Product Specification#

Status: Draft, 2026-08-04 (cited sources accessed 2026-08-04, except the AP&P Manual appendix items R151–R157, accessed 2026-08-06 — see sources.md).

Scope note. This is a standardized composite specification assembled for reference liability cash-flow modeling. It does not describe any single insurer’s product. Facts carrying a source tag — [S#] (primary product documents) and [R#] (regulatory/actuarial references), both numbered per _research/registered-index-linked-annuity.md — were extracted from the cited document. [REG-R#] tags resolve against the shared cross-product numbering space, which now runs R1–R157 with most of the R73–R149 block unused, curated at references/regulatory-and-actuarial-references.md: R1–R34 are the life-origin entries (research provenance _research/regulatory-actuarial.md), R35–R72 the annuity-specific entries (_research/regulatory-actuarial-annuities.md). It is one numbering space, not two. Values marked std are standardizations introduced for the reference implementation; each std table row carries a footnote giving the rationale and the observed range across insurers. Facts the research file could not verify are flagged unverified.

The implementation anchor for mechanics is the Brighthouse Shield Level II 6-Year Annuity Rule 424(b)(3) prospectus, whose Appendix F carries the complete AG 54-era interim value algebra and the worked proportional-withdrawal example S2.

Product overview and market role#

A RILA (the NAIC prefers ILVA, “index-linked variable annuity”, precisely to signal that a compliant design is a variable annuity first R2 REG-R44) is a deferred annuity under which purchase payments are allocated to index-linked options whose returns “(both gains and losses) are based at least in part on the performance of an index or other benchmark … over a set period of time (‘crediting period’)” R1. Upside is limited by cap rates and/or participation rates (“limits on gains”); downside by buffers or floors (“limits on losses”) R1. A buffer absorbs the first b percentage points of index loss and passes the excess through to the contract holder; a floor caps the holder’s loss at f and leaves the insurer with the tail R1.

The index-linked options sit in a non-unitized separate account S4 R2. Of the ILVA separate accounts the American Academy of Actuaries surveyed, none are SEC-registered, all are non-unitized, and they may be insulated or non-insulated; statutory accounting is separate account, U.S. GAAP is general account, and RBC splits C0–C1 general account / C3–C4 separate account R6. RILAs are themselves SEC-registered securities — unlike fixed indexed annuities, which returned to state regulation after Rule 151A was vacated and Dodd-Frank §989J enacted REG-R53. The SEC recorded RILA sales of $47.4 billion in 2023, 15% above the prior year and more than five times the 2017 level ($9.2 billion), with Q4 2023 the first quarter in which RILA sales surpassed variable annuity sales R1, citing LIMRA.

The distinguishing modeling fact: between term start and term end the contract has no account value in the ordinary sense. Every transaction — withdrawal, surrender, death claim, annuitization, transfer, fee deduction — settles at an Interim Value, a daily mark of a hypothetical replicating portfolio priced with an option-pricing model R2 S2 S4 S6. That is contractual, not a modeling refinement (see technical-notes.md).

Representative specification#

Contract identity and issue rules#

Parameter	Representative value	Basis
Design type	Individual single-premium deferred index-linked separate account annuity	S1 S2
Chassis	Brighthouse Shield Level II 6-Year design	S2; selection std (1)
Account structure	Non-unitized separate account for index-linked options; general account for Fixed Account and Holding Account	S2 S4 R2 R6
Premium structure	Single premium; no subsequent purchase payments	S1 S2; scope std (2)
Owner / annuitant issue ages	0–85	S1 S2
Minimum purchase payment	$25,000 (prior approval below $25,000 or at/above $1,000,000)	S1 S2
Minimum account value	$2,000 (below this a withdrawal request is treated as a full withdrawal)	S1 S2
Minimum allocation to one index-linked option	$500	S1
Minimum partial withdrawal	$500	S1
Maturity Date (forced annuitization)	Contract anniversary after the oldest Owner’s 90th birthday, or 10 years from issue, whichever is later	S2
Free look	10 days after receipt (longer in some states)	S1 S2
Anchor model point	Male 60, single premium $100,000, 100% allocated to one 6-year option, S&P 500 price return, 10% buffer, Cap crediting	std (3)

Footnotes to std rows:

The research file’s own conclusion: the best single reference target is a single-premium, 6-year-chassis buffered RILA with 1/3/6-year terms, Cap / Step / Edge crediting, a 7-7-6-5-4-3-0 withdrawal charge above a 10% free amount, a return-of-premium GMDB, no explicit asset charge and an AG 54 interim value — “essentially the Brighthouse Shield Level II design” S2, matching AG 54’s literal definitions R2 and the Academy’s worked example structure R6.
Observed: single premium S1 S2; flexible premium with a contribution cut-off at owner age 86 and $500/$50 minimum additional contributions S4; flexible-premium combination contract with variable subaccounts S3. Single premium removes premium-persistency modeling from a product whose difficulty lies entirely in the interim value.
Pure modeling choice. Age 60 sits inside the band receiving the return-of-premium death benefit (owners 80 or younger S2) and inside the standard issue-age range S1 S2. S&P 500 price return appears in the index menu of every source product whose menu was captured in the research file S1 S2 S3 S4.

