Annuity basics are covered in the national Annuities guide, including the accumulation and payout phases, fixed, indexed and variable products, payout options, surrender charges, 1035 exchanges and taxation. Kansas adds a few rules on who may sell annuities, how they may be described, what must be disclosed, and the minimum values a deferred annuity must guarantee.

Who may sell

• Fixed annuities fall under the life line of authority, which by statute covers "endowment and annuities" (K.S.A. 40-4903(a)(1)).
• Variable annuities and other products that reflect the investment experience of a separate account need the variable life and variable annuity line (40-4903(a)(5)). They also need securities registration.

Suitability

• Kansas annuity suitability standards are in K.A.R. 40-1-53. That regulation adopts by reference the Insurance Department's "policy and procedure regarding suitability in annuity transactions," dated January 10, 2023. It took effect January 1, 2024.
• Separately, K.A.R. 40-2-14(c)(5) makes it an unfair or deceptive practice to recommend the purchase or replacement of an annuity when the agent has reasonable grounds to believe it is unsuitable, based on information the applicant gave or the agent otherwise obtained.

Advertising and disclosure (K.A.R. 40-2-14)

• No annuity may be advertised or solicited with language calling it "risk free" or anything similar (40-2-14(d)(1)).
• When an application is taken for a single premium deferred annuity, the disclosure form prescribed by the Commissioner must be signed by both the applicant and the selling agent and attached to the application (40-2-14(d)(2)).
• The life insurance policy summary requirement in 40-2-14(b) does not apply to annuities. Annuities have their own disclosure form instead.
• The general rules still apply. A premium may not be described as a deposit, investment or savings, and an agent identifies himself or herself as an insurance agent at the start of a solicitation.

Minimum nonforfeiture values (K.S.A. 40-4,104)

A deferred annuity must guarantee a minimum nonforfeiture amount built from:

• net considerations equal to 87.5% of the gross considerations credited each contract year
• accumulated at an interest rate equal to the five-year Treasury rate less 125 basis points, but no higher than 3% and no lower than 0.15%

Guaranty association

If the insurer fails, the Kansas Life and Health Insurance Guaranty Association protects the present value of annuity benefits, including cash surrender and withdrawal values, up to $250,000 (K.S.A. 40-3008).

Common exam traps

• Calling an annuity "risk free" is prohibited outright.
• An SPDA disclosure form is signed by both the applicant and the agent and attached to the application.
• Annuities don't get a life policy summary.
• Nonforfeiture net considerations are 87.5% of gross, with an interest floor of 0.15% and a cap of 3%.
• The guaranty limit is $250,000 of annuity present value.