 112See VASP Adopting Release at section II.A.1.c.ii.(v). this disclosure so that investors can assess that disclosure in determining whether the RILA is an appropriate investment for them. 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 indexlinked options may change in the future we are proposing 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 contractual minimum guarantees), and (3) substitute the index of an index-linked option during its crediting period. We are also proposing 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. 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. We are proposing that this item be broadened 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, 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.107 We propose to require RILA issuers to include this disclosure, as such disclosure is equally applicable to RILAs as it is to variable annuities. (d) Taxes We also propose to require RILA issuers to include the line item under the heading ‘‘Taxes,’’ ‘‘What are the Contract’s tax implications?’’ 108 This line item is designed to alert investors to the tax implications of variable contracts and, as we propose to amend this item, of RILAs. It currently requires a statement that an 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 propose to subject RILAs to this requirement because the same tax considerations apply. (e) Conflicts of Interest Investment Professional Compensation. We propose to require RILA issuers to include the first line item under the heading ‘‘Conflicts of Interest,’’ ‘‘How are investment professionals compensated?’’ 109 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.110 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 providing the required disclosure 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 RILAs, and we therefore are proposing to require an insurance company registering a RILA to provide the same disclosure. Exchanges. We propose to require RILA issuers to include the second line item under the heading ‘‘Conflicts of Interest,’’ ‘‘Should I exchange my Contract?,’’ with conforming changes.111 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.112 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 RILA. In a change that would apply to variable annuities and RILAs, and to put investors on notice that there may also be costs or charges associated with terminating an existing contract, we are also proposing 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. (f) Requests for Comment on Key Information Table We request comment generally on the proposed amendments to the KIT, and specifically on the following issues.
14. Should we require all issuers to
provide the ‘‘Overview of the Contract’’ disclosure before the KIT, as proposed? Would this provide relevant context for an investor to help understand the KIT disclosure or, conversely, would it detract from the KIT’s efficacy in conveying key information about the contract up front in a consistent format? Are there other reasons to precede the KIT disclosure with the current ‘‘Overview of the Contract’’ disclosure? Alternatively, should we allow issuers to maintain the current order of disclosure and include new rows in the KIT to provide contract overview disclosure to investors? Would this be a more effective way to provide context for investor to understand the KIT, or

113See N.Y. Comp. Codes R. & Regs. tit. 11, App.
28.8 (2023).
114See Section II.B.3.b. would it lead to disclosure that is too lengthy for the KIT format and potentially duplicate disclosure in the Overview of the Contract section of the prospectus? Alternatively, should we require the Overview of the Contract to precede the KIT only in prospectuses offering annuity contracts with indexlinked options, rather than for all issuers?
15. Should we add disclosure to the
KIT regarding whether index-linked options offered under the contract are based on a price return index (i.e., an index that only reflects price movements of the security) or a total return index (i.e., one that includes additionally factors like dividends), so that, where appropriate, investors understand whether or not they can expect their account value to increase as a result of dividends?
16. Should we add any additional
headings and sub-headings to the KIT, for example, a new heading ‘‘Contract Overview,’’ with related line items or sub-headings ‘‘What is the purpose of the contract?,’’ ‘‘What is the time period for measuring growth (or loss) on my contract value?,’’ and/or ‘‘Who may the contract be appropriate for?’’? Would this information be helpful to an investor in providing context for the KIT disclosure or, conversely, would these requirements lead to lengthy disclosure that makes the KIT less investor friendly?
17. Would rephrasing the topics of the
KIT line items in a question format and requiring the descriptions in the righthand column of the KIT to be presented in an answer format, as proposed, be helpful for investors making an initial purchase of an annuity contract? Should we make the Q&A format mandatory for all issuers that use Form N–4? Or should we instead require that issuers state the line items in the left-hand column as brief descriptions of the topics to be detailed in the right-hand column of the KIT, as is currently required? Should any of the required line items or sub-headings be worded in a different way, or using different terminology, than the proposal would require?
18. Should we allow issuers to change
the wording of the line item questions in circumstances where the changes would not impede investor comprehension and clear, consistent disclosure? Could this undermine standardized disclosures and investors’ ability to make comparisons of certain disclosure topics among RILA and variable annuity prospectuses, or would issuers’ ability to customize the disclosure lead to more informed investor decisions about that particular RILA?
19. Should we require issuers to add
a new column in the KIT labeled
‘‘Location in the Prospectus’’ or similar caption, and place it next to the relevant disclosure presented in the table to provide hyperlinked cross-references directly to the location in the statutory prospectus where the investor can find more detailed information about the subject matter or should we, as proposed, continue to permit issuers to provide cross-references either within the table row or presented as an additional column? Are there any particular sub-headings or captions that would help investors identify where to find information?
20. Should we mandate particular
examples or illustrations in the KIT? For example, should we require a chart of historical index performance with the guaranteed minimum cap overlaid? Should we require a table showing examples of the dollar amounts of losses and gains, without fees, an investor would face in a variable annuity as compared to RILAs with various floors, buffers, and caps over a four-year period assuming various index movements? 113 Are there other useful examples or illustrations currently provided by RILAs that help to illustrate their structure effectively to investors that we should include in the KIT? For example, should we require a graphic in the KIT to illustrate surrender charges and contract adjustments during different time periods of the contract? If so, what should the requirements for these graphics or illustrations be? Should we require illustrations in the KIT showing how caps, floors, and/or buffers could affect an investor’s returns across different market scenarios? If so, what should these scenarios be? As another example, we request comment below on requiring insurance companies to disclose the difference between a hypothetical $100,000 investment in an index-linked option and the value, or the cost to assemble, the economic components underlying the indexlinked option.114 Should that disclosure be required in the KIT?
21. We have proposed that insurance
companies include disclosures in the
KIT regarding any limits on gains the RILA imposes, including an illustrative example demonstrating the operation of those limits. Would this disclosure be improved by requiring that the example conform to any specific parameters? Would other examples be helpful? For example, should we require that the example use the most common limit on gains offered under the RILA for the previous year? Should we require that the example disclose the amount of gains an investor would have given up due to the limit over the prior ten years, based on the index’s performance during that time and assuming the limit on gains discussed in the example applied during each of those ten years? Should we require that the example use only round numbers?
22. Should we allow or require issuers
to provide cross-references to charts or other graphics designed to facilitate investor understanding of RILAs, including, e.g., educational resources designed by the Commission staff? Should we require issuers to provide these hyperlinked cross-references in the current right-hand column of the KIT directly after the relevant sentence of disclosure? Would the KIT be more succinct and easier to read if the hyperlinked cross-references were placed on the cover page of the prospectus instead of the KIT? Would requiring the registrant to state ‘‘More information can be found at:’’ before or after these cross-references help investors easily find the information they may need to make an informed investment decision? Should we require cross-references to other prospectus sections to include a specific page number in the prospectus where an investor could find the information?
23. Besides hyperlinks, are there other
technological tools that would help an investor find information that is crossreferenced in the KIT or on the cover
page of the prospectus, such as QR
codes or other technological tools?
24. Is the level of detail of the
disclosure that we propose in each line item of the KIT appropriate? Does it strike the right balance between providing enough information to alert an investor to the most salient facts (including ongoing implicit fees, expenses, risks, and conflicts) of the RILA contract, but not too much, or too detailed information? If not, how should we modify the table and/or the instructions? Are there other key features of RILA contracts that RILA issuers should disclose in the KIT to help investors make an informed investment decision?
25. RILAs are frequently marketed as
a way to protect against investment losses through loss-limiting features such as buffers and floors. Should we require RILA issuers to provide more detailed disclosures about how these loss-limiting features have affected RILA investors historically? For example, would investors be better positioned to

make informed decisions if we were to require RILA issuers to disclose: (a) the total number of investor crediting periods (across all investors and indexlinked options) that utilized a losslimiting feature for a certain historical period (e.g., the past five years); (b) the percentage of those investor crediting periods where an investor’s contract value benefited from a loss-limiting feature (because the feature eliminated or reduced a negative credit resulting from the performance of the indexlinked option); and (c) the percentage of those investor crediting periods where an investor’s contract value was not impacted by a loss-limiting feature. Should a RILA issuer have experience with a certain minimum number of crediting periods in order to be subject to this disclosure? What should a RILA issuer disclose if their experience with loss-limiting features does not meet the minimum threshold? Where in the prospectus would be the appropriate location for this information? For example, if we require this disclosure, do commenters feel it would be best positioned as part of the KIT, in Item 6 (in the Limits on Index Losses section), or in the Contract Overview? Are there other disclosures that commenters would recommend in the alternative as a way to increase investor knowledge about the utility of loss-limiting features and their ability to positively affect investors’ contract values? Whether or not we require more detailed disclosures about the historical effects of loss-limiting features, should we require similar disclosure about the historical effects of limits on gains (i.e., upper limits on an investor’s ability to participate in an index-linked option’s upside performance)? Should we require disclosure comparing the economic effects of the limits on gains to the limits on losses? For example, should we require disclosure of the number of periods in which each limit would have actually limited an investor’s losses or capped an investor’s gains? Should we require disclosure of the dollar value of losses an investor would be protected against compared to gains an investor would give up over a prescribed period of time, such as the past 10 years?
26. Are there any particular legends
that should be included in the KIT, e.g., ‘‘We will not return your money at the end of the crediting period unless you tell us to,’’ ‘‘The contract adjustment applies in addition to any surrender charge,’’ ‘‘You may earn less than the index’s return,’’ and/or ‘‘You may lose up to [X]% of your investment if you withdraw your money before the end of a crediting period. This loss can be greater if there is a surrender charge, taxes, and/or tax penalties’’? If so, what legends and why?
27. Is the process of what happens at
the end of the crediting period adequately highlighted in the proposed KIT? Should insurance companies be required to provide more specific details, either in the KIT or elsewhere in the prospectus, about how investors can choose an investment option at the end of the crediting period and the limitations on those choices?
28. Would the disclosure that a RILA
issuer would provide in response to the proposed ‘‘Fees and Expenses’’ line items convey the appropriate amount of information to investors and concisely alert investors to the most important fees, charges, penalties, and expenses associated with the RILA contract?
29. Should the proposed ‘‘Fees and
Expenses’’ line item, ‘‘Are there charges for early withdrawals?,’’ include disclosure both about the surrender charges and contract adjustments, as proposed? Would this disclosure sufficiently alert investors to the typical contract adjustment of a contract and its impact in reducing contract value (in addition to any surrender charge) if the investor withdraws money before the expiration of a specified period? Alternatively, should we sub-divide this line item into two line items, with the one focused on surrender charges and the other titled (for example) ‘‘Are there penalties for mid-term withdrawals?,’’ focused on contract adjustments? Would this help an investor to understand both concepts better? Or would sub-dividing the line item cause confusion, for example by making it seem as if a surrender charge and a contract adjustment could not apply simultaneously? If so, should we require an explicit disclosure that they could apply simultaneously?
30. Would the Minimum and
Maximum Annual Fee and Lowest and
Highest Cost tables assist investors in understanding the costs of their investment and help them compare the costs of different investment options and optional benefits in the RILA context? Should we modify the proposed disclosure or require other additional information to accompany the tables?
31. Would the proposed disclosure
that an issuer would provide about contracts that do not impose ongoing fees and expenses adequately convey the implicit ongoing fees of contracts with index-linked options that have features that limit positive index return? If not, should we modify the proposed disclosure or require additional information from issuers?
32. Would the disclosure that a RILA
issuer would provide in response to the proposed ‘‘Risks’’ line items adequately convey an overview of the risks of investing in a contract with an indexlinked option? Are there other risks of investing in these contracts that we should require a registrant to disclose in the proposed KIT? For example, should we require RILA issuers to state that an investor can lose money by investing in these contracts including a loss of principal? Alternatively, should we require all issuers to state this, not just RILA issuers?
33. Would the disclosure that a RILA
issuer would provide in response to the proposed ‘‘Restrictions’’ line items convey the appropriate amount of information about certain restrictions that various contract options may entail, in light of the goals of the proposed KIT and the unique nature of a RILA? Should an issuer be required to disclose information about restrictions in the KIT other than those associated with the contract’s investment options and benefits? If so, what? Instead, should we provide flexibility by permitting issuers to disclose other restrictions at their discretion? Do commenters agree that our proposal to require disclosure about restrictions on contract benefits generally (as opposed to the current requirement which is limited to optional benefits) is appropriate?
34. Is the disclosure that a RILA issuer
(along with other issuers that use Form N–4) would be required to provide in response to the proposed ‘‘Taxes’’ line item appropriate, in light of the goals of the proposed KIT? Given that some investors in these products may not have the means or ability to consult a tax professional, should we require additional disclosures in addition to the required statement that investors should consult a tax professional? For example, should a RILA issuer be required to consider which tax consequences are most likely be faced by retail investors and to provide general information regarding those consequences? For example, should an issuer be required to emphasize more prominently that withdrawals will be subject to ordinary income tax, and not the capital gains rates? Should the line item require disclosure of the specific tax penalties and requirements that investors in annuity contracts may incur (e.g., penalties for withdrawal before age 591⁄2, or that purchases through a taxqualified plan may be subject to required minimum distribution each year beginning at age 701⁄2)?

115Because we propose to require the KIT to appear before the Overview of the Contract, current Item 3 (Overview of the Contract) would be renumbered as Item 2. 116See VASP Adopting Release at text accompanying n.207. 117See proposed Item 2(b)(2)(i) through(iv) of Form N–4. 118See proposed Item 2(d) of Form N–4.
35. Are the disclosures that a RILA
issuer (along with other issuers that use Form N–4) would be required to provide in response to the proposed ‘‘Conflicts of Interest’’ line items appropriate, in light of the goals of the proposed KIT? Would these disclosures adequately apprise investors of the potential conflicts that arise when their investment professional is compensated for recommending an investment into a new, or an exchange from, an existing RILA contract or variable annuity contract? Should we revise these proposed disclosure requirements, and if so, how?
36. Do the instructions associated
with each of the proposed line items clearly explain what an issuer would be required to disclose? In keeping with the structured format of a tabular presentation, we sought to promote concise disclosure by largely directing issuers to state, rather than to explain, certain information in response to the required line items. Should the instructions prescribe specific language or should issuers have flexibility in drafting their responses? Are there any particular instructions that we should include or modify in any way, for clarity or for any other reason?
37. Should we require particular
terms in the KIT (e.g., those that are defined in a related glossary or list of definitions that the insurance company chooses to include) to be formatted in a way that will emphasize them, or indicate that they are defined elsewhere in the prospectus, for example by using bold and/or italic font?
38. Should we apply the structural
changes we are proposing to the KIT in other variable insurance contract registration forms, that is, Forms N–3 and N–6? The principles we outlined above regarding the potential efficacy of these changes could be just as applicable in the context of those forms as in the context of Form N–4. For example, should we apply the proposed requirements for Forms N–3 and N–6 issuers to present all disclosures in the KIT in a Q&A format and to begin each response with a ‘‘yes’’ or ‘‘no’’ in bold text when answering a question presented in a given row of the KIT, unless the context otherwise requires? Similarly, should we require in those forms that issuers include in their required legends on contract exchanges that investors consider any fees or penalties to terminate the existing contract before exchanging their contracts?
3. Principal Disclosure Regarding RILAs
(Items 2, 6, and 17)
We are proposing amendments to
Form N–4 to provide investors with the principal disclosures regarding RILAs and the index-linked options available under the contract in three items of the form. First, investors would receive a concise description of the basic information about any index-linked option available under the contract as well as any contract adjustments in Item 2 (Overview of the Contract), which, as discussed above, would appear before the KIT.115 Second, investors would be provided with detailed information about the index-linked options available under the contract in Item 6 (Description of the Insurance Company, Registered Separate Account, and Investment Options). Lastly, investors would be provided with a summary information table, with legends highlighting risks, that outlines the available index-linked options in Item 17 (Investment Options Available Under the Contract). These amendments build on the existing disclosure requirements in each 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, or combination contract offering both variable and index-linked options. (a) Overview of the Contract (Item 2) We are proposing to amend Item 2 (Overview of the Contract) to include information about RILAs generally and require the insurance company to provide an overview of certain key elements of any index-linked options offered under the contract and to highlight any contract adjustments. This item is designed to describe certain basic and introductory information about the contract and its benefits.116 It currently requires a concise description of the contract. This description must include information about (1) the contract’s purpose (e.g., to help the investor accumulate assets through an investment portfolio), (2) the phases of the contract (the accumulation (savings) and annuity (income) phases) including a discussion of the investment options available under the contract, and (3) the primary features of the contract (such as death benefits). We would require insurance companies to provide this existing disclosure when registering RILA offerings, adjusted to account for the specifics of RILAs, because it is equally relevant for these types of annuity contracts. In particular, in addition to the general information about the contract already required by Form N–4, the following information would be required with respect to any indexlinked option offered under the contract:

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;
A statement that an investor could
lose a significant amount of money if the index declines in value and prominent disclosure of the maximum amount of loss (as a percentage) an investor could experience from negative index performance, after taking into account the minimum guaranteed limit on index loss provided under the contract; and
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 of the manner in which such returns may be limited, along with an example and disclosure of the minimum limit on index losses guaranteed for the life of the contract for any index-linked option.117 We also are proposing to require the insurance company to state, if applicable, that an investor could lose a significant amount of money due to the contract adjustment if amounts are removed from an index-linked option or from the contract prior to the end of a specified period.118 The issuer would also provide a brief description of the transactions subject to a contract adjustment. We would require a prominent statement, as a percentage, of the maximum amount of loss an investor could experience from a negative contract adjustment and that this loss could be greater due to surrender charges and tax consequences. These disclosures, together, are designed to highlight upfront some of the key elements of a RILA. The required disclosure about any indexlinked option offered under the contract would highlight for investors the key

119See current Item 3(c) of Form N–4.
120See proposed Item 2(c) of Form N–4; see also supra footnote 107 and accompanying text. 121See proposed Item 6(a) through (c) of Form N– 4. 122We also propose to add an instruction requiring the insurance company to indicate whether it is relying upon the exemption provided by 17 CFR 240.12h–7 (‘‘rule 12h–7’’), consistent with the requirements of that rule. See proposed Instruction to Item 6(a) of Form N–4; see also rule 12h–7(f) (requiring issuers of securities subject to insurance regulation that rely on the exemption from the duty to file section 13(a) reports with respect to securities registered under the Securities Act to provide a statement indicating that fact in the relevant prospectus). 123See proposed Item 6(c)(1) of Form N–4. 124See proposed Item 6(d) of Form N–4. features of these investment options in general: that returns are based in part on an index, that investors could still lose a significant amount of money under the contract, and that there are limits on both positive and negative index performance. The required disclosure on contract adjustments would highlight a separate but important consideration for an investor considering investing in a RILA: that in addition to any losses from poor index performance, the investor also can lose a significant amount of money if the investor takes money out of an index-linked option or the contract early. These disclosures collectively also would provide context for the KIT, which immediately follows this item under the proposal, as well as context for more detailed disclosures that would appear elsewhere in the prospectus. In addition to these items that are specific to RILAs, we also are proposing to expand the current requirements for disclosures regarding optional benefits in Form N–4. Currently, when summarizing a contract’s primary features, the form requires a discussion of any optional benefits.119 A benefit under the contract, such as a nonoptional guaranteed living benefit, might be characterized as a standard (i.e., not optional) benefit but nonetheless be a key feature of the contract that should be highlighted for investors in the overview section of the prospectus. We are therefore proposing to require that the discussion of benefits cover all of the primary contract benefits, not just optional benefits.120 This requirement would apply to all contracts registered on the form. We request comment on the proposed summary disclosures contained in Item 2.
39. Is the proposed information on
index-linked options and contract adjustments appropriate? Is there other or different information we should require? For example, we are proposing to require RILA issuers to include examples of how limits on gains and downside protection operate but do not mandate a form of presentation. Should we require these examples be provided in a graphical presentation, or require only a narrative example? Should we require the examples be converted into a dollar amount? Would investors understand the examples more readily if we did this? As another example, should we require RILA issuers to briefly summarize the index crediting methodologies available under the contract?
40. Should we require the proposed
disclosures for index-linked options and contract adjustments in Item 2, including the existing disclosure to be provided in the context of a RILA? Is this information necessary for investors to understand the other disclosures in the prospectus?
41. Should we, as proposed, broaden
the current discussion of the primary contract features to include a discussion of contract benefits generally, not just optional benefits (the current focus of the disclosure requirement)? (b) Description of Insurance Company, Registered Separate Account, and Investment Options (Item 6) We propose to amend Item 6 of Form N–4 to modify certain existing disclosure requirements and to expand the item to include new disclosures for RILAs. Proposed Item 6(d), discussed further below, would set forth most of the substantive new disclosure requirements for contracts that include index-linked options. We would also include new disclosures for any fixed options provided as part of the contract. The information that would be required by the proposed amendments is designed to convey key aspects of each index-linked option offered under the contract to investors. As an initial matter, the proposed amendments to Item 6 would largely retain the existing requirement to provide a concise discussion about the insurance company, registered separate account, and variable options, subject to certain modifications in nomenclature to implement definitional changes and minor restructuring to accommodate the addition of RILAs to the form.121 Specifically, these changes would incorporate the proposed changes to certain defined terms and revise existing disclosures to clarify the entities that should be associated with certain disclosures (e.g., because the insurance company would be obligated to pay all amounts promised to investors under the contracts subject to its financial strength and claims-paying ability, we would require disclosure about this topic to be framed in terms of the insurance company, not the registered separate account, as the requirement is currently worded).122 We are proposing to require one new disclosure item for contracts that offer variable options, which would be similar to a proposed disclosure for index-linked options, discussed below. Specifically, the prospectus for such contracts would be required to include a statement indicating that ‘‘contract value allocated to a Variable Option will vary based on the investment experience of the corresponding Portfolio Company in which the Variable Option invests,’’ and ‘‘there is a risk of loss of the entire amount invested.’’ 123 The risk of loss inherent in a variable annuity is currently disclosed in the form’s ‘‘Key Information Table,’’ and we are proposing to mandate this disclosure in Item 6 as well to warn that an investor can lose the entire amount invested in a variable option. In addition to informing investors about investment risks in a variable option generally, where an annuity contract offers both variable and index-linked options, this disclosure also would help to explain the different nature of the investment risks posed by each kind of investment option. In that case the prospectus would disclose the maximum loss associated with the index-linked options while also disclosing
that, for the variable options, the investor could lose the entire amount invested. Description of Index-Linked Options We are proposing to require the insurance company to disclose information about the key features of the index-linked options currently offered under the contract.124 These proposed disclosures are designed to complement other proposed disclosures in the prospectus about index-linked options generally by providing investors specific information about each index-linked option’s features and risks, akin to the information that is currently available to investors about variable options in the prospectuses for the mutual funds underlying those options. Specifically, the insurance company would be required to describe the index-linked options currently offered under the contract as well as information about how interest is calculated and credited for each index-linked option, specifically: (1) limits on index losses; (2) limits on index gains; (3) crediting period; (4) crediting methodology and

125See OIAD Study at Section 7, Conclusions, Summary of Findings and Discussion. 126See OIAD Study at Section 5, Qualitative Testing, Summary of Qualitative Testing. 127See proposed Item 6(d)(1) of Form N–4. 128See proposed Item 17 of Form N–4. 129See infra footnote 164 and accompanying text. 130See infra at section II.B.3(b) (describing proposed amendments to Item 17 (Portfolio Companies Available Under the Contract) to include parallel provisions for RILAs). 131See proposed Item 6(d)(2) of Form N–4. 132See proposed Item 6(d)(2)(i) and (ii) of Form N–4. 133Proposed Items 6(d)(2)(i)(B) and 6(d)(2)(ii)(B) of Form N–4. 134This information about minimum guaranteed index gain limits is also set forth in the appendix, which is part of the summary prospectus. See proposed Instruction 7 to Item 17(b); proposed rule 498A(b)(5)(ix). We are also proposing to require RILAs to publish online limits on gains. See infra
section II.B.3.c. Although changes to an indexContinued
examples; (5) relevant indexes; (6) maturity; and (7) other material features of the index-linked option. These disclosures are intended in part to address points that investors found to be confusing in investor testing.125 Further, some investors in the qualitative interviews indicated that they would prefer more information about these points relative to the KIT disclosures.126 Description of the Index-Linked Options Currently Offered Under the proposed amendments, RILA issuers would be required to describe the index-linked options currently offered under the contract, including statements indicating 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.127 To dispel potential investor confusion relating to the reference to an index, we are proposing to require RILA issuers to state that an investment in an indexlinked option is not an investment in the index or in any index fund. Other cautionary statements regarding the index-linked options offered would include that the potential for investment loss could be significantly greater than the potential for investment gain, and that an investor could lose a significant amount of money if the index declines in value. To illustrate the potential scope of such a loss, RILA issuers would have to prominently state (as a percentage) the maximum amount of loss an investor could experience from negative index performance over a crediting period, after taking into account the minimum guaranteed limit on index loss provided under the contract. Because index-linked options are often marketed as a way to limit investment losses, this disclosure is designed to convey to investors that they could still lose a significant amount on an index-linked option, despite having a floor or buffer. To emphasize the substantial risks associated with an early withdrawal from an index-linked option, RILA issuers would be required to 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. To further underscore the risk, RILA issuers would also prominently state (as a percentage) the maximum amount of loss an investor could experience from a negative contract adjustment, and that this loss could be greater due to surrender charges and tax consequences. To inform investors of the possibility that their investment options could be unilaterally changed without action on their part, the insurance company would be required to state, if applicable, that it can add or remove index-linked options and change the features of an index-linked options from one crediting period to the next, including the index and current limits on gains and limits on index losses, subject to contractual minimum guarantees. Similar to the current requirement for prospectuses for
contracts that offer variable options, the insurance company would be required to state that certain information regarding the features of each currently offered index-linked option is available in an appendix to the prospectus,128 and to provide a crossreference to that appendix. An instruction would permit this statement to be modified if needed to conform to the corresponding table in the
appendix.129 As described further
below, the appendix would also be amended to include a table listing the index-linked options currently available under the contract.130 How Interest Is Calculated and Credited To aid investors in making informed investment decisions, we propose to require RILA issuers to describe how interest is calculated and credited for each index-linked option.131 As part of this description, the insurance company would be required to disclose any limits on index losses and/or index gains, the crediting periods available under the contract (e.g., 1, 3, and 6 years), a description of an index-linked option’s index crediting methodology, information about each index, what happens when an index-linked option matures, and any other material features associated with index-linked options. We discuss each of these requirements in turn. How Interest Is Calculated and Credited—Limits on Index Losses and Gains We are proposing to require the insurance company to describe, as a primary element of a RILA contract, the limits on index losses and gains for each index-linked option.132 In each case, and as applicable, the insurance company would 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). We also are proposing to require 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 would 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%). The prospectus similarly would 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% in interest at the end of the term, meaning the investor’s contract value will increase by 4%). We also propose to require the insurance company to disclose, for each index-linked option, current limits on index losses and gains, as well as the minimum limits on losses and gains that are guaranteed for the life of the contract.133 The guaranteed minimum limits tend to be lower than those currently provided for in the contract but will not change for the life of the contract, whereas the actual limits for an index-linked option will vary from crediting period to crediting period. However, at no point will these limits be lower than the guaranteed minimums. Both pieces of information are important to understanding the potential returns of an index-linked option because one of the central economic tradeoffs a RILA presents is an investor’s consideration of whether to sacrifice potential gains in exchange
for protection against potential losses. An investor therefore will not only need to consider the guaranteed limits, but also understand that the actual limits can vary over the life of the contract.134

linked option, including current limits on gains, are material, we recognize that these limits in particular can change from time to time. Therefore, insurance companies may update current limits on gains using a prospectus supplement filed pursuant to rule 497 under the Securities Act. See infra section II.E.2. 135Similar disclosure has been required in other contexts. See, e.g., Item 9(a) of Form N–4 (requiring disclosure of material factors that determine the level of annuity benefits); see also Instruction 2 to Item 7(a) of Form N–6 (requiring the identification of factors that determine the applicable cost of insurance rate). 136For 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. 137See proposed Item 6(d)(2)(iii) of Form N–4. 138See OIAD 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.’’). 139We 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 would 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. 140See proposed Item 6(d)(2)(iv)(A) of Form N– 4. 141As noted above, 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 We also propose to require the insurance company to state that current limits on gains and limits on index losses will not change during the indexlinked option’s crediting period. This would help investors understand that although the current limits on gains and limits on losses—unlike the minimum guaranteed limits—can change from crediting period to crediting period, they will not change during any given crediting period. Because an insurer can generally set rates at its discretion and may take into account a number of factors in setting those rates, we are proposing that the insurance company explain how it selects rates for limiting index losses and gains to help investors understand how the features of a particular indexlinked option will impact that option’s risk/return profile. In particular, we are proposing to require the insurance company to describe the factors it considers in determining the current limits on losses and gains for an indexlinked option (e.g., long-term interest rates, market volatility, the cost of option contracts supporting the indexlinked option guarantees, etc.),135 and how that choice may impact other features of the option set by the insurance company. Giving investors information about the factors the insurer considers in determining current limits—which are key features of an index-linked option— may help manage their expectations regarding how the product operates. If an investor sees that last year’s cap on an index-linked option was 22% and this year the
cap is 17%, the proposed disclosure may help them understand why the insurer’s rates have changed.136 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. The proposed 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 indexlinked option. 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 indexlinked option will protect against loss, the insurance company may then reduce the amount of upside index participation the investor could receive. The prospectus would also require an explanation of the factors an investor should consider regarding limits on index losses or gains before selecting an index-linked option for investment. This disclosure should 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. How Interest Is Calculated and Credited—Crediting Period We are proposing to require the insurance company 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.137 An example of one such factor an insurance company could include as part of this disclosure would 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.138 The insurance company also would be required to prominently state that amounts must remain in an indexlinked option until the end of its crediting period to be credited with all or partial interest, as applicable, and to avoid a possible contract adjustment in addition to potential surrender charges and tax consequences. This discussion would also include a description of the transactions subject to a contract adjustment (e.g., living benefits), with appropriate cross-references to related disclosures in the prospectus. 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. How Interest Is Calculated and Credited—Methodology and Examples Each index-linked option
has an ‘‘index crediting methodology’’ that explains how interest is calculated and credited to the contract. For example, one index crediting methodology is ‘‘point-to-point,’’ that is, the amount credited to the contract is based upon a comparison of the index’s performance at two points in time (such as at the beginning and end of the crediting period). We- propose to require insurance companies to explain the index crediting methodologies used in the index-linked options available under the RILA contract, along with numerical examples about how these methodologies work. We further propose to require insurance companies to provide a bar chart that illustrates the annual total return of each index along with hypothetical examples of index return after applying standardized limitations on index gains and losses. Specifically, insurance companies would be required to describe, for each index crediting methodology,139 how interest is calculated and credited at the end of a crediting period based on the interest crediting formula or performance measure.140 Form N–4, as we propose to amend it, would provide examples of common crediting methods that the insurance company would describe if applicable, such as point-topoint, step-up calculations, and enhanced performance.141 To help

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%. 142See proposed Item 6(d)(2)(iv)(C) of Form N–4. 143See proposed Item 6(d)(2)(iv)(B) of Form N–4. 144See also infra section II.F. investors understand how these crediting methods work, we also are proposing to require the insurance company to include a numeric example to illustrate the mechanics of each index crediting methodology.142 The examples would be required to show, in a clear, concise, and understandable manner, how each crediting method functions when the index has positive returns as well as negative returns to help investors understand how the crediting method functions in both circumstances. Specifically, we would require numeric examples that reflect a positive return above the limit on index gains, and a negative return below the limit on index losses for each methodology. The examples also would 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. Additional examples, charts, graphs, or other presentations would be permitted if they are clear, concise, understandable. 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 would also require insurance companies to include a legend, in the format specified in the form, 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. We also are proposing to require a bar chart for each index available under the currently-offered index-linked options showing the index’s annual return for the last 10 calendar years (or for the life of the index, if less than 10 years), with the corresponding numerical performance adjacent to each bar.143 Further, insurance companies would be required to 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 would be permitted to reflect a rate or measure used to limit index gains or losses under the contract that is comparable. Insurance companies would not be permitted to include additional performance presentations, or historical index performance that precedes the inception
of the index. Further, insurance companies would be required to provide two footnotes to this table, if applicable, that disclose (1) that the index return does not reflect dividends paid on the assets in the index, and (2) that the index provider deducts fees and costs when calculating index return. These bar charts would 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 information is intended to provide context for the index-linked options that the RILA contract offers and would better inform an investor when deciding whether to invest in a RILA. 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. We appreciate, however, that historical index presentation alone, without the addition of hypothetical caps and buffers, may mislead investors into thinking that these historical rates of index performance are what investors would have received under the contract if they invested in a particular indexlinked option. As we discuss in more detail below, we are concerned that presenting historical RILA performance without additional context can be potentially misleading given that investors cannot access the same RILA terms as were available historically. Relatedly, we are concerned that statements in RILA advertisements are being made without sufficient context so that investors can understand the qualifications to those statements.144 As an example of how historical index performance could confuse investors, consider an investor who has selected an index-linked option with performance based on the performance of XYZ Index and a one-year crediting period, and this investor has allocated contract value to that index-linked option over 10 consecutive crediting periods. This investor’s RILA contract value after 10 years likely will differ from the XYZ Index’s 10-year performance. Reasons for this likely difference include, for example, that the index-linked option only provides a portion of the
performance of the index because of a cap rate, buffer, or floor. Accordingly, we are proposing to require insurance companies to provide historical index information to investors, but with important qualifications so that investors will not confuse this index information for the historical performance of the RILA itself. In particular, the overlay of hypothetical caps and buffers is designed to help investors understand better how those limits can cause RILA performance to differ from that of the index. Further, the legends we are proposing also are designed to put investors on notice that the presented performance is not the RILA’s performance. The proposed bar chart, including the proposed 10-calendar-year period, is modeled on the risk/return bar chart in Item 4(b)(2) of Form N–1A. Form N–4 also currently requires variable annuity issuers to show 10-years of performance in the portfolio company appendix. We preliminarily believe that 10 calendar years is an appropriate time to illustrate the performance of the index over the long term to help guide investors. We are proposing to require a 5% cap rate and ¥10% buffer rate to help investors understand how caps and buffers affect the index return, but without using values that are so high or so low that they will bear no resemblance to the

145See proposed Item 6(d)(2)(v)(A) of Form N–4.
146See proposed Item 6(d)(2)(v)(B) of Form N–4.
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. 147See proposed Item 6(d)(2)(vi) of Form N–4. 148See proposed Item 6(d)(2)(vii) of Form N–4. 149A ‘‘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. 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). 150See proposed Item 6(e) of Form N–4. Interests in fixed account options are exempt securities under Section 3(a)(8) of the Securities Act. 151 General Instruction C.1.(a) of Form N–4 (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.’’). 152 Items 2 and 3 of Form N–4. level of gains and losses that is being offered. The illustrative rates are designed to achieve this effect because they are higher than typical guaranteed levels of caps and floors, but lower than typical currently offered levels. How Interest Is Calculated and Credited—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 proposing to require 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 more information about the index.145 Where there is more than one version of an index (for example a total return version and a price return version), the disclosure would clearly state which version of the index relates to the index-linked option. If the index is an exchange-traded fund (‘‘ETF’’), the disclosure would have to 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 or closing value and, if the performance is based on the ETF’s share price, the impact of using the share price as opposed to total
return. These disclosures collectively are designed to help ensure that investors understand the applicable indexes. The disclosure would also state, if applicable, that the index does not reflect dividends paid on its underlying securities, or that the index deducts fees and costs when calculating index performance, which will reduce index performance. 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. We also propose to require the insurance company to state that it reserves the right to substitute an index prior to the end of the crediting period.146 This would 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. The insurance company also would 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 this 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 indexlinked option will be discontinued prior to the end of the crediting period. This information would allow an investor to better understand the likelihood of the insurance company making a substitution and its potential effects. How Interest Is Calculated and Credited—Maturity and Other Material Features To help investors anticipate what may happen at the end of an index-linked option’s crediting period, the insurance company also would be required to state whether an investor would receive advanced notice of a maturing indexlinked option, how an investor might provide instructions regarding the reallocation of the contract value rate at the end of the crediting period, and any automatic default allocation in the absence of such instructions.147 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. Finally, we propose to require the insurance company to describe any other material aspects of the indexlinked option to ensure that any other item not discussed above that could affect an investment decision is disclosed.148 This would include disclosure related to limitations on transfers to or from index-linked options, rate holds, ‘‘bail-out’’ provisions, start dates, and holding accounts.149 We would also require a brief description of how charges may impact the index-linked option’s value if applicable as part of this discussion. Fixed Options In addition to
variable options and index-linked options, annuity contracts commonly include fixed investment options, such as traditional, unregistered fixed options and unregistered index options.150 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. 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.151 The form also currently requires specific disclosure about fixed options in the KIT and the Contract Overview.152 Because we are proposing to include disclosures relating to index-linked options in Item 6, we are also proposing to require disclosures on this other type of investment option available to annuity contract investors so that they have a complete understanding of what they may invest in through that contract, either actively, or by default. This approach is designed to increase investor comprehension by ensuring that substantive information about all of the available investment options is presented in the same location in the prospectus. The proposed disclosures for fixed options would be similar to those provided for index-linked options, tailored for the specifics of a fixed option. Specifically, registrants would 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

153As discussed below, we are also proposing to require disclosure relating to any fixed options currently offered under the contract in the Item 17
appendix. 154Proposed Item 6(d)(2)(iv) of Form N–4.
minimum guaranteed interest rate is available in an appendix with crossreferences.153 Further, registrants would 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). As with index-linked options, the registrant also would be required to state whether an investor would receive advance notice of a maturing fixed option, including what steps an investor might 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, 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. Also as with index-linked options, we would require 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. Request for Comment We request comment generally on the proposed amendments to Item 6 of Form N–4, and specifically on the following issues:
42. Should we require each of the
specific disclosures (e.g., disclosures relating to limits on index losses and gains, crediting period, etc.) relating to the RILAs and index-linked options as proposed? Would all of these proposed amendments provide information that would be important to investors? Should we modify or expand any of these proposed disclosure requirements?
43. Should we make any other
changes to the required prospectus disclosures addressing index-linked options? For example, we are proposing to require numeric examples, charts, graphs, or other presentations, as appropriate, to illustrate the mechanics of each type of index crediting methodology.154 Would the proposed requirement be likely to provide useful information for investors? If not, why not? Would the inclusion of such examples, charts, and graphs be likely to confuse investors about how indexlinked options work? Is there a concern that insurance companies would utilize these examples to over-emphasize the benefits of RILAs relative to their risks? If so, how could this be remedied? Should such examples be included in the prospectus in response to Item 6, or would they be better located elsewhere in the prospectus, for example, in Items 3 or 17? Given the potential length of such examples, should they be included in an appendix to the prospectus?
44. Should the current limits on gains
and losses be required in the statutory prospectus, as proposed? If not, where should such disclosure be located? Should insurance companies update current limits on gains as they change from time to time by filing a rule 497 prospectus supplement, or should a rule 485 post-effective amendment be required?
45. Should we require the proposed
disclosures relating to the risks of investing in variable options?
46. Should we require that the
historical performance of indexes be disclosed as proposed? Is the proposed bar chart an effective or appropriate presentation approach, or should we instead require another presentation approach, such as a line graph or the 1-, 5-, and 10 year table required in the Form N–1A? If so, why? Are there any concerns that investors would confuse the inclusion of historical index information with the performance of the index-linked option itself? If so, are our proposed requirements to provide a hypothetical example of a 5% cap and ¥10% buffer and a legend sufficient to make clear that the performance illustrated by the bar chart does not show or suggest how an investment in the contract will perform for the investor? Are the 5% cap and ¥10% buffer appropriate limits to use in the hypothetical examples? Instead of prescribing a specific cap and buffer, should we require or permit issuers to include the current and/or guaranteed limits as an overlay to the bar chart, or would this provide too much visual clutter for investors, or be misleading in any way? Is 10 calendar years of index performance the right amount of time to present?
47. Should we require discussion of
fixed investment options currently offered under the contract? Are the proposed disclosure items appropriate for these types of investment options?
48. Is there other information we
should require insurance companies to disclose to help investors better understand the economic tradeoffs associated with an index-linked option? For example, issuers of structured notes that offer bounded returns similar to RILAs disclose the issuer’s valuation of the note, based on the value of (1) the embedded derivatives; and (2) a fixedincome bond. This disclosure allows investors to understand the difference between the issuer’s valuation and the original issue price that they are paying for the structured note. Would a similar disclosure for RILAs, provided with respect to each permutation of an indexlinked option, be helpful to investors? Would the difference between a hypothetical $100,000 investment in an index-linked option and the value, or the cost to assemble, the economic components underlying the indexlinked option be informative to investors? Would it appropriately reflect the implied cost the investor is paying when investing in that index-linked option? If we were to require this disclosure, should it be expressed in dollars, as a percentage of a hypothetical $100,000 investment, or both? Should we require the insurance company to annualize the costs over a stated period of time to express the cost as more akin to an annual expense? Recognizing that RILAs are intended to be long-term investments, what would be an appropriate period of time (e.g., 10, 20, or 30 years)?
49. If we were to require insurance
companies to provide the disclosure described in request for comment 48, should we require the insurance company to compare a hypothetical $100,000 investment in the index-linked option to the value, or cost, of the following components: derivatives that would provide the index-linked option’s investment exposure; a fixed-income component; and the standard insurance features offered with the index-linked option?
50. If we were to require insurance
companies to provide the disclosure described in request for comment 48, should we require that the insurance company value or price the derivatives using exchange-listed derivatives, such as exchange-traded options, and based on prices on the exchange, except in cases where exchange-listed derivatives could not efficiently provide the indexlinked option’s investment exposure? Would that approach provide for consistent and reliable pricing? In practice are insurance companies typically constructing and hedging index-linked options’ investment exposure using exchange-listed options or other derivatives where feasible?
51. If we were to require insurance
companies to provide the disclosure described in request for comment 48, in determining the value of the derivatives underlying an index-linked option, should we require insurance companies

155See infra footnote 429 and accompanying text.
156 VASP Adopting Release at n.267 and accompanying text. 157 ‘‘Investment options’’ are defined as any variable option, index-linked option, or fixed option available under the contract. See infra
section II.B.7(b).
158Proposed Item 17(d) of Form N–4.
159See proposed Item 17(b) of Form N–4.
160See, e.g., proposed Item 6(d) of Form N–4.
161See proposed Item 6(d)(2)(i)(B) of Form N–4 and supra footnote 134. to use a collection of hypothetical index options with an expiration equal to the crediting period, consistent with our analysis in section III.B.3? 155
52. If we were to require insurance
companies to provide the disclosure described in request for comment 48, what calculation would be appropriate for the fixed-income component of an index-linked option? Should we, for example, provide that the insurance company should use the $100,000 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? Conversely, should we require 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, consistent with our analysis in section III.B.3?
53. If we were to require insurance
companies to provide the disclosure described in request for comment 48, how should the insurance company value, or determine the cost of purchasing separately, the standard insurance features? Do insurance companies maintain internal pricing information that could be used for this purpose where those features are not offered separately rather than in connection with annuities or other financial products sold by the insurance company? Should the cost or value of insurance be based on amounts insurance companies are required to reserve in connection with those insurance obligations? Should we require additional disclosure related to early withdrawal charges, fees, or penalties? For example, should we require more prominent placement of these features on marketing or other materials, or should we require a comparison of these features to potential benefits of the RILA to clarify for investors possible trade-offs?
54. If we were to require insurance
companies to provide the disclosure described in request for comment 48, should we, in addition to requiring the disclosure of this cost figure, also require the insurance company separately to disclose the costs or values associated with each component underlying the index-linked option?
55. If we were to require insurance
companies to provide the disclosure described in request for comment 48, where should insurance companies place it in the registration statement? Would this information be most helpful to investors if it were included in the disclosure required by Item 6, which provides more detailed information on each index-linked option, or in the summary prospectus appendix identifying the RILA’s investment options? Alternatively, should it be disclosed the KIT as a range based on the available index-linked options? If this information were in the summary prospectus, would it change frequently and result in a high number of prospectus supplements delivered to investors? If we were to further require the disclosure of the underlying components and pricing assumptions used to determine the cost to investors disclosure, would the SAI be an appropriate place for that disclosure? Should these disclosures be structured using inline XBRL as proposed for other additional disclosures? (c) Appendix: Investment Options Available Under the Contract (Item 17) We propose to amend Item 17 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.156 Similarly, we anticipate that an overview of the index-linked options available to investors in a RILA, as well as any fixed option currently available under the contract, would help investors 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 should enhance the ability of investors to understand, evaluate, and compare all the investment options available under the contract. To reflect the expanded scope of the
appendix, we would amend the current
heading to ‘‘Investment Options
Available Under the Contract.’’ 157 We would provide 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. Because variable options, fixed options, and index-linked options can vary by benefit offered under the contract, we also propose to move the restrictions table currently required for variable annuities by instruction 1(f) of Item 17 to be a separate requirement for all investment options, with no other changes.158 Index-Linked Options To accommodate the inclusion of index-linked options in the appendix, we propose to add a new table titled ‘‘Index-Linked Options.’’ 159 As part of our approach to layered disclosure, the information to be supplied in the table for index-linked options would summarize certain prospectus disclosures required elsewhere in the prospectus.160 Legends Similar to the requirements for variable annuities, the table for indexlinked options would be prefaced with a legend. Specifically, the legend would state that the table lists index-linked options currently available under the contract. Further, because insurance companies typically change the indexlinked options available over time, we would require the legend to specify that the insurance company may change the features of the index-linked options in the table (including the index and the current limits on gains and limits on losses), 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 of these changes. As discussed above, current limits on index gains for index-linked options would be disclosed in the prospectus in response to Item 6, and changes to current limits on index gains would be disclosed in prospectus supplements.161 However, to avoid frequent updates to the summary prospectus, insurance companies would not be required to include current limits on index gains for index-linked options in the appendix as

162As discussed below, the proposed appendix would appear in the summary prospectus, but Item 6 would not. See infra section II.C; see also infra
section II.E.1 (discussing proposal to amend rules
485 and 497 for RILAs).
163Consistent with the current instructions to the form, any website address, including this one, that is included in an electronic version of the statutory prospectus would be required to include an active hyperlink or other means of facilitating access that leads directly to the relevant website address. However, this requirement would not apply to an electronic summary prospectus that is filed on EDGAR. See proposed General Instruction C.3.i of Form N–4. 164 If all index-linked options offered by a RILA contract used the same crediting methodology, the
table would not include the column. See, e.g., supra
footnote 139. 165 In contrast to current limits on index gain, we understand that the current limits on index loss typically do not change frequently. 166As discussed above, instead of also requiring a column for current limits on index gains (in addition to the column for guaranteed minimum limit on index gains), the legend would state that information about current limits on index gains is available at a specified website address. 167Consistent with the approach in Item 6, the minimum guaranteed interest rate would be required to be stated as a numeric rate rather than referring to any minimums permitted under State law. those limits can change frequently.162 Instead, and in addition to the disclosure in Item 6, to ensure that investors have convenient access to changes in current limits on index gains, which can significantly affect an investor’s returns on an index-linked option, the proposed legend would require insurance companies to state that current limits on gains are available at a website address.163 This website address must be specific enough to lead investors directly to current rates, rather than to the home page or other section of the website on which the rates are posted. Requiring RILA issuers separately to include information about current limits on gains on their websites would benefit investors by making this information easier to find and understand. Furthermore, because websites may be updated quickly, website disclosure would be efficient for compiling index-linked options’ current limits on gains, given our understanding that these rates can change often and that insurance companies currently disclose current rates on their websites. Lastly, set off from the rest of the legend and with emphasis, we would require a notation that if amounts are withdrawn from an index-linked option before the end of its crediting period, the insurance company may apply a contract adjustment and 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. We are proposing this notation given the potential impact on an investor’s returns if amounts are withdrawn prior to the end of a crediting period. We propose to require the legend to include appropriate cross-references to the section(s) of the prospectus that describe the features of the index-linked options as well as the contract adjustment. 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.
Table
The legend would be followed by a
table that lists and highlights key
elements of each index-linked option available under the contract. Specifically, the table would 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) limits on index loss if held to the end of the crediting period; and (6) guaranteed minimum limit on index gain. The description of the type of index would be a brief statement of which type of index it is (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). The column indicating the type of index crediting methodology used for each index-linked option would only be required if the RILA utilizes multiple index crediting methodologies under the contract (e.g., point-to-point, step-up, enhanced upside, etc.).164 The disclosures regarding limits on index loss would require an issuer to state the current percentage used in the insurance company’s interest credit methodology to limit the amount of negative index return credited to the index-linked option and to identify in the table whether this limit is a buffer, floor, or some other rate or measure.165 In the last column, issuers would be required to state the guaranteed minimum percentage that may be used to limit the amount of positive index return credited to the index-linked option and to identify in the table whether this limit is a cap, participation rate, or some other rate or measure.166 To ensure investors only receive disclosure relevant to them, RILAs would only be permitted to include in the table those index-linked options that are available under the contract. Further, to promote disclosure in a consistent format to facilitate comparisons, issuers would be allowed to add, modify, or exclude table headings only as necessary to describe the material features of an index-linked option. Insurance companies would also be required to indicate if any of the index-linked options are restricted (e.g., because of a ‘‘hard’’ or ‘‘soft’’ close), consistent with the current disclosure requirements for variable options. The proposed instructions also would state that if an index provider calculates the index’s return in a manner that does not reflect the full investment performance of the assets tracked by the index (e.g., the return does not reflect dividends paid on the assets composing the index, the return reflects a fee or cost, etc.), a footnote to the table must, if applicable, be included stating that the index’s return does not reflect the full investment performance of the assets it tracks, which will reduce the index’s performance. An investor 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 would alert investors that the index associated with a particular
indexlinked option will have relatively lower returns. Fixed Options Consistent with our proposed approach to the Item 6 disclosure requirements, we are proposing to require in the appendix summary information about fixed options currently available under the contract. These disclosure requirements would be similar to the legend and table for index-linked options discussed above, adjusted to reflect fixed option details. The fixed option legend, in addition to identifying that what follows is a list of fixed options currently available under the contract, would 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. The fixed option table would include columns identifying (1) the name of the fixed option, (2) the term, and (3) the minimum guaranteed interest rate.167 Insurance companies would be instructed to include appropriate crossreferences in the legend to the sections of the prospectus that describe the features of fixed options. As with indexlinked options, insurance companies could add, modify, or exclude table heading only as necessary to describe material features of a fixed option.

168Proposed Item 6(d)(2)(iv) (Methodology and Examples) of Form N–4. We are proposing to permit this information to be included in an appendix. See supra section II.B.3(a). 169See VASP Adopting Release at n. 690 and accompanying text. 170See proposed Item 5(a)-(b), (d)-f) of Form N– 4. 171See proposed Item 5(c) of Form N–4. 172See proposed Item 5(a) of Form N–4. 173See proposed Item 1(a)(6) (Outside Front Cover Page) (‘‘Prominently 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.’’); proposed Item 2(b)(ii) (Overview of the Contract) (‘‘[P]rominently state as a percentage the maximum amount of loss an investor could experience from negative Index performance, after taking into account the minimum guaranteed limit on Index loss provided under the Contract.’’); proposed Item 6(d)(1)(ii) (Investment Options) (‘‘Prominently state as a percentage the maximum amount of loss an investor could experience from negative Index performance, after taking into account the minimum guaranteed limit on Index loss provided under the Contract.’’). 174We recognize that this example may suggest to some investors that an option with a buffer is riskier than one with a floor. In fact, the protection offered by a buffer is more likely to be triggered than the protection offered by a floor. In general, a buffer Request for Comment We request comment generally on the proposed inclusion of index-linked option summary information in the
appendix, and specifically on the
following issues:
56. Should we require these new
disclosures to be included in the
appendix? Are the proposed appendix
disclosures for index-linked options appropriate? Would they help investors to compare information among indexlinked options and generally understand the index-linked options available? Is this information likely to be relevant and useful to investors? Is there more or different information that we should require? Should any of the information not be included? For example, should we require current limits on gains to be disclosed in the appendix, rather than requiring the appendix to include a website address where information about current limits is available (as well as requiring this information in the statutory prospectus)? Would investors find it useful to have online access to information about current limits on gains? Will investors find current limits on index loss in the summary prospectus useful even if the current limits on index gains are not included?
57. We are proposing to require in the
statutory prospectus numeric examples, charts, graphs or other presentations to illustrate the mechanics of each type of index crediting methodology.168 Should we permit or require some or all of these examples for index-linked options to be included in the appendix? Would the inclusion of these examples add undue length or complexity to the appendix, or overwhelm the disclosure for other investment options? Could these concerns be ameliorated by only permitting or requiring a limited number of examples (e.g., no more than 4), or by placing certain other limitations on the inclusion of such examples? If so, how? If we were to require examples for index-linked options to be included in the appendix, should we also require the examples to be included in the Item 6 disclosures, or should such disclosures only be required in a single location (and if so, which one)?
58. Should we include the proposed
disclosure in the appendix relating to fixed options currently available under the contract? Are there any changes we should make to the specific proposed disclosure requirements?
4. 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 propose to amend Item 5 to address certain principal risks that are particularly relevant to investors in RILAs. In addition to restructuring the current item to incorporate the proposed risk disclosure requirements addressing index-linked options, we propose 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 proposed changes also would consolidate certain risk disclosures insurance companies currently provide for variable annuities in other sections of the prospectus. We are proposing to require these disclosures in a single location to more consistently and effectively communicate risks to investors. As the Commission has previously explained, the principal risk disclosure in the prospectus is designed to provide a consolidated presentation of principal risks, which registrants can cross-reference to reduce repetition that might otherwise occur if the same principal risks were repeated in different sections of the prospectus.169 The principal risk disclosure item of Form N–4 currently consists of a single paragraph requiring a registrant to summarize in the prospectus the principal risks of purchasing a contract, including the following risks: (1) poor investment performance, (2) that contracts are unsuitable as short-term savings vehicles, (3) limitations on access to cash value through withdrawals, and (4) the possibility of adverse tax consequences. We propose to retain these substantive risk disclosure requirements but would restructure the current single paragraph into separate sub-items while also making certain minor changes designed to clarify existing obligations.170 The proposed 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 subitems would also include new risk disclosures specific to index-linked options, as applicable.171 We are making parallel changes to the risk disclosures most applicable to variable annuities to avoid any implication that risk disclosure should be provided at a different level of detail than the disclosures for RILAs. Most contracts offering variable options that are currently registered on Form N–4 likely would not need to revise their risk disclosure in response to the proposed amendments to the risk disclosure requirements. In our experience, it is common practice for these registrants currently to include the disclosures that the proposal would require in their prospectuses as principal risk disclosure (or elsewhere in their prospectuses). The proposed approach would retain the current requirement
for registrants to explain the principal risks of purchasing a contract, but would also require an explanation of the principal risks of investing in an investment option, including the risks of poor investment performance.172 Additionally, for index-linked options, a registrant would disclose the maximum potential loss from negative index performance over the crediting period, as a percentage. Although disclosures that address certain risks of indexlinked options would be required in other locations in the prospectus, we are proposing that RILA issuers include certain risk factors, such as this one, in the consolidated summary of principal risks associated with the contract.173 The maximum potential loss resulting from negative index performance is a salient way to quantify potential returns for particular investment options. For example, absent this disclosure, it may not be apparent to investors that an index-linked option that offers a –10% buffer still has the potential for 90% loss.174 This statement would help

protects the investor from experiencing smaller, more common losses on an index (as well a portion of any larger loses), while a floor protects the investor from larger, less-common losses (but does not protect against smaller losses). Insurers that offer both buffers and floors should generally make this distinction clear to investors in their Item 5 risk disclosures, as well as in response to proposed Items 2(b)(2) and 6(d) of Form N–4. 175See OIAD Report at Section 4, Review of RILA Marketing. 176See proposed Item 5(b) of Form N–4. 177See proposed Item 1(a)(7) (Outside Front Cover Page) (‘‘Prominently state as a percentage the maximum potential loss resulting from a negative Contract Adjustment, if applicable.’’); proposed Instruction 2(a) to Item 3 (Key Information Table) (‘‘Include in this statement the maximum potential loss (as a percentage of the investment) resulting from a negative adjustment. . . .’’); proposed Item 4 (Fee Table—Transaction Expenses) (‘‘Contract Adjustment Maximum Potential Loss (as a percentage of Contract value at the start of the Crediting Period or amount withdrawn, as applicable)’’); and proposed Instruction 1 to Item 7(e) (Contract Adjustment) (‘‘State the maximum potential loss, as a percentage, that could result from a negative Contract Adjustment.’’). 178See proposed Item 5(c) of Form N–4. 179See proposed Item 5(d) of Form N–4. 180See proposed Item 5(e) of Form N–4. 181See current Instruction 3(d) to Item 2 of Form N–4. investors assess the particular risks associated with RILAs in the context of the other required principal risk disclosures. The potential risk of loss is particularly important for investors to understand because RILAs are often presented to investors as having the benefit of offering a balance between the opportunity for growth and the reduced risk of loss relative to savings alone or more conservative investments.175 The next proposed sub-item, which concerns the risks of early withdrawal, would retain the current requirement for registrants to disclose that contracts are unsuitable as short-term savings vehicles and to summarize the limitations on access to cash value through withdrawals, including the possibility of adverse tax consequences.176 We propose to expand this disclosure requirement to specify that a summary of the limitations on access to cash value through withdrawals may also include, if applicable, surrender charges, as well as negative contract adjustments and loss of interest. These are features of RILAs that implicate why they are not shortterm saving vehicles. In addition, insurance companies that offer indexlinked options would be required to state the maximum potential loss resulting from a negative contract adjustment, as a percentage. Although this last statement would be required to be provided in other locations in the prospectus, we are proposing to include this risk disclosure in the consolidated summary of principal risks because contract adjustments can
significantly affect contract value.177 Also, contract adjustments are a distinctive feature of contracts with index-linked options that we recognize (based on results of qualitative investors interviews) investors can find difficult to understand. Quantifying maximum potential loss resulting from a negative contract adjustment is intended to illustrate the possible effects of these adjustments. Further, unlike other types of losses, contract adjustments are typically avoidable by investors. As a result, we anticipate that showing the maximum loss possible would help investors evaluate whether to take an action that would result in a contract adjustment. It also would help investors understand the potentially significant risks that they could face in a RILA, regardless of a RILA’s bounded return structure. Therefore, this statement would assist investors in assessing unique risks associated with indexlinked options in the context of the other required principal risk disclosures. The next proposed sub-item, which concerns the principal risks associated with index-linked options, would include new risk disclosure requirements tailored to address unique risks associated with these investment options.178 Under these proposed requirements, a registrant would have to describe the principal risks of investing in any index-linked options offered under the contract (in addition to the risks of potential loss from negative index performance, as discussed above). The proposed sub-item would 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. To help ensure that RILA prospectuses address certain key risks, the proposed instructions to this disclosure requirement would specify that discussion of the principal risks related to index-linked options would be required to include the principal risks relating to, as applicable: (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. We are also proposing instructions specifying that this discussion would be required to include, as applicable, 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. These instructions would 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 indexlinked option’s term. An additional proposed new sub-item would require 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. These risks include, for example, investment restrictions associated with a living benefit, which may limit investment performance.179 As an additional example, there are risks that withdrawals may substantially reduce the benefit, that some guaranteed benefits are based on a contingency that may never occur (e.g., the contract value falling to zero), that the rates for contract benefits may change over time, and that certain benefits may be discontinued prior to election. Because these risks could impact the expected performance of the annuity, or in some cases could even terminate the annuity, we are proposing to require issuers to disclose them to in the prospectus. Another proposed new sub-item would require 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.180 We recognize that a summary of certain insurance company risks is currently required to be disclosed in the KIT.181 Moreover, although there is no corresponding disclosure requirement that mandates the inclusion of insurance-companyrelated risks in the principal risk disclosure in contract prospectuses, most Form N–4 registrants already provide this disclosure. We therefore do not expect that current Form N–4 registrants likely would have to modify their disclosures to comply with the proposed requirement. Nevertheless, we propose to require this disclosure to be included in the consolidated principal risks section of the prospectus for