Index-linked option menu#

Parameter	Representative value	Basis
Term lengths offered	1, 3, 6 years (point-to-point)	S1 S2 S3 S4 S5; 2-year dropped std (4)
Buffers (“Shield Rates”) offered	10%, 15%, 25%	S1 S2
Representative buffer	10%	universal across insurers S1–S6 R1; pick std (5)
Indices	S&P 500, Russell 2000, MSCI EAFE, Nasdaq-100 — all price return	S2
Rate crediting types	Cap Rate; Step Rate; Step Rate Edge	S2
Floor strategies	Not offered on this chassis (documented as a variation)	S1 S2; contrast S5
Reallocation	Only during the Transfer Period — the 5 calendar days following the Contract Anniversary coinciding with a Term End Date	S1 S2
Default at Term End	Automatic renewal into the same option at the new declared rate unless the owner elects otherwise; 30 days’ advance notice	S1 S2

Observed term menus: 1/3/6 S1 S3 S4 S5; 1/2/3/6 S2; 1 and 6 only S6; the Academy survey reports one, two, three or six years R6. The 2-year term is unique to S2 among the retrieved sources and is dropped to hold the menu at the industry mode.
Observed buffer menus: 10/15/25 S1 S2; 5/10/15/20/100 S3; 10/15/20/40 S4; 10/20/30 plus a −10% floor S5; protection levels 10/15/20/25 S6. The 10% buffer is the one value present in every menu, and Equitable commits that “we will always offer a Segment Option with a Segment Buffer that protects the first 10% of loss” S4.

Declared (non-guaranteed) crediting parameters — snapshot#

Parameter	Representative value	Basis
6-year Cap Rate (10% buffer)	100%	std (6)
3-year Cap Rate (10% buffer)	55%	std (6)
1-year Cap Rate (10% buffer)	12%	std (6)
1-year Step Rate (10% buffer)	8%	std (7)
1-year Edge Rate (10% buffer)	6%	std (7)
Participation Rate	100%	S4; adoption std (7)
Declared Fixed Account rate	3.00%	std (8)

No currently-declared rate sheet was retrievable — the Brighthouse Shield rates page and the Equitable performance cap rate page both returned HTTP 403 / WAF rejections (research gap 1) — so every rate here is a modeling snapshot. Observed illustrative prospectus values: 10% cap, 1-year S1; 75% cap, 3-year at a 10% buffer S3; 12% cap 1-year and 100% cap 6-year S6; 60% cap with 110% participation on a 6-year 20%-buffer segment and 9% cap on a 1-year Step Up S4. The chosen 12% / 55% / 100% triple brackets those and sits well above the contractual minima below.
Observed illustrative step/trigger values: 8% Step S1; 5% Step with 90% participation S3; 12.5% trigger and 6% dual trigger, 1-year S6. No Edge value appears in any retrieved document; 6% is a modeling choice set below the 8% Step, the correct economic ordering because the Edge design pays down to −b rather than to 0 and so buys a lower rate. Participation Rate 100% is what Equitable guarantees for the life of every current segment type S4.
No declared fixed-account rate appears in any retrieved document; only the 1% contractual minimum is public S1 S2. 3.00% is a snapshot consistent with the std 4.00% risk-free assumption in technical-notes.md.

Guaranteed minimum crediting parameters (contractual floors on the declared rates)#

Parameter	Representative value	Basis
Minimum guaranteed Cap Rate	2% (1-year), 6% (3-year), 8% (6-year)	S1 S2
Minimum guaranteed Step Rate	2%	S2
Minimum guaranteed Edge Rate	2%	S2
Minimum guaranteed interest rate, Fixed Account and Holding Account	1%	S1 S2
Buffer (Shield Rate)	Guaranteed for the life of each term; not redeterminable mid-term	S1 S2

These are guaranteed elements in ASOP No. 2 terms — it lists “minimum index parameters” as a guaranteed element and “index parameters used to determine credited interest” as a non-guaranteed element R5 REG-R26. A projection model must floor every renewal-rate assumption at this table.

