5.2 Pennsylvania Annuity Disclosure Requirements
Key Takeaways
- Pennsylvania requires delivery of the NAIC Annuity Buyer's Guide before or at application
- All surrender charges, fees, and limitations must be disclosed in writing before purchase
- The free look period for annuities is 10 days (30 days for seniors age 65+)
- Guaranteed and non-guaranteed elements must be clearly distinguished in illustrations
- Replacement transactions require comparison disclosures of existing and new annuities
Pennsylvania requires comprehensive disclosures to ensure consumers understand annuity products before purchase.
Buyer's Guide Requirement
Delivery Requirements
| Timing | Requirement |
|---|---|
| Standard Sale | At or before application |
| Replacement | Before application accepted |
| Direct Response | With policy delivery |
Contents
The NAIC Annuity Buyer's Guide includes:
- How annuities work
- Types of annuities
- Questions to ask before buying
- Understanding fees and charges
- Surrender charge information
Fee and Charge Disclosures
Required Written Disclosures
| Fee Type | Disclosure Required |
|---|---|
| Surrender Charges | Full schedule and duration |
| Administrative Fees | Annual charges |
| M&E Charges | For variable annuities |
| Investment Fees | Subaccount expenses |
| Rider Charges | Optional benefit costs |
Surrender Charge Information
Producers must explain:
- How surrender charges work
- Complete surrender schedule
- Duration of surrender period
- Free withdrawal provisions
- Waiver conditions (if any)
Exam Tip: Pennsylvania emphasizes complete surrender charge disclosure. Know that failure to disclose is a serious violation.
Free Look Period
Pennsylvania provides significant free look protections:
Standard Free Look
| Consumer Age | Free Look Period |
|---|---|
| Under 65 | 10 days |
| 65 and older | 30 days |
Free Look Rights
During the free look period:
- Consumer may return annuity for full refund
- No questions asked
- No surrender charges apply
- Period begins upon delivery
Guaranteed vs. Non-Guaranteed Elements
Illustration Requirements
All annuity illustrations must clearly identify:
| Element Type | Examples |
|---|---|
| Guaranteed | Minimum interest rate, minimum death benefit |
| Non-Guaranteed | Current crediting rate, projected values |
| Assumed | Hypothetical returns, projections |
Labeling Requirements
- Guaranteed elements clearly labeled
- Non-guaranteed elements identified as such
- Assumptions stated for projections
- Current vs. guaranteed rates distinguished
Replacement Disclosures
Additional Requirements for Replacements
| Disclosure Item | Requirement |
|---|---|
| Existing Policy Summary | Current values and benefits |
| New Policy Comparison | Side-by-side comparison |
| Surrender Charges | Charges on existing contract |
| Tax Consequences | Potential tax impact |
| New Surrender Period | Length and amounts |
Replacement Notice
The replacement notice must:
- Be signed by the consumer
- Acknowledge replacement is occurring
- Show comparison of key features
- Explain cost of replacement
Senior Consumer Protections
Enhanced Protections for Age 65+
| Protection | Requirement |
|---|---|
| Free Look | Extended to 30 days |
| Suitability | Enhanced scrutiny |
| Documentation | More detailed records |
| Time Horizon | Careful evaluation |
Special Considerations
When selling to seniors:
- Carefully assess liquidity needs
- Consider shorter remaining life expectancy
- Document why surrender period is appropriate
- Ensure senior understands product
When must the NAIC Annuity Buyer's Guide be provided in Pennsylvania?
How long is the free look period for an annuity purchased by a 70-year-old in Pennsylvania?
In a Pennsylvania annuity illustration, which element must be labeled as non-guaranteed?
What additional disclosure is required for annuity replacements in Pennsylvania?
If a Pennsylvania consumer returns an annuity during the free look period, they receive: