Supporting Statement 498A (2023 RILAs)

OMB CONTROL NUMBER: 3235-0765

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 498A
A.

JUSTIFICATION
1.

Necessity for the Information Collection
Section 5(b)(2) of the Securities Act of 1933 (the “Securities Act”) 1 makes it

unlawful for any person, directly or indirectly, to carry or cause to be carried through the
mails or in interstate commerce securities for the purpose of sale or for delivery after sale,
unless accompanied or preceded by a prospectus meeting the requirements of section 10
of the Securities Act. 2 Section 10(a) of the Securities Act describes the type of
information required to be included in a statutory prospectus. 3 Sections 10(b) of the
Securities Act and 24(g) of the Investment Company Act of 1940 (the “Investment
Company Act”) 4 permit the Securities and Exchange Commission (the “Commission”) to
allow the use of a prospectus that omits or summarizes information required by section
10(a). 5
Rule 498A under the Securities Act permits a person to satisfy its prospectus
delivery obligations under Section 5(b)(2) of the Securities Act for variable annuity and
variable life insurance contracts (together, “variable contracts”) by: (1) sending or giving

1

15 U.S.C. 77a et seq.

2

15 U.S.C. 77e(b)(2). A “prospectus,” as defined by the Securities Act, is any prospectus,
notice, circular, advertisement, letter, or communication, written or by radio or television,
which offers any security for sale or confirms the sale of any security, with certain
exceptions. 15 U.S.C. 77b(a)(10).

3

15 U.S.C. 77j. For purposes of this supporting statement, a prospectus meeting the
requirements of a section 10(a) prospectus is referred to as a “statutory prospectus.”

4

15 U.S.C. 80a-1 et seq.

5

15 U.S.C. 77j(b); 15 U.S.C. 80a-24(g).

to new investors key information contained in a variable contract statutory prospectus in
the form of an initial summary prospectus; (2) sending or giving to existing investors
each year a brief description of certain changes to the contract, and a subset of the
information in the initial summary prospectus, in the form of an updating summary
prospectus; and (3) providing the statutory prospectus and other materials online. 6 Rule
498A considers a person to have met its prospectus delivery obligations for any portfolio
companies associated with a variable contract if the portfolio company prospectuses are
posted online. 7 Under the rule, a registrant (or the financial intermediary distributing the
variable contract) relying on the rule must send the variable contract statutory prospectus
(that statutory prospectus must be filed as part of registration statement on Form N-3, N4, or N-6, as applicable) and other materials to an investor in paper or electronic format
upon request. 8 A summary prospectus that complies with rule 498A is deemed to be a
prospectus that is authorized under section 10(b) of the Securities Act and section 24(g)
of the Investment Company Act. 9
On September 29, 2023, the Commission issued a release proposing amendments
to several rules and forms that would modify the registration, offering, and
communications process for registered index-linked annuities (“RILAs”) under the
Securities Act. 10 Specifically, the Commission is proposing to amend rule 498A to permit

6

Rule 498A(b) and (c).

7

Rule 498A(j).

8

Rule 498A(i)(1) and (j)(1)(iii).

9

Rule 498A(b) and (c).

10

Registration for Index-Linked Annuities; Amendments to Form N-4 for Index-Linked and Variable
Annuities, Investment Company Act Release No. 35028 (Sep. 29, 2023), [88 FR 71088 (Oct. 13,
2023)], available at https://www.sec.gov/files/rules/proposed/2023/33-11250.pdf.

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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. Consistent with current rule 498A, the proposed
use of summary prospectuses for RILAs would be voluntary, but the rule’s requirements
would be mandatory for issuers that elect to send or give a summary prospectus in
reliance upon proposed rule 498A. The proposed amendments to rule 498A are part of a
layered disclosure approach that is designed to provide investors with a summary
prospectus to help them make informed investment decisions regarding RILAs.
2.

Purpose and Use of the Information Collection
The purpose of rule 498A is to provide investors with a summary prospectus to

help them make informed investment decisions regarding variable contracts. Unlike
many other federal information collections, which are primarily for the use and benefit of
the collecting agency, this information collection is primarily for the use and benefit of
investors.
3.

Consideration Given to Information Technology
The Commission has provided guidance noting that electronic delivery may be

used to satisfy prospectus delivery requirements under certain circumstances. 11 Rule
498A requires additional information (i.e., the variable contract’s statutory prospectus,
summary prospectuses, statement of additional information, and in the case of a registrant

11

See, e.g., Securities Act Release No. 7233 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)];
Securities Act Release No. 7856 (Apr. 28, 2000) [65 FR 25843 (May 4, 2000)].

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on Form N-3, the registrant’s most recent annual and semi-annual reports to shareholders
under rule 30e-1) to be publicly accessible, free of charge, at a website address specified
on or hyperlinked in the cover of the summary prospectus. The rule also provides an
optional method for satisfying portfolio company prospectus delivery obligations by
making additional information (i.e., the portfolio company’s statutory prospectus,
summary prospectus, statement of additional information, and the most recent annual and
semi-annual reports to shareholders under rule 30e-1) available online at the website
address specified on or hyperlinked in the variable contract summary prospectus.
4.