Charges#

Parameter	Representative value	Basis
Explicit asset-based charge (M&E, administration) on index-linked value	None	S2 S3 S4 S6 R6
Contract maintenance fee	None	S2
Withdrawal charge (% of the amount withdrawn in excess of the free amount)	7%, 7%, 6%, 5%, 4%, 3%, 0% by complete contract years since the Issue Date	S1 S2
Withdrawal charge gross-up	None — the charge is deducted from the amount withdrawn, not added to it	S1 S2; contrast S4
Free withdrawal amount	Zero in contract year 1; thereafter 10% of Account Value as of the prior Contract Anniversary, less amounts already withdrawn in the current contract year; non-cumulative	S1 S2
Premium tax	0% (state pass-through, modeled as zero)	S2; value std (9)
Trading cost provision inside the interim value	0.10% of the sum of the absolute market values of the replicating options	std (10)

Brighthouse lists the complete charge inventory as “(i) Withdrawal Charges; and (ii) Premium Tax and other taxes” S2. Premium tax is state-specific and is not quantified in any retrieved document; zero is the modeling default with the parameter exposed.
AG 54 requires consistency with the hypothetical portfolio “less a provision for the cost attributable to reasonably expected or actual Trading Costs” R2, and S2, S4 and S6 all say the derivative valuation reflects “the estimated cost of exiting” the options — without a number (research gap 8). The Academy example shows trading costs of $0.01–$0.04 per $100 of base against net derivative values of $12.94–$38.46 R6, i.e. of order ten basis points of net option value. The std factor here is assessed on the sum of absolute option component values — a wider base than the Academy’s net figure (at their t = 0 the gross base is $31.14 against a net $12.94), so 0.10% on this base is a deliberately conservative reading of the same order of magnitude. It must be treated as a free parameter, and the assessment base must be stated whenever it is recalibrated.

Death benefit#

Parameter	Representative value	Basis
Standard death benefit, owners 80 or younger at issue	Return of Premium: greater of Account Value and Purchase Payment	S2
Standard death benefit, owners 81+ at issue	Account Value	S2
Adjustment for withdrawals	The Purchase Payment component is reduced proportionately by the percentage reduction in Account Value for each partial withdrawal, including any applicable withdrawal charge	S1 S2
Value used mid-term	Interim Value of each open index-linked option	S1 S2 S4 S6
Determination date	End of the business day on which due proof of death and an acceptable payment election are received	S1
Optional GMDB riders	Out of scope	scope std (see Riders)

The guarantee therefore sits on top of a value that can itself be depressed by a negative interim value: “we will pay the Interim Value, which may be less than if you held the Contract until all of your Shield Option(s) reach their Term End Date” S1. The GMDB is genuinely in the money in equity stress — it is not a nominal guarantee.

Annuitization#

Parameter	Representative value	Basis
Income options	Life Annuity with 10 Years of Annuity Payments Guaranteed; Joint and Last Survivor Annuity with 10 Years Guaranteed	S2
Value applied	Interim Value if annuitized before a Term End Date	S1
Annuity purchase rates	Not located in any retrieved document — modeled from a public basis	research gap; std (11)

Option names are documented S1 S2 but the mortality basis, assumed interest rate, factor tables and the survivor continuance percentage on the joint form are not; they live in the contract specimen or SAI, neither of which was located (research gap 2). The reference model computes payout factors from the 2012 IAM Period Table — the loaded table, correct for a guaranteed purchase-rate basis — with Projection Scale G2 per Model #821 / VM-M REG-R59 at a std 2.50% assumed interest rate, and assumes 100% last-survivor continuance std unverified. The payout-phase mechanics themselves are not restated here: they are the chassis in products/immediate_annuity/product-spec.md and products/immediate_annuity/technical-notes.md, restricted to the two forms above — this contract offers no cash-refund or installment-refund form S2, so those branches of that chassis are unused.

Interim value (the defining mechanic)#

Parameter	Representative value	Basis
Methodology	AG 54 Hypothetical Portfolio = Fixed Income Asset Proxy + Derivative Asset Proxy, less Trading Costs	R2 S2
Algebraic family	`(A − B) x [(1+C)/(1+D)]^E` for the fixed leg, plus the current market value of the replicating options	S2; selection std (12)
Option-budget amortization	Straight-line to the end of the term	S2; selection std (13)
Discount rate (“Market Value Rate”)	Constant Maturity Treasury yield at the term’s maturity, linearly interpolated between adjacent CMT maturities	S2
Option pricing model	Black-Scholes, European options	S2 R2
Transactions settled at interim value	Partial withdrawal, surrender, death benefit, annuitization, transfer, deduction of any fee, free-look cancellation	S1 S2 S4 S6
Value during the Transfer Period	Interim Value equals the Investment Amount at the Term End Date (no option adjustment)	S2

Three algebraic families appear across the retrieved prospectuses (see Variations). Family (a) — fixed leg net of the initial option budget with an explicit interest-rate adjustment factor — is chosen because it is the closest literal implementation of AG 54’s Fixed Income Asset Proxy definition R2 and is used by two of the five insurers S2 S3.
Observed: straight-line amortization nationally S2; updated time to expiry nationally but straight-line in Pennsylvania S3; linear amortization of the beginning proxy value S5. Straight-line is chosen with the alternative retained as a configuration switch (technical-notes.md).

Contractual mechanics#

Notation: R = index performance over the term = I(T)/I(0) − 1; b buffer (positive, e.g. 0.10); c cap; s step; e edge; PR participation; f floor (positive).

Term-end crediting S1 S2 #

Buffer + Cap    g = min(R, c)   if R >= 0 ;   g = min(0, R + b)   if R <  0
Buffer + Step   g = s           if R >= 0 ;   g = min(0, R + b)   if R <  0
Buffer + Edge   g = e           if R >= -b;   g = R + b           if R <  -b

S1 states the buffer branch verbatim as “the lesser of: zero or the Index Performance increased by the Shield Rate” (worked: −15% index performance under Shield 10 → a −5% Performance Rate) together with the governing rule that “The Performance Rate can never be greater than zero if the Index Performance is negative” S1. Cap-versus-Step contrast from S1: at +15% index performance a 10% Cap pays 10% and an 8% Step pays 8%; at 0% index performance the Cap pays 0% and the Step pays 8%. The Edge design moves the trigger threshold from 0 to −b — it pays “the rate credited at the Term End Date if the Index Performance is equal to or greater than the Shield Rate” S2. Roll-forward S1 S2 (worked in S1 as $50,000 + $4,000 = $54,000):

InvestmentAmount(term end) = InvestmentAmount(term start, adjusted for withdrawals) x (1 + g)

Interim value#

For any business day strictly inside a term, InterimValue = market value of the Fixed Income Asset Proxy + current market value of the Derivative Asset Proxy, the fixed leg being S2:

(A - B) x [ (1 + C) / (1 + D) ] ^ E
   A    = Investment Amount on the day the Interim Value is calculated
   B    = market value of the Derivative Asset Proxy under INITIAL market conditions,
          with straight-line amortization to the end of the Term
   C, D = Market Value Rate on the Term Start Date / on the calculation day
   E    = total days remaining in the Term / 365

The [(1+C)/(1+D)]^E factor is “a Market Value Adjustment to address any changes in interest rates from the Term Start Date to the day the Interim Value is calculated” S2. The Derivative Asset Proxy is valued with Black-Scholes and “reflects the impact of the Cap Rate, Step Rate, Edge Rate, and Shield Rate at the end of the Term as well as the estimated cost of exiting the replicating options prior to the Term End Date” S2. Replicating portfolios S2 — ATMC/OTMC at-/out-of-the-money call, OTMP out-of-the-money put, ATMBC/ITMBC at-/in-the-money binary call:

Cap Rate option:  ATMC - OTMC - OTMP        Step Rate option: (Step Rate x ATMBC) - OTMP
Step Rate Edge option:  (Edge Rate x ITMBC) - OTMP

“For purposes of the Interim Value formula, the value of the out-of-the-money call will be zero if a Cap Rate Shield Option is uncapped” S2. Two economic warnings a model must reproduce: “the out-of-the-money put will almost always reduce the Interim Value, even when the current Index Value on a Business Day is higher than the Index Value on the Term Start Date”; and “you could have negative Interim Value, even if the Index Value has increased at the time of the calculation” S2. Worked in S2 (index 500 → 600, six months remaining, Market Value Rate 3%): $49,452.40 + $4,062.37 = $53,514.77.

Withdrawals — the proportional rule#

A mid-term withdrawal reduces the index-linked notional in the same proportion that the withdrawal reduced the Interim Value, not dollar-for-dollar S2 S3 S4 S6:

InvestmentAmount_after = InvestmentAmount_before x ( 1 - GrossWithdrawal / InterimValue )

Worked in S2: $50,000 x (1 − $20,000 / $53,514.77) = $31,313.57; the reduced amount becomes the notional for the rest of the term S2. Prudential states the identical rule and works it at a 71.429% ratio S3. The prospectus states the asymmetry: “a withdrawal when Interim Value is less than the Investment Amount will cause a greater percentage reduction in the Investment Amount that remains in your Shield Option relative to the percentage reduction for the same withdrawal amount when Interim Value is greater than the Investment Amount” S2. The reduction in notional can exceed the cash the owner receives — numeric illustration in technical-notes.md.

