Supporting Statement_Rule 498A_RILA

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
The Commission recently adopted rule and form amendments to provide a
tailored form to register the offerings of registered index-linked annuities (“RILAs”). In

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).

the same rulemaking, the Commission also adopted amendments to extend the
registration, filing, and disclosure approach for RILAs to annuity contracts that offer
fixed investment options and apply market-value adjustments (“MVAs”) to amounts
withdrawn from a fixed option before the end of the fixed option’s term, where the
offering is required to be registered with the Commission because of the MVA
(“registered MVA annuities” and, collectively with RILAs, “non-variable annuities” or
“non-variable annuity contracts”). In connection with the adoption of these rule and form
amendments, the Commission amended rule 498A to permit insurance companies
registering offerings of non-variable annuities, as well as issuers of “combination
contracts” offering a combination of variable and non-variable options, to use a summary
prospectus to satisfy statutory prospectus delivery obligations. The use of summary
prospectuses for non-variable annuities is voluntary, but the rule’s requirements are
mandatory for issuers that elect to send or give a summary prospectus in reliance upon
rule 498A. The rules use a layered disclosure approach that would permit a person to
satisfy its prospectus delivery obligations under the Securities Act for a non-variable
annuity contract by sending or giving a summary prospectus that presents key
information about a non-variable annuity contract’s terms, benefits, and risks, with access
to more detailed information available online and electronically or in paper format on
request. 6

6

Registration for Index-Linked Annuities and Registered Market Value Adjustment Annuities;
Amendments to Form N-4 for Index-Linked Annuities, Registered Market Value Adjustment
Annuities, and Variable Annuities; Other Technical Amendments, Investment Company Act
Release No. 35273 (June. [], 2024), available at https://www.sec.gov/rulesregulations/2024/07/rila#33-11294final (“Adopting Release”).

2

Specifically, as amended, 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 a
contract by: (1) sending or giving to new investors key information contained in a
variable or non-variable annuity contract (“annuity 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. 7 Rule 498A considers a
person to have met its prospectus delivery obligations for any portfolio companies
associated with an annuity contract if the portfolio company prospectuses are posted
online. 8 Under the rule, a registrant (or the financial intermediary distributing the annuity
contract) relying on the rule must send the annuity contract statutory prospectus (that
statutory prospectus must be filed as part of registration statement on Form N-3, N-4, or
N-6, as applicable) and other materials to an investor in paper or electronic format upon
request. 9 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. 10

7

Rule 498A(b) and (c).

8

Rule 498A(j).

9

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

10

Rule 498A(b) and (c).

3

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 annuity 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 annuity contract’s statutory prospectus,
summary prospectuses, statement of additional information, and in the case of a registrant
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. The
final amendments require insurers to disclose, for each index-linked option, current limits

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 index losses and gains (along with a statement that the current limit will not change
during an index-linked option’s crediting period) by posting the information to a website
that is publicly accessible, free of charge, and specifically incorporating this information
by reference into the prospectus. 12
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.
The Commission staff considered special requirements for small entities. The
Commission staff believes, however, that rule 498A will not have a significant economic

12

See Adopting Release at Section II.C.4.a.

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impact on a substantial number of small entities. 13 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. 14 As a result, the Commission staff expects few, if any,
separate accounts to be treated as small entities, 15 and no small entities currently file
registration statements on Forms N-3, N-4, or N-6.
Furthermore, based on a review of EDGAR filings of existing non-variable
annuity issuers, the Commission does not expect any non-variable annuity issuers to be
treated as small entities. Additionally, non-variable annuity issuers are not investment
companies. For these reasons, we believe that the final amendments, as adopted, would
not have a significant economic impact on a substantial number of small entities.
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.

13

See Adopting Release, supra footnote 1, at Section V; 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”)..

14

17 CFR 270.0-10(b).

15

See Adopting Release, supra footnote 1, at Section VI.

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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
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. 16 The effect of these provisions is that persons are required to update their
annuity 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).

16

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

7

8.

Consultation Outside the Agency
Before adopting the final amendments to rule 498A, the Commission solicited and

evaluated public comments on the proposal and its collection of information
requirements. Specifically, the public was given the opportunity to comment on the
Commission’s estimates for the burden of Form rule 498A as proposed and as compared
to the existing approved burden inventory in the proposing release for the amendments. 17
The Commission did not receive any comments regarding the PRA estimates for rule
498A. The Commission and the staff of the Division of Investment Management
participate in an ongoing dialogue with representatives of the insurance 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 paperwork
burdens confronting the industry. The Commission requested public comment on the
information collection requirements of rule 498A before it submitted this request for
revision and approval to OMB. The Commission received no comments in response to its
request. 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).

