The 10/10 Rule is Spreading Like a Bad Rash
Just a big heads up for everyone- Florida will be a 10/10 state as of 1/1/11. This means that after that date, no annuities will be available to Floridians where the surrender charges exceed 10-years or the first-year surrender penalty exceeds 10%.
I am happy to report that with the cooperation and assistance of all of you that we at least got a 5/5 Rule off of the table. Great work everyone!
Nonetheless, this new legislation will tremendously impact the 20% of our nation’s seniors that live in the Sunshine State. This also means that nearly 25% of the states in our nation are using some variation of the 10/10 Rule. See here for a list of current 10/10 states.
Note that due to Florida’s CS/CS/SB 2176, the “Safeguard our Seniors Act,” there will be additional legislative changes for annuity sales in Florida. These changes will include:
1. Mandatory minimum of three hours continuing education on the subject of life and annuity suitability,
2. Prohibition from naming an insurance agent as the beneficiary of a policy where the insured person is not owned by his/her family member,
3. A misdemeanor charge with penalties as high as $75,000 for knowingly twisting or churning of life or annuity contracts (unknowingly commission of the offense results in fines as high as $5,000)
4. A mandatory extension of the free-look period to 21 days
AnnuitySpecs.com is not opposed to legislation which protects American consumers. We are, however, concerned when legislators and regulators pass laws and rules that limit consumer choices. Remember that when you limit the surrender charges on an annuity, you also limit the premium bonus, the compensation, and the potential interest to the client. Some people may think this is fine, but as a young owner of numerous indexed annuities, I want people to know that I would be LIVID if Iowa ever passed a 10/10 Rule.
I did not feel comfortable watching my 401(k) turn into a 201(k) at the turn of the century. Instead, I took my retirement funds and rolled them into an indexed annuity. As a young saver, I want the biggest premium bonus product that I have available to me; I will not need income for close to 30 years. So, products that exceed ten-year surrender charges are INDEED SUITABLE for some!
Please help to ensure that the 10/10 Rule does not spread. Always make suitable sales and ensure that you and your client understand their policy’s provisions.
Let us know if you have any questions. We are always happy to help. Thanks! sjm
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Saturday, Jun 5
2010
Don Retallick
Sheryl,
Thanks for all that you do. Is there any way to appeal or fight the 10/10 Rule like 151A?
Monday, Jun 7
2010
Sheryl J. Moore
Hi Don!
Thanks for your kudos. No, you really cannot appeal the 10/10 Rule like you can 151A. The insurance commissioner is the one that makes the call on 10/10. I suppose you could bombard the insurance commissioner’s office, but I’m not sure how effective that would be. I think the biggest way to fight the rule is to stop it from spreading. In addition, we keep correcting all of the negative/inaccurate media; setting the public straight on indexed annuities. Collectively, I think this industry can stop 10/10 from extending to the remaining states. SJM
Saturday, Jul 24
2010
Gary
I believe that the 10/10 rule should be set up for those over a certain age so as to allow for those under that age to choose what they feel is right for them. This also prevents the agent from selling long surrender charge policies to older retirees and locking them up beyond their life span. I guess the law is approved and cannot be changed at this point, but they should have thought it through before passing it.
Tuesday, Jul 27
2010
Sheryl J. Moore
Gary,
Some states do it in the manner you suggest. This variation of 10/10 is sometimes referred to as a 70-10 rule, meaning that the surrender charges of the annuity cannot exceed ten years or go past the annuitant’s age 70. Looks like someone already stole your idea!
Thanks for the contribution! sjm
Friday, Dec 3
2010
Tony Tecce
Sheryl,
Continued thank you’s for your continued support in tha annuity field. The last time we met was when you spoke at a Midland National conference in Las Vegas a few years ago.
Purpose of my comment is that you state above, and again, I apologize if your 6/24/10 article has been amended since then.
However you state that Florida will not allow any annuities with surrender periods longer than 10 years nor higher than 10%.
Florida is allowing over 10 years and over 10% and even to those over 65 if they are an accredited investor.
Therefore it is not as harsh as first thought.
Take care Sheryl and keep up the super work you do.
Tony
Friday, Dec 3
2010
Sheryl J. Moore
Tony,
I am VERY proud that you have a firm understanding of Florida’s new variation on the 10/10 Rule! GREAT job! Initially, Florida was looking at a straight 5/5 Rule, and then 10/10. However, what they ultimately resorted to is a variation of 10/10, which you have described above. Congratulations, Tony- you have further reiterated that INDEXED ANNUITY AGENTS HAVE THEIR STUFF TOGETHER! Thanks for your comment and attention. Your kudos are what keep me going! sjm
Tuesday, Dec 28
2010
Brad
What are the qualifications to be an accredited investor as described? Similar to REITs?
Wednesday, Dec 29
2010
Sheryl J. Moore
Excellent question, Brad. According to Florida, an “accredited investor” is something who:
A. has a new worth or joint net worth with his or her spouse, at the time of purchase that exceeds $1 million, OR
B. had an individual income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year.
Florida is allowing an exemption from their 10/10 rule variation for individuals who meet the qualifications above.
To the best of my knowledge, there are only two insurance companies selling indexed annuities that are permitting their licensed agents to use the accredited investor exemption. sjm