Duplication
The Commission periodically evaluates rule-based reporting and recordkeeping

requirements for duplication, and reevaluates them whenever it proposes a rule or a
change in a rule. Certain reporting requirements of rule 498A are duplicated by the
requirements of Forms N-3, N-4, and N-6. In particular, under the rule, certain
disclosures may appear in both the summary prospectus and the statutory prospectus, but
this is necessary in light of the policy goals of the rule and parallels the approach to
summary prospectus disclosure in the context of mutual funds and ETFs.
5.

Effect on Small Entities
The information collection requirements of rule 498A do not distinguish between

funds that are small entities and other funds. To the extent that smaller entities would rely
on rule 498A, their burden to comply with its requirements may be greater than for larger
entities due to economies of scale.

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The Commission staff considered special requirements for small entities. The
Commission staff believes, however, that rule 498A will not have a significant economic
impact on a substantial number of small entities. 12 Generally, an investment company is
a small entity if, together with other investment companies in the same group of related
investment companies, it has net assets of $50 million or less as of the end of its most
recent fiscal year. The analysis is slightly different for insurance company separate
accounts. Because state law generally treats separate account assets as the property of the
sponsoring insurance company, rule 0-10 aggregates each separate account’s assets with
the assets of the sponsoring insurance company, together with assets held in other
sponsored separate accounts. 13 As a result, the Commission staff expects few, if any,
separate accounts to be treated as small entities, 14 and no small entities currently file
registration statements on Forms N-3, N-4, or N-6.
The Commission staff reviews all rules periodically, as required by the Regulatory
Flexibility Act, to identify methods to minimize reporting or recordkeeping requirements
affecting small businesses.
6.

Consequences of Not Conducting Collection
Section 5(b)(2) of the Securities Act makes it unlawful for any person, directly or

indirectly, to carry or cause to be carried through the mails or in interstate commerce
securities for the purpose of sale or for delivery after sale, unless accompanied or

12

See Proposing Release, supra footnote 1, at section V.

13

17 CFR 270.0-10(b).

14

See Proposing Release, supra footnote 1, at section V.

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preceded by a prospectus meeting the requirements of section 10 of the Securities Act.
Section 10(a)(3) of the Securities Act generally requires that when a prospectus is used
more than nine months after the effective date of the registration statement, the
information in the prospectus must be as of a date not more than sixteen months prior to
such use. 15 The effect of these provisions is that persons are required to update their
variable contract statutory prospectuses at least annually to reflect current cost,
performance, and other financial information. This legal requirement prevents the
Commission from specifying less frequent distribution of a prospectus—including any
summary prospectus that issuers relying on rule 498A will use—to investors when
offering securities for sale.
The requirement that funds using a summary prospectus must respond to an
investor’s request for additional information within three business days ensures that
investors who wish to review additional information before making an investment
decision will be able to do so.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
The collection is not inconsistent with 5 CFR 1320.5(d)(2).

8.

Consultation Outside the Agency
The Commission and the staff of the Division of Investment Management

participate in an ongoing dialogue with representatives of the variable contract industry
through public conferences, meetings, and informal exchanges. These various forums
provide the Commission and the staff with a means of ascertaining and acting upon the

15

See 15 U.S.C. 77j(a)(3).

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paperwork burdens confronting the industry. In addition, the Commission has requested
public comment on the proposed amendments to rule 498A, including the collection of
information requirements resulting from the proposed amendments. The Commission’s
solicitation of public comments included estimating and requesting public comments on
the burden estimates for all information collections under this OMB control number (i.e.,
both changes associated with the rulemaking and other burden updates). All comments on
the proposal are available at https://www.sec.gov/comments/s7-16-23/s71623.htm.
Before adopting these amendments, the Commission will receive and evaluate public
comments on the proposed amendments and their associated collection of information
requirements as required by 5 CFR 1320.11(f).
9.

Payment or Gift
No payment or gift to respondents was provided.

10.

Confidentiality

No assurance of confidentiality was provided.
11.

Sensitive Questions
No information of a sensitive nature, including social security numbers, will be

required under this collection of information. The information collection does not collect
personally identifiable information (PII). The agency has determined that a system of
records notice (SORN) and privacy impact assessment (PIA) are not required in
connection with the collection of information.

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12.