17

See Registration for Index-Linked Annuities; Amendments to Form N-4 for Index-Linked and
Variable Annuities, Investment Company Act Release No. 35028 (Sept. 29, 2023)
(“Proposing Release”), available at https://www.sec.gov/files/rules/proposed/2023/3311250.pdf.

8

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.
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 18 and are not derived from a
comprehensive or even representative survey or study of the cost of Commission rules
and forms. Rule 498A contains collection of information requirements. Variable annuity
contract separate accounts registered or registering with the Commission, or insurance
companies registered or registering offerings of non-variable annuity contracts registered
or registering with the Commission (collectively, “registrants”), are the likely

18

44 U.S.C. 3501 et seq.

9

respondents to this information collection. Under rule 498A, use of the summary
prospectus is voluntary, but the rule’s requirements are mandatory for registrants that
elect to send or give a summary prospectus in reliance upon rule 498A. 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 a total aggregate
annual hour burden of 7,634 hours, and a total aggregate annual external cost burden of
$9,094,866. 19
We have historically estimated the paperwork burden of rule 498A based on the
number of variable annuity and variable life insurance separate account registrants, and
our estimates of the updated burden resulting from the final amendments are similarly
based on the number of non-variable annuity issuers. 20 We estimate that there are 38
insurance companies that issue RILAs, registered MVA annuities, or annuity contracts
offering index-linked options and MVA options, and that there are 416 separate account
registrants on current Form N-4 that would be impacted by the proposed amendments. 21
The summary prospectus is voluntary, so the percentage of registrants that will choose to
utilize it is uncertain. Given this uncertainty, we have assumed that insurance companies
registering offerings of non-variable annuities will choose to use a summary prospectus
for 90% of all non-variable annuities, which is the same as our current estimate for

19

20
21

On January 9, 2024, the Office of Management and Budget (OMB) approved this collection
of information estimate for rule 498A. The Proposing Release discussed a prior burden
estimate, which the Office of Management and Budget approved on November 13, 2020. See
Proposing Release at n.494.
VASP Adopting Release at Section V.E.
The non-variable annuity issuer estimate is based on a review of non-variable annuity
registration statements filed with the Commission as of May 2024. The estimate of variable
annuity separate accounts is based on Form N-CEN data as of December 31, 2023. As
mentioned above, OMB approved the burden estimate for rule 498A on January 9, 2024.

10

variable annuity separate accounts. The table below summarizes our PRA initial and
ongoing annual burden estimates associated with the final amendments to rule 498A.
Rule 498A – PRA Estimates
Internal initial
burden hours

Internal annual
burden hours

Internal time
costs

Wage rate1

Annual external
cost burden

FINAL ESTIMATES
Separate Account Registrants
Final Amendments

9

62

$425 (compliance attorney)

$2,550

-

Number of separate account registrants

x 4163

x 416

-

Total annual burden

2,496

$1,060,800

-

Use of summary prospectus

x 90%

x 90%

-

Total new annual burden for Reliance
on Rule 498A

2,246

$954,720

-

Non-Variable Annuity Registrants
Preparation and filing of Initial Summary
Prospectus/Updating Summary
Prospectus

40

244

$313 (blended rate)5

$7,512

$5,0006

Online Posting of Contract Documents

2

37

$299 (webmaster)

$897

-

Total burden per registrant

-

27

-

$8,409

$5,000

Number of non-variable annuity issuers

-

x 388

-

x 38

x 38

Total annual burden

-

1026

-

$319,542

$190,000

Use of summary prospectus

x 90%

x 90%

x 90%

Total new annual burden for Reliance
on Rule 498A

923

$287,588

$171,000

FINAL ESTIMATES FOR PRINTING AND MAILING BY NON-VARIABLE ANNUITY REGISTRANTS9
Initial Summary Prospectus

$57,000

Updating Summary Prospectus

$456,000

11

Total annual burden

$513,000

Use of summary prospectus

x 90%

Total new annual burden for Reliance
on Rule 498A

$461,700
Total Final Estimated Burdens
Responses

Internal Hour
Estimate

Internal Hour
Cost Estimate

External Cost
Estimate

Current aggregate annual burden
estimates

663

7,634

$2,337,471

$9,094,866

Aggregate proposed additional annual
burden estimates

+35

+3,169 (2,246 +
923)