182See proposed Item 5(f) of Form N–4.
183See OIAD Report at Section 6, Quantitative Testing, Testing Impacts, Table 9 (noting that 16.2 percent of participants understood that a participation rate reduces potential gains from the market and 52.1 percent of participants understood that a cap reduces potential gains from the market). 184See, e.g., OIAD Report at Section 5, Qualitative Testing, Results From Round 2. 185 In order to eliminate unnecessary information in the prospectus, we propose amending the general instructions to clarify that registrants may omit a narrative explanation that is not applicable under the contract. See proposed instruction 1 to Item 4 of Form N–4. We also are proposing an amendment to general instruction 5 regarding the preparation of the Transaction Expenses and Annual Contract Expenses tables, clarifying that the instruction to completeness, and to help ensure that a prospectus for a contract that offers fixed options and index-linked options discloses the insurance company’s claims-paying ability with regard to its contractual guarantees. In contrast to variable options, where amounts invested are held in a separate account insulated from the insurance company’s general account and protected from general account creditors, assets invested in an index-linked option are subject to the insurance company’s claims-paying ability for most RILAs. Lastly, we propose a final new subitem, which would require a description of the principal risks relating to any material reservation of rights under the contract, including if applicable, (1) the right to remove or substitute portfolio companies; (2) add or remove indexlinked 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.182 We propose to require 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. We request comment generally on the proposed amendments to Item 5 of Form N–4, and specifically on the following issues:
59. Do the proposed amendments to
Item 5 appropriately describe the types of principal risks that are typically associated with investing in a contract that offers variable options and/or index-linked options? Should different or additional principal risks be required to be summarized in the prospectus?
60. Do commenters agree with the
proposed approach of amending Item 5 to restructure the current item into separate sub-items? For contracts offering variable options, do commenters agree that the proposed changes would clarify existing requirements, but would not generally result in substantively different principal risk disclosure requirements? Would the proposed changes to Item 5 require contracts offering variable options that are currently registered on Form N–4 to revise their current risk disclosure, or could they continue to use their existing disclosures? Why or why not? To the extent that Form N–4 registrants are currently disclosing risks on topics that the proposed changes address in other parts of the prospectus, would this current risk disclosure be considered to be ‘‘principal’’ risk disclosure?
61. Although we are proposing to
require disclosure of specified indexlinked option-related principal risks to be provided in response to the Item 5 disclosure requirements, we also propose to require aspects of these risks to be disclosed in response to certain other prospectus disclosure requirements, facilitating a layered disclosure approach. Is this appropriate? What ‘‘layers’’ of risk disclosure are appropriate for the summary prospectus, statutory prospectus, and SAI?
62. Are the proposed additions to the
current principal risk disclosures appropriate? If not, why not? Should we, for example, require a registrant specifically to disclose principal risks associated with index-linked options, contract benefits, the insurance company, and any material reservation of rights under the contract, as proposed? If not, why not? Is an insurer’s ability to discontinue contract features, reduce index limits on gains and otherwise change features likely to be inconsistent with an investor’s reasonable expectations, as we state above? Should we modify any of the aspects of these proposed principal risk disclosure requirements?
5. Addition of Contract Adjustments
and Other Amendments to Fee and
Expense Disclosures (Items 4, 7, and 22) We are proposing amendments to Form N–4 to require specific disclosures regarding contract adjustments and other implicit RILA-specific costs that can result in a significant erosion of investment principal. The proposed disclosures are designed to provide investors with a better understanding of the mechanics of these costs and the associated potential for loss. Under the proposed approach, these disclosure requirements would be set forth in Items 4, 7, and 22(d) of Form N–4. We are also proposing revisions to the existing provisions of these Items, applicable to all Form N–4 issuers, to clarify certain terminology. (a) Amendments to Fee Table Disclosure Requirements (Item 4) We propose amending Item 4 to require specific disclosures regarding contract adjustments and other costs specific to RILAs. Item 4 currently requires variable annuity registrants to provide comprehensive information on the fees and expenses investors will pay when buying, owning, and surrendering or making withdrawals from a contract, as well as expenses paid each year during the time the investor owns the contract. While RILAs typically do not charge the explicit ongoing fees and expenses common to variable annuities, investors do experience an implicit ongoing fee to the extent the insurer limits, through the use of a cap, participation rate, or some other rate or measure, index gains. Moreover, RILA issuers typically utilize contract adjustments, which can result in a significant charge to investors who make withdrawals from an index-linked option or from the contract before the end of a specified period. Further, investor testing suggested that most participants struggled to fully comprehend the costs to investors of these products.183 These costs include contract adjustments because they can negatively affect an investor’s contract value or the amounts an investor could withdraw from the contract.184 Accordingly, we are proposing to include a detailed description of contract adjustments in the prospectus, and that this disclosure be proximate and similar to other disclosures regarding fees and expenses. Thus, we are proposing several amendments to incorporate the concept of contract adjustments as well as implicit ongoing fees and expenses into the current Item 4 disclosure requirements. We propose generally expanding the tabular disclosures that Item 4 requires to address contract adjustment costs that investors will pay when buying, owning, and surrendering or making withdrawals from an investment option, and as noted below, requiring disclosures about the maximum potential loss that an investor could experience in connection with a contract adjustment. We are also proposing to expand the tabular disclosures with respect to annual contract expenses, to alert investors to the implicit ongoing costs associated with limiting positive index returns. In addition, we are proposing certain nonsubstantive changes to the fee table
disclosures and instructions that would be applicable to all issuers.185

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 proposed instruction 5 to Item 4 of Form N– 4. 186See proposed instruction 11 to Item 4 of Form N–4. 187See proposed Instruction 10 to Item 4 of Form N–4. Under the proposed definition, ‘‘transfer fee’’ would 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 proposed amendments regarding the definition and terminology surrounding transfer fees would not result in any substantive change for existing Form N–4 issuers. 188We are also proposing two related, nonsubstantive amendments to the instructions relating to annual contract expenses relevant to all issuers. These changes are to broaden terminology given the expanded scope of issuers that under the proposal could file on Form N–4. Currently the instruction for describing administrative expenses references ‘‘any Contract, account, or similar fee on all Investor Accounts;’’ however, as noted below, we propose deleting the term ‘‘Investor Account,’’ and accordingly also propose amending this instruction to conform to that change. Relatedly we are proposing to amend 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,’’ replacing it with an instruction to consider fees and expenses ‘‘charged to any Investment Option.’’ 189Additionally, we are proposing two nonsubstantive terminology changes in Instruction 3 to Continued Particularized changes we propose to the fee table disclosures are discussed below. Transaction Expenses Table Form N–4 issuers 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. This requires a description of the sales load imposed on purchases (as a percentage of purchase payments), the deferred sales load (as a percentage of purchase payments or amount surrendered, as applicable), and transfer fees. To provide proximate and similar disclosure for RILA-specific costs, we propose to require 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. To provide investors notice of the circumstances where they might be subject to this cost, we also propose that insurance companies include a footnote describing all transactions potentially subject to a contract adjustment.186 Currently this
table also 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 subaccounts or to the insurance company’s general account. In a change relevant to all Form N–4 issuers, we are proposing a terminology change, replacing the term ‘‘exchange fee’’ with ‘‘transfer fee,’’ as this term better reflects our experience, namely that the vast majority of such fees are those imposed on transfers of account value among investment options under the contract.187 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 propose an amendment that would also allow base contract expenses to be expressed as a percentage of average account value or contract value. We do not expect that this change will substantively affect variable annuities’ existing disclosure. We are proposing this expansion to describe expenses deducted where index-linked options or fixed options are implicated, as those options do not generally use the concept of average account value.188 Additionally, to place investors on notice of the unique and ongoing tradeoff costs associated with RILAs that may not be captured by this table, we are proposing to require registrants to include the following statement in the
table:
In addition to the fees described above, we limit the amount you can earn on an IndexLinked 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. 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 also would apply to variable annuities prospectuses, we are proposing that registrants disclose that expenses shown in this table may change over time and may be higher or lower in future. We propose this change for two reasons. First, this modification would help to ensure that investors understand that these charges may increase over time, notwithstanding that these charges are described as maximum expenses. Second, given that we are proposing similar disclosures with regard to features of RILA offerings that are subject to change, we propose to require a similar level of disclosure with regard to variable annuity offerings where appropriate. 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 propose amending the example requirements to clarify, for variable annuity and RILA issuers, 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. Under the proposal, the example would 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 indexlinked options or fixed options. (b) Charges (Item 7) Currently, Item 7 requires registrants to provide a brief description in their prospectuses of all current charges deducted from purchase payments, investor accounts, or assets of the registrant. Consistent with the proposed changes to Item 4, we also are proposing a change in terminology that would 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, variable annuity and RILA issuers would describe charges
deducted from purchase payments, contract value, or investment option assets.189

Item 7(a) regarding how registrants must describe the sources that will be used to cover shortfalls where proceeds from sales load will not cover expected costs. First, we propose 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 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 propose striking this italicized language referring to assets of the registered separate account because it is superfluous given the definition of ‘‘base contract expenses’’ in proposed Instruction 14 to Item 5, discussed above. 190See instructions (a) through (d) to Item 7 of Form N–4. 191See proposed instructions (e)(1) through (e)(3) to Item 7 of Form N–4. In describing the transactions subject to a contract adjustment, the insurance company would need to describe, for example, whether adjustments apply if amounts are transferred or withdrawn from an index-linked 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. 192See proposed instruction (e)(5) to Item 7 of Form N–4. If applicable, the insurance company would 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. 193See proposed instructions (e)(4) and (e)(6) to Item 7 of Form N–4. The description of how the contract adjustment is determined would 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 an 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). 194See proposed instruction (e)(7) to Item 7 of Form N–4. 195See proposed instruction (e)(8) to Item 7 of Form N–4. 196See, e.g., OIAD Report at Section 5, Qualitative Testing, Results From Round 2 and Section 7, Conclusions. 197See proposed instruction (e)(4) to Item 7 of Form N–4. 198See proposed instruction (e)(1) to Item 7 of Form N–4. For the reasons described above and given the potentially significant economic consequences contract adjustments can have on RILA investors, we are also proposing additional specific requirements to incorporate contract adjustments into the prospectus’s disclosure of charges, which would entail detailed
descriptions of any contract adjustments under the contract. These disclosures are designed to be comparable in scope and proximate to existing disclosures about contract charges applicable to variable annuities.190 Specifically, we are proposing that insurance companies would have to: (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.191 Insurance companies also would have 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 value under the contract in an amount greater than the value withdrawn.192 They would 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 or fees applied under the contract, including, for example, the sequence in which charges and adjustments are applied.193 The required disclosure would 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.194 Finally, issuers would 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.195 These proposed disclosures are intended to provide investors with the necessary scope and level of detail of the contract adjustments that could negatively affect an investor’s contract value or the amounts an investor could withdraw from the contract. These disclosures are further justified given the RILA Act’s requirement that the Commission use the results of investor testing in designing a registration form for RILAs. That mandated investor testing 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).196 These disclosures are designed to address these areas of identified confusion. To simplify this disclosure, we propose specifying that detailed disclosure on the method of calculating the contract adjustment appear in the SAI, as opposed to the prospectus.197 We also propose requiring that Item 7(e) include a cross-reference to Item 22 of Form N–4, which would require moredetailed 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 is not, however, a substitute for the Item 7 requirements. Thus, for example, an insurance company could not include the formula underlying the contract adjustment calculation in the SAI in lieu of the required discussion of the formula in the prospectus. Rather, in addition to stating the formula in the SAI, the insurance company would need to include in the prospectus a brief description, in simple terms, of the manner in which contract adjustment is determined. Further, while the proposed disclosures are tailored to the mechanics of contract adjustments, they are also designed to be, where possible, consistent with existing requirements regarding disclosure of current charges deducted from purchase payments, investor accounts, or assets of the registrant. For example, Form N–4 currently requires disclosure of current fees and charges, which are typically expressed as a percentage. Because the value of a given contract adjustment can change daily, we are proposing that insurance companies disclose the maximum potential loss, as a percentage, that could result from a negative contract adjustment (rather than mandate a disclosure of a current contract adjustment value that could quickly become outdated).198 (c) Purchase of Securities Being Offered (Item 22) We are proposing to amend Item 22, which addresses the purchase of securities being offered, to require specific, detailed contract adjustment disclosures to appear in RILA issuers’ SAIs. As discussed above, issuers would be required to provide a simple explanation of the underlying mechanics of contract adjustments in their prospectuses, while noting that further detail is available in the SAI and providing a cross reference to that information. Under the proposal, in addition to the discussion required in the prospectus by Item 7, Item 22 would require issuers to explain fully the operation of any contract adjustment that can be applied under the contract. This more detailed explanation would not take the place of the prospectus discussion and would need to address all the material features of the adjustment and include an explanation

199See proposed Item 22(a) of Form N–4.
200See proposed Item 22(b) of Form N–4.
201See proposed Item 22(c) of Form N–4.
202See proposed Item 31A of Form N–4. An issuer transitioning from an existing registration statement on Form S–1 or S–3 to Form N–4 through Continued of any formulas used to calculate the adjustment, and at least one numeric example to illustrate the application of the contract adjustment. This numeric example would have 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 mechanics of contract adjustments under a RILA contract are typically complex, often implicating the application of factors or formulas that can be difficult for many investors to understand. Because the application of a negative contract adjustment can substantially affect an investor’s contract value, however, we propose to require the inclusion of information on negative contract adjustment in the SAI, so that investors who wish to learn more about the calculation may do so. In addition to promoting transparency generally, this proposed disclosure would ensure that liability attaches under section 11 of the Securities Act for any material misrepresentations regarding the application of a contract adjustment. We are also proposing to make applicable to RILA issuers certain existing SAI disclosure requirements about the purchase of securities being offered. Specifically, we are proposing revisions to the instructions to the existing requirement to describe the manner in which the securities are offered to the public, which would instruct RILA issuers to respond by addressing any exchange privileges between investment options.199 Additionally, we propose to make the existing requirement to describe the method used to determine the sales load applicable to RILA issuers.200 We do not propose applying the existing disclosure requirement dealing with frequent transfer arrangements to RILA issuers, as its provisions are relevant only to variable annuity contracts.201 (d) Request for Comment We request comment on these proposed amendments.
63. Do commenters agree that it is
appropriate to include a discussion of contract adjustments in Items 4, 7, and 22 as proposed? If not, how would commenters suggest issuers disclose contract adjustments to ensure that investors have sufficient information to make an informed investment decision regarding RILAs?
64. Is it appropriate to require the
disclosure of the contract adjustment maximum potential loss in the transaction expense table? Do commenters agree that is appropriate to require that issuers express the contract adjustment maximum potential loss as a percentage? If not, what alternative measure would commenters suggest?
65. Do commenters agree that the
proposal strikes the proper balance in the location of the proposed contract adjustment disclosures? Are there any contract adjustment disclosures we propose including in the SAI that commenters believe would be more appropriately located in the prospectus? Are there any contract adjustment disclosures we propose including in the prospectus that commenters believe would be better situated in the SAI?
66. Do commenters agree with our
proposal that issuers be required to include, in the annual contract expenses
table, a statement disclosing that, in
addition to the expenses described in the table, investors will be subject to limits on the amounts they can earn in connection with index-linked options? Do commenters agree that it is appropriate to include a statement addressing current limits on gains in conjunction with the annual contract expenses table? Do commenters agree the proposed statement captures the most salient concerns to investors of these kinds of limits on gains? Do commenters have any suggestions for alternate wording or placement of the statement?
67. Do commenters have any
suggestions about additional or alternative disclosures that would address the areas of confusion regarding contract adjustments that this release describes as being identified in investor testing?
68. Are there any concerns with our
proposal to use the term ‘‘contract adjustment’’ when referring to MVAs (market value adjustments) and IVAs (interim value adjustments)? Is there an alternative term that we should use to describe these kinds of adjustments?
69. Does our proposal to replace the
term ‘‘exchange fee’’ with ‘‘transfer fee’’ in Item 4 raise any concerns?
70. With regard to the numeric
examples we propose requiring in the
SAI, should there be any additional requirements for what those examples would need to include? For example, should we require that the example utilize the average negative contract adjustment in operation for the preceding year, or the negative contract adjustment expected over the next year? Should we also (or instead) require an example of a contract adjustment in the prospectus? If so, why, and what particular assumptions should we require in the example?
71. Do commenters agree with our
recommendation to place the more detailed disclosures associated with the mechanics of contract adjustments (such as applicable formulas) in the SAI as opposed to the prospectus? Why or why not?
72. In addition to the contract
adjustment disclosures we have proposed, should we also require issuers to provide a graphic illustrating the operation of a contract adjustment? If so, where should we require that graphic illustration be presented, and what particular circumstances should it illustrate? For example, would it be helpful to require issuers to include a graphic illustration demonstrating how a contract adjustment works when investors withdraw amounts from their contract prior to the end of a crediting period? Should we require illustrations that demonstrate the operation of a contract adjustment for investors in circumstances where they change to a different index-linked option before the end of a crediting period, and demonstrating how they can change investment options to minimize the financial impact to their contract value?
6. Information About Contracts With
Index-Linked Options (Item 31A)
We are proposing new Item 31A of
Form N–4 to require census-type information regarding RILAs offered in connection with the applicable registration statement. Specifically, under proposed Item 31A, an insurance company would be required to provide the following information regarding any RILA offered through the registration statement, as of the most recent calendar year-end: (1) the name of each contract; (2) the number of contracts outstanding; (3) the total value of investor allocations attributable to index-linked 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 options. This information would be required as of the most recent calendar year-end and, accordingly, would generally be updated through a posteffective amendment to a registration statement on Form N–4.202

a post-effective amendment would be required to report this information as of the most recently completed calendar year in its first post-effective amendment transitioning onto Form N–4. 203See Item F.14 of Form N–CEN; see also Investment Company Reporting Modernization, Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18, 2016)] at the sentences following n.1142. 204See 15 U.S.C. 77j(a)(3). 205We 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 would result in limited effect on the reporting. 206 Issuers registering combination contracts on Form N–4 would be required to exclude amounts allocated to a variable option when providing information in response to Item 31A as these allocations would be separately reported by registered separate accounts on Form N–CEN. 207For example, a variable annuity separate account that has not previously filed a Securities Act registration statement would identify itself as a new registrant, regardless of whether the sponsoring insurance company has filed a recent Securities Act registration statement or amendment thereto as the proposed requirements request information on the registrant. In the same manner, an insurance company filing on Form N–4 would determine whether it is a new registrant solely with respect to its own Securities Act registration statement filings. 208 In addition to this checkbox, we are proposing an instruction that implements the requirements of rule 12h–7 to indicate that the insurance company is relying upon the exemption provided by that rule in the relevant prospectus. See supra section II.B.3.b. 209See supra section II.A. This information is census-type data that would provide contract-level disclosures designed to assist the Commission and staff in identifying trends in insurance companies’ offerings of RILAs. This information would also provide improved transparency to investors by supplementing the information available about the marketplace for the contracts offered in connection with a registration statement. These items are relatively limited in scope and primarily consist of information that should generally be readily available to issuers. The particular data required is similar to that provided by registered separate accounts that likewise assist the Commission and staff in identifying trends in variable annuities.203 We are proposing to require information to be presented as of the most recent calendar year-end to provide the Commission and its staff with information that will be updated with an annual frequency for offerings of RILAs. We anticipate that this information would typically be updated as part of an issuer’s annual update to its registration statements for such contracts.204 This approach would result in information provided as of a uniform date for all offerings of RILAs, regardless of the issuer’s filing date, and, in
turn, would provide for increased comparability across issuers and contracts.205 Requiring this information to be updated annually is intended to achieve an appropriate balance between providing the Commission and its staff with current information while avoiding overburdening issuers. An annual snapshot should be sufficient for the census-type nature of the information and would provide Commission staff with appropriate intervals of data points over time in which to identify trends in insurance companies’ offerings of RILAs. Requiring these issuers to report such census information semi-annually or more frequently would place an increased burden on issuers that may not be justified by a commensurate increase in the value of the information received by the Commission. This reporting would provide the Commission with additional transparency into the RILA market segment, which would in turn improve the effectiveness of the Commission’s oversight of offerings on Form N–4. Requiring this high-level reporting would permit the Commission to identify trends occurring in this market segment over time and assist with allocating the Commission’s resources in administering the form. This reported information on index-linked options would complement parallel census-type information that is currently required to be reported annually on Form N–CEN by registered unit investment trusts offering variable annuities.206 The new census-type information therefore would help provide the Commission with a more complete picture of the marketplace for insurance products offered through registration statements on Form N–4. In addition, this information may benefit the public in supplementing the information available about RILAs. We request comment on these proposed amendments.
73. Are the required reporting
elements in Item 31A of proposed Form N–4 appropriate and clear? If not, what elements require additional instruction?
74. Do commenters agree that it is
appropriate to require reporting under Item 31A to be provided as of calendar year-end? Do commenters agree that there is limited practical difference between requiring a fiscal year-end and calendar year-end requirement in light of investment company practices?
75. Should we require additional or
different reporting of census-type reporting regarding RILAs? If so, should we also amend the requirements of Form N–CEN to ensure parallel reporting by registered unit investment trusts offering variable annuities registered on Form N–4?
76. Would RILA issuers face any
significant challenges in providing the required reporting elements? If so, why?
77. Do commenters agree that it
would be appropriate for issuers with existing contracts to report information required by proposed Item 31A for the calendar year prior to the calendar year the issuer first transitions its registration statement onto Form N–4?
7. Other Amendments and Provisions
Our proposed amendments also include certain other amendments to Form N–4 and related rules designed to accommodate the inclusion of RILA issuers on that 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 proposal. These proposed amendments are discussed below. (a) Facing Sheet We are proposing amendments to include a new checkbox section on the facing sheet. Specifically, an issuer would be required to identify in this new section: (1) if it is a new registrant, defined as, as applicable, 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; 207 (2) if it is an emerging growth company (‘‘EGC’’), as defined by Rule 12b–2 under the Exchange Act; (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; and (4) if it is relying on an exemption from Exchange Act reporting requirements in reliance on rule 12h–7.208 These changes would help the Commission better understand the types of registration statements being filed on Form N–4 and, in the case of the EGC information, mirrors similar facing sheet requirements found in Form S–1. In addition, we are proposing amendments to the description of the types of entities that use Form N–4 to include insurance companies that offer index-linked options, either as standalone or combination products.209 (b) Definitions (General Instruction A) We are proposing amendments to General Instruction A to update the

210We are also proposing to amend Form N–4 throughout to use the gender-neutral reference of ‘‘investor’’ where appropriate. See, e.g., proposed Instruction 6 to Item 2 of Form N–4. 211Because RILA returns may not be one for one with the index, we propose to indicate that positive or negative interest is only based ‘‘in part’’ on the index’s performance. 212As proposed, ‘‘index’’ means any index, rate, or benchmark (such as a registered exchange-traded fund that tracks an index) used in the calculation of positive or negative interest credited to an indexlinked option. See proposed General Instruction A to Form N–4. 213As proposed, ‘‘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 index-linked 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. See id. 214As proposed, ‘‘crediting period’’ means the period of time over which an index’s performance is measured, subject to applicable limits on index gains and losses, to determine the amount of positive or negative interest that will be credited to an index-linked option at the end of the period. 215See, e.g., proposed Items 3, 7, 8, 24, 32, and 34(a) of Form N–4; see also proposed definitions for ‘‘class’’ (clarifying applies to all contracts) and ‘‘platform charge’’ (clarifying only applies if there is a variable option). 216See Item 11 of Form N–4. existing definitions in Form N–4, add new definitions to accommodate the inclusion of RILAs on Form N–4, and implement these proposed definitions throughout the form. However, unless otherwise stated, the proposed amendments to the definitions in General Instruction A would not alter the existing obligations under Form N– 4 for current issuers on Form N–4. These changes should 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.210 Specifically, we propose to add a new definition for ‘‘index-linked option.’’ The proposed definition covers 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.211 This is a functional definition focused on the key features of a RILA and would cover RILAs as defined in the RILA Act. We also propose to define ‘‘fixed option’’ as an investment option under the contract pursuant to which the value of the contract, either during an accumulation period or after annuitization, or both, will earn
interest at a rate specified by the insurance company, subject to a minimum guaranteed rate under the contract. Further, we would change the existing definition of ‘‘variable annuity contract’’ to ‘‘variable option’’ and move the parts of that definition that refer to annuity contracts generally to a new definition for ‘‘contract.’’ In connection with the addition of other types of investment options on Form N–4, we are proposing to amend ‘‘portfolio company’’ to clarify that this term relates to the investment companies offered as investment options in contracts containing variable options. We also propose to add a new defined term ‘‘investment option’’ to refer collectively to any index-linked, variable, or fixed option. We propose to add these items to help clarify which provisions of amended Form N–4 apply to which types of annuities or investment options. Because an insurance company issuing a RILA is not acting as a depositor, we propose to change the definition of ‘‘depositor’’ to ‘‘insurance company.’’ The proposed definition refers to the insurance company that issues the contract, which company is subject to state supervision, and that the insurance company may also be the depositor or sponsor for a variable annuity separate account. We would also add a new definition of ‘‘registered separate account’’ defined as the separate account in which the contract participates with regard to any variable option offered under the contract, and refine the definition of ‘‘registrant’’ to mean either the registered separate account or insurance company, as applicable. These changes further help to clarify which provisions of the form apply to variable annuities and RILAs. We also propose to add definitions of ‘‘index,’’ 212 ‘‘contract adjustment,’’ 213 and ‘‘crediting period’’ 214 to refer to these RILA-centric concepts in the form and, in the case of ‘‘contract adjustment’’ and ‘‘crediting period,’’ help clarify when the relevant disclosures would be required. Lastly, we propose to eliminate the currently defined term ‘‘investor account.’’ Insurance companies typically do not use this term in their disclosure, and the more generalized concept of contract value, which also is designed to address the value of an investor’s investment, is intended to convey the characteristics of the broader scope of annuities that insurance companies could register on Form N–4 under the proposal. We also are proposing related amendments throughout Form N–4 to help implement the proposed new definitions. For example, we are proposing to clarify 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.215 As another example, the form requires disclosure of the procedures to purchase an annuity contract including certain particularized information.216 We would apply this provision generally to all annuities including RILAs, but are
only requiring certain disclosures relating to the operation of accumulation units and sub-accounts to contracts with variable options as those elements are not utilized by RILAs. (c) Rules 405, 480, 481, 483, and 484 We are proposing amendments to 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. 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 RILAs, 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 the proposed amendments. As such, the proposed new defined term ‘‘form available solely to investment companies registered under the Investment Company Act of 1940’’ would specify that these rules would continue to apply to registration statements filed on Form N–4. Specifically, we are proposing to amend 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 index-linked annuity for purposes of the Securities Act of 1933. By operation of this new

217These rules currently 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. 218See Public Law 117–328; 136 Stat. 4459 (Dec. 29, 2022). 219This is functionally the same as the requirement of the RILA Act that the RILA ‘‘be registered with the Commission in accordance with
section 5 of the Securities Act of 1933.’’ See section
101(a)(5) of Division AA, Title I of the Consolidated Appropriations Act, 2023. 220See Public Law 117–328; 136 Stat. 4459 (Dec. 29, 2022) (defining RILA as an annuity, among other things, the returns of which may be subject to a market value adjustment if amounts are withdrawn before the end of a period in which that market value adjustment is applied) (emphasis added). 221See Item 16 of Form S–1; Item 16 of Form S– 3; Item 601 of Regulation S–K. 222The disclosure currently required in Item 34, the fee representation mandated of registered separate accounts under the Investment Company Act, would 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. See also 15 U.S.C. 80a–26(f)(2)(A). We would also rename this item ‘‘Fee Representation and Undertakings.’’ 223See 17 CFR 229.601. 224See 17 CFR 229.601; proposed Item 27 of Form N–4. 225See 17 CFR 229.601; proposed Item 27 of Form N–4. For example, some items, like Item 601(b)(96) of Regulation S–K which requires a technical report summary to be filed as an exhibit to a registration statement on Form S–1 when a registrant discloses information concerning its mineral resources, are wholly inapplicable to RILAs. 226See 17 CFR 229.601(b)(107). term, RILA registration statements on Form N–4 would be subject to rules 480, 481, 483, and 484.217 We propose to subject RILA registration statements to these rules to help facilitate a consistent application of Form N–4 requirements. We are also proposing to add 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. Specifically, we would define ‘‘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 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. Under the RILA Act, the term ‘‘registered index-linked annuity’’ means an annuity (A) that is deemed to be a security, (B) that is registered with the Commission in accordance with
section 5 of the Securities Act, (C) that
is issued by an insurance company that is subject to the supervision of the insurance commissioner or bank commissioner of any State or any agency or officer performing like functions as such commission, (D) that is not issued by an investment company, and (E) the returns of which are based on the performance of a specified benchmark index or rate (or a registered exchange traded fund that seeks to track the performance of a specified benchmark index or rate) 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.218 The proposed definition in rule 405 differs in certain respects from this definition, but covers all offerings that would be included in the RILA Act’s definition. These differences are intended to simplify the definition and use terminology that is consistent with other rules under the Securities Act. For example, the proposed definition clarifies that the insurance company is registering the offering of a RILA, rather than the RILA itself, with the Commission.219 As another example, the proposed definition in rule 405 does not include a reference to a ‘‘market value adjustment,’’ as the RILA Act’s definition does, because the RILA Act did not require that feature as a predicate for being a ‘‘RILA.’’ 220 Since the presence of a market value adjustment does not factor into the assessment of whether a security is a RILA under the RILA Act’s definition, it is unnecessary to refer to this feature in the proposed definition in rule 405. The proposed definition, however, continues to encompass the full scope of the RILA Act’s definition. (d) Exhibits and Undertakings (Items 27 and 34) As a function of moving RILAs onto Form N–4 and subjecting them to the requirements of rule 483, RILA issuers would be required to file various exhibits as part of a registration statement, similar to the requirements these issuers are subject to when registering RILA offerings on Forms S– 1 and S–3 currently.221 Further, in addition to the requirements of rule 484, we are proposing to amend Item 34 of Form N–4 to include certain undertakings currently required of RILAs as part of their Form S–1 and S– 3 registration statements.222 Item 27—Exhibits RILA issuers are currently subject to the integrated disclosure requirements of Regulation S–K when registering their offerings, which provide requirements for exhibits that must be filed as part of the registration statement.223 Conversely, issuers on Form N–4 are required to file the exhibits required by rule 483 and Item 27 of Form N–4. To provide consistent requirements for Form N–4 issuers, we are proposing amendments to require RILA issuers to adhere to the same requirements as current issuers on Form N–4. RILA issuers and current Form N–4 issuers are subject to somewhat different provisions for filing exhibits to a registration statement. However, there are significant similarities between the types of the
exhibits that each type of issuer is required to file, and thus we generally are not proposing to change those requirements. RILA registration statements will therefore continue to include the types of exhibits currently included in their registration statements on Forms S–1 and S–3. For example, RILA issuers filing on Form N–4 would continue to be required to file such exhibits as the insurance company’s certificate of incorporation and by-laws, forms of contracts offered in connection with the registration statement, underwriting agreements, legal opinions, and other material contracts, as applicable.224 We are not, however, proposing to amend Item 27 of Form N–4 to include required exhibits under Regulation S–K that are generally not applicable to RILAs or would no longer be relevant in light of the proposed amendments.225 For example, RILA registration statements are currently required to include a filing fee exhibit. Under the proposed amendments, RILA issuers would no longer include registration fee payments as part a registration statement or post-effective amendment filing. Therefore, the proposed amendments to Item 27 of Form N–4 omit this existing exhibit requirement for RILAs.226 We are, however, proposing to amend Form N–4’s required exhibits list to add new Item 27(p) for all issuers, which would require the filing of any power of

227RILA registration statements on Forms S–1 and S–3 similarly include a power of attorney, when applicable, to be filed as part of the registrations statement. See 17 CFR 229.601(b)(24). See also supra section II.D (discussing the addition of a new exhibit relating to changes in accountants). 228See rule 415(a)(3) and 17 CFR 229.512(a). Under the proposed amendments, RILAs would be exempt from the conditions of rule 415, including furnishing the required undertakings pursuant to Item 512(a) of Regulation S–K. See infra footnote
331. For example, RILA registration statements
would no longer be required 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 posteffective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. We preliminarily believe this requirement is not necessary for RILA registration statements on Form N–4 in light of the other amendments we are making to the prospectus and registration statement filing process for RILAs. See infra section II.E (discussing proposed amendments to rules 485 and 497 under the Securities Act). 229See 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. 230See 17 CFR 229.512(a). 231See 17 CFR 229.512(a)(3). attorney included pursuant to rule 483(b).227 While this exhibit is already required to be filed with a Form N–4 registration statement under rule 483(b), practices differ in regards to the placement of a required power of attorney exhibit within the exhibit list. This amendment is designed to assist the public in comparing these exhibits by standardizing their location in the registration statement. In addition, we are proposing conforming changes in Item 27 to reflect the proposed amendments to the definitions in Form N–4. Item 34—Fee Representation and Undertakings We are also proposing amendments to Item 34 of Form N–4 to require RILA issuers to include specific undertakings in their registration statements on Form N–4. Under the proposed amendments, a RILA issuer would be required to furnish two undertakings as part of the registration statement on Form N–4. These undertakings are (1) to file, during any period in which offers or sales are being made, through a posteffective amendment to its 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 proposed undertakings are the same as two undertakings RILA issuers currently provide in registration statements,228 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.229 We are proposing that RILA issuers continue to furnish these representations concerning posteffective amendments to a registration statement as, under the proposed amendments, RILAs may be continuously offered on a registration statement for an indefinite amount of time. In that time, a RILA registration statement may be subject to a number of various post-effective amendments. Conversely, the proposed amendments do not include other undertakings which may be currently required in RILA registration statements. These undertakings relate to the process for conducting continuous offerings under rule 415, which RILAs will no longer be subject to under the proposed amendments. In addition, we are not including other undertakings that are unnecessary in light of the proposed amendments as a whole.230 For example, RILA issuers currently are required to include an undertaking to remove from registration any of the securities being registered that remain unsold at the termination of an offering through a post-effective amendment.231 However, under the proposed amendments, RILA issuers will be registering an indeterminate amount of securities and paying registration fee payments in arrears on amended Form 24F–2 for the life of an offering. Under this approach, a RILA issuer would only pay registration fees on the exact amount of net issuance of securities relating to an offering and therefore, it is unnecessary to additionally require an undertaking that relates to a surplus registration of securities during an offering. (e) Request for Comment We request comment on these proposed amendments.
78. Are the instructions for the
proposed new section on the facing sheet appropriate? Should there be additional or different options for the proposed new section on the facing sheet?
79. Are the definitions in Part A of the
General Instructions of Form N–4 appropriate? If not, which definitions require additional clarity or modifications? For example, do commenters believe it is appropriate to use the collective term ‘‘registrant’’ to include insurance companies that may not be registered entities under the Securities Act? Do the definitions effectively convey which provisions apply to which type of annuity contract?
80. Do commenters agree with the
statement that ‘‘investor account’’ is not generally used in insurance company disclosures to investors relating to annuity contracts?
81. Did we appropriately scope those
provisions that practically only apply to variable options to those types of investment options? Are there any other disclosures we should limit to variable options? Conversely, are there provisions we limited to variable options that we should also apply to index-linked options?
82. Should we add any additional
definitions to Part A of the General
Instructions to Form N–4? Should we retain the term ‘‘investor account’’?
83. Is the definition of ‘‘Index-Linked
Option’’ appropriate? Should we revise the definition in any way? Does this definition encompass all potential RILAs and index-linked options offered in combination contracts as proposed as required by the RILA Act?
84. Do commenters agree that the
proposed definition of ‘‘registered index-linked annuity’’ in rule 405 is appropriate? Do commenters agree that the proposed definition is inclusive of the types of RILAs encompassed in the definition of ‘‘registered index-linked annuity’’ in the RILA Act?
85. Do commenters agree that with the
proposed definition of ‘‘Form available solely to investment companies registered under the Investment Company Act of 1940?’’ Do commenters think this may cause confusion as RILA issuers are not investment companies registered under the Investment Company Act?
86. Should we require RILA issuers to
adhere to rules 480, 481, 483, and 484 when registering RILAs on Form N–4?
87. Do commenters agree that the
Exhibit List for proposed Form N–4 encompasses the types of exhibits that RILA issuers currently include in registration statements and is appropriate for RILAs? If not, what exhibit requirements should govern RILAs registered on Form N–4? Are there additional exhibits that RILA issuers should be required to file as part of their registration statements on Form N–4? Are there any exhibits that the integrated disclosure requirements of Regulation S–K currently include that we should require on Form N–4?

232As noted above, some of these items would be amended to account for changes in defined terms and to use gender-neutral terminology. See supra
section II.B.7.
233See supra section II.B.7(b) (discussing proposed amendments to the definitions used in the form). 234The items described in this section can generally be found in proposed General Instruction C of Form N–4. See also supra section II.B. [Other Amendments] (discussing definitional updates). EDGAR permits registrants to file required financial statements separately under a specific submission type. Thus, registrants may incorporate by reference into their post-effective amendment and other filings the financial statements filed under this EDGAR submission type. See VASP Adopting Release at n.592. 235We are also proposing to correct 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 is supposed to refer to Item 27 (Exhibits), which do exist, are in Part C, and are more Securities Act in nature. This instruction would be updated to refer instead to Item 27 as a result. 236See proposed General Instructions C.1.(a) and (c) to Form N–4. This specific text is not intended to discourage use of a formula, but rather, to clarify that if a formula is used in connection with a term or feature, investors are first provided appropriate plain English disclosure regarding the operation of the term or feature. See VASP Adopting Release at n.591. 237See proposed General Instruction C.3.(c) to Form N–4. As discussed above, we are proposing to require Q&A formatted responses to the Key Information Table. See supra section II.B.2. 238See proposed General Instruction C.3.(b) to Form N–4. 239See proposed General Instruction C.3.(b) to Form N–4. 240See proposed General Instruction C.3.(g) to Form N–4. 241See proposed General Instruction C.3.(d) to Form N–4. 242Registrants are also permitted to define terminology only used in one section in such
section.
243See proposed General Instruction C.3.(e) to Form N–4. The instructions state that ‘‘essentially identical’’ is a facts and circumstances-based determination but that contracts that differ in providing optional benefits or being group or individual contracts are not essentially identical whereas variances due only to State regulatory requirements would be. 244See proposed General Instruction C.3.(f) to Form N–4; 17 CFR 230.423. 245See proposed General Instruction C.3.(i) to Form N–4. 246Proposed General Instruction D of Form N–4.
88. Is it appropriate to require RILA
issuers to furnish the undertakings in Item 34 of proposed Form N–4? Are there different or additional undertakings that should be required for these issuers?
8. Remaining Form N–4 Items
We propose to make applicable to
RILAs the remaining requirements and disclosure items on the existing Form N–4 discussed below, which we do not propose to substantively change.232 The general instructions to the proposed form include both organizational requirements along with substantive requirements for the preparation of the registration statement, including instructions relating to the organization, presentation, and prospectuses permitted to be included in a registration statement. The remaining disclosure items principally provide investors with information about the annuity contract and how it operates. In addition, these items 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. (a) General Instructions RILAs 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; 233 (B) Filing and Use of Form; (C) Preparation of the Registration Statement; and (D) Incorporation by Reference.234 This would result in a number of substantive outcomes for those issuers.235 Specifically:

Plain English. The instructions
provide a number of points to issuers on how best to promote effective communication between issuers and prospective investors. For example, issuers are directed to use document design techniques that promote effective communication and to respond to the items in the form as simply and directly as reasonably possible and avoid the use of formulas as the primary means of communicating certain terms or features of a contract.236 Issuers are also encouraged to use, as appropriate, Q&A formats beyond the KIT, tables, and other presentation methods in the form generally.237
Organization. Issuers are directed to
organize information in the prospectus and SAI to make it easy for investors to understand, with some limitations on the order of presentation.238
Other Information. Issuers are
permitted to include (other than in
Items 2 or 3) information in the prospectus or SAI not otherwise required as long as the additional information is not incomplete, inaccurate, or misleading and does not, because of its nature, quantity, or manner of presentation, obscure, or impede understanding of the information that is required.239 In similar circumstances, issuers may include sales literature in the prospectus.240
Terminology. Issuers are required to
define special terms used in the prospectus in any presentation that clearly conveys meaning to investors.241 Only these special terms must be defined or listed in any glossary or list of definitions elected to be used.242 Registrants are not required to use the same terminology as that used in the form as long as the registrant clearly conveys the meaning of, or provides comparable information as, the form’s terminology.
Multiple Contracts. Issuers are
permitted to describe multiple contracts that are essentially identical in a single prospectus, and the instructions discuss the presentation of information regarding multiple contracts in these circumstances.243 Further, issuers are permitted to combine multiple prospectuses into a single registration statement where the contracts are substantially similar.
Timing. The instructions state that,
consistent with Securities Act rules, in most circumstances prospectuses and SAIs used after the effective date of the registration statement shall be dated approximately as of such effective date, but that a revised or amended prospectus or SAI used thereafter need only bear the approximate date of its issuance. Each supplement to the prospectus or SAI shall be dated separately the approximate date of its first use.244
Provision of Websites. Any websites
included in an electronic version of the prospectus must include active hyperlinks or other means of facilitating access that leads directly to the relevant website address, though this requirement does not apply to a prospectus filed on EDGAR.245
Incorporation by Reference. In
addition to the general requirements of the Commission rules on incorporation by reference, issuers are not permitted to incorporate by reference information required to be in the prospectus unless otherwise permitted by the form, but may incorporate by reference the SAI into the prospectus without delivering the SAI and incorporate by reference information required to be included in the SAI or Part C.246 Collectively, these general instructions 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 RILA issuers to prepare their registration statements in accordance with these instructions would 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 RILAs as proposed would 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. (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, that we propose making applicable to RILA issuers without substantive change.
TABLE 4—CONTRACT DISCLOSURES
Item Description
Prospectus (Part A)
General Description of the Contracts (Item 8) ... A general description of the contract, 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 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; 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 Contract (Item 10) A tabular summary overview of the 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 (Item 11) ........... A description of the procedures for 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. Also an identification of the principal underwriters (other than the insurance company) of the contracts and other information about that underwriter such as any affiliations. Surrenders and Withdrawals (Item 12) .............. A description of how surrenders and 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 or contract adjustments will apply. 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 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 nonperiodic 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 Contents (Item 18) .... A statement of the name of the insurance 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 Investing in the Contract (Item 20). A summary of the non-principal risks of purchasing a contract not otherwise disclosed in the prospectus. Services (Item 21) .............................................. Information on services provided to the registrant in connection with the contract. If not disclosed elsewhere, this requires a summary of the substantive provisions of certain 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 contracts not discussed in Parts A or B, including the last three years’ payment history.

247See Registration Forms for Insurance Company Separate Accounts That Offer Variable Annuity Contracts, Investment Company Act Release No. 14575 (June 24, 1985) [50 FR 26145 (June 25, 1985)] (‘‘Forms N–3 and N–4 Adopting Release’’). 248See VASP Adopting Release at n.26 and accompanying text. 249See Forms N–3 and N–4 Adopting Release. 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.247 Because disclosure of this information is equally fundamental to the ability of investors to make informed investment decisions about RILA contracts, we are proposing to apply these requirements to RILAs. 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.248 Insurance companies also offer these benefits in connection with RILAs. (c) Issuer and Offering Disclosures In addition to disclosures about the contract, the proposed amendments to Form N–4 would require that RILA issuers 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, would not apply to RILAs.
TABLE 5—ISSUER AND OFFERING DISCLOSURES
Item Description Similar form S–1 disclosure Prospectus (Part A) Legal Proceedings (Item 15) ........... A description of material pending legal proceedings to 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. Item 11(c) (legal proceedings). Statement of Additional Information (Part B) General Information and History (Item 19). Basic information regarding the background and organization of the insurance company, including the jurisdiction in which it is organized and a description of its business. Item 11(a) (description of business). Underwriters (Item 23) .................... Identification of the principal 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. Item 8 (plan of distribution). Other Information (Part C) Directors and Officers of the Insurance Company (Item 28). A statement of the name, principal business address, position, and office held for each director or officer of the insurance company. Item 11(k) (directors and executive officers). Persons Controlled by or Under Common Control with the Insurance Company or the Registrant (Item 29). Disclosure of persons directly or indirectly controlled by or under common control with the registrant or the sponsoring insurance company. Item 11(k) (directors and executive officers). Indemnification (Item 30) ................ Information about the effect of relevant indemnification agreements, arrangements, or statutory provisions through which underwriters or affiliates are insured or indemnified against any liability incurred in their official capacity. Item 14 (indemnification of directors and officers). Principal Underwriters (Item 31) ..... A statement of investment companies, other than any registered separate account related to the filing, 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. Item 8 (plan of distribution). Information about the issuer and the offering process are relevant when purchasing an annuity contract, including in the context of a RILA.249 These items, which largely correspond to items currently required to be disclosed by RILAs on Forms S–1 and S–3 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 RILAs are dependent on the insurance company’s claim-paying ability, RILA purchasers 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 RILAs, we have not included those disclosures in proposed Form N–4.

250See OIAD Report at Section 7, Conclusions, Summary of Findings. 251See Instruction C.1.b of Form N–4. 252This proposed tagging requirements would be implemented by amending General Instruction C.3(h) of Form N–4, and by revising rule 405(b) of Regulation S–T to include the proposed RILAspecific disclosures. 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. 253See proposed General Instruction C.3(h) of Form N–4; see also proposed Items 2(b)(2), 2(d), 6(d), 7(e), 26(c), and 31A. 254See proposed General Instruction C.3(h) of Form N–4; see also proposed Item 6(e). 255See proposed General Instruction C.3(h) of Form N–4; see also proposed Items 6(a) (instruction) and 6(c)(1). 256See rule 405(b) of Regulation S–T; proposed General Instruction C.3(h) of Form N–4; see also proposed Items 3, 4, 5, 10, and 17. 257See VASP Adopting Release at paragraph accompanying n.904. 258See General Instruction C.3(h) of current Form N–4; see also Interactive Data to Improve Financial Reporting, Release No. 33–9002 (Jan. 30, 2009) [74 FR 6776], as corrected by Release No. 33–9002A (Apr. 1, 2009) [74 FR 15666] (requiring operating companies to submit financial statements accompanying their registration statements and periodic and current reports in XBRL). (d) Request for Comment We request comment on our proposed application of these requirements and disclosures to RILAs.
89. Is it appropriate to require RILA
issuers to meet these general instructions of the form? Should we tailor any particular provision to account for the differences between RILAs and the variable annuities that currently use the form? For example, is there any reason to treat RILAs different for purposes of the ‘‘essentially identical’’ test?
90. The investor testing results
suggested that investors had significant difficulty in understanding certain terminology used in connection with RILAs, in particular the words ‘‘term’’ and ‘‘investment term.’’ 250 Should we, as a result, change any instruction to aid in investor understanding? For example, the form currently provides that the prospectus disclosure requirements in Form N–4 are intended to elicit information for an average or typical investor who may not be sophisticated in legal or financial matters.251 In light of this feedback in investor testing, should we amend this instruction or otherwise provide that insurance companies should not use ‘‘term,’’ ‘‘investment term,’’ or other terminology that investors found confusing? Regardless of whether insurance companies use ‘‘investment term’’ or different terminology, in the glossary definition of the ‘‘investment term’’ (or another term to describe that concept) should insurance companies be required to specifically disclose to investors that the ‘‘investment term’’ is not the same as the life of the contract? As another example, should we require, rather than permit, the use of a glossary or list of definitions for the entirety of the form so that investors have one place to look to understand a particular term? Should we clarify what terms are ‘‘special terms’’? What terminology in particular should be considered a special term in the RILA context?
91. Should we define certain key
terms that insurance companies must use in their registration statement to help to mitigate investor confusion and help investors compare one RILA to another? Which key terms should we address and how should they be defined?
92. Is it appropriate, as proposed, to
apply these exiting Form N–4 disclosure requirements to RILA issuers? Are any of these disclosure items inappropriate for including in a RILA registration?
93. Are there other details about the
RILA contract, not otherwise addressed above, that we should require be disclosed on amended Form N–4? Are there details regarding the issuer or offering that we should require?
94. Certain of these disclosures are
repeated throughout the registration statement. For example, similar disclosures regarding principal underwriters are contained in the prospectus (Item 11) and SAI (Item 23). Should we limit these items to a particular location in the registration statement?
95. Under the proposal, certain
information that RILA issuers currently provide on Forms S–1 and S–3 would still be required by Form N–4, but would be placed in the SAI rather than the prospectus. Should any of the information we propose to require in the SAI instead be provided in the prospectus?
96. Are these items properly ordered?
Should we move any of these items to greater prominence or move items from the prospectus, SAI, or Part C to another
part of the registration statement?
9. Inline XBRL
We are proposing to require RILA issuers to tag certain of the information they would disclose in their prospectuses and SAIs in a structured, machine-readable data language. Specifically, we are proposing to require RILA issuers to tag the required information in Inline XBRL in accordance with Rule 405 of Regulation S–T (17 CFR 232.405) and the EDGAR Filer Manual.252 The proposed requirements for RILA issuers would include tagging of the overview and more in-depth descriptions of indexlinked options and contract adjustments that RILA issuers would have to include in their prospectuses under the proposal, the proposed disclosure of census-type information regarding contracts with index-linked options, and information disclosed about changes in and disagreements with accountants.253 RILA issuers, in addition to variable contracts issuers whose contracts offer fixed options, would have to tag the proposed descriptions of fixed options available under the contract.254 Form N–4 filers also would have to tag the proposed new disclosures indicating that the insurance company is relying on the exemption provided by rule 12h–7, and variable contract issuers would have to tag the proposed new statement relating to the risks of variable options.255 In addition, RILA issuers would have to tag those prospectus disclosures that Form N–4 currently requires to be tagged.256 These include the following disclosure items: the Key Information
Table, Fee Table, Principal Risks of
Investing in the Contract, Other Benefits Available Under the Contract, and Investment Options Available Under the Contract in the statutory prospectus. The proposed Inline XBRL requirements, like the current Inline XBRL requirements for Form N–4 issuers, would only apply to contracts being sold to new investors. The result of this proposed approach would be that prospectus disclosure for contracts that are no longer being sold to new investors would not need to be tagged, as we believe tagging this disclosure would have less utility for current investors and other market participants.257 Issuers of variable annuities registered on Form N–4 are currently required to tag certain registration statement disclosure items using Inline XBRL.258 These items are those that would be most suited to being tagged in a structured format and be of greatest utility for investors and other data users that seek structured data to analyze and compare RILA contracts. This rationale is the same as that which the Commission articulated in originally adopting these tagging requirements in

259See VASP Adopting Release at section II.E.
260See supra footnotes 253–255. These primarily include the proposed new disclosure items that are specific to RILAs, as opposed to extant Form N–4 disclosure items to which we are proposing incremental amendments to address RILAs along with variable annuities. 261See supra section II.B.I.A.6; see also Item F.14 of Form N–CEN. 262See proposed General Instruction C.3(h)(i)(B) of Form N–4. This instruction relates to posteffective amendments filed pursuant to paragraph (b)(1)(i), (ii), (v), (vi), or (vii) of rule 485. 263See proposed General Instruction C.3(h)(i)(A) of Form N–4. 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. 264See proposed General Instruction C.3(h)(ii) of Form N–4. 265See rule 201 Regulation S–T (temporary hardship exemption) and rule 202 of Regulation S– T (continuing hardship exemption). 266Section 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 the context of variable annuity disclosure.259 In addition to these existing items, requiring Inline XBRL tagging of the new disclosure requirements we are proposing to include in Form N–4 would 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.260 We chose these particular items in the form to structure—including those that issuers of variable annuities would newly have to structure—because we believe that they are the most salient to investors and benefit most from being structured. We believe that tagging this disclosure, along with the requirement for RILA issuers to tag the same other disclosure items that are currently tagged, would result in information being tagged that would best permit investors and other data users to analyze and compare RILAs. For example, this would enable automated extraction and analysis of descriptions of index-linked options available under the contract, information regarding the features of each currently offered index-linked option, and information regarding contract adjustments. This would allow investors and other market participants more efficiently to perform large-scale analysis and comparison across RILAs (including the index-linked options that different RILAs offer) and time periods. Similarly, the requirement to tag information about fixed options will permit the same type of
analysis with respect to these investment options— including comparing fixed options across contracts, as well as index-linked options, variable options, and fixed options offered under the same contract. As another example, census-type information about variable annuity contracts, which is parallel to the SAI disclosure we propose to require for contracts with index-linked options, is currently reported in structured data format.261 Requiring census-type information about contracts with indexlinked options to be tagged in Inline XBRL would 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 requirement also would facilitate other analytical benefits, such as more easily extracting and searching disclosures about annuities, and automatically comparing these disclosures against prior periods. We are proposing to require RILA 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 would have to 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; 262
For initial registration statements
(and post-effective amendments other than as described in the bullet immediately above), Interactive Data Files would have to be filed in a subsequent amendment on or before the date the registration statement or posteffective amendment that contains the related information becomes effective; 263 and
For any form of prospectus filed
pursuant to rule 497(c) or (e), Interactive Data Files would have to be submitted concurrently with the filing.264 We anticipate that this approach would facilitate 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 would allow them to quickly process and share the data and related analysis with investors. Like other issuers, RILA issuers could request temporary and continuing hardship exemptions for the inability to timely file electronically the Interactive Data File.265 Request for Comments We request comment generally on the proposed amendments to require the use of Inline XBRL, and specifically on the following issues:

Should we adopt rules that make
the submission of structured data in the Inline XBRL format mandatory for RILA issuers?
Is it appropriate that RILA issuers
would have to tag the same disclosure items that variable annuity issuers tag? Why or why not? If RILA issuers were to be required to tag other disclosure items that are also applicable to variable annuities, should variable annuity issuers also be required to tag these same items?
Is it appropriate that all Form N–
4 filers would have to tag certain of the new disclosure items that we are proposing to add to Form N–4, in particular, proposed Items 2(b)(2), 2(d), 6(a) (instruction), 6(c)(1), 6(d), 6(e), 7(e), 26(c), and 31A of Form N–4? Should insurance companies not be required to tag any of these items, and if so, why not? Are there other proposed disclosure items that we should also require insurance companies to tag? If so, why?
Is it appropriate that the
approach for RILA issuers to submit
Interactive Data Files be consistent with the current approach for issuers of variable annuities registered on Form N–4, as proposed? If not, what alternative approach would be more appropriate and why? Is it appropriate that, like variable annuities registered on Form N–4, the proposed Inline XBRL requirements for RILA issuers would apply only to contracts being sold to new investors? Do commenters agree that tagging the prospectus disclosure would have less utility for current investors and other market participants?
Are any other amendments
necessary or appropriate to require the submission of the proposed required information in Inline XBRL? If so, what are they?
C. Option To Use a Summary
Prospectus
We are proposing to amend 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 statutory prospectus delivery obligations.266

prospectus.’’ For purposes of this section, we refer to RILA contracts and combination contracts together as ‘‘RILA contracts.’’ 267To further effectuate the changes being proposed, we propose to exclude RILA 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, RILA offerings would be subject to a separate framework governing communications with investors under the proposal. See supra section II.E; see also Offering Reform Release at section VI.B.1.b. 268See VASP Adopting Release at n.21 and accompanying text. 269See id.; see also Enhanced Disclosure and New Prospectus Delivery Option for Registered OpenEnd 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). 270See VASP Adopting Release at n.20 and accompanying text; Tailored Shareholder Reports Adopting Release at nn.10, 11, and 29 and accompanying text; see also supra discussion following footnote 7. 271To facilitate this change, and to make the terminology used in rule 498A more consistent with certain terms used in the proposed amendments to Form N–4, we are also proposing a number of amendments to the rule’s definitions. Specifically, we would (1) amend the definitions to ‘‘Class,’’ ‘‘Contract,’’ Investment Option,’’ ‘‘Registrant,’’ ‘‘Variable Annuity Contract,’’ and ‘‘Variable Life Insurance Contract’’ to address RILA contracts, 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 would otherwise affect the way these terms are defined in rule 498A); (2) add definitions for ‘‘Fixed Option,’’ ‘‘Index-Linked Option,’’ ‘‘Insurance Company,’’ ‘‘Registered Separate Account,’’ ‘‘RILA Contract,’’ and ‘‘Variable Option’’ consistent with their counterparts in the proposed Form N–4 amendments; and (3) deleting the definition of ‘‘Depositor.’’ These changes are necessary to communicate the provisions of the rule that would be applicable to RILA and
combination contracts. 272See proposed 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. The proposed amendments to rule 498A would extend this provision to RILA contracts. See rule 498A(g). Under the proposed amendments, the rule 498A provision addressing information that may be incorporated by reference into a summary prospectus also would apply the same to RILAs as it does to other contracts currently within the scope of the rule. See rule 498A(d). 273This proposed 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 proposed rule 498A(b)(5)(ix); proposed rule 498A(c)(6)(iv). 274The 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). 275See VASP Adopting Release at discussion accompanying nn.41–45; see also infra section III.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 RILA issuers to choose to use summary prospectuses and that therefore the majority of RILA 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). Investors would continue to have access to the RILA statutory prospectus and other information about the RILA contract online, with paper or electronic copies of this information upon request.267 This proposed approach would provide parity between RILA issuers and issuers of variable annuities registered on Form N–4, which are permitted to use summary prospectuses to satisfy their prospectus delivery obligations. RILA Summary Prospectus Overview 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 readerfriendly presentation, with more detailed information available elsewhere. We anticipate that the summary prospectus framework would improve investor understanding of RILA contracts, as the Commission similarly expressed when it adopted the summary prospectus rule for variable contracts.268 This proposed approach for RILA contracts builds on the Commission’s decades of experience with layered disclosure and rules permitting the use of summary prospectuses.269 The proposal also recognizes investors’ expressed preferences for concise and engaging disclosure of key information. Accordingly, we believe the proposed 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.’’ 270 The proposed amendments to rule 498A would broaden the scope of the rule to address RILA contracts.271 Under the proposed amendments, the rule’s conditions for relying on the rule to satisfy prospectus delivery obligations would be the same for RILA contracts as for variable contracts.272 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, on a website in the manner that the rule specifies. The proposed amendments to rule
498A would involve the use of two distinct types of summary prospectuses for RILA contracts, employing the same approach the rule currently uses for variable contracts. An ‘‘initial summary prospectus,’’ covering contracts offered to new investors, would 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 would also require ‘‘updating summary prospectuses’’ to be provided to existing investors in RILA contracts as a condition to relying on the rule. The updating summary prospectus would include 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 would be provided in both the initial summary prospectus and updating summary prospectus.273 As under current rule 498A for variable contracts, the proposed use of summary prospectuses for RILA contracts would be voluntary. This would be appropriate to provide RILA issuers sufficient time to transition to a summary prospectus regime, as well as in recognition of the fact that there could be different relative benefits of using a summary prospectus for certain RILA issuers and investors in these contracts.274 Similar considerations informed the Commission’s decision to adopt a voluntary summary prospectus regime for variable contracts.275 Initial Summary Prospectus As under the current rule 498A, an initial summary prospectus for a RILA

276See proposed rule 498A(b)(1). 277The definition of the term ‘‘class’’ in the proposed 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 distributionrelated fees and expenses). Proposed rule 498A(a). 278See VASP Adopting Release at paragraph accompanying nn.58–59. 279Proposed rule 498A(b)(5). 280See 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 6 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 RILA context as a general matter in section II.B, supra. 281See supra section II.B.I.A.2. 282Currently, rule 498A requires issuers to place ‘‘Important Information You Should Consider About the [Contract]’’ disclosures before ‘‘Overview of the [Contract] disclosures.’’ contract may only describe a single contract that the RILA issuer currently offers for sale.276 An initial summary prospectus may describe more than one class of a currently offered contract.277 Aggregating disclosures for multiple contracts, or currently offered and nolonger-offered features and options of a single contract, 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 could simplify and consolidate lengthy and complex disclosures. The content and ordering of items is designed to highlight aspects of a RILA contract that may not be emphasized in marketing materials and other disclosures. Like other summary prospectuses that rule 498A addresses, we are proposing a standardized presentation for RILA initial summary prospectuses to require certain disclosure items that we believe would be most relevant to investors to appear at the beginning of the initial summary prospectus, followed by supplemental information.278 The required presentation could also facilitate comparisons of different RILA contracts, as well as comparisons between RILA contracts 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.279 The information would be required to appear in the same order, and under relevant corresponding headings, as the rule specifies. The chart in Table 6 below outlines the information that we propose to require to appear in an initial summary prospectus for a RILA contract. We would not change these content requirements, with the exception of the ordering of the Overview of the Contract and KIT disclosures, from the current
variable annuity requirements. The Commission has historically viewed these items as providing annuity 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.280 We preliminarily believe that this rationale is equally true in the context of RILA disclosure. Further, as discussed above, we propose that the Overview of the Contract disclosures (currently Item 3 of Form N–4, but proposed to be re-numbered as Item 2) should precede the KIT (currently Item 2 of Form N–4, but proposed to be renumbered 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].281 This change would be reflected in the requirements of rule 498A.282 Otherwise, the same order of disclosures would be provided as under the current rule.
TABLE 6—OUTLINE OF THE INITIAL SUMMARY PROSPECTUS
Heading in initial summary prospectus Relevant paragraph in proposed amendments to rule 498A Item of Form N–4 (as proposed to be amended) Applicable to RILA contracts? Applicable to variable annuities registered on Form N–4? Cover Page:
Identifying Information (front cover
page) 1.
Rule 498A(b)(2)(i) through (iv) ... ........................ ✓ ............................... ✓ Legends (front cover page) 2 ................. Rule 498A(b)(2)(v) ..................... ........................ ✓ ............................... ✓ EDGAR Contract Identifier (back cover
page).
Rule 498A(b)(3) ......................... ........................ ✓ ............................... ✓
Table of Contents (optional) .................. Rule 498A(b)(4) ......................... ........................ ✓ ............................... ✓
Content:
Overview of the [Contract] ..................... Rule 498A(b)(5)(ii) ..................... 2 ✓ ...............................
(each paragraph of
Item 2, as applicable).
✓
(each paragraph of
Item 2 except
(b)(2) and (d), which are generally only applicable to RILA contracts). Important Information You Should Consider About the [Contract].
Rule 498A(b)(5)(i) ...................... 3 ✓ ...............................
(with line items applicable to RILA contracts, as specified in instructions to Item 3). ✓ (with line items applicable to variable annuities, as specified in instructions to Item 3). Benefits Available Under the [Contract] Rule 498A(b)(5)(iv) .................... 10(a) ✓ ............................... ✓ Buying the [Contract] ............................. Rule 498A(b)(5)(v) ..................... 11(a) ✓ ............................... ✓ Making Withdrawals: Accessing the Money in Your [Contract]. Rule 498A(b)(5)(vii) .................... 12(a) ✓ ............................... ✓ Additional Information About Fees ........ Rule 498A(b)(5)(viii) ................... 4 ✓ ............................... ✓

283Proposed rule 498A(b)(5).
284A RILA issuer, like a variable annuity issuer, could 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. Proposed rule 498A(c)(1). See also VASP Adopting Release at n.209 and accompanying text. 285See VASP Adopting Release at section II.A.2.a. As discussed above, the policy rationale for content requirements that would be the same among updating summary prospectuses for RILA contracts and variable annuity contracts—as well as the rationale for the location of these contents—is the same as that which the Commission articulated in adopting rule 498A. 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.2.c. Further, we provide our reasoning as to why these particular disclosures are important to investors in the RILA context as a general matter in section II.B, supra. 286The Commission discussed this rationale when it initially adopted rule 498A. See VASP Adopting Release at section II.A.2.a.
TABLE 6—OUTLINE OF THE INITIAL SUMMARY PROSPECTUS—Continued
Heading in initial summary prospectus Relevant paragraph in proposed amendments to rule 498A Item of Form N–4 (as proposed to be amended) Applicable to RILA contracts? Applicable to variable annuities registered on Form N–4?
Appendix: [Investment Options/Portfolio
Companies] Available Under the Contract.
Rule 498A(b)(5)(ix) .................... 17 ✓ ...............................
(Item 17(b) and
17(c), as applicable).
✓
(Item 17(a) and
17(c), as applicable).
Notes to Table 6:
1The beginning or front cover page of a RILA contract’s initial summary prospectus, like the initial summary prospectus of a variable annuity registered on Form N–4, would need to 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. 2The required legends would be the same for RILA contracts 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 RILA contracts has been prepared by Commission staff and is available at investor.gov. The initial summary prospectuses for RILA contracts as well as variable annuities also would have to include the additional statements that we are proposing to require on the cover page of the prospectus for all Form N–4 issuers. See supra section II.B.1; see also proposed Item 1(a)(6)–(8) of Form N–4. A RILA initial summary prospectus would be 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 RILA contract summary prospectus as for a summary prospectus of a variable annuity registered on Form N–4.283 Further, certain of these required contents would vary in substance to reflect the unique aspects of RILA contracts as compared to variable annuities. These are indicated in Table 1 above and include:

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, as well as 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 certain rows in the required table are specific to RILA contracts as opposed to variable annuities;
Disclosure provided under the
heading ‘‘Additional Information About Fees’’ (Item 4 of Form N–4), where the requirements for fee information for RILA contracts differ from the parallel requirements for variable annuities (reflecting that RILA contracts generally do not entail annual contract expenses, but there are other costs associated with an investment in a RILA contract); and
Disclosure under the heading
‘‘Appendix: Investment Options
Available Under the Contract’’ (Item 17 of Form N–4), where a RILA contract would 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.
Each of these disclosure items, which would also appear in a RILA statutory prospectus, is discussed in more detail in section II.B above. Updating Summary Prospectus As under current rule 498A, RILA issuers would not send an updated initial summary prospectus to investors each year. Instead, any RILA issuers would send an updating summary prospectus, which would provide a brief description of certain changes with respect to the contract that occurred within the prior year.284 This would allow investors to focus their attention on new or updated information relating to the contract. Additionally, the updating summary prospectus would include 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 RILA 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.285 Because the initial summary prospectus is designed for someone making an initial investment decision, we believe that existing RILA investors would 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.286 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. Unlike an initial summary prospectus, which could describe only a single contract that a RILA issuer currently offers for sale, an updating summary prospectus for a RILA could describe one or more contracts covered in the statutory prospectus to which the updating summary prospectus relates,

287Proposed rule 498A(c)(2); see also VASP Adopting Release at nn.342–343 and accompanying paragraph. 288Proposed rule 498A(c)(6). 289The legend would be the same for RILA contracts 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].’’ Proposed rule 498A(c)(6)(i)(A). 290Proposed rule 498A(c)(6)(i)(B); see also VASP Adopting Release at paragraph accompanying n.374. 291See VASP Adopting Release at paragraph following n.372. 292See id. at paragraph accompanying nn.365– 369. as under current rule 498A.287 Similar to the initial summary prospectus, an updating summary prospectus could also describe more than one class of a contract. Updating summary prospectuses for RILA contracts, like initial summary prospectuses, would include specific disclosure items appearing in a prescribed order, under relevant corresponding headings.288 An updating summary prospectus for a RILA contract would have to contain the information required by the rule, and only that information, in the order specified by the rule. The chart in Table 7 below outlines the information that we propose to require to appear in an updating summary prospectus for a RILA contract.
TABLE 7—OUTLINE OF THE UPDATING SUMMARY PROSPECTUS
Heading in updating summary prospectus Relevant paragraph in proposed amendments to Rule 498A Item of amended Form N–4 Applicable to RILA contracts? Applicable to variable annuities registered on Form N–4? Cover Page:
Identifying Information (front cover
page) 1.
Rule 498A(c)(3)(i) through (iv) ... ........................ ✓ ............................... ✓ Legends (front cover page) 2 ................. Rule 498A(c)(3)(v) ..................... ........................ ✓ ............................... ✓ EDGAR Contract Identifier (back cover
page).
Rule 498A(c)(4) .......................... ........................ ✓ ............................... ✓
Table of Contents (optional) 3 ................ Rule 498A(c)(5) .......................... ........................ ✓ ............................... ✓
Content:
Updated Information About Your Contract.
Rule 498A(c)(6)(i) through (ii) .... ........................ ✓ ............................... ✓ Important Information You Should Consider About the [Contract].
Rule 498A(c)(6)(iii) ..................... 3 ✓ ...............................
(with line items applicable to RILA contracts, as specified in instructions to Item 3). ✓ (with line items applicable to variable annuities, as specified in instructions to Item 3).
Appendix: [Investment Options/Portfolio
Companies] Available Under the Contract.
Rule 498A(c)(6)(iv) ..................... 17 ✓ ...............................
(Item 17(b) and
17(c), as applicable).
✓
(Item 17(a) and
17(c), as applicable).
Notes to Table 7:
1The beginning or front cover page of a RILA contract’s updating summary prospectus, like the updating summary prospectus of a variable annuity registered on Form N–4, would need to 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. 2The required legends would be the same for RILA contracts 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 RILA contracts has been prepared by the SEC staff and is available at investor.gov. The updating summary prospectuses for RILA contracts as well as variable annuities also would have to include the additional statements that we are proposing to require on the cover page of the prospectus for all Form N–4 issuers. See supra section II.B.1; see also proposed Item 1(a)(6) through (8) of Form N–4. 3The requirements for this optional table of contents would be the same for an updating summary prospectus as for an initial summary prospectus. See proposed rule 498A(b)(4); proposed rule 498A(c)(5). The updating summary prospectus for a RILA contract would be required to 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 would appear under the heading ‘‘Updated Information About Your Contract,’’ with a required legend following the heading.289 The changes that the rule would require a RILA 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 RILA issuer wishes to disclose, provided they occurred within the same time period as the other changes the rule would require the issuer to describe. In providing a concise description of a contract-related change in the updating summary prospectus, RILA issuers would have to provide enough detail to allow investors to understand the change and how it will affect them.290 The topics for which a change would necessitate a description in the updating summary prospectus would be the same for RILA contracts as for variable annuities registered on Form N–4. We do not anticipate that disclosures addressing these topics in a contract statutory prospectus would 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.291 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 RILA contract.292 We are proposing to amend rule 498A to specify that, in the context of a RILA

293Proposed rule 498A(c)(6)(i).
294 VASP Adopting Release at n.361.
295Proposed rule 498A(c)(6).
296See VASP Adopting Release at n.417 and accompanying text; and Office of Investor Education and Advocacy of the U.S. Securities and Exchange Commission, Study Regarding Financial Literacy Among Investors (Aug. 2012), available at https://www.sec.gov/news/studies/2012/917- financial-literacy-study-part1.pdf, at iv, xix. These proposed 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. 297For proposed requirements relating to the required online contract documents, see generally proposed rule 498A(h). 298A current version of each of the required online contract documents would have to 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. Proposed rule 498A(h)(1). 299Proposed rule 498A(b)(2)(v)(B). 300Proposed rule 498A(e). 301Proposed rule 498A(f)(4); proposed rule 498A(g)(4). 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) of Form N–4 requires (that is, the table in the appendix of investment options that will appear in a RILA contract summary prospectus).293 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.294 In the context of index-linked options, any change to the features of the index-linked options that the required table would describe—that is, the index, type of index, crediting period, index crediting methodology, limit on index loss, and/or guaranteed minimum limit on index gain—would meaningfully change the investor’s experience of investing in a RILA contract with the index-linked option that investor had previously chosen. For this reason, under the proposed amendments a change to any of these features would represent a change in the availability of the investment options that the RILA contract offers. The topics of the additional contents included in an updating summary prospectus—as well as the required headings under which these contents must appear—would be the same for RILA contracts and for variable annuities registered on Form N–4.295 Certain of these required contents, however, would vary in
substance to reflect the unique aspects of RILA contracts as compared to variable annuities. These are indicated in Table 2 above and include:

Disclosure provided under the
heading ‘‘Important Information You
Should Consider About the Contract’’
(Item 3 of Form N–4), where certain rows in the required table are specific to RILA contracts as opposed to variable annuities; and
Disclosure under the heading
‘‘Appendix: Investment Options
Available Under the Contract’’ (Item 17 of Form N–4), where a RILA contract would 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.
Online Accessibility of Contract
Statutory Prospectus and Certain Other Documents Relating to the Contract Investors who receive a RILA contract initial or updating summary prospectus would have access to more detailed information about the RILA contract, either by reviewing the information online, or by requesting the information to be sent in paper or electronically. In this respect, the proposed amendments would include the same requirements for RILA contracts as for variable contracts. These requirements further the layered disclosure framework that rule 498A creates for variable contracts and would, under the proposed amendments, similarly create for RILA contracts. Those insurance companies that issue RILAs, 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 RILA investors to access the contract statutory prospectus in several ways (online and by physical or electronic delivery) would maximize the accessibility and usability of this information and that investors have historically indicated a preference for both online and paper resources.296 Under the proposed amendments, a RILA issuer relying on rule 498A (like a variable annuity issuer relying on this rule currently), would have to make the contract’s current initial summary prospectus, updating summary prospectus, statutory prospectus, and SAI (together, the ‘‘required online contract documents’’) available online.297 These required online contract documents would be 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.298 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.299 The required online contract documents would have to be presented in a manner that is humanreadable 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 proposed amendments include requirements for 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. Both initial summary prospectuses and updating summary prospectuses for RILA contracts would, like variable annuity summary prospectuses, be required to define any ‘‘special terms’’ elected by the registrant, using any presentation that clearly conveys their meaning to investors.300 In RILA contract summary prospectuses that are available online, the proposed amendments (like the current rule) 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. Satisfying each of these requirements regarding online accessibility of contract statutory prospectuses and certain other documents relating to the contract is a condition for a RILA issuer to rely on rule 498A to satisfy prospectus delivery obligations.301 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

302Proposed 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. 303For these additional proposed requirements, see generally proposed rule 498A(i). 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 proposed amendments, like the current rule, includes a safe harbor provision addressing temporary noncompliance.302 Other Requirements for Summary Prospectus and Other Contract Documents Like current rule 498A, the proposed amendments to rule 498A include additional requirements for RILA contract summary prospectuses.303 These include:

Certain requirements relating to 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 would not, however, negate a person’s ability to rely on the rule to satisfy prospectus delivery obligations. Request for Comments We request comment on the proposed amendments to rule 498A, which would permit RILA issuers to use a summary prospectus to satisfy statutory prospectus delivery obligations:

Is it appropriate to permit RILA
issuers, as well as issuers of
‘‘combination contracts,’’ to use a summary prospectus to satisfy statutory prospectus delivery obligations? Why or why not?
Would the current rule 498A
framework, which provides for an initial summary prospectus and an updating summary prospectus, be appropriate for RILA contracts?
Is it appropriate that the use of
summary prospectuses for RILA contracts be voluntary, as proposed? Should the use of summary prospectuses for RILA contracts instead be mandatory?
Should an initial summary
prospectus for a RILA contract only describe a single contract that the RILA issuer currently offers for sale, as proposed? Instead should we permit an initial summary prospectus to describe more than one contract? Do commenters recommend any other changes to the proposed scope requirements for initial summary prospectuses for RILA contracts?
Is the proposed presentation for
RILA initial summary prospectuses appropriate, or should we modify the initial summary prospectus presentation requirements in any way?
Are the proposed summary
prospectus cover page requirements appropriate? For example, is it appropriate that initial (and updating) summary prospectuses for RILA contracts as well as variable annuities also would have to include the additional statements that we are proposing to require on the cover page of the prospectus for all Form N–4 issuers?
Do the proposed RILA initial
summary prospectus content items represent the disclosure that would best highlight the key terms, benefits, and risks of a RILA contract? Do the proposed content items capture key considerations that a typical contract investor would find salient? Should an initial summary prospectus include additional information an investor would need in order to make an informed investment decision, and if so, what would this information be? For example, is there any information we are proposing to include in Item 6 of Form N–4 that we should include in the summary prospectus? Alternatively, should we exclude or modify any of the proposed initial summary prospectus disclosure requirements? To the extent that commenters suggest changes that would result in different content across initial summary prospectuses for RILA contracts versus variable annuities, why would such changes be appropriate, and how should we address these suggested changes in the context of ‘‘combination contracts’’ offering a combination of index-linked options and variable options?
Under the proposal, would initial
summary prospectuses for RILA contracts, on average, be longer, shorter, or about the same length as variable annuity initial summary prospectuses? What would account for any meaningful differences in average length?
Is the proposed updating
summary prospectus approach appropriate for existing RILA investors? Do commenters agree that existing RILA investors would benefit more from a brief summary of the changes to the contract reflected in the statutory prospectus than from receiving all of the disclosures in the initial summary prospectus? Instead should existing RILA investors receive a summary prospectus akin to the initial summary prospectus year after year?
Should we permit, as proposed,
an updating summary prospectus for a
RILA contract to describe one or more contracts covered in the related statutory prospectus? Do commenters recommend any other changes to the proposed scope requirements for updating summary prospectuses for RILA contracts?
We request comment on the
proposed requirement to include a brief description of certain contract-related changes in the updating summary prospectus. Would this disclosure requirement be useful to investors? Is the scope of changes that a RILA issuer would be required to discuss appropriate? Are there other topics about which we should require a RILA issuer to describe a change? Should we define a change in the availability of investment options that would require disclosure as a change to any of the features of the index-linked options that the table that Item 17(b) of Form N–4 would require, as proposed? If not, what definition would be more appropriate and why?
Do the other proposed RILA
contract updating summary prospectus content items represent the disclosure that would be most appropriate and useful for existing investors, for example in considering whether to continue making additional purchase payments or reallocate contract value? If not, what alternative disclosure should we require?
Should rule 498A include, as
proposed, the same requirements with respect to online accessibility of a RILA contract statutory prospectus and certain other documents relating to the contract as the rule provides for variable annuities (including, as described above, the requirements to make the required online contract documents

304Similar to insurance products currently filing registration statements on these forms, RILA issuers would 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. Proposed item 16 of Form N–4. 305Similar instructions are contained in the other forms used to register insurance products issued by investment companies. See instruction 1 to Item 31(b) of Form N–3 and instruction 1 to Item 28(b) of Form N–6. 306See 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). 307See, e.g., F&G Life Letter. 308See 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. 309 17 CFR 210.3–12(a). RILA issuers 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. 310See Instruction 3 to Item 26(b) of Form N–4. available online, presentation and linking requirements for these documents, and requirements relating to the definitions of ‘‘special terms’’)? If not, what alternative requirements should we adopt to help ensure that investors who receive a RILA contract summary prospectus have access to more detailed information about the RILA contract if they want it? For example, should the required online contract documents also include information about the current limits on gains for each index-linked option offered under the contract? As another example, should the required online contract documents for issuers of RILAs and variable annuities that rely on rule 498A also include the financial statements of the registrant and/or insurance company, to the extent that these financial statements are not included in the SAI (if, for instance, an insurer’s financial statements are filed on Form N–VPFS or Form 10–K, and are incorporated by reference into the registration statement)? To what extent would using the same approach for both RILAs and variable annuities ease compliance burdens on insurers? Is it appropriate that, as proposed, satisfying each of these proposed online accessibility requirements would be a condition for a RILA issuer to rely on rule 498A to satisfy
prospectus delivery obligations? Are there any modifications we should make to the proposed safe harbor provision for temporary noncompliance?
115. Should rule 498A include, as
proposed, the same other requirements for summary prospectuses (relating to delivery upon request, prominence of the summary prospectus in relation to accompanying materials, ‘‘convenient for reading and printing’’ formatting, and hyperlinking requirements) as the rule currently requires for variable annuity summary prospectuses? Is it appropriate that, as proposed, satisfying each of these proposed requirements would not be a condition for a RILA issuer to rely on rule 498A to satisfy prospectus delivery obligations? D. Accounting (Items 16 and 26) We are proposing to permit RILA issuers to provide financial statements on amended Form N–4 in the same way that insurance companies currently do on Form N–4. The principal consequence of this change would be that the financial statements filed in connection with a RILA registration statement could be prepared in SAP to the same extent as currently permitted for insurance companies’ financial statements filed on that form. 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).304 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.305 In interpreting this instruction the Commission has stated that the insurance product forms do not require the use of GAAP 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.306 Forms S–1 and S–3 do not include an instruction similar to Instruction 1 of Item 26(b) of Form N–4. Rather RILAs registered on these forms are required to provide their financial statements in accordance with GAAP. The Commission, however, acting through authority delegated to the staff, has permitted insurance companies registering on Form S–1 to include SAP financial statements in RILA registration statements in the circumstances permitted by Form N–4.307 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.308 We preliminarily believe this is also true for insurance companies that offer RILAs and that it is important to provide for the consistent treatment of financial statements for all insurance companies that meet the circumstances permitted by Form N–4. As a result, permitting RILA issuers to rely on Instruction 1 to Item 26 to provide SAP financial statements to the same extent as issuers registering offerings of variable annuities on Form N–4 would be consistent with investor protection. 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, appear to provide sufficient material information for investors evaluating RILAs. Another consequence of requiring insurance companies to register offerings of RILAs on Form N–4 is that they will have greater flexibility to update their registration statement without the need to update certain financial statements. Under section 10(a)(3) of the Securities Act, RILA issuers, like variable annuity issuers, generally must file a post-effective amendment annually to update their audited fiscal year-end financial statements. In addition, Regulation S–X 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.309 Form N–4 filers are not subject to this requirement.310 In addition, after the end of an insurer’s fiscal year, RILA issuers must include year-end audited financial statements in any new registration statement or post-effective amendment filed 45 days after the fiscal

311See 17 CFR 210.3–01(c).
312See Instruction 3 to Item 26(b) of Form N–4.
313A further consequence of the proposed changes would be that insurance companies would generally be making available their RILA-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 RILA-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. 314See 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)]; see also item 11(i) of Form S–1. 315See Item 27(b)(4) of Form N–1A. 316To accommodate the changes proposed in this release, EDGAR would be modified to require insurance companies registering RILAs to use a different CIK than that used for their other offerings. One CIK would be utilized to register the offerings of RILAs on Form N–4 and pay registration fees for securities relating to RILA offerings on Form 24F–
2. The other would be utilized to register the
insurance company’s other offerings of securities as they do currently. As a result, insurance companies would need to utilize separate CIKs for their RILArelated filings. If the issuer only offers RILAs, it should only use one CIK. Further, we are proposing to amend rule 313 of Regulation S–T in order to permit filings relating to RILA offerings to have both an investment company type and contract identifier in order to facilitate RILA issuers’ filing these forms and for ease in identification of particular RILA contracts. 317The proposed rule amendments would apply the same registration fee payment approach to RILAs that is currently provided by rule 24f–2 to current Form N–4 issuers. See proposed rules 456(e) (providing that where the registration statement relates to a RILA offering, RILA issuers would 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 RILA issuers to pay registration fees for securities relating to RILA offerings on the same annual net basis as other Form N–4 issuers); see also proposed Form 24F–2. See section 4(e) of the Exchange Act [15 U.S.C. 78d–4(e)]; section 28 of the Securities Act [15 U.S.C. 77z–3]. We preliminarily believe that these actions are necessary or appropriate in the public interest and consistent with the protection of investors. 318As a general matter, the proposed amendments would provide the same process for registering an indeterminate amount of securities relating to RILA offerings as is currently provided for exchangetraded vehicle securities under rule 456(d) (which, in turn, mirrors of the process for current Form N– 4 issuers to register securities) except that (1) this process would be mandatory for RILAs and (2) RILA issuers would pay fees on Form 24F–2 instead of through a prospectus supplement in accordance with rule 424. 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’’). For example, the proposed amendments would provide the same mechanics as other Form 24F–2 issuers when addressing interest calculations for late payments. 319All payments of filings fees for RILA registration statements would continue to be made by wire transfer, debit card, or credit card or via an ACH and there would be no refunds. See 17 CFR 230.111; proposed instruction A.5 to Form 24F–2. 320 In addition to conforming changes in proposed Form 24F–2 to effectuate the changes discussed below, in order to improve the form we are proposing to: (1) remove reporting relating to shares paid for prior to Oct. 11, 1997; (2) remove 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) remove 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) revise current Instruction C.9 for Item 5(vii) to correspond to the current instructions for fee filing rates on the year-end.311 However, Form N–4 filers instead have a 90-day grace period.312 As a result of the proposal to include RILAs on Form N–4, RILA issuers therefore would be able to file and amend their registration statements during certain times of year without the need to update their financial statements, which RILA issuers cannot do today.313 These approaches, in consideration of consistency in treatment among all insurance companies that meet the circumstances permitted by Form N–4, are equally appropriate for RILA filers on Form N– 4. We are also proposing to require RILAs to provide the 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, RILAs would 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 on Forms S–1 and S–3 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.314 The proposed amendments would not be required for variable annuities in light of their tiered investment company structure. Variable annuities typically invest indirectly in mutual funds offered as investment options under such contracts, which themselves are subject to similar disclosure obligations relating to changes in and disagreements with accountants on accounting and financial disclosure.315 We request comment on these aspects of the proposal.
116. Is it appropriate, as proposed, to
permit RILA issuers to use the same approach with respect to the use of SAP financial statements, for purposes of preparing financial statements that are included on a registration statement on Form N–4, as Form N–4 currently provides for insurance company issuers? Why or why not?
117. Would SAP financials provide
sufficient material information for a RILA investor to make an informed investment decision? Why or why not?
118. Why do insurance companies
currently provide SAP financials instead of GAAP financials in their Form N–4 registration statements when permitted to do so? Do SAP financials currently provide sufficient material information for a variable annuity investor to make an informed investment decision?
119. Should we require the proposed
items relating to changes in accountants for RILAs? If so, should we also require these items for all Form N–4 filers? If the information called for in Item 304 of Regulation S–K is required, is it appropriately placed in the SAI? E. Filing and Prospectus Delivery Rules

Fee Payment Method and
Amendments to Form 24F–2
We are proposing to require insurance companies to pay securities registration fees relating to RILA offerings using the same method used for variable annuities.316 Specifically, issuers registering the offerings of RILAs on amended Form N–4 would be deemed to be registering an indeterminate amount of securities upon effectiveness of the registration statement.317 These issuers would 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 registered separate accounts to pay securities registration fees relating to variable annuities (Form 24F–2).318 We are further proposing to specify the calculation method for paying securities registration fees for RILA offerings, consistent with the fee calculation methodology that applies to variable annuities.319 We are also proposing amendments to Form 24F–2 to specify when issuers can take credits for RILA 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 nonsubstantive and conforming amendments.320

Commission’s website; (5) correct the website linked in current Instruction D.1; and (6) remove 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. 321 In general, issuers today—including insurance companies issuing securities relating to RILA offerings—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 wellknown seasoned issuers have additional flexibility in paying filing fees, none of the insurance companies that issue securities relating to RILA offerings currently claim status as a well-known seasoned issuer. See supra footnote 21. 322See 15 U.S.C. 80a–24(f). 323See id.; Form 24F–2. 324For 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 option) would file a separate Form 24F–2 relating to the payment of registration fees for its respective securities offered under the product. 325As part of the proposed amendments to Form 24F–2, RILA issuers would be required to include the value of any expiring annuity contract or indexlinked 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. RILA issuers further would be required to report such contracts or options as a redemption. This would result in zero net sales being reported in this situation. See proposed instruction C.4 to Form 24F–2. 326See 17 CFR 230.457(p). To facilitate the transition to calculating fees on an annual net basis and filing Form 24F–2, a RILA’s fee calculation should exclude excess securities that were registered under its last registration statement that remain unsold prior to the effectiveness of any final rule. See proposed instruction C.5 to Form 24F–2. This would be so that a filing fee is not charged twice for the same securities being registered. 327See generally Closed-End Fund Offering Reform Adopting Release at n.348. 328See 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. 329 In addition to RILA issuers, 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. Currently, insurance companies, like most issuers, register a specific amount of securities when registering RILAs and are required to pay a registration fee for those securities to the Commission at the time of filing a registration statement on Form S–1 or S–3.321 In contrast, the Investment Company Act 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.322 Instead of paying registration fees at the time of filing a registration statement, registered separate accounts pay registration fees in arrears based on their net issuance of securities, no later than 90 days after the issuer’s fiscal year end, on Form 24F–
2.323 As a result, RILA issuers must
currently ensure that they do not inadvertently sell more securities than they have registered, however this is not a concern in relation to variable annuities. Further, RILA issuers pay fees at effectiveness on Forms S–1 or S–3 for the securities being registered, while registered separate accounts do not 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. Consistent with the other elements of this proposal, these proposed amendments are designed to require insurance companies to use the same framework to pay securities registration fees for RILAs that they do for variable annuities. Insurance companies offer RILAs in a manner substantially similar to variable annuities and would similarly benefit from paying registration fees on an annual net basis and from registering offerings of an indeterminate number of securities. The proposed amendments would 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.324 Requiring insurance companies to pay registration fees for securities relating to RILA offerings on Form 24F–2 would therefore be efficient for insurance companies. This approach would eliminate the risk that a RILA issuer may inadvertently oversell securities 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 RILAs.325 Further, by requiring RILA and variable annuity offerings to use the same form and payment method, this process also would be efficient for the Commission. The proposed fee calculation method is also consistent with the continuous offering of RILAs to investors. These investors may make additional allocations or other investment decisions over time with respect to an investment in a RILA. One effect of this is that RILA issuers, unlike other Form S–1 or S–3 issuers, may have increased difficulty in using the filing fees associated with unsold securities of a particular RILA offering to offset the filing fees due for a subsequent registration statement. This is because many RILA issuers are not easily able to terminate a RILA offering, a necessary step to recoup fees paid on unsold securities for use in a separate RILA offering.326 We are also proposing amendments to Form 24F–2 that would indicate when RILA issuers can take credits for redemptions of securities not claimed in a prior fiscal year (‘‘non-claimed prior redemptions’’). Typically, issuers that file Form 24F–2 can take credit for these redemptions to offset some of the purchases being reported for the current fiscal year. This is only intended to be available for non-claimed prior redemptions that had occurred since the use of the form (and the payment of registration fees on an annual net basis) was available to the issuer.327
The form, however, includes a legacy instruction 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–2.328 With the addition of RILAs 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 it is clear that issuers will only be able to take credit for non-claimed prior redemptions that occur on or after the date the issuer became eligible to use the form, which for RILA issuers would be the effective date of the proposed amendments, if adopted.329 We request comment on the proposed fee payment methodology for RILAs and the proposed amendments to Form 24F– 2.
120. Is it appropriate to require RILA
issuers to pay registration fees in arrears for the registration of securities? Would the process be more efficient for insurance companies than the current registration fee processes used by RILA issuers? If not, what is the appropriate manner in which RILA issuers should pay registration fees? For example, should we instead amend Form N–4 to permit or require the payment of fees on that form for RILA issuers at the time the issuer files the registration statement, consistent with insurance companies’ current practices when paying registration fees for securities offerings registered on Forms S–1 and S–3?
121. Instead of requiring RILA issuers
to pay registration fees in arrears as proposed, should we permit RILA issuers to choose whether to take this treatment or use some other registration fee system?