Withdrawal charge and surrender#

The charge is a percentage of the amount withdrawn in excess of the Free Withdrawal Amount, by complete contract years since the Issue Date, and is not grossed up S1 S2. Worked in S2: $100,000 purchase payment, $80,000 Account Value at the start of contract year 6, full withdrawal → free amount $8,000 (10%), charge 3% x $72,000 = $2,160, cash value $77,840. The Free Withdrawal Amount is zero in contract year 1, thereafter 10% of the Account Value at the prior Contract Anniversary, reduced by amounts already withdrawn in the same contract year, with no carry-over S1 S2.

Fixed Account, Holding Account, transfers, renewal, Performance Lock#

A Fixed Account (general account) is available with a term of not less than one year and a minimum guaranteed interest rate not less than 1% S1 S2; a Holding Account (also general account, minimum 1%) receives maturing amounts when both the same option and the Fixed Account are unavailable and holds them to the next Contract Anniversary S2. Transfers among index-linked options are permitted only during the Transfer Period — the five calendar days following the Contract Anniversary coinciding with the Term End Date — and partial transfers outside it are not permitted S1 S2. There is no separate fixed-account MVA formula in the prospectus; the only MVA language in it is the [(1+C)/(1+D)]^E factor inside the interim value appendix S2. Once per term the owner may lock an option’s Interim Value; the lock is irrevocable for the rest of the term, after which withdrawals reduce the Performance Lock Value dollar-for-dollar and transfers become permissible on any Contract Anniversary S2 — economically the option leg vanishes and the bucket becomes a fixed accrual to term end.

Riders and options#

In scope (modeled). The built-in return-of-premium GMDB (no explicit charge, owners 80 or younger at issue, proportional reduction for withdrawals) S2; the Fixed Account and Holding Account as general-account destinations at term end and for unallocated amounts S1 S2; automatic renewal into the same option at the new declared rate at each Term End Date with a Transfer Period election window S1 S2; and Performance Lock as an optional module S2.

Out of scope (listed, not modeled):

Optional GMDB riders for a charge: Highest Anniversary Value Death Benefit S4; Maximum Anniversary Value Death Benefit at 0.20% of a Charge Base S5.
Guaranteed lifetime income riders — Allianz’s Select Income variant bundles one inside a 1.95% base contract fee on a Charge Base, the only explicit asset-based charge in the sample, and its figures are provisional (“[To be updated by amendment]” markers in an initial N-4) S5.
Dual-direction / absolute-return segments paying |R| for losses inside the buffer S4, the trigger rate for the same S5, or a Dual Performance Trigger Rate / Dual Rate S6; floor strategies (Allianz Index Guard, −10% floor) S5; 100% buffer full-protection strategies S3.
Annual Lock segments, which compound yearly Standard-rule rates and whose interim value needs “a single extended exotic option that periodically settles and resets in strike price” S4 S6; tiered participation rate strategies S3; Optimal Mix / rainbow segments blending 3 or 4 component indices S4.
Secure Lock+ (a lock that also resets the Performance Cap, minimum Reset Rate 3.50%) S6; variable investment subaccounts on a combination chassis S3; dollar cap averaging accounts S4; systematic withdrawal and RMD programs; transfer and special-service fees ($35 / $55 / up to $90, currently waived) S4.