Burden of Information Collection

The following estimates of average burden hours and costs are made solely for
purposes of the Paperwork Reduction Act of 1995 16 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules
and forms.
The respondents to these collections of information would be RILA issuers and
registered variable contract separate accounts. The information provided under rule 498A
will not be kept confidential.
In our most recent Paperwork Reduction Act submission for rule 498A, we
estimated for rule 498A total aggregate annual hour burden of 14,688 hours, and a total
aggregate annual external cost burden of $11,559,420. 17 We estimate that 90 RILAs
would be registered using Form N-4 if the proposal was adopted and that there are 419
registrants on current Form N-4 that would be impacted by the proposed amendments. 18
The summary prospectus is voluntary, so the percentage of RILA issuers that will choose
to utilize it is uncertain. Given this uncertainty, we have assumed that insurance
companies will choose to use a summary prospectus for 90% of all RILAs, which is the
same as our current estimate for variable contract separate accounts. The table below

16
17

44 U.S.C. 3501 et seq.

On Nov. 13, 2020, the Office of Management and Budget approved this collection of information
estimate for rule 498A.
18
The RILA estimate is based on a review of RILA registration statements filed with the Commission as
of May 2023 and the current Form N-4 registrants estimate is based on Form N-CEN reports through Apr.
15, 2023.

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summarizes our PRA initial and ongoing annual burden estimates associated with the
proposed amendments to rule 498A.
Table 1: Rule 498A PRA Estimates
Internal initial
burden hours

Internal annual
burden hours

Internal time
costs

Wage rate2

Annual external
cost burden

PROPOSED ESTIMATES
Separate Account Registrants
Proposed Amendments

91

61

$425 (compliance attorney)

$2,550

Number of registrants3

x 419

x 419

Total annual burden

2,514

$1,068,450

Use of summary prospectus

x 90%

x 90%

Total new annual burden for Reliance
on Rule 498A

2,262.60

$961,605

-

-

-

RILA Registrants
Preparation and filing of Initial Summary
Prospectus/Updating Summary
Prospectus

40

24.674

$313 (blended rate)5

$7,709.38

$5,0008

Online Posting of Contract Documents

2

2.676

$289 (webmaster)

$771.63

-

Total burden per registrant

-

27.34

-

8,481.01

$5,000

Number of registrants7

-

x 90

-

x 90

x 90

Total annual burden

-

2,460.60

-

$763,290.90

$405,000

x 90%

x 90%

x 90%

2,214.54

$686,961.81

$364,500

Use of summary prospectus

Total new annual burden for Reliance

9

on Rule 498A
ESTIMATES FOR PRINTING AND MAILING BY RILA REGISTRANTS9
Initial Summary Prospectus

$120,000

Updating Summary Prospectus

$1,048,000

Total annual burden

$1,168,000

Use of summary prospectus

x 90%

Total new annual burden for Reliance
on Rule 498A

$1,051,200
Total Burdens
Responses

Internal Hour
Estimate

Internal Hour
Cost Estimate

External Cost
Estimate

676

14,688

$3,900,193

$11,559,420

Aggregate proposed additional annual
burden estimates

+8310

+4,477.14

+1,648,566.81

+$1,415,700

Revised aggregate annual burden
estimates

=759

=19,165.14

=5,548,759.81

=$12,975,120

Current aggregate annual burden
estimates

As summarized above, in our most recent Paperwork Reduction Act submission
for rule 498A, Commission staff estimated that the annual compliance burden to comply
with the collection of information requirements of rule 498A is 14,688 hours, with an
internal cost of about $3.9 million. We estimate that the total internal burden associated
with rule 498A will be 19,165.14 hours per year, at a cost of about $5.5 million.
13.

Costs to Respondents
Cost burden is the cost of goods and services purchased to prepare, submit, and

disseminate documents using rule 498A. The cost burden does not include the hour
burden discussed in Item 12 above. The Commission staff estimates for rule 498A a total

10

annual external cost burden of $12,975,120, which includes the costs associated with the
printing and mailing of summary prospectuses.
14.

Costs to Federal Government
The annual cost of reviewing and processing registration statements,

post-effective amendments, proxy statements, shareholder reports, and other filings of
funds amounted to approximately $29 million in fiscal year 2022 based on the
Commission staff’s computation of the value of staff time devoted to this activity and
related overhead.
15.

Changes in Burden
As summarized in Table 1 above, the estimated hourly burden associated with rule

498A has increased from 14,688 hours to 19,165.14 hours (an increase of 4,477.14
hours). In addition, the cost burden associated with rule 498A has increased from
$11,599,420 to $12,975,120 (an increase of $1,415,700). The amendments proposed by
the Commission would result in a change in our estimate of the burden associated with
this collection of information, specifically to account for additional requirements for
issuers that use rule 498A currently and to add RILAs.
These changes in burden also reflect the Commission’s revision and update of
burden estimates for all information collections under this OMB control number (whether
or not associated with rulemaking changes), and the Commission requested public
comment on all information collection burden estimates for this OMB control number.

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16.

Information Collection Planned for Statistical Purposes
Not applicable.

17.

Approval to Omit OMB Expiration Date
Not applicable.

18.

Exceptions to Certification for Paperwork Reduction Act Submissions
The Commission is not seeking an exception to the certification statement.

B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
The collection of information will not employ statistical methods.

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