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Pennsylvania Passes Best Interest Annuity Rule

Pennsylvania is the 19th state to pass a ‘best interest’ rule relating to annuity sales and recommendations based on the National Insurance Commission (NAIC) model rule, which was originally finalized in 2020.

Others may soon follow: According to the Insured Retirement Institute, North Carolina recently issued its own proposed rule, joining several other states in considering proposals based on the work of the NAIC. Sarah Wood, IRI’s director of state policy and regulatory affairs, said WealthManagement.com That speeding up the signing of more states could prompt other states to consider similar moves.

“It’s certainly state by state, but as you see more states sign, it gives companies and producers more direction on how they should approach their compliance efforts,” she said.

In late December, Penn. Government signed by Tom Wolf Legislation amending state statutes on the suitability of annuity transactions to reflect NAIC’s model, according to catalog Recent state fiduciary developments collected by the law firm Fagre Drinker. The new rule requires a manufacturer to “act in the best interest of a consumer under known circumstances at the time the recommendation is made,” and is set to take effect June 20.

NAIC Passed its own model rule in February 2020 In an effort to align the regulatory framework relating to annuity sales and regulations with the federal rules on securities codified in the SEC’s Regulation Best Interest. According to state regulators at the time, this was to ensure that state and federal regulators were not using separate rulebooks.

Shortly after the NAIC passed its model rule, Iowa became the first state to propose its own version based on it, followed closely by Connecticut, ohio, Virginia And idaho, In November last year, Kentucky and Mississippi Became 17th and 18th state to adopt best interest rules based on the model of NAIC.

According to Wood, Pennsylvania’s rule “aligns well” with the NAIC’s model. There are eight other states with proposals currently pending, including Nevada, Maryland, New Mexico, South Carolina, Wisconsin, Hawaii, South Dakota and North Carolina. According to Wood, the latter three states only announced their proposals last month.

“We are certainly pleased with the progress made so far,” she said. “It is encouraging to see the three states put forward new proposals, especially within the first month of the year.”

Of these states, Wood believes Wisconsin may move soon on its legislative rule, suggesting it may be finalized by the end of the state’s legislative session in May, while Maryland , South Carolina and New Mexico entries are rules rather than laws, which makes it more difficult to determine their potential deadlines.

Wood and IRI expect a total of 35 states to have finalized legislation or regulation based on the NAIC’s model by the end of the year.

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