Variations across insurers#

Interim value algebra — three families. (a) Fixed leg net of the option budget, with an explicit interest-rate adjustment factor: (A − B) x [(1+C)/(1+D)]^E S2 S3. (b) Full notional discounted at a single current rate plus a separate, always-positive expense rebate: Equitable’s SegmentInvestment / (1 + rate)^(time to maturity) plus a Cap Calculation Factor S4; Lincoln’s C x [1/(1+E)^D x (1+E)^D/(1+F)^D], which collapses algebraically to C / (1+F)^D S6. (c) A delta applied to the notional rather than a value: Allianz’s Daily Adjustment = [Δ Proxy Value + proxy interest] x Index Option Base, with no interest-rate adjustment term at all S5. Chosen: family (a) — it is the closest literal reading of AG 54’s Fixed Income Asset Proxy definition R2 and it is the chassis anchor S2.
Option-budget amortization convention. Straight-line to term end S2; updated time to expiry S3 — except in Pennsylvania, where the same insurer switches to straight-line S3; linear amortization of the beginning proxy value S5. Chosen: straight-line, matching the chassis; the alternative is a configuration switch because a single insurer needs both.
Discount rate reference. CMT at the term’s maturity, linearly interpolated S2; CMT plus a market-observable investment-grade corporate spread S6; the Bloomberg Barclays U.S. Intermediate Credit Index at a set duration that “may not match the actual length of the Index Strategy” S3; an investment-grade rate built as risk-free plus a spread, which Equitable notes is above swap rates and therefore “will result in a lower value for that component” S4. AG 54’s project history explains the dispersion: MVA requirements were deliberately removed because consensus was unreachable, leaving the “equity” principle to state review R2. Chosen: CMT, per the chassis.
Buffer versus floor. Buffers dominate. Only one insurer in the retrieved sample offers an explicit floor — Allianz’s Index Guard Strategy at a −10% Floor — and it needs a four-option replicating portfolio (ATM call − OTM call − ATM put + OTM put) rather than the three-option buffer portfolio S5. Prudential’s 100% buffer is full protection achieved inside the buffer framework, not a floor S3. The Academy confirms both species exist R6 and the SEC treats buffers and floors as the two kinds of “limits on losses” R1. Chosen: buffer only, with the floor payoff and its replicating portfolio in technical-notes.md so the module can be switched on.
Buffer depth and term length. Buffers 10/15/25 S1 S2; 5/10/15/20/100 S3; 10/15/20/40 S4; 10/20/30 S5; 10/15/20/25 S6 — 10% is universal and Equitable commits to always offering it S4. Terms 1/3/6 are near-universal, S2 adds 2 years, S6 offers only 1 and 6, and the Academy reports one/two/three/six R6. Chosen: 10% buffer on a 1/3/6 menu, full buffer menu retained.
Dual-direction and absolute-return designs. Equitable’s Dual Direction pays |R| for losses within the buffer, the participation rate applying only to positive index performance S4; Allianz’s Index Dual Precision pays the trigger rate for the same region S5; Lincoln’s Dual Performance Trigger and Dual Rate accounts likewise S6; Brighthouse’s Step Rate Edge triggers at −b rather than 0 S2. Chosen: Edge only — the minimal member of the family, needing one binary option rather than a re-strike of the whole portfolio.
Withdrawal accounting is uniform and is the single most important behavioral rule: all insurers reduce the notional proportionally to the reduction in interim value S2 S3 S4 S6, and all warn the proportional reduction can exceed the dollar withdrawal when the interim value is below the notional S2 S3 S6. The one exception is a locked bucket, reduced dollar-for-dollar S2. Chosen: proportional, with the locked-bucket exception in the Performance Lock module.
Charge structure. S1–S4 and S6 carry no explicit asset-based charge on index-linked value; the cap is the fee — “While no fees or charges are deducted from the amounts held in the Index Strategies, the available Cap Rates, Participation Rates, Tier Levels, and Step Rates reflect the expenses related to the Index Strategies” S3, and S4 and S6 both call the cap an “implicit ongoing fee”. The Academy confirms “Most contracts do not have explicit fees other than for optional benefits” R6. The outlier is Allianz’s rider-bundled 1.95% S5. Chosen: no explicit charge. unverified whether any RILA applies an explicit M&E charge to index-linked account value — none of the retrieved documents does.
Fee-series structure. One chassis often sells three ways: Series B (8%-grading-to-0 withdrawal charge over 6 years), Select (no charge, lower caps) and Advisory (no charge) S4; B-Share and Advisory S6. A model must parameterize the withdrawal-charge schedule and the cap level jointly, since they trade off. Chosen: the commission-paying B-equivalent (7-7-6-5-4-3-0 S1 S2).
Pre- versus post-AG 54 interim value. The older Shield Level Select design used no option pricing at all — a time-prorated accrual in which the Shield, Cap and Step Rates each accrue linearly over the term and the term-end rules are applied to the accrued rates (worked in S1: 10% cap x 183/365 = 5% accrued cap, giving a $52,500 interim value on a $50,000 investment amount) S1. It predates AG 54’s July 1, 2024 effective date R2 and would not satisfy the Hypothetical Portfolio requirement without a material-consistency demonstration. Retained in technical-notes.md as a tractable first implementation target and regression contrast, not as the representative design.

