Insurance News Net did a piece entitled, "SEC Rules Affect Variable Annuities." The article says, "Issuers of variable annuities (VAs) are being forced to revisit the types of money market mutual funds they offer within their VAs. This is because of changes to Securities and Exchange Commission (SEC) rules that impose new requirements on money market mutual funds (MMFs). In a note to clients, lawyers at Carlton Fields Jorden Burt, say VA issuers must consider what type of MMFs to make available in their VA offerings as a result of the SEC action. And, if necessary, depending on the VA, "issuers are considering how to move various groups of existing owners out of one type of MMF and into another, for example, due to unavailability of retail MMFs to institutional investors, as well as how to avoid or implement gates and fees required" under the amendments, according to Chip Lunde, author of the Carlton Fields note. The issue is important because industry officials say most VA products offer MMFs as investment options. Lunde says he hasn't heard whether any issuers are considering discontinuing the use of MMFs in VAs. "One reason VA issuers are likely to keep MMFs in VAs is that MMFs are a convenient default option for certain transactions (e.g., during the free look period or in the event another fund liquidates and the contract owner doesn't give reallocation instructions)," Lunde said." The article continues, "He said insurance product funds considering offering an institutional MMF may need to consider several factors. These include whether a floating net asset value (NAV) is compatible with the actuarial assumptions of issuers of insurance products for which the MMF serves as an investment option; and complications of administering any fees and gates at the insurance product level.... According to Lunde, some insurance product funds have considered offering an ultra-short bond fund as an MMF alternative. "However, using an ultra-short bond fund may also involve unique considerations," Lunde said." Note: Fidelity is changing its VIP variable annuity money fund from "prime" to government (see Monday's News, "Fidelity Announces Major Changes to MMFs; Staying Stable, Going Govt.")