330See rule 485(b).
331Consistent with this change, we are also proposing corresponding changes to (1) rule 424(f) to specify that RILA issuers must use rule 497 rather than rule 424 when filing prospectuses and prospectus supplements, and (2) rule 415(b) to exempt RILA offerings from the requirements of paragraph (a) of that rule consistent with the treatment of variable annuity separate accounts. 332See, e.g., section 10(a)(3) of the Securities Act [15 U.S.C. 77j(a)(3)]. 333See rule 485(b)(1)(i). Material post-effective amendments, however, are not immediately effective. See rule 485(a). 334See, e.g., section 10(a)(3) of the Securities Act; rule 415(a); Item 512 of Regulation S–K. 335Under 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. 336See 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 RILAs currently claims status as a well-known seasoned issuer. 337See 15 U.S.C. 77h; 17 CFR 229.501(a); 17 CFR
230.473. See also supra footnote 335 (describing the
Form S–3 post-effective amendment process).
338See rule 424(a); rule 497.
122. Is the proposed calculation
methodology appropriate for RILAs? If not, what aspects of the methodology should be changed and why?
123. Is it appropriate to have RILA
issuers file Form 24F–2 for this purpose, or should we instead have RILA issuers file a prospectus pursuant to rule 424(i), consistent with the treatment of exchange-traded vehicle securities under rule 456(d)?
124. Are the proposed amendments to
Form 24F–2 appropriate? Should we tailor Form 24F–2 to RILAs in other ways? Are the proposed amendments clear as to how a RILA issuer would use that form? Are there any other clarifications we should offer?
125. Should we, as proposed, require
separate Form 24F–2 filings for indexlinked options and variable options that are offered as investment options in combination contracts? If not, how can we amend Form 24F–2 and rules 456 and 457 to accommodate combination contracts, given different legal entities are issuing the securities associated with different types of investment options?
126. Are the proposed amendments to
rule 456 and 457 sufficiently clear as to how RILA issuers should calculate and pay the registration fees for securities relating to RILA offerings? Should we amend the rules further to provide more clarity?
127. The proposed amendments to
rule 456 and Form 24F–2 provide procedures for how to address a merger or the cessation of operations of the issuer, which in the RILA context is the insurance company issuing the RILA. Are these provisions necessary for RILA issuers? Should these instructions instead address the cessation or merger of the particular RILA being reported?
128. Do commenters agree with the
proposed requirements for how to address non-claimed prior redemptions? Why or why not?
129. Are there any other
considerations or changes we should make to facilitate requiring RILA issuers to pay registration fees in arrears, either regarding securities already registered by RILA issuers or for some other reason?
2. Post-Effective Amendments and
Prospectus Supplements
To facilitate the registration of RILA offerings on Form N–4 and consistent with the other elements of this proposal, we are proposing amendments to require RILA issuers to use the same framework for filing post-effective amendments to the registration statement that other issuers on Form N– 4 currently use. Specifically, the proposal would amend rule 485 to require RILA issuers to use that rule when amending RILA registration statements on Form N–4. This change would permit RILA issuers to file posteffective 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).330 In addition, we are also proposing amendments that would require RILA issuers to apply rule 497 under the Securities Act when appropriate to file RILA prospectuses and prospectus supplements with the Commission.331 These amendments are intended to facilitate a uniform posteffective amendment and prospectus filing framework for issuers on Form N– 4 and should provide increased efficiencies for RILA issuers and Commission staff by applying consistent procedures for all security offerings registered on Form N–4. Our rules currently provide different processes for RILA issuers on Forms S– 1 and S–3 and current issuers on Form N–4 to update and keep current a registration statement or prospectus. Form N–4 is 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. Therefore, these issuers have 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 in order to, among other things, comply with Securities Act requirements.332 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, for example, 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.333 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. Conversely, RILA issuers currently follow the processes operating companies use to update their registrations statements. Operating companies that are engaged in a continuous offering of securities, like RILA 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.334 For RILAs whose offerings are registered on Form S–1, these updates typically occur through a post-effective amendment.335 Rule 462 currently provides RILA issuers with a limited set of circumstances, none of which are specific or generally relevant to RILA offerings, in which a post-effective amendment to a registration statement is effective upon filing.336 Rather, when a RILA issuer seeks to update a RILA 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.337 In addition to differences in the posteffective amendment process, RILA issuers also follow different processes to file prospectuses than current Form N– 4 filers, relying on rule 424 rather than rule 497. Although these rules provide for similar processes, there are certain differences. For example, rule 424 requires an issuer to file a prospectus only if the issuer makes substantive changes or additions to a previouslyfiled prospectus, whereas rule 497 requires funds to file every prospectus that varies from any previously-filed prospectus.338 Accordingly, under the proposed amendments, a RILA issuer

339See proposed rule 497(e).
340See rule 424(b).
341See proposed rule 415(b).
342See proposed rule 485.
343See Rule 172(b) and (c); see also Offering Reform Release at n.561 and accompanying text. 344 Id. at section VI.B.1.b. 345See 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 Offering Reform 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)). would be required to file every prospectus relating to a RILA offering that varies in form from a previously filed prospectus before it is first used.339 This approach would provide a publicly accessible, usable database of current RILA prospectuses which would also assist the Commission in conducting its regulatory functions. In addition, rule 424 includes provisions related to continuous or delayed securities offering under rule 415.340 However, in light of the proposed amendments to the RILA registration framework, these provisions would no longer be applicable to RILAs.341 Consistent with the other elements of this proposal, the proposed amendments are designed to provide parity between RILAs and other annuities registered on Form N–4. RILAs, 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 or reallocate assets. Accordingly, applying rule 485’s simplified post-effective amendment process is a more appropriate framework for RILA registration statements in light of their similarity to variable annuities. RILA 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 proposed amendments addressing the post-effective amendment process for RILA registration statement should provide benefits to current RILA issuers using Form S–1 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.342 Requiring RILA issuers to rely on the simplified post-effective amendment process would enable these issuers to update their disclosures in a manner that complements and facilitates RILAs’ offering structure and particularly provide efficiency in the context of combination contracts. Requiring RILA issuers to rely on rules 485 and 497 also would 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 options offered as part of combination annuity contracts, consistent filing requirements across related products. This should also 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 would provide Commission staff with an increased degree of administrative efficiency by facilitating the review of amendments containing material changes to RILA registration statements while permitting amendments with nonmaterial changes to become effective immediately. We request comment on the proposed application of rules 485 and 497 to RILAs.
130. Should we require RILA issuers
to file post-effective amendments to registration statements on Form N–4 under rule 485? Are there additional circumstances not currently enumerated in the rule for which we should permit the immediate effectiveness of posteffective amendments?
131. Do commenters agree that the
current post-effective amendment process for RILA registration statements on Form S–1 may result in increased uncertainty and costs for RILA issuers than if the same issuers used the proposed post-effective amendment process under proposed rule 485 to amend RILA registration statements? Will using the process required by rule 485 mitigate these concerns?
132. Should we require RILA issuers
to file prospectuses and prospectus supplements under rule 497 rather than under rule 424? If not, what is a more appropriate process for RILA issuers to file prospectuses and prospectus supplements given the proposed move of RILA registration statements to Form N–4?
133. How would RILA issuers be
affected by the requirement to file the exact form of prospectus under rule 497, given rule 424 only requires filers to file prospectuses that contain substantive changes from or additions to a previously filed prospectus?
134. Are there other filing rules that
should be amended to help facilitate the movement of RILA registration statements to Form N–4? Is so, please explain what rules should be amended and the rationale for the suggested changes.
3. Prospectus Delivery
We also propose to prohibit the use of rule 172 in connection with the offering of a RILA. 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 it with the Commission as
part of the registration statement within
the required rule 424 prospectus filing timeline.343 Registered investment companies, including variable annuity separate accounts, are excluded from rule 172 and therefore must deliver a prospectus to investors.344 Therefore, we are excluding RILA offerings from rule 172 to ensure that investors receive a prospectus about these complex investments and because we are proposing to treat offerings of RILAs like offerings of variable annuities in other respects. Moreover, we understand that, as a practical matter, RILA issuers typically do not rely on rule 172 because RILA issuers typically deliver prospectuses to accompany or precede other communications, such as annuity applications, in order to avoid those communications being offers that otherwise would be non-conforming prospectuses that violate section 5 of the Securities Act.345 We request comment on excluding RILA offerings from rule 172.
135. Is our understanding correct that
RILA issuers typically deliver prospectuses to investors to accompany or precede other communications, and thus do not rely on rule 172? If not, in what circumstances to RILA issuers typically rely on rule 172? Is there any reason we should permit RILA issuers to rely on rule 172 even though issuers cannot rely on the rule for other offerings registered on Form N–4? F. Materially Misleading Statements in RILA Sales Literature We are proposing to amend rule 156 to make its provisions applicable to RILA sales literature. Under the Federal securities laws applicable to all securities (including RILA offerings), it

346See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b–5. 347See Mutual Fund Sales Literature Interpretive Rule, Investment Company Act Release No. 10915 (Oct. 26, 1979); [44 FR 64070 (Nov. 6, 1979)] (‘‘Rule 156 Release’’). 348See rule 156(b). 349See, e.g., 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’’). 350 Insurance companies may apply a contract adjustment to the investors’ 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 The Design and Regulatory Framework of Registered Index-Linked Annuities, ALI CLE Conference on Life Insurance Products 2022 (‘‘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.’’) is unlawful for any person to use materially misleading communications in connection with the offer or sale of any security.346 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 a statement involving a material fact is or might be misleading in the specific context of investment company sales literature for purposes of the Federal securities laws, including sales literature relating to the sale of variable annuities. Applying this rule to RILA sales literature is consistent with the RILA Act in that it would provide RILA issuers guidance on ways to avoid presenting investors with materially misleading advertisements, which should help ensure that investors receive the information necessary to make informed decisions about these products.347 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.348 While these factors have some relevance to the marketing of all securities, similarities between variable annuities and RILAs (as to how and to whom they are marketed), make the extension of rule 156 to RILAs particularly appropriate. Like investment company sales literature generally (and variable annuity marketing materials particularly), RILA advertisements discuss complex investment features, and RILA issuers should benefit from rule 156’s contextual analysis in considering whether a particular representation is materially misleading. Thus, the proposed
amendments to rule 156 would help address these concerns by focusing attention to specific areas of RILA sales literature that we have identified as being particularly susceptible to misleading statements.349 Commission staff have reviewed RILA advertisements to better understand how insurance companies market these products to investors. As part of this review, and based upon prior experience reviewing RILA registration statements, the staff identified common 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. For example, in the sales literature reviewed by the staff, insurance companies typically marketed RILAs as growth products based primarily on the linkage to an underlying index. Current rule 156(b)(1)(ii) provides that a statement could be misleading because of ‘‘[t]he absence of explanations, qualifications, limitations or other statements necessary or appropriate to make such statement not misleading.’’ Thus, if rule 156 were applied to RILAs as proposed, rule 156 would assist insurance companies in considering whether representations about a RILA as a growth product would require qualification in light of particular RILA features, such as the existence and extent of any limitations on upside index performance. Representations that highlight downside protections of a RILA could similarly be misleading without the context of the cost or limitation of those protections (e.g., upside limitations). The same analysis would apply to representations that tout 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 fail to explain that the insurance company has reserved the right to change or remove key features of the contract while surrender charges still apply. If RILA sales literature discussed 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. Accordingly, the application of rule 156(b)(1)(ii) to RILA sales literature would require an insurance company to consider whether an advertisement would be materially misleading if it suggests a given RILA is a lossavoidance vehicle or a customizable product in the absence of qualifying explanations or statements. Similarly, if sales literature advertises a particular feature of the product’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 or the full term of any surrender charge period, the rule would require consideration of whether the statement is misleading without providing additional
context as to the insurer’s discretion. As another example, current rule 156(b)(4) provides that ‘‘[r]epresentations 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.’’ While RILA investors are not typically charged direct ongoing fees or expenses, RILAs do typically limit an investor’s ability to participate in upside performance, and charges like contract adjustments can impose costs upon highlighted features such as guaranteed benefits. In the context of RILA sales literature, the proposed application of this provision of rule 156 to RILA advertisements would require consideration about whether representations or portrayals either of a RILA’s costs or charges (e.g., advertising implying that a RILA had 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 RILA.350 Lastly, current 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 RILA advertising, the

351See rule 156(b)(1)(ii) (statement can be misleading because of ‘‘absence of explanations, qualifications, limitations or other statements necessary or appropriate to make such statement not misleading’’). 352See, e.g., OIAD Report at Section 3, Comparing RILA Features, Variations in Term Length and Simulated Returns; Section 7, Conclusions, Implications of the Research: The Economics of RILAs. 353See Amendments to Investment Company Advertising Rules, Investment Company Act Release No. 26195 (Sept. 29, 2003) [68 FR 57760 (Oct. 6, 2003)] (‘‘482 Amendment Release’’). 354See id. 355See 17 CFR 230.433(b)(2). 356As a result, RILA sales literature, as ‘‘free writing’’ prospectuses, would continue to be subject to 17 CFR 230.164 and 17 CFR 230.433, as well as any other applicable rule that permits a communication notwithstanding the ‘‘gun jumping’’ provisions of the Securities Act. proposed provision would require consideration of whether illustrations about the operation of a RILA or its features could be misleading because, for example, they use 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. Including historical index performance in an advertisement also would mislead investors 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 to illustrate how a RILA works 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 the proposed extension of rule 156 to RILA advertisements, assuming those advertisements otherwise include appropriate caveats to ensure that the illustrations are not misleading.351 Moreover, our preliminary view is that purporting to show the historical performance of the RILA or any particular index-linked option itself would generally be materially misleading. This is because the terms of a RILA investment, such as limits on gains, change frequently, making past performance 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 indexlinked option chosen by the investor.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. Our understanding is that insurance companies do not currently advertise the historical performance of the RILA or any
particular index-linked option itself. In addition to rule 156, advertisements and sales literature for existing N–4 issuers is subject to 17 CFR
230.482 (‘‘rule 482’’). Rule 482 requires,
among other things, enhanced disclosures in investment company and business development company advertisements designed to convey balanced information to prospective investors, particularly with respect to standardizing representations of a fund’s past performance.353 These provisions were introduced as a result of the Commission’s experience with fund advertisements that were creating unrealistic or misleading expectations through representations regarding past performance.354 Accordingly, rule 482 now permits funds to use performance data in their advertisements, but only according to standardized methodologies set forth in the rule. Unlike the rules applicable to most RILAs, rule 482 also permits registered investment companies and business development companies to provide advertisements and sales literature to investors without it being accompanied or preceded by a statutory prospectus.355 While not required by the RILA Act, we nevertheless considered whether RILA advertising might raise similar concerns that would justify amending rule 482 to include RILAs. As explained below, we have not yet seen sufficient evidence to support an expansion of rule 482 to RILAs at this time, though we acknowledge such concerns may develop in the future.356 This conclusion largely follows from the rule’s standardized performance data requirements, which do not align with current practices in RILA advertisements. While variable annuity marketing materials frequently utilize standardized performance returns, this is not the case with RILA advertisements. Rather than relying on past performance, insurance companies 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. RILA advertising also typically does not attempt to utilize past performance, suggesting there is neither a need for rules prescribing RILAspecific past performance metrics, nor sufficient experience to inform the development of such metrics. For these reasons, we would not change rule 482 to include RILAs. We request comment on the proposed application of rule 156 to RILAs and our proposal not to amend rule 482 to include RILAs.
136. Would the application of rule
156 to RILA sales literature help to prevent or address material misstatements in those communications? Is there any other action we should take to address this concern?
137. Are there differences between
variable annuities and RILAs that would justify not extending rule 156 to RILA sales literature as proposed?
138. Instead of extending rule 156 to
RILAs, should we create a new rule that specifically and solely deals with materially misleading information in RILA sales literature? If so, what is it about RILAs that necessitates a RILAspecific rule about materially misleading sales literature, and what particular areas or topics should we address in a RILA-specific sales literature rule?
139. Do commenters agree with the
contextual concerns highlighted above with regards to the representations typically used in RILA sales literature? Are there other claims or suggestions in RILA sales literature that insurance companies use that we should be concerned about?
140. Do insurance companies
currently utilize any performance metrics in RILA advertisements? Why do insurance companies not currently utilize past performance in RILA sales literature to the same extent as variable annuity advertisements? Is there a way to standardize RILA past performance information? Is there a way to view RILA past performance information as other than as materially misleading?
141. Do commenters agree that
advertising the historical performance of a RILA or any particular index-linked option would be misleading in light of the customized nature of RILA contracts and the pace at which the RILA features that determine RILA performance are subject to change?
142. Are there benefits to investors in
amending rule 482 to include RILA advertising materials? If so, how should it be amended? How would we address past performance metrics for a RILA in light of the customized nature of RILAs and the changing nature of RILA features?

357Rule 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.’’ We would not be rescinding exemptions provided in any of the letters outlined below provided with respect to non-RILA insurance products because they are not affected by this rulemaking. 358Registered MVAs are securities because the MVA feature imposes certain investment risks on purchasers. 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). 359See, e.g., proposed General Instruction B.1 of Form N–4.
143. Should we permit insurance
companies to provide RILA sales literature to investors without being accompanied or preceded by a summary or statutory prospectus as variable annuities do? How would insurance companies be able to present such a complex product to investors in a way that they can understand? G. Existing Commission Letters Certain Commission letters, or portions thereof, exempting 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 based on the authority provided in 17 CFR 210.3–13 (‘‘3–13 Exemptions’’) would be withdrawn or rescinded in connection with any adoption of this proposal in light of the proposed change to permit RILAs to provide SAP financial statements on amended Form N–4 in the same way that other insurance companies are permitted to do so on current Form N–4.357 Following the compliance date of any final rule, some letters, or portions thereof, would be moot, superseded, or otherwise inconsistent with the final rule and, therefore, would be withdrawn or rescinded. If commenters believe that additional Commission letters or other actions, or portions thereof, should be withdrawn or rescinded, they should identify the letter or guidance, state why it is relevant to the proposal, how it or any specific portion thereof should be treated, and the reason therefor. Based on the proposal, 3–13 Exemptions that would be withdrawn or rescinded would include, but would not necessarily be limited to, all of the 3– 13 Exemptions listed below.
TABLE 8—EXISTING COMMISSION LETTERS
Name Date
Great-West Life & Annuity Insurance Company and Great-West Life & Annuity Insurance Company of New York .................. 9/28/2018 Athene Annuity and Life Company ................................................................................................................................................ 9/28/2018 Allianz Life Insurance Company of North America and Allianz Life Insurance Company of New York ...................................... 9/28/2018 MONY Life Insurance Company of America ................................................................................................................................. 3/7/2019 Symetra Life Insurance Company and First Symetra National Life Insurance Company of New York ....................................... 8/8/2019 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 Financial Life Insurance Company .................................................. 2/11/2021 Midland National Life Insurance Company ................................................................................................................................... 8/12/2021 Protective Life Insurance Company and Protective Life and Annuity Insurance Company ......................................................... 10/14/2022 Everlake Life Insurance Company ................................................................................................................................................ 10/21/2022 Fidelity & Guaranty Life Insurance Company and Fidelity & Guaranty Life Insurance Company of New York .......................... 3/17/2023 Delaware Life Insurance Company and Gainbridge life Insurance Company .............................................................................. 4/28/2023 We request comment on the proposed recessions.
144. Are there any other Commission
letters or actions that should be rescinded or withdrawn if the proposal is adopted?
145. Are there any staff letters or
guidance pieces that would be moot, superseded, or otherwise inconsistent with the final rule?
146. In a future rulemaking, should
we consider codification of any 3–13
Exemptions that have been granted to other insurance products? If so, what considerations should the Commission consider in doing so? H. Registered Market-Value Adjustment Annuities In addition to RILAs, there are other non-investment company insurance products that are securities under the Federal securities laws. Like RILAs, offerings of these securities are currently registered by insurance companies on Forms S–1 or S–3. For example, some annuity contracts that offer fixed investment options and apply marketvalue adjustment annuities (‘‘MVAs’’) to amounts withdrawn from such fixed options before the end of the fixed option’s term (e.g., due to contract withdrawals, transfers to other investment options, and annuitization) are required to register the MVA with the Commission (‘‘registered MVAs’’).358 For these annuities, fixed options are either offered on their own or in a combination contract with variable options. Like RILAs, a significant feature of a registered MVA is the contract adjustment. Because RILAs and registered MVAs differ only with respect to the manner in which interest is calculated and credited, many of the disclosures we are proposing for RILAs on Form N–4 would also be appropriate for registered MVAs. This is particularly true of the proposed disclosures relating to the operation of contract adjustments, given their importance in both a RILA and a registered MVA. We are not proposing to require insurance companies to register offerings of registered MVAs on Form N–4 at this time because the RILA Act does not address these securities and imposes specific timelines for the Commission both to propose rules and to adopt final rules. We request comment below, however, on whether we should also require insurance companies to register offerings of registered MVAs on Form N–4. To help commenters evaluate these requests for comment, we also have analyzed the changes to Form N–4 we believe would be necessary to accommodate offerings of these securities:

Adding registered MVAs to the list
of permissible uses of Form N–4 on the facing page and general instructions; 359
Adjusting the definition of
‘‘Contract Adjustment’’ in the form to

360See proposed Item 6(e)(2) of Form N–4.
361See proposed Item 7(e) of Form N–4.
362See proposed Item 17(c) of Form N–4.
363See proposed Item 26(c) of Form N–4. As with RILAs, if insurance companies were required to use Form N–4 for registered MVAs, they would also be permitted to use SAP in registered MVA registration statements to the same degree as other Form N–4 filers. See supra section II.D. If we were to do this, 3–13 Exemptions provided in connection with registered MVAs would be withdrawn or rescinded for the reasons discussed in section II.G above. 364See proposed Item 31A of Form N–4. 365See proposed Items 27(q) and 34(b) of Form N–4. 366See supra sections II.C, E, and F. 367This definition mirrors that of ‘‘registered index-linked annuity’’ we are proposing to add to rule 405 for RILAs, other than the last provision which borrows from the definition of ‘‘contract adjustment’’ we are proposing to add to Form N–
4. We could also consider creating a defined term
in rule 405 that combines both the RILA and registered market-value adjusted annuity definitions for simplicity. 368See supra section II.B.9. 369Facilitating 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)]. 370See Exempt Offering Framework Adopting Release at amendatory instructions 50 and 51; see also VASP Adopting Release at section II.C.4 (Table 6). 371This compliance period would apply for all of the amendments in this release other than the technical amendment to Form N–6 discussed in
section II.I supra.
account for investment options beyond index-linked options;

In the discussion of how interest is
calculated for the contract’s fixed options in the description of the insurance company, registered separate account, and investment options, requiring: (1) a statement that an investor could lose a significant amount of money due to the contract adjustment if amounts are removed from a fixed option prior to the end of its term, (2) a description of the transactions subject to a contract adjustment with crossreferences to the related disclosure in the prospectus, and (3) a prominent statement of the maximum amount of loss, as a percentage, an investor could experience from a negative contract adjustment and that this loss could be greater due to surrender charges and tax consequences; 360
Adjusting the disclosures in the
prospectus about contract adjustments in the charges-related disclosures to account for investment options beyond index-linked options having contract adjustments; 361
In the appendix of available
investment options, in the discussion of fixed options, requiring: (1) a legend stating that if amounts are withdrawn from a fixed option before the end of its term, the insurance company may apply the contract adjustment and that this may result in a significant reduction in contract value; and (2) the provision of appropriate cross-references to the prospectus disclosure relating to contract adjustments; 362
Requiring registered MVAs to
provide the same disclosure proposed for RILAs regarding changes in accountants; 363
Requiring registered MVAs to
provide the same census-type information as we are proposing for RILAs; 364 and
Requiring the same undertakings
and exhibits for registered MVAs as we are proposing for RILAs.365 In addition to these changes to Form N–4, if we were to require insurance companies to use Form N–4 to register offerings of registered MVAs, we would anticipate providing the same functional changes we are proposing for RILAs, that is, the ability to use a summary prospectus and the use of the same filing and marketing rules, for the same reason as we are proposing these changes for RILAs.366 For example, we could create a defined term ‘‘registered market value-adjusted annuity’’ in rule 405 that would be 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 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) not issued by an investment company; and (5) whose value may reflect a positive or negative adjustment (based on calculations using a predetermined formula, or a change in interest rates, or some other factor or benchmark) if amounts are withdrawn before the end of a specified period. We could then use this definition to apply to registered MVAs those Securities Act rules we propose to apply to RILAs.367 We would also expect to have the same requirements as to the use of Inline XBRL for similar reasons.368 We request comment on whether to require insurance companies to register the offering of registered MVAs on Form N–4.

Would it be appropriate to
require insurance companies to register the offering of registered MVAs on Form N–4 (as proposed to be as amended in this proposal)? Should all of the changes suggested above apply to registered MVAs?
Is the definition of ‘‘registered
market-value adjusted annuity’’ included above as an example the correct one?
Are there any other disclosures
that would be relevant in the registered MVA context?
I. Technical Amendment to Form N–6
The Commission is proposing 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’’).369 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).370 The amendments we are proposing 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 proposing a technical amendment to Item 30 of Form N–6 that correctly reflects the placement of the amendment that the Commission adopted in the Exempt Offering Framework Adopting Release in this item instead of in Item 26. J. Compliance Period We are proposing a compliance date one year after publication of final amendments in the Federal Register.371 All initial registration statements and post-effective amendments that are annual updates to effective registration statements on Form N–4 that are filed after the compliance date would be required to comply with the amendments. This compliance period is designed to give registrants sufficient time to comply with the proposed changes, including to update their registration statements; to prepare to use rules 485 and 497 to update their registration statements and file prospectuses with the Commission; and to begin paying securities registration fees on Form 24F–2. RILAs that have previously registered offerings of securities on Forms S–1 or S–3 would file a post-effective amendment to their registration statement pursuant to rule 485(a) at the

372A 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. RILA registrants generally should be able to rely on template filing relief, in which case they would not need to file a rule 485(a) filing for each RILA. See proposed amended rule 485(b)(1)(vii). Existing RILA issuers that only issue RILAs and will be using the same CIK would 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. RILA issuers that will be acquiring new CIKs for their RILA offerings would need to transition by filing an administrative Form N–4 submission 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). 373A 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 posteffective 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 posteffective 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). 374There would be no transition period associated with the technical amendment to Form N–6 discussed in section II.I supra. 375See supra discussion accompanying and following footnote 7. time of their next annual update following the compliance date, using Form N–4.372 In appropriate circumstances, we would consider requests by registrants with respect to existing variable annuity contracts to file post-effective amendments pursuant to Securities Act rule 485(b)(1)(vii) when these post-effective amendments make conforming changes to comply with the proposed amendments to Form N–4.373 We also are proposing to provide a six-month delayed effective date for all amendments except for the amended Form N–4, amended rule 498A, and technical amendments to Form N–6, such that all other final amendments would be effective six months after publication in the Federal Register. Thus, we propose that a registrant would be able to rely on rule 498A to satisfy its obligations to deliver a RILA contract’s statutory prospectus beginning on the effective date of the rule amendments, provided that the registrant is also in compliance with the amendments to Form N–4.
The delayed effective date for remaining amendments would provide the Commission time to prepare the EDGAR system to accommodate transitioning RILA offerings onto the proposed framework.374 We are not delaying the effective date of the proposed changes to Form N–4 and rule 498A, however, to allow registrants to begin filing registration statements under the revised form as soon as possible. We believe allowing registrants to use the new form as soon as possible following the Commission’s adoption of final amendments is consistent with Congress’s intent in directing the Commission to prepare and finalize a new form for RILAs within 18 months of enactment. We request comment on the proposed compliance period:
150. Would the proposed compliance
period provide registrants sufficient time to prepare to comply with the amendments? Would more time be appropriate or, conversely, should we provide a shorter compliance period to ensure that investors receive the benefit of the proposed amendments more quickly?
151. Should we provide a separate
compliance period to provide more time for insurance companies to comply with the requirement to structure certain disclosure in Inline XBRL? For example, should we provide an additional year period after the date insurance companies are required to first update their disclosure?
152. Is it appropriate to permit a
registrant to rely on rule 498A to satisfy its obligations to deliver a RILA contract’s statutory prospectus beginning on the effective date of the rule amendments, provided that the registrant is also in compliance with the amendments to Form N–4? K. General Request for Comment From Retail Investors We are requesting input from the retail investor community relating to the experiences of seeking information about, and investing in, a RILA. We understand that RILAs are typically sold to retail investors. This, together with the congressional mandate to design disclosure requirements for RILAs with the goal of ensuring that key information is conveyed in terms a purchaser is able to understand, makes feedback from retail investors particularly relevant as we consider the disclosures that would be required in a RILA registration form.375 Specifically, we invite retail investors seeking to comment on their feedback with annuities generally and RILAs in particular to submit a short Feedback Flyer, available at Appendix D.
III. 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 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 proposing 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 proposing to amend 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 proposing to amend certain filing rules and make other related amendments. In addition, we are proposing other amendments to Form N–4 that would apply to all issuers that use that form. We are also proposing to apply a current Commission rule that provides guidance as to when sales literature is materially misleading under the Federal securities laws to RILA advertisements and sales literature. While the Commission has developed a set of specific registration forms for variable insurance contracts, RILA issuers cannot use those forms because a RILA issuer is not an investment company. Currently, insurance companies register the offerings of RILAs 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 RILAs (or indeed insurance products more generally), these forms include a number of disclosure requirements that may be less material to investors when

376Based on analysis of Forms S–1, S–3 and POS AM filed by RILA issuers. 377EDGAR Database. Certain Commission letters, or portions thereof, exempt 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 Section II.G. 378 Data obtained from Forms S–1, S–3 and POS AM filed by RILA issuers. 379 Data obtained from Forms S–1, S–3 and POS AM filed by RILA issuers. 380 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 2022). evaluating an insurance product like a RILA and do not include line-item requirements mandating RILA-specific information that is of importance to investors in these products. The inclusion of disclosures that are of little relevance to investors and the omission of information that is of importance to investors limits the usefulness of the information investors currently receive about RILAs 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, appear to provide sufficient material information for investors evaluating RILAs. Investors may also 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. The proposed rule would increase the usefulness of the information provided to current and prospective investors in RILAs by:

Adapting the existing registration
and disclosure framework for variable insurance contracts to accommodate RILAs;
Requiring RILA-specific disclosure
requirements in Form N–4, including disclosures specific to the underlying investment options, such as, for each available index-linked option, the index, crediting period, and index crediting methodology;
Proposing amendments to Form N–
4 based on our experience in administering the form and in reaction to our observations of investor testing, which would be applicable to all issuers that use this registration form and which are designed to improve disclosures;
Switching the order of the Key
Information Table and Overview of the Contract items;
Utilizing a question and answer
format for the Key Information Table;
Removing an instruction that
permits registrants to omit additional disclosure in the prospectus that repeats information disclosed in the Overview of the Contract or the Key Information
Table; and
Extending the current rule
providing 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 to RILAs, in order to address misleading statements about RILA fees, product features, and certain performance presentations in RILA sales literature. We have considered the potential costs and benefits that would result from the proposed rules, as well as the potential effects on efficiency, competition, and capital formation. Certain potential economic effects of the proposed rule would stem from the statutory mandate, while others would stem from the discretion we are exercising. We discuss the potential economic effects of the proposed amendments in section III.C. We also consider certain alternatives to our proposed approach to implementing the statutory mandate, as discussed in
section III.E. We note that, where
possible, we have attempted to quantify the costs, benefits, and effects on efficiency, competition, and capital formation expected to result from the proposed rule. 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. 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 invites commenters to include estimates and data that could help it form useful estimates of the economic effects of the proposed amendments. B. Baseline
1. Affected Parties
The proposed rule would affect issuers of and investors in RILAs, as well as issuers of and investors in variable annuities that are registered on Form N–4. a. The Market for Annuity Products As of January 2023, there were 90 RILAs registered with the Commission issued by 23 insurance companies.376 Among the 90 RILAs, 50 are stand-alone RILA products, while 40 are combination contracts that offer indexlinked options as well as variable options. The number of RILAs registered with the SEC on Form S–1 is 52, while the remaining 38 are registered on Form S–3. A little over half of the registered RILAs (47 RILAs) report SAP financials, with the remainder (43 RILAs) reporting GAAP financials.377 RILA contracts currently offer a variety of index-linked options. Specifically, RILA contracts that are currently registered with the Commission offer index-linked options whose returns are linked, in part, to between two and nine indices with an average among RILAs of 4.3 indices.378 The indices associated with current RILA contracts commonly include 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 less frequency.379 As discussed in Section I, indexlinked 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. RILAs that are currently registered with the Commission offer between 4 and 64 index-linked options, with an average of 22.8 index-linked options. Common crediting periods include one, two, three, and six years, with one year being most common. In the past, index-linked options with terms as long as 10 years have been offered, although the longest indexlinked option term currently offered is six years. For those ‘‘combination’’ contracts that offer index-linked options and variable options, the number of variable options ranges from 1 to 100, with an average of 10.4 variable options. The most common variable option is a money market fund—in all instances of combination contracts, a money market fund (or, in one case, a similar liquid investment) is offered as a variable option.
Table 9 provides information on the
dollar amount of RILA sales from 2016 to 2022.380 RILA sales have increased from $7.3 billion in 2016 to $41.1 billion in 2022, which represents a 463% increase between these two years.