+$1,242,308
($954,720+
$287,588)

+$632,700
($171,000 +
$461,700)

Revised aggregate annual burden
estimates

=698

=10,803

=$3,579,779

=$9,727,566

Notes:
1. The Commission’s estimates of the relevant wage rates are based on salary information for the securities industry compiled by the Securities Industry and
Financial Markets Association’s Office Salaries in the Securities Industry 2013. The estimated wage figures are modified by Commission staff to account for
an 1,800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of
inflation. See Securities Industry and Financial Markets Association, Report on Management & Professional Earnings in the Securities Industry 2013 (as
adjusted to account for inflation, the “SIFMA Wage Report”).
2. Internal annual burden hours represents initial burden estimates annualized over a three-year period (9 hours / 3 = 3 hours) plus 3 hours of ongoing
annual burden hours.
3. Estimate is based on a review of Form N-CEN reports through December 31, 2023. In its most recently approved PRA submission, the Commission
estimated that 419 registrants on Form N-4 would be subject to the information collection burden under current rule 498A. For the estimated burden of the
amendments to rule 498A, we have taken into account updated data regarding the number of registrants on Form N-4.
4. Represents initial burden estimates annualized over a three-year period plus 11 hours of ongoing annual burden hours ((40 hours /3 = approximately 13
hours) + 11 hours = approximately 24 hours).
5. Represents a blended wage rate of a compliance attorney ($425 per hour) and an intermediate accountant ($200 per hour). $313 is based on the
following calculation: ($425 + $200)/2 = $313 rounded to the nearest whole dollar.
6. We estimate that each insurance company that chooses to rely on rule 498A with regards to a non-variable annuity will incur a one-time collective external
cost burden of $10,000 per registration statement to prepare both a new initial summary prospectus and a new updating summary prospectus for offerings
on Form N-4. We also estimate an on-going collective burden of $2,500 per registration statement during each subsequent year to prepare updates to these
materials. The three-year average cost of these estimates is $5,000.
7. Represents initial burden estimates annualized over a three-year period plus two hours of ongoing annual burden hours ((2 hours /3 = approximately 1
hour) + 2 hours = approximately 3 hours).
8. This estimate is based on the number of insurance companies issuing non-variable annuities. The proposal reflected an estimate of the number of RILA s,
as opposed to the number of insurance companies issuing RILAs. We have updated this approach to better reflect the way that the burden for rule 498A has
historically been calculated (reflecting the number of variable annuity separate accounts relying on rule 498A—thus, reflecting the registrants that rely on the
rule, not the number of contracts with summary prospectuses under the rule).
9. Costs associated with printing and mailing for separate account registrants are already accounted for in the currently approved burdens for rule 498A.
Estimates for non-variable annuity issuers printing and mailing costs are based on the currently approved burdens for printing and mailing costs under rule
498A (approximately $1,500 per registrant for initial summary prospectuses and approximately $12,000 per registrant for updating summary prospectuses).
10. The estimated number of new responses is based on the total of the number of non-variable annuity responses under the proposed amendments (38
responses) and the difference between the number of responses for registered separate accounts under the current aggregate annual burden estimate (419
responses) and the final additional annual burden estimates (416 responses). (38 non-variable annuity issuer responses subtracted by 3 registered separate
account responses).

12

The table above summarizes the Commission staff’s PRA annual burden estimates
associated with rule 498A. In the aggregate, the Commission staff estimates the total
annual hour burden to comply with rule 498A to be 10,803 hours, at an internal time cost
equivalent of $3,579,779.
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
annual external cost burden of $9,727,566, 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 $33 million in fiscal year 2023 based on the
Commission staff’s computation of the value of staff time devoted to this activity and
related overhead.
15.

Changes in Burden
The estimated aggregate total hour burden for preparing and filing summary

prospectuses increased 3,169 hours, from 7,634 hours to 10,803 hours, and external costs
increased from $9,094,866 to $9,727,566. This increase in burden hours and external
costs is attributable primarily to an estimated increase in the number of responses as a
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result of the final amendments to rule 498A and the effects of inflation. 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.
16.

Information Collection Planned for Statistical Purposes
The results of any information collection will not be published.

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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