Regulatory context#

Actuarial Guideline LIV (AG 54) — definitional. AG 54 specifies “the conditions under which an Index-Linked Variable Annuity (ILVA) is consistent with the definition of a variable annuity and exempt from Model 805 and specify nonforfeiture requirements consistent with variable annuities” R2 REG-R44. Because an ILVA account is not unitized, it requires Interim Values materially consistent with a Hypothetical Portfolio = Fixed Income Asset Proxy + Derivative Asset Proxy, less a provision for Trading Costs; the Index Strategy Base must equal the Strategy Value at term start; the fixed proxy is a hypothetical bond starting at (Base − Derivative Asset Proxy value) and, at unchanged yield, accreting to the Base at term end; derivative assumptions must track observable market prices wherever possible, valued by “the standard Black-Scholes method, Monte-Carlo Simulation techniques, and other market consistent option valuation techniques”; and non-hypothetical-portfolio methods need a material-consistency demonstration “under a reasonable number of realistic economic scenarios that include index changes that test crediting constraints and recognize initial option pricing market conditions” R2. An actuarial memorandum with certifications is required with each ILVA filing R2. Effective for all contracts, riders, endorsements and amendments issued on or after July 1, 2024; an ILVA that fails “is not considered a variable annuity and therefore is subject to Model 805” R2. Whether an MVA is included, and any formula, was deliberately left to the states under the equity principle R2. The retrieved document’s adoption trail stops at the Life Insurance and Annuities (A) Committee (2/24/2023); NAIC Executive/Plenary adoption is unverified.

NAIC Model #250 and the model-number correction. AG 54 requires ILVA nonforfeiture benefits to comply with Section 7 of Model #250, not including Section 7.B, with net investment return consistent with the interim value requirements R2 REG-R43 — §7.B being the provision that would otherwise push non-varying benefits back to the deferred-annuity nonforfeiture law R4. Correction carried from the research: #250 is the Variable Annuity Model Regulation; the Annuity Disclosure Model Regulation is #245, not #250 REG-R43 REG-R45, as AG 54’s own citation confirms REG-R44. RILAs are largely exempt from #245 via its §3.D registered-product carve-out but still owe the Buyer’s Guide REG-R45.

NAIC Model #805 and the 15-basis-point correction. Model #805 does not apply to a RILA if and only if AG 54 is satisfied R2 REG-R42 REG-R44. Where a model must nevertheless evaluate the #805 floor (a non-compliant design, or a fixed account tested under Model #250 §7.B), the indexed nonforfeiture rate is the lesser of 3% and the five-year CMT rate (rounded to the nearest 1/20 of one percent, from a date no more than 15 months before issue or redetermination) reduced by 125 basis points and subject to a floor of 15 basis points (0.15%) — not the 1% floor commonly asserted REG-R42. The minimum nonforfeiture amount accumulates net considerations of 87.5% of gross, less prior withdrawals, a $50 annual contract charge, premium tax paid and indebtedness REG-R42.

SEC registration — the 2024 move to Form N-4. Release Nos. 33-11294; 34-100450; IC-35273; File No. S7-16-23; RIN 3235-AN30 amended 17 CFR Parts 230, 232, 239 and 274 to require RILAs and registered MVA annuities to register on Form N-4 rather than Forms S-1/S-3, driven by the Registration for Index-Linked Annuities Act, Division AA, Title I of the Consolidated Appropriations Act, 2023, Pub. L. 117-328; 136 Stat. 4459 (Dec. 29, 2022) R1 REG-R49. Effective September 23, 2024 (verified twice REG-R49 REG-R49b); compliance date May 1, 2026, by which RILA issuers must file a Rule 485(a) post-effective amendment on final Form N-4 R1 — that date carries unverified in the cross-product bibliography, which reports it from filing-agent and law-firm summaries without reading section II.J of the release REG-R49 unverified. The rule requires tailored disclosure of cap rates, participation rates, buffers and floors, contract adjustments and surrender charges; a prescribed Key Information Table; optional summary prospectuses under Rule 498A, whose title now expressly extends to “registered non-variable annuity contracts” REG-R51; and Rule 156 compliance for sales literature REG-R49. It also names the three early-withdrawal costs — surrender charges, interim value adjustments (“the IVA will adjust the contract value based, generally, on a complex formula where the IVA may change daily and can be positive or negative”), and a positive or negative MVA — collectively “contract adjustments” R1. Form N-4 itself was not retrievable (sec.gov HTTP 403) and is described only through the adopting releases REG-R52.

Valuation — VM-21 and its scope test. VM-21 constitutes CARVM in its scope, aggregate reserve = stochastic reserve (CTE70) + additional standard projection amount REG-R35. Applicability is frequently mis-stated. §2.A.1 brings in variable deferred annuities and “any other policy or contract which contains guarantees similar in nature to GMDBs or VAGLBs … where there is no other explicit reserve requirement”, but §2.A.3 excludes “Separate account contracts that guarantee an index and do not offer GMDBs or VAGLBs” R3. So a bare accumulation RILA is outside VM-21, while the representative design here — carrying a return-of-premium GMDB — is in scope R3 S2; §2.A.2 disapplies VM-21 to contracts falling under VM-A item A-255 while extending it to subaccounts with MVA-like features R3. That A-255 limb is no longer a blind cross-reference: A-255 has been read, and the test is its ¶1 definition — a deferred annuity, individual or group, whose underlying assets are held in a separate account, whose values are guaranteed if held for specified periods, whose nonforfeiture values rest on a market-value-adjustment formula if held for shorter periods, and whose assets “must be in a separate account during the period or periods when the contract holder can surrender the contract” REG-R157. Whether the representative design meets that test is not resolved here — the exclusion is VM-21’s text, not A-255’s REG-R157 REG-R35 unverified. AG 43 is not simply superseded: through reference in AG 43, VM-21 also reaches pre-2017 contracts outside its own scope, and the two populations may be reserved as one aggregated group REG-R35 REG-R38.

