Annuity types, phases and taxation are covered in the national Annuities guide. South Dakota layers on a best-interest standard for annuity sales, a one-time training requirement, disclosure and record rules, a free look, and licensing rules for variable products. The sources are SDCL 58-33A and 58-15-59.1, plus ARSD 20:06:07:08.

Best-interest standard (SDCL 58-33A-13 to 58-33A-27)

• A producer who recommends an annuity must act in the consumer's best interest. The producer and the insurer can't put their own financial interests ahead of the consumer's (58-33A-16).
  • This standard replaced the older suitability-only rule.
• Consumer profile information includes (58-33A-13):
  • age, income and financial situation
  • financial objectives
  • liquidity needs and liquid net worth
  • risk tolerance
  • tax status
• If the consumer refuses to give profile information, the producer gets a statement signed by the consumer that documents the refusal and its consequences (58-33A-19.2).
• Replacements and exchanges: the producer considers (58-33A-16.3):
  • surrender charges
  • lost benefits
  • whether the new product substantially benefits the consumer
  • any other exchange or replacement in the past 60 months
• Disclosure (58-33A-16.5): the producer explains:
  • their role
  • the products they can sell and the insurers they represent
  • the sources and types of their cash and non-cash compensation
  • the consumer's right to request more compensation detail
• Producers and insurers can't discourage a consumer from answering an insurer's confirmation request truthfully, filing a complaint or cooperating with an investigation (58-33A-20.2).
• Records of consumer information, disclosures and recommendations are kept 5 years after the transaction (58-33A-27).
• Exemptions (58-33A-15): contracts that fund ERISA plans and employer plans under IRC 401(a), 401(k), 403(b), 408(k) or 408(p), among others.

Annuity training

• Before selling annuities, a producer with a life line completes a one-time 4-credit-hour training course approved by the Director (58-33A-25.1).
• The insurer must confirm the training is done before letting the producer sell its annuities (58-33A-25.3).

Free look

• Every individual annuity delivered in South Dakota carries a 10-day right to return it, except variable annuities (58-15-59.1).
• When an annuity replaces existing coverage, the right to return it is 30 days from delivery (ARSD 20:06:08:60).

Variable annuities

To sell variable contracts, a producer must (ARSD 20:06:07:08):

• pass the life exam and hold a life license
• pass a FINRA Series 6, 7, 63 or 66 exam
• add the variable line to the license

Guaranty protection

The South Dakota Life and Health Insurance Guaranty Association covers up to $250,000 in present value of annuity benefits per life, including cash surrender and withdrawal values (SDCL 58-29C-46).

Common exam traps

• The standard is best interest, not just suitability.
• Annuity training is a one-time 4 hours, and the insurer must confirm it.
• The 10-day free look doesn't apply to variable annuities. Replacements get 30 days.
• The replacement review looks back 60 months.
• Records are kept 5 years.