Yesterday I posted about the new [Supplement No. 1 to Circular Letter 27 (2008)] related to same-sex spouses and annuity contract language. The NYSID has now posted [Filing Guidance] for companies needing to file policy forms to comply with the requirements found in the Circular Letter. "Any revisions needed to address the concerns raised in the supplement concerning default options must be made to both in-force and new issue starting November 1, 2009." This post addresses issues I see in the disclosure portion of the Guidance. A future post will address the more general filing issues for policy forms.
It is interesting to note that the guidance appears to assert approval jurisdiction over the disclosures as well as any required policy form language needed to address the default options. According to the [Office of General Counsel], disclosures are generally not considered policy forms as that term is defined by statute in section 3201.
The filing guidance provides template disclosure language:
"Pursuant to the Federal Defense of Marriage Act, same-sex marriages are not recognized for purposes of federal law. Therefore, the favorable tax treatment provided by federal tax law to an opposite-sex spouse is NOT available to a same-sex spouse. Same-sex spouses should consult a tax advisor prior to purchasing annuity products that provide benefits based upon status as a spouse, and prior to exercising any spousal rights under an annuity."
If this disclosure is used exactly, then the certified, or CL6, process can be used by a company going forward for form filings. If there is any deviation from this text, then the forms may not be submitted on a certified basis because the disclosure will need review on a case-by-case basis, according to the Department's Guidance.
This is an interesting assertion of authority. On its face, it would seem that this disclosure is not different than many other types of disclosure mandated by the Department where they think it important for consumer protection. However, unlike those other instances, here if a company deviates in any way from prescribed text, full prior approval is required. This should not be understood as an objection to this disclosure as a way to resolve this challenging issue posed by a conflict between state and federal law. My concern is that this approach of mandating specific and exact and keying it to approval methods takes state-oversight of drafting to unusual, and in my opinion, unnecessary, heights.
Why can't a company use the following without losing the right to use an expedited process?
PLEASE NOTE: the Federal Defense of Marriage Act does not allow recognition of same-sex marriages for purposes of federal law. As a result, any favorable tax treatment provided by federal tax law to an opposite-sex spouse under this and other deferred annuity contracts is NOT available to a same-sex spouse in the same situation. We recommend that same-sex spouses consult their personal tax advisor prior to purchasing annuity products that provide benefits based upon status as a spouse. Further, we recommend that an advisor be consulted prior to exercising any spousal rights under an annuity to determine if it is right for you in your situation.
All the requirements of the applicable Circular Letter are addressed, but in different words. Nonetheless, if a company adopts alternative language that, for example, their in-house legal counsel likes better, they lose the option of a certified process. Instead, a non-substantive change in disclosure language results in the mandate of a prolonged and non-expedited filing process.
Further, does this mandated language mean that if a company elects a non-contractual disclosure form - say a stand-alone disclosure, where perhaps the text could be in a larger or alternative colored font - that form, otherwise not a policy form under the OGC opinion, now needs approval which can only be certified if it mirrors the guidance's text?
Is that really a necessary assertion of approval authority?