Valuation — the formulaic CARVM floor, and what now sources it. A contract outside VM-21 falls back to formulaic CARVM: SVL §5a, printed word for word at A-820 ¶15 REG-R1 REG-R153 ¶15. Its interpretive layer has been read at first hand. AG 33 reaches this contract — it applies “to all annuity contracts subject to CARVM, where any elective benefits … are available”, with no product list, no separate-account exception and no threshold, and this chassis offers its three named elective benefits (full surrenders, partial withdrawals, full and partial annuitizations) REG-R151 S1 S2. AG 35 was retrieved and does not address this design — it defines no term “equity indexed annuity” and says nothing about separate accounts, registered products, buffers, floors or AG 54; record it as neither including nor excluding RILA REG-R152. A-250 and A-255, long called this product’s “closest formulaic items”, turn out not to be reserve methods at all — one printed page each, each delegating the reserve to A-820, and between them containing no formula, symbol, factor, table, elective-path rule, interim-value rule or the word CARVM REG-R156 REG-R157. What remains unsourced is narrower than before and still real: no retrieved document says how an Interim Value — a market-consistent derivative price — becomes “the future guaranteed benefit” of §5a, AG 54 governing the nonforfeiture value and not the reserve R2 REG-R44.

Capital. C-3 Phase II sets the Total Asset Requirement at CTE 90 and RBC as the excess of TAR over statutory reserves, subject to a Standard Scenario floor REG-R47; VM-21 §§4.A–4.E and the RBC requirements are identical except for the elective tax treatment REG-R35, so one projection serves both. Reform background (hedging penalties, Standard Scenario misalignment) is in the Oliver Wyman QIS II reports REG-R48. The Academy places ILVA RBC as “C0–C1: General Account, C3–C4: Separate Account” R6.

Non-guaranteed elements. Cap, Step, Edge and Participation Rates reset at each Term Start Date are NGEs under ASOP No. 2, which lists “index parameters used to determine credited interest” as an NGE and “minimum index parameters” as guaranteed elements, and whose scope covers fixed, variable and indexed deferred annuities R5 REG-R26. It requires a determination policy, an NGE framework, NGE scales, policy classes and periodic review of in-force NGEs R5. The prospectuses confirm the discretion: “Trigger Rates, Caps, and Participation Rates may be adjusted on the next Term Start Date and may vary significantly from Term to Term” S5.

Federal tax. IRC §72: LIFO income-first on pre-annuity-starting-date distributions from deferred annuities; §72(q)’s 10% additional tax on the includible portion of non-qualified distributions; §72(s)’s at-least-as-rapidly and five-year death distribution rules; and aggregation of all annuity contracts issued by one company to one policyholder in a calendar year REG-R55. §1035 permits annuity-to-annuity and annuity-to-qualified-LTC exchanges but not annuity-to-life REG-R56. §817(h) requires adequate diversification of the segregated asset account REG-R15. §807 sets the tax reserve at the greater of net surrender value and 92.81% of the NAIC-prescribed method (CARVM), capped at statutory REG-R16.

Distribution conduct. Model #275 (2020 best-interest revision) requires producers to act in the consumer’s best interest and insurers to supervise recommendations REG-R46; FINRA Rule 2330 governs recommended purchases and exchanges of deferred variable annuities, with principal review within seven business days and disclosure of the surrender period and the pre-59½ tax penalty REG-R54 — unverified whether FINRA applies it to RILAs specifically, since the rule text says “deferred variable annuities”. Both bite the model indirectly, through exchange velocity and hence surrender assumptions.

Interstate Insurance Compact. The Compact’s ILVA standard (IIPRC-03-I-ILVA) is narrower than AG 54: it “requires the use of the Hypothetical Portfolio methodology and does not allow for materially consistent approaches” R6. Quoted second-hand through the Academy paper; the Compact standard was not retrieved R6 unverified.

U.S. GAAP. RILA index credits and annuity guarantee riders are the paradigm market risk benefits at fair value through earnings under LDTI REG-R34, with ASOP No. 10 (Doc. No. 207) the professional-standards counterpart; the MRB-versus-insurance-liability classification determines the measurement model REG-R71.