381Cerulli Associates & Insured Retirement Institute, Custom Key Findings, U.S. Annuity Markets 2021: Acclimating to Industry Trends and Changing Demand Ex. 1 (2021) (‘‘Cerulli Report’’), available at https://www.irionline.org/wp-content/ uploads/2022/02/IRI-Key-Findings_2021_Final_ 12622.pdf. 382 Id. at Exhibit 2. 383 Id. at Exhibit 3. Other RILA distribution channels include: brokerage general agencies/ independent marketing organizations, registered investment advisers, and direct sales. 384Cerulli Report at Exhibit 5. 385See 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. 386 Id. 387 Id. 388 Id. 389 Data obtained from Forms S–1, S–3 and POS AM filed by RILA issuers. 390Calculated using data obtained from Forms S– 1, S–3 and POS AM filed by RILA issuers. 391Annual Estimates of the Resident Population for Selected Age Groups by Sex for the United States: Apr. 1, 2020, to July 1, 2021 (NC–EST2021– AGESEX). We do not have demographic data on RILA investors. A 2013 survey found that 86 percent of individual annuity investors purchased their first annuity before age 65, including 47% 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 70. See The Gallup Organization and Mathew Greenwald & Associates for The Committee of Annuity Insurers, Survey of Ownership of Individual Annuity Contracts (2013). 392Projected Age Groups and Sex Composition of the Population: Main Projections Series for the United States, 2017–2060. U.S. Census Bureau, Population Division: Washington, DC. 393 John Y. Campbell, Restoring Rational Choice:
The Challenge of Consumer Financial Regulation (NBER Working Paper No, 22025, 2016), available at http://www.nber.org/papers/w22025 (‘‘Campbell Paper’’). 394 Insured Retirement Institute, Retirement Readiness Among Older Workers 2021 (2021) (‘‘IRI Survey’’), available at https://www.irionline.org/wpcontent/uploads/legacy/default-document-library/ iri-retirement-readiness-2021_fullreport.pdf. 395See Campbell Paper. Campbell argues that individuals take too little financial risk and that the willingness to take financial risk varies with wealth—individuals with greater wealth are willing to take on more financial risk than individuals with less wealth. 396 John Y. Campbell, Howell E. Jackson, Brigitte
C. Madrian, and Peter Tufano, 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
TABLE 9—SALES OF RILAS, 2016–2022
2016 2017 2018 2019 2020 2021 2022
Sales of RILAs ($ billions) ......................... 7.3 9.0 11.2 17.4 24.1 38.7 41.1 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 2022). 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.381 When surveyed about the factors driving the growth in RILA sales, the three most commonly cited reasons were: (1) increased understanding of RILAs among advisers and broker-dealers (85%), (2) the entrance of large, reputable insurers into the RILA market (80%), and (3) increased supply due to the entrance of large issuers and distributors of RILAs (80%).382 Respondents also indicated that they expected to see the largest increases in sales among the following distribution channels: independent agents or broker/dealers, captive insurance agents, regional broker/ dealers, and wirehouses.383 RILAs were also the product most insurers indicated had ‘‘tremendous’’ growth potential over the near term.384 As of 2019, there were a total of 2,396 unique variable annuity products offered by a total of 33 companies.385 Net assets totaled $2,018.0 billion. Also in 2019, variable annuity sales totaled $98.3 billion.386 Of the total sales, $62.8 billion (64% of total sales) were annuities within qualified plans and $35.5 (36%) were non-qualified annuities.387 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%); wirehouses/regional broker-dealers, $12.6 billion (13%); and direct response, $2.8 billion (3%).388 b. Issuing Insurance Companies The number of insurance companies currently offering securities registered as RILAs with the Commission is 23, from 19 insurance company complexes. Out of these 23 insurance companies, 15 of them register RILAs on Form S–1, while the remaining 8 use Form S–3.389 Insurance companies offer, on average, 4 RILA contracts, ranging from a maximum of 11 RILAs to a minimum of 1 RILA. The top two issuers offer 21 RILAs in total, or 29% of the number of existing RILA products.390
c. Investors
In 2021 there were an estimated 83 million individuals aged 45–64 and 56 million individuals aged 65 or older in the United States, representing 25 percent and 17 percent of the total population, respectively.391 The number of individuals age 65 or older is projected to be 65 million (19 percent of the total projected population) in 2025, 78 million (21 percent of the projected population) in 2035, 83 million (22 percent of the projected population) in 2045, and 90 million (24 percent of the projected population) in 2055.392 Individuals that are planning for, or are already in, retirement face increasing challenges with respect to achieving their income goals for retirement. First, people are living longer. Second, traditional definedbenefit retirement systems that provide guaranteed income are being replaced with defined-contribution systems that require people to accumulate their own retirement savings.393 Evidence suggests that, on average, individuals may not be saving appropriately to meet their retirement goals. For example, one survey found that while 74 percent of individuals are saving for retirement: (1) 51 percent of older individuals have less than $50,000 saved for retirement, (2) 57 percent of individuals save less than 10 percent of their income, and (3) 33 percent of individuals save less than 5 percent of their income.394 In addition to the finding that individuals may not be saving an appropriate amount for retirement, there is also concern that individuals may not be taking on an appropriate amount of financial risk.395 Investors may not be saving appropriately to meet their retirement goals for several reasons. For example, 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.396 Second, improving

conditions, particularly for financial decisions that are undertaken only infrequently. 397See Campbell Paper. 398See Campbell et al. Paper. The Campbell 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 not invest appropriately 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 they expect an asset to 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. 399See Campbell et al. Paper. Campbell et al. note that individuals with present-biased preferences favor present consumption which can lead an individual to make decisions today that reduce their future welfare in a way that the individual later regrets. 400See supra footnote 5 and accompanying text. 401Certain Commission letters, or portions thereof, exempt 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, 47 RILAs report SAP financials. 402See 17 CFR 229.601(b)(101)(i)(B). 403 Generally, Form S–1 (or 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. RILAs 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 RILA investors may make additional allocations or other investment decisions with respect to an investment, unless a prior RILA offering is completely unsold, RILA issuers may have increased difficulty in using filing fees associated with unsold securities of a prior offerings. 404The 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. technology has permitted the development of more complex and confusing financial products.397 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 spend less time and effort (i.e., resources) than is required to make appropriate investment decisions. Investors may not be saving appropriately for other reasons, as well. For example, some investors may not make the appropriate decisions for themselves even if they were presented with all the information that was required to make a decision. Decision making limitations may be particularly problematic in the context of saving for retirement because learning from experience is
difficult. Investing in retirement products is only done infrequently and the outcomes from 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).398 Another possibility is that investors may have preferences that lead them to favor present consumption over future consumption (‘‘present-biased preferences’’) and, as a result, they save an inappropriate amount for retirement.399 Finally, many people have a limited financial capacity to save, particularly individuals already burdened with student loans and mortgages.
2. Current Regulatory Requirements
As discussed in section I above,
RILAs are securities for purposes of the Securities Act, and public offerings of RILAs, therefore, must be registered with the Commission.400 Unlike variable annuity contracts for which the Commission has adopted a specific registration form tailored to those products, insurance companies register RILA offerings on Form S–1 or Form S– 3. 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 the Commission’s EDGAR website. 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 includes audited financial statements prepared in accordance with GAAP.401 Currently, disclosures about RILA offerings are largely unstructured. 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.402 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–

The amount of the fee is based on the
proposed maximum aggregate offering price.403 The issuer must indicate the amount of each type of security being registered and calculate the fee payable for each security. 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.404 Reporting obligations under the Exchange Act include audited financial statements prepared in

405See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b–5. 406 Id. The IRI Fact Book argues that annuities give investors the ability to create their own pensions. The IRI Fact Book also argues that, unlike mutual funds, annuities offer a wide variety of guarantees to protect an investor’s investment. For example, death benefits provide principal protection in the event that an investor dies during a market downturn. 407 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. See IRI Fact Book. 408 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. 409 Id. The IRI Fact Book contends that fixed index annuities are designed for investors who want to partake in the benefits of a market-linked vehicle with a protected investment floor if there is a downturn in the index. 410Currently, insurance companies with a minimum A.M. Best Insurance Ratings of A¥ offer fixed rate annuities that guarantee between 3.70% and 5.40% for a three-year period, and between 3.20% and 5.25% for a ten-year period. Multi-Year Guarantee Annuities (MYGA), ANNUITY ADVANTAGE (accessed Aug. 17, 2023, and filtered by ‘‘State’’ of ‘‘- All’’; ‘‘Min AM Best’’ of ‘‘A¥’’; ‘‘Years’’ of ‘‘10’’; and ‘‘Range’’ of ‘‘Exact’’), https:// www.annuityadvantage.com/annuity-rates-quotes/ multi-year-guarantee-annuities/ ?rating=4&years=10&pos=300&sort=guarantee_ period_yield&limit=all. 411 IRI Fact Book. 412 Id. 413Additionally, 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. 414Thorsten Moenig, It’s RILA Time: An Introduction to Registered Index-Linked Annuities, 89 J. Risk & Ins. 339 (2022) (‘‘Moenig Paper’’). 415See IRI Fact Book. 416 Id. The IRI Fact Book also contends that historically investors generally fell into one of two camps: those willing to exchange safety of principal for modest returns, and those able to tolerate the higher risk of being invested in securities in exchange for greater upside potential. RILAs address a developing demand for products that allow investors some ability to customize a level of risk with which they are comfortable. Structured annuities (i.e., RILAs) meet the needs of the inbetween investor who wants some degree of certainty but also desires some upside potential. 417 Id. 418 Id. accordance with GAAP and 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 the Commission’s EDGAR website. 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. A Form S–3 filed by a non-WKSI must be declared effective by the Commission. A Form S–3 receives either a full review, a targeted review of one or more sections of the registration statement, or no review. Commonly, a full review takes approximately 30 days with targeted reviews taking less time. 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. Under the Federal securities laws applicable to all securities (including RILA offerings), it is unlawful for any person to use materially misleading communications in connection with the offer or sale of any security.405 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. 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.406 There are multiple types of annuities available to help investors who have different financial goals or tolerances for risk save for retirement:
fixed annuities, variable annuities, and RILAs. Fixed annuities offer investors preservation of their investment by guaranteeing a minimum rate of return, but with little opportunity for asset growth. During the accumulation phase,407 a traditional (i.e., book value) fixed annuity offers investors a fixed rate of return (known in advance) for a given period of time.408 A market value adjusted annuity (see section II.H) is similar to a traditional annuity, but the assets are subject to a market value adjustment based on interest rate changes.409 Fixed index annuities guarantee a certain rate of return,410 but also provide the potential for (limited) additional returns based on the performance of a specified market index.411 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.412 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.413 RILAs are an index-linked product that can be purchased by individual investors as part of both qualified and non-qualified retirement accounts.414 RILAs combine features of fixed-index annuities and variable annuities. RILAs limit or reduce downside risk in return for an investor accepting limited 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.415 RILAs allow investors some ability to customize a level of risk with which they are comfortable.416 Like other annuities, RILAs have an accumulation phase followed by a payout phase. The accumulation phase is divided into one or more crediting periods.417 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.418 Investors, however, may lose money if they withdraw early from an investment option or from the contract, as explained in section I.A above. 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,

419 Id.
420 Id. The Moenig Paper argues that RILAs are structurally similar to fixed-index annuities except that RILAs may credit negative returns. A fixedindex 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%). 421See Moenig Paper. 422 Id. 423 Id. 424 Id. 425We understand that for shorter crediting periods and for common indexes such as the S&P 500, insurance companies are able to use exchangetraded derivative securities to closely approximate the insurer’s liabilities from a RILA contract at the end of each crediting period. 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 can 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 would purchase a call option, sell a call option (with a higher strike price), and selling a put option (with a lower strike price, as appropriate given the downside buffer). In this case, the insurance company can 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. 426See Moenig Paper; Public Filings on EDGAR. 427The staff obtained the term rates from Rates:
Current rates for Allianz Index Advantage ADV Variable Annuity, Allianz, https:// www.allianzlife.com/what-we-offer/Annuities/ registered-index-linked-annuities/index-advantageadv/rates (visited Sept. 14, 2023); Variable Annuities, Equitable, https://equitable.com/ retirement/products/variable-annuities (click ‘‘View Performance Cap Rates’’) (visited Sept. 14, 2023); Nationwide Defender Annuity, Nationwide (Sept. 1, 2023), (visited Sept. 14, 2023). 428Each contract designates a distinct set of buffer and cap rates with no additional features. The sample period spans from September 5 to 15, 2023. The Moenig Paper cited an industry survey as a source for the data in its analysis. We understand that the industry survey cited does not contain updated product-level contract-level details beyond the data cited in the Moenig Paper. We request comment on data sources (e.g., pricing vendors) that should be considered for these calculations. See infra section III.F. 429More specifically, the options position encompasses a long At-the-Money (ATM) call option, coupled with a short Out-the-Money (OTM) call option with strike price equal to the index value increased by a factor of the cap rate and a short OTM put option with strike price equal to the index value decreased by a factor of the buffer rate. 430The volatility surface data is obtained through IvyDB OptionMetrics. 431The other model inputs—the end-of-day S&P 500 index value and the risk-free interest rate—are obtained through IvyDB OptionMetrics. 432The staff incorporated any explicit annual product fee charged by the insurance company into the cost calculation. This analysis could be extended to incorporate several additional factors that differentiate the RILA from the replicating strategy that would be priced in a market. For example, it does not consider any effective difference to the investor in liquidity because of early withdrawal charges or penalties, differences in portfolio value prior to maturity, death benefits, or specific crediting methods. We request comment on these aspects of pricing of RILA contracts below. See infra section III.F. subject to restrictions on the upside, through a cap and/or ‘‘participation rate,’’ as well as some form of downside protection.419 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).420 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.421 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 to reduce its upside risk by lowering cap rates.422 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.423 Also, unlike variable annuities, most RILAs do not include any direct ongoing fees or charges to the investor. Insurance companies, however, can benefit from offering RILAs in at least three ways. 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.424 That is, insurance companies set the level of upside limits such that their value (to the issuer) exceeds the cost of providing the downside protection mechanism to investors.425 One study estimates an average annual cost to investors from the imbalance between the downside protections that a RILA contract offers and the upside limits is approximately 0.17% of the RILA investment amount.426 To assess if the findings of the study continue to be relevant for the current RILA market, the staff conducted an independent analysis of RILA contract terms. Specifically, staff examined 24 one-year term rates linked to the S&P 500 index, Nasdaq 100 index, Russell 2000 index, and MSCI EAFE.427 These rates were offered by three insurance companies across a two-week interval.428 In particular, staff calculated the fair value of the portfolio, composed of a risk-free zero-coupon bond with one-year maturity and a collection of hypothetical index options with oneyear expiration that would replicate the promised payoff for each contract.429 Staff used the Black-Scholes formula for European options to derive fair prices of these hypothetical index options. In estimating the implied volatility for each specific strike price, staff utilized an estimated one-year volatility surface.430 The volatility surface estimates the values for implied volatility across a range of standardized options with varying implied strike prices, including both calls and puts. Staff then linearly interpolated between the implied volatilities with implied strikes adjacent to the strike price of each hypothetical option to obtain the implied volatility. This implied volatility is used as an input in the Black-Scholes formula to derive the fair values of the options.431 Staff assumed that the options expire in exactly one year. The annual cost of each contract is defined as the difference between the par value and the calculated risk-neutral fair price of the contract, divided by the par value.432
Table 10 presents the mean and
median annual costs for each of the twenty-four contracts during the sample period. The annual costs hover around zero for all contracts. The mean annual costs are positive for nearly all of the contracts, ranging from 0.04% for contract 22 and 0.93% for contract 20, but negative for others, such as contract 1, contract 2, contract 3, and contract
16. These results are consistent with the
Moenig Paper’s findings of a mean cost of 0.17%.
TABLE 10—PRICING OF TWENTY-FOUR SAMPLE RILA CONTRACTS
Mean
(%)
Median
(%)
Contract 1 ................................................................................................................................................................ ¥0.30 ¥0.30 Contract 2 ................................................................................................................................................................ ¥0.64 ¥0.64

433See supra footnote 431.
434 Id. The Moenig Paper provides the following example. 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. Omitting dividend payments benefits insurers by reducing the cost of providing a given amount of downside protection (e.g., through lower option prices). 435See also supra footnote 431. 436See Moenig Paper. 437 Id. 438 Id. 439 Id. 440Thorsten Moenig and Nan Zhu (2018). Lapseand-Reentry in Variable Annuities, Journal of Risk and Insurance, 85(4), 911–938 (‘‘Moenig and Zhu Paper’’). 441See Moenig Paper.
TABLE 10—PRICING OF TWENTY-FOUR SAMPLE RILA CONTRACTS—Continued
Mean
(%)
Median
(%)
Contract 3 ................................................................................................................................................................ ¥0.30 ¥0.29 Contract 4 ................................................................................................................................................................ 0.57 0.61 Contract 5 ................................................................................................................................................................ 0.34 0.34 Contract 6 ................................................................................................................................................................ 0.37 0.50 Contract 7 ................................................................................................................................................................ 0.42 0.44 Contract 8 ................................................................................................................................................................ 0.39 0.40 Contract 9 ................................................................................................................................................................ 0.60 0.58 Contract 10 .............................................................................................................................................................. 0.72 0.74 Contract 11 .............................................................................................................................................................. 0.51 0.46 Contract 12 .............................................................................................................................................................. 0.09 0.09 Contract 13 .............................................................................................................................................................. 0.22 0.22 Contract 14 .............................................................................................................................................................. 0.24 0.25 Contract 15 .............................................................................................................................................................. 0.35 0.36 Contract 16 .............................................................................................................................................................. ¥0.08 ¥0.11 Contract 17 .............................................................................................................................................................. 0.16 0.11 Contract 18 .............................................................................................................................................................. 0.12 0.13 Contract 19
.............................................................................................................................................................. ¥0.08 ¥0.22 Contract 20 .............................................................................................................................................................. 0.93 0.93 Contract 21 .............................................................................................................................................................. 0.63 0.64 Contract 22 .............................................................................................................................................................. 0.04 0.04 Contract 23 .............................................................................................................................................................. 0.33 0.33 Contract 24 .............................................................................................................................................................. 0.38 0.38 Note: The table summarizes the annual costs for each of the twenty-four contracts offered by three insurance companies during a two-week interval. See Rates: Current rates for Allianz Index Advantage ADV Variable Annuity, Allianz, https://www.allianzlife.com/what-we-offer/Annuities/ registered-index-linked-annuities/index-advantage-adv/rates (visited Sept. 14, 2023); Variable Annuities, Equitable, https://equitable.com/retirement/products/variable-annuities (click ‘‘View Performance Cap Rates’’) (visited Sept. 14, 2023); Nationwide Defender Annuity, Nationwide (Sept. 1, 2023), https://nationwidefinancial.com/media/pdf/VAM-3629AO.pdf (visited Sept. 14, 2023). At the end of each business day, we employ a market price approach to compute the fair value of each contract. We then compare the fair value to the par value to derive the annual cost and incorporate any explicit product fee. Subsequently, we compute the mean and median annual costs for each contract over the two-week measurement period. 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.’’ Further, 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.433 The excluded dividends can act as an implicit ‘‘fee’’ on investors with the magnitude of the implicit fee being comparable to average dividend rates among the underlying index stocks.434 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.B.2.a, charges for early or mid-term withdrawals could include, surrender charges, contract adjustments, and transaction charges (separate from surrender charges).435 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.436 Also, the financial guarantees common to variable annuities are long term and are only applied when the contract terminates, either at maturity or due to the investor’s death, or if the account value reaches zero due to guaranteed withdrawals.437 These factors make variable annuity guarantees difficult to value and hedge due to their long-term nature (potentially 25 years, or more).438 The guarantees that RILA contracts offer as part of their bounded return structure, on the other hand, are shortterm (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.439 Further, guarantees that RILA contracts offer may be much less dependent on investor behavior than variable annuity guarantees. Variable annuity investors may have a strong incentive to surrender or exchange their policy when an embedded guarantee loses its value (i.e., moves ‘‘out of the money’’).440 The guarantees RILA contracts offer reset with the end of the crediting period of the index-linked option the investor selects, so such guarantees are more commonly ‘‘at the money’’ and investors do not have as strong of an incentive to surrender or exchange their policies.441

442 Id.
443 Id.
444 Id.
445See proposed General Instruction B.1 of Form N–4.
446The 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. Additionally, RILAs and variable annuities differ with respect to their use of proceeds. As discussed in Section II.B.4, variable annuity proceeds are held in separate accounts and, therefore, insulated from the issuer’s creditors. Variable annuity proceeds in unitized sub-accounts must be invested as the investor chooses and returns are credited to the account directly. Like variable annuity proceeds, RILA proceeds are placed into a (nonunitized) separate account. As a result, the proceeds are not insulated from the issuer’s creditors. Also, RILA proceeds can be invested as the issuer sees fit. We understand that for index-linked options offering shorter crediting periods, and whose returns are based on common indexes such as the S&P 500 Index, insurance companies are able to invest RILA proceeds in exchangetraded derivative securities that closely approximate the issuer’s liabilities from a RILA contract at the end of each crediting period.442 In doing so, insurance companies are able to hedge away their risk at a low cost. Further, we understand that insurance companies can, and do, invest the remaining proceeds into fixed-income securities (e.g., corporate bonds) that allow them to earn a ‘‘credit risk premium.’’ 443 The credit risk premium can be an important source of benefits to issuers.444
C. Benefits and Costs

Benefits
a. Use of Form N–4
Unlike variable annuity offerings that are registered on Form N–4, insurance companies register RILA offerings on Forms S–1 or S–3. These forms include a number of disclosure requirements that are specific to the insurance company issuing the RILA that the Commission does not require in the registration statements for offerings of variable annuities. We are proposing that insurance companies use Form N–4 to register the offering of RILAs and we are proposing to adapt Form N–4 for that purpose.445 Because it is an existing form, we believe RILA issuers and investors are familiar with Form N–4. As a result of expanding the scope of Form N–4 to address RILAs, RILA offerings would be registered on the same form as variable annuities. Requiring that insurance companies register RILA offerings on Form N–4 would leverage insuranceproduct specific disclosure requirements reflected in the form and also would permit the summary prospectus layered disclosure framework the Commission adopted in 2020 for variable annuities. 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 would benefit investors by making it easier for them to evaluate and compare RILAs, and also to compare other annuity products with RILAs. For example, investors may require less effort to evaluate and compare annuity products that register using the same form. 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. b. Contents of Form N–4 The proposal is designed to facilitate the Commission’s goal it sought to achieve in adopting Form N–4, namely to help investors make an informed investment decision regarding the annuity products that are registered on that form. 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 more reader-friendly presentation, with access to more detailed information for those investors who want it. Providing investors with key information is particularly important in the context of annuity contracts since their structure is typically more complex than other types of investment products commonly sold to retail investors. Specifically, the proposal would update the contents of Form N–4 to specifically address RILAs, 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; (4) providing new principal
disclosures regarding RILA investment options; and (5) providing for new contract adjustment and fee disclosures. The proposal would also include certain other technical and conforming amendments to Form N–4 and related rules designed to accommodate the inclusion of RILA 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. (1) General Instructions The proposal would require RILA 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. We believe 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 could facilitate not only the evaluation and comparison among RILA offerings, but also could facilitate the comparison of RILAs to other annuity products.446 Further, certain investors, while aware of variable annuities, simply may not be aware of RILAs as an investment option. Presentation of information in a consistent manner on Form N–4 could increase investor awareness of RILAs as an investment option. (2) Front and Back Cover Pages The proposal would make certain changes to information currently required on the front and back pages of

447Many 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, we also are proposing to 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 infra footnote 84 and accompanying text. 448Currently, such format is suggested but not required. See General Instruction C.3.(c) of Form N– 4. a prospectus for all registrants on Form N–4. Like variable annuities registered on Form N–4, RILAs would be required to present certain information on the front and back cover pages of the prospectus. The proposal would require several new cover page disclosures for all Form N–4 issuers. One of these would provide additional information distinguishing among the investment options available in the annuities registering on Form N–4 and crossreference 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. Also, the proposal would require the inclusion of three new legends that highlight risks that are particularly prevalent in RILAs. The new legends that highlight risk that are particularly prevalent in RILAs should benefit investors by putting them on notice of these key considerations at the outset, helping the investor make informed decisions. (3) Key Information Table As required for current Form N–4 issuers, the proposal would require RILA issuers to provide a Key Information Table in their registration statements. The KIT includes a summary of five areas: (1) fees and expenses, (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 proposed amendments to the KIT requirements are intended to highlight important considerations related to RILAs, including certain unique and/or opaque aspects of RILAs.447 Consistent with our layered disclosure approach for variable annuities registered on Form N–4, RILA issuers would be 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 would apply to all Form N–4 issuers. In particular, in a change from the current KIT requirements for Form N–4 issuers, the amendments would require that responses in an item be presented in a Q&A format.448 In a change for all Form N–4 issuers, the proposal also would change the order in which the KIT appears relative to the Overview of the Contract disclosures in the prospectus. Overall, the proposed KIT requirements (like the current KIT requirements for variable annuities) are designed to provide a brief description of key facts about a RILA in a specific sequence and in a standardized presentation that is designed to be easy to read and navigate. We believe that 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 RILA offerings. Also, the standardized presentation of information could facilitate not only the evaluation and comparison among RILA offerings, but also could facilitate the comparison of RILAs to other annuity products. (4) Principal Disclosure Regarding RILA Offerings The proposal would amend Form N– 4 to require disclosure that would provide investors with information about all annuities whose offerings are registered on Form N–4 as well as with specific information about RILAs and the index-linked options available under the RILA contracts. With regard to Form N–4 issuers generally, the proposal would require registrants to disclose investment option risk, early withdrawal risk, contract benefits risk, insurance company risk, and the risk of contract changes. With regard to specific information about RILAs, the proposal includes requirements related to: (1) information about RILAs generally and an overview of certain key elements of any index-linked option offered under the contract; (2) a more in-depth description of index-linked investment options available under the contract; (3) the inclusion of an appendix that consolidates certain summary information related to index-linked options and fixed options available under the contract (which would accompany similar information about variable options offered under a ‘‘combination’’ contract); and (4) certain principal risk disclosures relating to investing in the RILA contract that the prospectus describes. The proposed disclosure requirements are designed to provide additional information regarding the risk of investing in Form N–4 issuers generally, as well as the unique aspects of RILAs and certain summary and detailed information about index-linked options available under a RILA contract. The information could benefit investors by making it easier for investors to evaluate and compare variable annuity products registered on Form N–4. The required disclosure relating to index-linked and fixed options available under a contract could 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 RILA contracts offer. (5) Addition of Contract Adjustments and Other Amendments to Fee and Expense Disclosures RILA investors have the ability to take a withdrawal or transfer out their money before the end of a crediting period. If amounts are removed from an investment option before the end of a crediting period, typically an insurance company will apply an interim value adjustment to the investor’s contract value. The IVA, which will adjust the contract value based on a formula, can move up and down as market conditions change throughout the crediting period and may adjust daily. The IVA is irrelevant if the investor does not move money from an investment option until the end of the crediting
period, but it becomes relevant if the investor withdraws or transfer the money before the end of a crediting period. Similarly, a positive or negative market value adjustment could apply if amounts are partially or fully withdrawn from the contract 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. We propose amendments to Form N– 4 to 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 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, we believe that it is important to include a detailed description of

449See supra section II.B.9.
450See supra footnote 402.
451Currently tagged disclosures include: Item 2 (Key Information), Item 4 (Fee Table), Item 5 (Principal Risks of Investing in the Contract), Item 10 (Benefits Available under the Contract), and Item 17 (Portfolio Companies under the Contract). See Instruction C.3.h of Form N–4; 17 CFR 232.405(b)(2)(iii). contract adjustments in the registration statement. Specifically, we are proposing to 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. We are also proposing 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. We believe that these disclosures would benefit investors since they would be able to better evaluate the costs of purchasing and owning annuity contracts, including RILAs. In addition, these disclosures can make lessinformed investors aware of RILAs’ unique characteristics, which could increase investor understanding of RILAs as an investing option. (6) Other Amendments to Form N–4 The proposal would include certain other amendments to Form N–4 and related rules designed to accommodate the inclusion of RILA 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 that help to implement the proposal. Because these other amendments to Form N–4 and related rules are designed to accommodate the inclusion of RILA 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. The proposal would also amend Form N–4’s required exhibits list to add new Item 27(p) for all issuers, which would require 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 in regard to the placement of a required power of attorney exhibit within the exhibit list. This amendment would 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 RILAs in a manner that is consistent with their overall financial needs and objectives. We are also proposing to add new Item 31A in Form N–4 to require census-type information on RILAs offered in connection with the applicable registration statement. Under this proposed new item, an insurance company would have to provide information regarding any RILA 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 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. The information in new Item 31A would help the Commission and staff in identifying trends in insurance companies’ offerings of RILAs and have a more complete understanding of the marketplace for annuity securities. We also propose amendments to Item 34 of Form N–4 to require RILA issuers 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 posteffective amendment to its 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 proposed undertakings are the same as two undertakings RILA issuers currently provide in registration statements. We believe that it remains appropriate for RILA issuers to continue to furnish these representations concerning posteffective amendments to a registration statement as, under the proposed amendments, RILAs may be continuously offered on a registration statement for an indefinite amount of time. (7) Remaining Items The proposal would require RILA 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 filers to provide disclosure in response to the remaining items on Form N–4 to the extent applicable would help ensure that comparable information is provided in a standardized, consistent manner for all filers using Form N–4. We believe standardized, consistent disclosure of comparable information benefits investors by making it easier for investors to evaluate and compare RILA offerings. Also, the presentation of information in a standardized, consistent manner across all filers using Form N–4 could facilitate not only the evaluation and comparison among RILA offerings, but also could facilitate the comparison of RILAs to variable annuities. Further, certain investors, while aware of variable annuities, simply may not be aware of RILAs as an investment option. Presentation of information in a standardized, consistent manner on Form N–4 could increase investor awareness of RILAs as an investing option. Facilitating the comparison of annuity products could benefit investors by helping them to invest in RILAs in a manner that is consistent with their overall financial needs and objectives. (8) Inline XBRL The proposal would require many of the newly added disclosures on Form N–4 to be structured (i.e., tagged) in Inline XBRL, a structured, machinereadable data language.449 In addition, RILA issuers would have to tag those prospectus disclosures that Form N–4 currently requires to be tagged. Currently, disclosures about RILA offerings are largely unstructured; only the insurance company’s financial statements, if reported in GAAP and included in a registration statement that includes a price or price range, are required to be tagged in Inline XBRL.450 Certain of the existing disclosures on Form N–4 are required to be tagged in Inline XBRL.451 The proposed tagging requirements are designed to make the tagged disclosures more readily accessible for aggregation, comparison, filtering, and other analysis. As a point of comparison, XBRL requirements for
public operating company financial statement disclosures have been observed to improve investor understanding of the disclosed

