89R23508 SCF-F
By: Wharton H.B. No. 4386
Substitute the following for H.B. No. 4386:
By: Dean C.S.H.B. No. 4386
A BILL TO BE ENTITLED
AN ACT
relating to the exchange or surrender of an annuity contract.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 1114, Insurance Code, is
amended by adding Sections 1114.0541 and 1114.0542 to read as
follows:
Sec. 1114.0541. PROCESSING OF ANNUITY CONTRACT EXCHANGES.
(a) In this section, "exchange" means an annuity replacement
transaction:
(1) in which the money in an existing annuity contract
must pass directly from the existing annuity contract and existing
insurer to a new annuity contract and a replacing insurer; and
(2) in which the owner and annuitant of the new
contract are the same as the owner and annuitant of the existing
contract, regardless of whether the owner or annuitant may be
changed after completion of the transaction.
(b) If a transaction involves an exchange of an annuity
contract, the existing insurer and the replacing insurer shall
comply with this section.
(c) To initiate an exchange of an annuity contract, the
replacing insurer shall provide the existing insurer an exchange
request notice on a form provided by the existing insurer. An
existing insurer shall make an exchange request notice form
available on the insurer's Internet website or require a contract
owner or replacing insurer to request from the insurer a physical
copy of the form.
(d) An exchange request notice form may include or require
only the following elements:
(1) a statement that the contract owner has authorized
the replacing insurer to initiate the exchange;
(2) the existing annuity contract number;
(3) the name, mailing address, e-mail address, and
telephone number of the contract owner and annuitant;
(4) delivery instructions for the transfer of money;
(5) the ink or electronic signature of the contract
owner; and
(6) any disclosure documents required by federal law
relating to an exchange or replacement of an annuity.
(e) An existing insurer that receives an exchange request
notice from the contract owner and the replacing insurer shall:
(1) acknowledge receipt of the notice not later than
the fifth business day after the date the existing insurer received
the notice; and
(2) unless the existing annuity contract being
exchanged has a provision that gives the existing insurer the right
to defer payment for a different period, and subject to Subsection
(f), transfer the contract value of the existing annuity to the
replacing insurer not later than the 30th business day after the
date the existing insurer receives the notice.
(f) If an exchange request notice form provided to an
existing insurer under Subsection (c) does not include all required
information, the applicable period to transfer the contract value
does not begin until the day the existing insurer receives all
required information from the replacing insurer or contract owner,
as applicable.
(g) If a transfer payment is not completed within the period
provided by Subsection (e)(2) or the existing annuity contract, as
applicable, the existing insurer shall pay penalty interest on the
unpaid amount at an annual rate of 10 percent accruing from the
first business day after the date the contract value was required to
be transferred until the contract value is transferred to the
replacing insurer in full.
(h) Nothing in this section is intended to:
(1) change the suitability requirements applicable to
an agent or insurer seeking to replace an annuity under Chapter
1115; or
(2) prohibit a replacing insurer and existing insurer
from agreeing to use different formats or modes for assisting
contract owners in the timely and efficient processing of
replacements or exchanges of annuity contracts.
Sec. 1114.0542. PROCESSING OF SURRENDER REQUESTS FOR
ANNUITY CONTRACTS. (a) To initiate a surrender of an annuity
contract, a contract owner must submit a surrender request on a form
required by the insurer. An insurer that issues an annuity contract
shall make a surrender request form available on the insurer's
Internet website or require the contract owner to request a
physical copy of the form from the insurer. If a contract owner
submits a written request for a physical copy of the form, the
insurer shall mail the form to the contract owner not later than the
fifth business day after the date the insurer receives the request.
(b) A surrender request form may include or require only the
following elements:
(1) a statement that the contract owner intends to
surrender the annuity contract;
(2) the annuity contract number;
(3) the name, mailing address, e-mail address, and
telephone number of the contract owner;
(4) delivery instructions for the transfer of money;
(5) instructions for tax withholding;
(6) the ink or electronic signature of the contract
owner; and
(7) any other document or disclosure required by
federal or state law.
(c) An insurer that receives a surrender request from a
contract owner shall:
(1) acknowledge receipt of the request not later than
the fifth business day after the date the insurer receives the
request; and
(2) unless the contract being surrendered has a
provision that gives the insurer the right to defer payment for a
different period, and subject to Subsection (d), transfer the
current cash surrender value of the annuity contract to the
contract owner not later than the 30th business day after the date
the insurer receives the request.
(d) If a surrender request form submitted to an insurer
under Subsection (a) does not include all required information, the
applicable period to transfer the cash surrender value does not
begin until the day the insurer receives all required information
from the contract owner.
(e) If payment of a cash surrender value is not completed
within the period provided by Subsection (c)(2) or the annuity
contract, as applicable, the insurer shall pay penalty interest on
the unpaid amount at an annual rate of 10 percent accruing from the
first business day after the date the cash surrender value was
required to be transferred until the cash surrender value is
transferred to the contract owner in full.
(f) Nothing in this section is intended to change the
suitability requirements applicable to an agent or other person
advising a contract owner to surrender an annuity under Chapter
1115.
SECTION 2. Sections 1114.0541 and 1114.0542, Insurance
Code, as added by this Act, apply only to an exchange or surrender
of an annuity contract initiated on or after January 1, 2026.
SECTION 3. This Act takes effect September 1, 2025.