452See, 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., Chang, S., Siqueira, W.Z. & K. Tam, 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). 453Research 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, George F. Loewenstein, Sally Blount, Max H. Bazerman (1999). Preference Reversals Between Joint and Separate Evaluations of Options: A Review and Theoretical Analysis, Psychological Bulletin, 125(5), 576–90; see also Jeffrey R. Kling, Sendhil Mullainathan, Eldar Shafir, Lee Vermeulen, Marian V. Wrobel (2012). Comparison Friction: Experimental Evidence from Medicare Drug Plans, Quarterly Journal of Economics, 127(1), 199–235. In a randomized field experiment, some senior citizens choosing between Medicare drug plans were randomly selected to receive a letter with personalized, standardized, comparative cost information. Plan switching was 28% in the group that received a letter with personalized, standardized, comparative cost information, but only 17% in the comparison group, and the intervention caused an average decline in predicted consumer cost of about $100 a year among letter recipients. 454 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 Report at Section 5, Qualitative Testing, Results from Round 1. 455Some 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 would, under the proposed rule, be available online and in paper or electronic format upon request. information.452 While those observations are specific to operating company financial statement disclosures (including footnotes), and not to disclosures on Form N–4, they indicate that the proposed Inline XBRL requirements would provide investors with increased insight into key features of the contract that is described in the Form N–4 registration statement. 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.
c. Option To Use a Summary Prospectus
We are proposing to amend 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 statutory prospectus delivery obligations. Investors would continue to have access to the RILA statutory prospectus and other information about the RILA 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 readerfriendly presentation, with more detailed information available elsewhere. The proposed amendments to rule 498A would broaden the scope of the rule to address RILA contracts. As discussed in section II.C above, the proposed amendments to rule 498A would involve the use of two distinct types of summary prospectuses for RILA contracts, employing the same approach the rule currently uses for variable contracts. An ‘‘initial summary prospectus,’’ covering contracts offered to new investors, would 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 would also require ‘‘updating summary prospectuses’’ to be provided to existing investors in RILA contracts. The updating summary prospectus would include 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 would be provided in both the initial summary prospectus and updating summary prospectus. The proposed rule would create a choice for insurance companies. They may meet their prospectus delivery obligations by providing the statutory prospectus, or they may satisfy these obligations 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 proposed amendments to meet their prospectus delivery obligations. 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. The presentation proposed for the initial summary prospectus may also reduce the investor effort required to compare RILA contracts, to consider different index-linked options that a RILA offers, or to compare RILA contracts with each other and with variable annuity contracts, when an investor considers a new investment. Information provided in a concise, userfriendly 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.453 If insurance companies choose to meet their prospectus delivery obligations by delivering summary prospectuses to investors, with other documents available online, investors would then have a choice as well. Under the layered disclosure framework we are proposing for RILAs, investors would receive information in the form of a summary prospectus, with more detailed information available online if the investor chooses to access it.454 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 RILA issuers would 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. Initial Summary Prospectus. Should insurance companies issuing RILAs choose to use summary prospectuses, investors may benefit in a number of ways.455 The proposed initial summary prospectus for RILAs would 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 RILA, thereby facilitating investors’ evaluation of those features and risks. We are proposing a standardized presentation for RILA 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

456Proposed rule 498A(b)(5).
457There is evidence that the summarization of key information is useful to consumers. See, e.g., Sumit Agarwal, Souphala Chomsisengphet, Neale Mahoney, Johannes Stroebel, 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. 458See John Beshears, James J. Choi, David Laibson & Brigitte C. Madrian, 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-affectindividuals-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). 459See 2012 Financial Literacy Study. 460See George Loewenstein, Cass R. Sunstein & Russell Golman. (2014) Disclosure Psychology Changes Everything, 6 Ann. Rev. Econ. 391 (2014). 461Prior 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. 462Tailored Shareholder Reports Adopting Release. 463See supra footnote 453. information. An initial summary prospectus must contain the information required by the rule, and only that information, in the order specified by the rule.456 The information would be 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 RILA contracts, as well as comparisons between RILA contracts and variable annuities. We believe standardized, consistent disclosure of comparable information benefits investors by making it easier for investors to evaluate and compare RILA offerings. Also, the presentation of information in a standardized, consistent manner could facilitate not only the evaluation and comparison among RILA offerings, but also could facilitate the comparison of RILAs to other variable annuities. Further, certain investors, while aware of variable annuities, simply may not be aware of RILAs as an investment option. Presentation of information in a standardized, consistent manner in an initial summary prospectus could increase investor awareness of RILAs as an investing option. In addition, given the time required to review a statutory prospectus, RILA 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.457 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.458 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.459 Also, investors allocate their attention selectively,460 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 RILA 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.461 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.462 To the extent summary prospectuses increase readership of RILA contract disclosures, they could improve the quality and efficiency of portfolio allocations made on the basis of disclosed information for those investors who otherwise would not have read the statutory prospectus. The presentation proposed for the initial summary prospectus may also reduce the investor effort required to compare RILA contracts, to consider different index-linked options that a RILA offers, or to compare RILA contracts with each other and with variable annuity contracts, when an investor considers a new investment. Information provided in a concise, userfriendly 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.463 For example, the proposed amendments would require insurance companies to distill certain key product information into tables, which could facilitate comparison across different products. Further, the proposed framework for RILA contract summary and statutory prospectuses also includes design elements to facilitate investor use. In particular, the proposed 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 would 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 proposal would 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 would 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 proposing that RILA issuers send an

464Proposed rule 498A(c)(1).
465See supra footnote 285 and accompanying text.
466Proposed rule 498A(c)(6).
467Certain Commission letters, or portions thereof, exempt 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. 468See 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)]; see also item 11(i) of Form S–1. updated initial summary prospectus to investors each year. Instead, any RILA issuer that relies on rule 498A would send an updating summary prospectus, which would provide a brief description of certain changes with respect to the contract that occurred within the prior year.464 The updating summary prospectus would also include certain of the information required in the initial summary prospectus that we consider most relevant to investors when considering additional investment decisions.465 Further, updating summary prospectuses for RILA contracts, like initial summary prospectuses, would include specific disclosure items appearing in a prescribed order, under relevant corresponding headings.466 An updating summary prospectus for a RILA contract would have to contain the information required by the rule, and only that information, in the order specified by the rule. The proposed updating summary prospectus for RILAs would 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 RILA contract do not change from year-toyear, 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 proposed amendments, the updating summary prospectus would 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 RILA 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 proposed updating summary prospectus, if used by issuers to satisfy their prospectus delivery obligations, would 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 foregoing the repetition of most information that had remained unchanged. d. Use of Statutory Accounting The proposal would permit RILA issuers to provide financial statements on amended Form N–4 in the same way that insurance companies currently do on Form N–4.467 As a result of this change, the financial statements filed in connection with a RILA registration statement could 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, appear to provide sufficient material information for investors evaluating RILAs. As a result, permitting insurance companies to provide SAP financial statements when registering the offering of a RILA to the same extent as they can in connection with variable annuities on Form N–4 would be consistent with investor protection. Also, investors could benefit to the extent the reduced cost burdens provided by SAP financial statements are passed along to investors. The proposal also would require RILAs 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, RILAs would 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 on Forms S–1 and S–3 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.468 Because the requirements for Form N–4 filers under the proposal are the same as for Form S–1 and Form S–3 filers currently, we would not expect any additional benefits from the requirement to
provide information relating to changes in and disagreements with accountants on accounting and financial disclosure. e. Filing Rules Fee Payment Method and Amendments to Form 24F–2. The proposal would require RILA issuers to pay registration fees for RILAs using the same method that other filers on Form N–4 currently use. Issuers registering the offerings of RILAs on amended Form N–4 would be deemed to be registering an indeterminate amount of RILAs upon effectiveness of the registration statement. These issuers would 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 proposal would further specify the calculation method for paying RILA registration fees, consistent with the fee calculation methodology that applies to current Form N–4 filers. The proposal would also indicate when issuers can take credits for RILA 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. The proposed filing rules would provide benefits to insurance companies. Rather than registering a specific amount of securities, insurance companies would register an indefinite amount of securities upon the effective date of their registration statement. Registering an indefinite amount of

securities benefits insurance companies by eliminating the risk that a RILA 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 RILAs. 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.E, the proposal would require RILA 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 proposal would amend rule 485 under the Securities Act to require RILA issuers to use that rule when amending RILA registration statements on Form N–4. Requiring RILA issuers to use that rule when amending RILA registration statements on Form N–4 would permit RILA 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 RILA market, to structure terms of RILAs 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 proposal would require RILA issuers to apply rule 497 under the Securities Act when appropriate to file RILA prospectuses and prospectus supplements with the Commission. Under the proposed amendments, a RILA issuer would be required to file every prospectus relating to a RILA 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 would expect this benefit to be minimal, however, because rule 424 under the Securities Act requires RILA issuers only to file prospectuses that contain substantive changes. Prospectuses required to be filed under rule 497 that would not be required to file under rule 424, then, would be prospectuses updated with minor, non-substantive changes and likely of limited informational benefit to investors. 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 posteffective 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 proposal, then, RILA investors would have all the information available in one location 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. Issuers may benefit from applying rule 497 as well. The proposed rule would facilitate a uniform post-effective amendment and prospectus filing framework for all Form N–4 filers, which would 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. f. Materially Misleading Statements in RILA Sales Literature The proposal would amend rule 156 to make its provisions applicable to RILA sales literature. 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. Proposed amendments to rule 156 would indicate that whether a statement involving a material fact is misleading in RILA sales literature would depend on an evaluation of the context in which it is made, with the rule providing nonexhaustive factors to guide in this determination. For example, rule 156(b)(1)(ii) currently 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. This provision, where made applicable to RILA sales literature, would generally require an insurance company to consider whether an advertisement would 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, if sales literature advertises a particular feature of the product’s bounded return structure
that is not available for the life of the product or the full term of any surrender charge period, the provision as made applicable to RILA sales literature would require consideration of whether the statement is misleading without providing additional context as to the issuer’s discretion to make changes. Further, rule 156(b)(4) currently provides 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. We are proposing to amend this provision also to address representations about the fees or expenses associated with a RILA contract. In the context of RILA sales literature, this provision as amended would require consideration about whether representations or portrayals either of a RILA’s costs or charges, or optional benefits that are subject to a contract adjustment, would require qualifying statements or explanations regarding the economic costs to the investor to receive an advertised benefit or those generally associated with the RILA. Also, rule 156(b)(2)(i) currently 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

469See infra Table 13.
470An 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/accounting financialreporting/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)]. 471See infra Table 16. 472Based on analysis of Forms S–1, S–3, and POS AM filed by RILA issuers. 473See also infra section III.D. 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. This provision, where made applicable to RILA sales literature, would require consideration of whether illustrations about the operation of a RILA 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 RILA sales literature, applying rule 156 to RILAs would provide investors with protections and help 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 as well as investor comparison of RILAs to other annuity products.
2. Costs
The proposal could lead to certain additional costs for insurance companies. These costs would likely vary across insurance companies, depending on their existing lines of business. Costs may also vary depending on the extent to which insurance companies 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 would 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 RILAs frequently, and for those insurance companies that do not experience changes in, and disagreements with, accountants on accounting and financial disclosure. We anticipate that the costs to insurance companies would be comprised of both direct compliance costs and indirect costs. Direct costs for insurance companies would 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 proposal could lead to certain costs for investors as well. Any portion of additional costs that is not borne by insurance companies would ultimately be passed on to RILA investors. Investors also may bear costs associated with certain proposed changes such as the proposed change in filing rules as well as an insurance company’s option to use a summary prospectus. a. Direct Costs Form N–4. We believe that the direct costs associated with the proposed amendments would be most significant for the first Form N–4 registration statement that an insurance company would be required to prepare and file because the insurance company would 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 would 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) would be ameliorated to the extent an insurance company currently has experience and systems in place to prepare and file registration statements on Form N–4 (e.g., the insurance company currently offers variable annuities whose offerings are registered on Form N–4). We estimate the aggregate additional annual internal time cost
to be $16,133,834 and the aggregate annual external cost burden to be $2,914,740.469 Insurance companies would 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.470 We estimate the total aggregate additional annual internal time cost for XBRL compliance would be $308,560 and the aggregate annual external cost burden to be $63,000.471 In addition, 22 of the 23 insurers that issue RILAs 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.472 As such, to the extent these 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 would 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 proposed to be tagged, and reviewing the tags selected for those disclosures. Accordingly, we do not anticipate that the costs associated with Form N–4 tagging would be significant enough to deter insurance companies from entering the market for RILAs. As such, we do not expect that the new and modified tagging requirements in this proposal would decrease competition in the market for RILAs.473 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

474See Table 11, Rule 498A PRA Estimates.
475See Table 11, Rule 498A PRA Estimates. 476See VASP Adopting Release at n.1084. 477The 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. 478See Table 11, Rule 498A PRA Estimates. As discussed in footnote 477, these costs could be greater for Form S–3 filers than for Form S–1 filers. Also, we estimate an additional internal time cost of $2,436 for each additional prospectus required to be filed by separate account registrants. 479We estimate an initial burden of 15 hours, per advertisement, to review existing advertising materials at a blended cost of $381 ($5,715 = 15 × $381). See Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements adopting release at footnote 744. 480We estimate an initial burden of 5 hours, per advertisement, to review existing advertising materials at a blended cost of $381 ($5,715 = 15 × $381). See Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements adopting release at footnote 745. 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 would 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. We estimate the average annual burden to prepare initial and updating summary prospectuses to be $5,000 per registration.474 Insurance companies that choose to provide summary prospectuses are required to make statutory prospectuses and other materials available online. We estimate the aggregate cost to comply with the proposed website posting requirements of the rule for documents relating to RILAs to be $772 per registrant.475 However, some of these costs may have already been incurred by issuers of ‘‘combination’’ contracts offering variable options as well as index-linked options. Insurance companies that rely on rule 498A to use summary prospectuses for variable annuities are also required to include inter- and intra-document linking and special terms definitions. One linking requirement would allow the reader to move back and forth between a table of contents of the contract statutory prospectus or SAI, and the related sections of each document. Although prospectuses and SAIs are not required
to have individual headings corresponding to the items in the registration forms, we assume that the sections of a prospectus or SAI would correspond with the item requirements of the forms. We estimate that Form N–4 filers would require 27 back-and-forth internal links. The other linking requirement would allow the reader to move back and forth between each section of the summary prospectus and any related section of the contract statutory prospectus and SAI that provides additional detail. This backand-forth movement could occur either directly from the summary prospectus to the relevant section of the statutory prospectus or SAI, or indirectly by linking from the summary prospectus to a table of contents in the statutory prospectus or SAI. For our analysis, we assume direct links as those will tend to be more costly when compared with indirect linking through a table of contents. An initial summary prospectus for a Form N–4 issuer includes eight sections. The Key Information Table has instructions stating that, wherever feasible, a registrant should provide cross-references or links to the location in the statutory prospectus where the subject matter is described in greater detail. There are 12 sections of the Key Information Table. Therefore, we estimate that there would be 18 backand-forth links between initial summary prospectuses and statutory prospectuses for a Form N–4 issuer. An updating summary prospectus for a Form N–4 issuer includes three sections, one of which, the Key Information Table, includes 12 sections. One section is the ‘‘Updated Information About Your Contract’’
section. The number of links in this
section would depend on the number of
updates discussed. For example, assuming discussion of four updates, we estimate the number of back-and-forth links between a Form N–4 issuer’s updating summary prospectus and statutory prospectus to be 16. The proposed rule amendments would also require that RILA investors either be able to view the definition of each special term used in an online summary prospectus upon command (e.g., by ‘‘hovering’’ the computer’s pointer or mouse over the term), 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. We assume that RILA issuers could replicate links to a glossary or the computer code required to implement access to definitions by ‘‘hovering’’ over a term with little or no burden, but that there would be a burden associated with creating the requisite link or code for each special term. Accordingly, we estimate the cost to comply with the proposed requirement to include interand intra-document linking and special terms definitions as described above would include 6 burden hours and a cost of $800 annually, per registrant.476 Filing the Prospectus. As discussed in
section II.E, RILA issuers 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 proposed amendments, a RILA issuer would be required to file every prospectus relating to a RILA offering that varies in form from a previously filed prospectus before it is first used. The proposed requirement could increase the number of prospectuses required to be filed by RILAs which could, in turn, increase costs for issuers.477 For each additional prospectus required to be filed by RILAs, we estimate an addition internal cost burden of $113,659.70 and an external cost burden of $24,000.478 Materially Misleading Statements in RILA Sales Literature. The proposal would amend rule 156 to make its provisions applicable to RILA sales literature. The cost of the proposed amendments would include the direct cost of analyzing advertising materials in light of the guidance rule 156 provides. This may require review and approval of advertisements beyond what occurs currently, particularly because determining whether a statement involving a material fact is misleading in RILA sales literature would 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 the rule adoption. That is, these costs would be transition costs and not sustained beyond the first year. We estimate that the transition costs associated with the proposed advertising rule amendments would be $5,715.479 Also, ongoing sales literature activity may require internal review and approval of advertisements. We estimate that the costs associated with ongoing sales literature activity would be $1,905, annually.480 These costs would be borne

481According 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’’). 482See 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.
by issuers and third parties who prepare RILA advertisements. b. Indirect Costs Form N–4. While the prospectuses and other registration statement disclosure required by the proposal would likely facilitate investor evaluation and comparison of RILAs, investors could experience certain transition costs under the proposal, and some investors may experience other ongoing costs. Transition costs would 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 would 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 RILAs. Option to Use a Summary Prospectus. While we expect that, should insurance companies opt to use summary prospectuses, the majority of investors would 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 RILA investors who prefer to rely on statutory prospectuses when making investment decisions. While RILA statutory prospectuses would continue to be available online and in paper or electronic copy upon request, access to those statutory prospectuses would 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 would 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 RILA investors is not universal, those investors without home internet access might experience a reduction in their ability to quickly and easily access statutory prospectus information.481 Even for those investors with home internet access, there may be some resistance to taking the additional step of accessing the statutory prospectus online. Use of Statutory Accounting Principles. The proposal would permit RILA 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 would be that the financial statements filed in connection with a RILA registration statement could be prepared in SAP to the same extent as currently permitted for insurance companies’ financial statements filed on that form. The proposed rule would create a choice for certain insurance companies. They may prepare their registration statements in SAP, or they may prepare their registration statements in GAAP. Those insurance companies that expect to benefit from preparing their registration statements in SAP (e.g., through reduced costs) would choose SAP. Those insurance companies that do not expect to benefit from the option to prepare their registration statements in SAP
would continue to prepare their registration statements in GAAP. Because the proposed rule would, for certain issuers, create the option, but not the obligation, to prepare their registration statements in SAP, we do not believe this provision of the proposed rule would create additional costs. Filing and Prospectus Delivery Rules. As discussed in section II.E, when a RILA issuer seeks to amend a RILA 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 RILA offerings to become automatically effective may eliminate such reviews and, as a result, possibly increase the costs to investors. However, issuers would 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. As discussed in section II.E.3, we understand that RILA 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.482 Materially Misleading Statements in RILA Sales Literature. Issuers and third parties involved in preparing or disseminating investment company advertisements may incur costs to comply with the proposed advertising rule amendments. While reducing the potential for misleading or fraudulent statements in RILA sales literature would 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 funds would incur to implement the proposal. Alternatively, if the cost of compliance with these proposed amendments were significant, some RILAs might reduce advertising to lower the extra costs of compliance. If this were to occur, investors who would otherwise rely on advertisements to make investment decisions about RILAs or compare RILAs 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 RILA 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

483 If market frictions are sufficiently large, market frictions could eliminate exchange altogether. 484We 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. 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. 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 contract purchase and could discourage investors from considering RILAs even in circumstances where investment in a RILA would be beneficial. For their part, insurance companies only supply RILAs 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 RILAs, 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.483 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 as well as facilitating the comparison of RILAs to other annuity contracts, the proposed rule could reduce frictions for investors. Requiring insurance companies to use a single registration form and filing process for all RILAs as well as all variable annuity separate accounts that are structured as unit investment trusts, as well as allowing RILA 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 RILA issuers to tag certain key information in Inline XBRL would 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. These increases in efficiency could lead investors to save more appropriately to meet their retirement goals. For example, for existing RILA investors the proposal may increase the likelihood that investors choose to invest more or less money in RILAs 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 proposal may lead existing investors to choose to allocate their money into different investment options that the RILA offers, or different RILAs (or other insurance products like variable annuities) that best meet their needs. The proposal also may help promote investment in RILAs by investors who currently do not invest in RILAs, 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 RILA when the costs of doing so does not justify the benefits. Competition. If the proposed rule increases efficiency of exchange in the RILA market, then we may observe a change in investment in RILAs. For example, if there are individuals who currently do not invest in RILAs (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 RILAs as an investment, then to the extent the proposed rule lowers those costs or makes investor more aware of RILAs, we would expect to observe more investors entering the RILA market. Conversely, there may be RILA 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 RILAs. If there are insurance companies who limit their participation in the RILA market as a result of the requirement to register RILA offerings on Form S–1 or Form S–3 or because of the costs of current prospectus delivery requirements, those insurance companies may increase participation in the RILA market. 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, RILAs could affect competition in the RILA market. The proposed rule could also affect competition by requiring that information about RILAs be presented in a concise, user-friendly way, which could allow investors to compare information across products. Requiring RILA 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 RILA issuers for investor capital. For example, the proposed rule requires issuers to distill certain key product information into tables. The presentation of this information in a table
facilitates evaluation among different RILAs as well as comparison to variable annuities. Greater comparison among different RILAs as well as comparison to variable annuities could lead to greater competition. Furthermore, by reducing the costs associated with aggregating data across RILAs, the proposed Inline XBRL requirement could reduce barriers to entry for third-party data aggregators and induce competition among firms that supply information about RILAs to investors, including other third-party aggregators and sales agents. The effect on competition between insurance companies could be limited, however, to the extent RILA investors rely on an agent to help them select their RILA contract and the investment options under the contract and do not have access to broad comparisons across different RILAs (or among different investment options that the RILA offers) at the time of sale.484 Agents generally only provide their customers with a subset of all RILAs available in the general marketplace. Thus, while the product information in summary prospectuses would facilitate comparison across products offered by the agent, the effect would likely be limited to the agent’s set of products rather than to the broader market. Capital Formation. As discussed in connection with the potential effects of the proposed rule on competition, if the proposed rule increases the efficiency of exchange in the RILA market, then we may observe a change in investment in RILAs. As discussed in section III.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, RILA premiums are not directly invested into the assets of the indexes that are

associated with the index-linked options offered under the contract, but are typically invested into fixed-income securities such as corporate bonds. To the extent that an increase or decrease in the demand for RILAs 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 RILAs to have any effect on the underlying securities. An increase or decrease in the demand for RILAs could, however, increase or decrease the demand for fixed-income securities such as corporate bonds. To the extent the proposed rule 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 RILAs, 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 RILAs 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 RILA proceeds into fixedincome securities such as corporate bonds, there could be an increase in the demand for those securities. The proposed 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 RILA issuers to find appropriate sources of new investors. Smaller issuers in particular 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 RILAs, smaller RILA issuers may benefit from improved coverage by third-party information providers and data aggregators. E. Reasonable Alternatives

Creating an Entirely New Registration
Form for RILAs
The proposed rule would require the registration of RILA offerings on Form N–4. 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 in a concise and reader-friendly presentation. 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 permit insurance companies to substitute SAP financials in lieu of 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. As an alternative, we could have required insurance companies to register RILA offerings on an entirely new form. Form N–4 was designed for investment companies, and RILA issuers are not investment companies. A new form specifically tailored to RILAs could be more beneficial than working to fit them into an existing framework that was designed with a different structure in mind. 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 ‘‘combination’’ contracts that offer index-linked options as well as variable options). Furthermore, given that we are proposing to amend Form N–4 to address those 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 proposed 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 would efficiently provide investors with product-specific information about these combination contracts. As a result, investors would be able to compare annuity products, and the investment options that these products offer, with less time and effort. 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. We preliminarily believe that requiring RILA offerings to be registered on Form N–4 rather than on an entirely new form would also be more efficient for insurance companies since they would generally follow the same procedures they already use for the registration of variable
annuities. Using Form N–4 to register variable annuities and RILA offerings would 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 would be less costly because, if RILA offerings had to be registered on a form other than Form N–4, combination contracts offering variable options and index-linked options would have to use two separate registration forms. Commission staff would also benefit from using Form N–4 for RILAs because the disclosure requirements for variable annuities and RILAs would be located in one form only, and registration statements for these products would be subject to the same filing and review processes. This would reduce the use of resources by Commission staff needed to review the registration statements of RILAs and variable annuities.
Alternatives to Specific Form N–4
Amendments
The Commission is proposing amendments to Form N–4 so that insurance companies can register RILA offerings using that form. While the substance of many of the requirements in Form N–4 would not change from the current version of the form, we are proposing to update some items to include disclosures specifically tailored to RILAs. 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 proposed more or less tailoring the form for RILAs. A larger number of amendments tailored to RILAs than the number we propose would be more costly for insurance companies registering RILA 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 require insurance companies to provide information related to the economic tradeoffs

485See supra section II.B.3.b.
486 Id.
487See, 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. 488See supra section II.H. 489Based on internal estimates, there are 45 registered MVAs from 15 different insurance companies. 27 of these registered MVAs are in combination contracts whereas 18 are standalone. 27 of these registered MVAs use Form S–1 and 18 use Form S–3. Lastly, 26 of these registered MVAs use GAAP financials and 19 use SAP. 490See supra section III.C.1. 491See supra footnote 451. associated with index-linked options. For example, we could require the insurance company to compare a hypothetical investment in the indexlinked 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 in the Moenig Paper and the analysis conducted by the staff in
section III.B.3.485 In such a comparison,
we could either require that the insurance company should 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 require 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, consistent with our analysis in
section III.B.3.486 We could also
consider 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 require the calculation of a disclosure similar to the analysis in the Moenig Paper and the analysis conducted by the staff in section III.B.3 to explicitly include the impact of early withdrawal charges or penalties on the liquidity of the investment. We could also require more prominent placement of these features on marketing or other materials, or we could require a comparison of these features to potential benefits of the RILA to clarify for investors possible trade-offs. Conversely, a smaller number of amendments tailored to RILAs than the number we propose would be less costly for insurance companies. Since insurance companies already use Form N–4 to register variable annuities, and most RILA issuers offer variable annuities registered on Form N–4 (including, in many cases, combination contracts), we preliminarily believe that the costs of complying with the disclosure requirements of the amended form would not be substantial. The amendments to Form N–4 that we propose would promote investor understanding of RILA contracts by presenting information in a clear and concise manner. Proposing a larger number of amendments tailored to RILAs 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.487 Proposing only a subset of amendments tailored to RILAs, as compared with the proposed approach, could result in less investor understanding relative to the understanding resulting from the proposed amendments.
3. Require the Use of Form N–4 for
Registered MVAs
As discussed above, while we are not proposing to require insurance companies to register offerings of registered MVAs on Form N–4, one alternative would have been requiring insurance companies to register the offering of registered MVAs on Form N–
4.488 These offerings are currently
registered on Forms S–1 or S–3 but differ from RILAs only with respect to the manner in which interest is calculated and credited.489 As a result, many of the benefits and costs identified above regarding RILAs would also be true in applying the same registration and disclosure framework to offerings of registered MVAs, including potentially a change to the filing fee process to file on Form 24f–2 and requiring the issuers to follow rule 156. For example, as with RILAs, expanding the scope of Form N– 4 to include registered MVAs would benefit investors by making it easier for them to compare registered MVAs, and also compare registered MVAs with other annuity product offerings registered using Form N–4.490 In particular, because both RILAs and registered MVAs include contract adjustments, the inclusion of specified disclosures about contract adjustments would benefit investors since they would be able to better evaluate the costs of purchasing and owning annuity contracts, including registered MVAs. Requiring the registration of registered MVAs on Form N–4 also would entail efficiency benefits to insurance companies that offer combination contracts, for example ones that include both variable annuities registered on Form N–4 and registered MVAs, as the use of the same registration form for all of these products may reduce these companies’ compliance burdens. Conversely, including registered MVAs on Form N–4 would also entail similar costs to those outlined above for the proposed registration and disclosure approach for RILAs. These would include direct costs to the insurance company, for example filing fees, as well as outside legal and account fees. Direct costs also would include costs associated with filing the first Form N– 4 registration statement in connection with the registration of a registered MVA offering, where the insurance company would be required to familiarize itself with the new registration form and may need to configure its systems to efficiently gather the required information. Further, investors would bear certain indirect costs, such as the cost of adapting to new materials and the changes in the presentation of information. Ultimately, we determined not to propose to require insurance companies to register offerings of registered MVAs on Form N–4 at this time, but we request comment on this reasonable alternative.
4. Limiting Scope of Structured Data
Requirements
The proposed rule would require many of the newly added disclosures on Form N–4 to be tagged in Inline XBRL, and also would require RILA issuers to tag 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.491 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