Key Takeaway
- If you’re currently being shown a fixed indexed annuity or RILA illustration, the projected return column is built under rules regulators have formally identified as broken. Ask your agent to run a scenario at half the illustrated rate and show you what the guaranteed column looks like.
State insurance regulators spent August 3 trying to agree on how to stop insurers from showing retirement savers projected annuity returns that regulators say are simply not believable.
The NAIC’s Life Insurance and Annuities Illustrations (LII) Working Group, chaired by Ben Slutsker, director of life actuarial valuation at the Minnesota Department of Commerce, held the first of four scheduled consensus-building calls aimed at rewriting Model Regulation 245, the NAIC’s Annuity Disclosure Model Regulation. The impetus is explicit: regulators have observed indexed annuity sales illustrations projecting annual returns ranging from 10% to 25% sustained over multiple years. Slutsker has said publicly that “the basic issue here is that there are some concerns regarding illustrated annuity returns that are unrealistically high.”
The comment period on potential Model 245 modifications closed July 17. The working group now moves from gathering input to building consensus on actual changes, with technical proposals expected after the NAIC Summer National Meeting in Columbus, Ohio, August 10 through 12.
What Model 245 Governs, and Why Regulators Say It Isn’t Working
Model 245 sets disclosure requirements for annuity sales, including how carriers show buyers projected contract values and credited returns. Current rules, in regulators’ view, don’t adequately constrain how indexed annuity carriers present hypothetical future returns at the point of sale. This applies to both fixed indexed annuity (FIA) and registered index-linked annuity (RILA) issuers.
The working group is weighing revisions to four areas: illustration length, disclosure requirements, accountability measures, and how insurers present non-guaranteed crediting rates. Consumer advocates on the working group have argued that illustrations function in practice as performance forecasts, not disclosures, and that buyers use the projected columns to make purchase decisions. Carriers and industry trade groups, including the American Council of Life Insurers (ACLI), the Committee of Annuity Insurers, and the Insured Retirement Institute, have pushed back. Their position: the existing Model 245 language should be the starting point rather than new frameworks built from scratch.
The working group is also weighing whether to adopt temporary actuarial guidelines as a “stopgap” while states go through the slow process of formally adopting any revised model law. Industry trade groups were skeptical of the idea when it surfaced earlier this year.
The Life Insurance and Annuities (L&A) Committee voted unanimously earlier this year to authorize the reopening of Model 245. Before formal revisions can proceed, the NAIC Executive Committee must also sign off. Slutsker described a timeline of roughly one year from formal reopening to finalized model language.
What This Means If You’re Being Pitched an Indexed Annuity Right Now
Timing matters. LIMRA’s preliminary Q2 2026 sales data, released last week, shows total U.S. annuity sales hit a record $123.9 billion in the second quarter. This is up 4% year over year and the 11th consecutive quarter above $100 billion. RILA sales set their own quarterly record at $23.3 billion, up 22% from Q2 2025. FIA sales came in at $30.7 billion, down 7% year over year.
That’s a lot of illustrations being handed to buyers right now, under rules regulators have formally identified as inadequate.
Here’s what those illustrations show, and what they don’t. The projected column is what the carrier’s illustration software calculates under current crediting assumptions (e.g., cap rate, participation rate, index strategy). Neither the cap nor the participation rate is guaranteed. Carriers reset them, sometimes annually. An illustration built on today’s 10% cap rate and 100% participation in the S&P 500 point-to-point strategy isn’t a promise that those parameters will hold for the next 10 or 20 years. The guaranteed column shows contractual floor values assuming the minimum crediting rate under the worst-case scenario. It typically shows something far less impressive.
IUL illustration rules have gone through four tightening rounds: the original AG49 in 2015, AG49-A effective December 2020, a “quick fix” to AG49-A that applied to policies sold on or after May 1, 2023, and further AG49-A disclosure revisions that took effect April 1 of this year. All four rounds cover indexed universal life products. Model 245 covers annuities, and it hasn’t been substantively updated to match the current indexed product landscape. That gap is exactly what regulators are now trying to close.
IUL illustrations at the current illustrated rates assume today’s caps and participation rates hold for 30-plus years. Neither is guaranteed. Run the illustration at 5% with the guaranteed column visible, and the projected cash value often drops by half or more. The same logic applies to the FIA and RILA illustrations now under regulatory scrutiny.
If you’re sitting across from an agent showing you a fixed indexed annuity or a RILA, two questions cut through the noise. First: what does the guaranteed column show. The contractual floor, not the projected column? Second: run the scenario at half the illustrated crediting rate and show the resulting values. If the product doesn’t work in that stress test, the projected column is doing too much of the sales work.
The working group’s consensus call is scheduled to address disclosure issues first, then move into the more technically complex questions around illustrated crediting rates and hypothetical returns. Slutsker said the goal is to have technical proposals ready for drafting after the Columbus meeting. Once the NAIC Executive Committee authorizes a formal model reopening, the drafting clock starts.
For buyers looking at indexed permanent products, both best life insurance and best life insurance for seniors resources can help identify carriers with strong financial strength ratings, a separate but related question from what the illustration shows.
The NAIC has not set a public deadline for final adoption of the revised Model 245 language. Individual state DOI’s would then need to adopt whatever the NAIC finalizes before the new rules could carry legal force in their jurisdictions. The adoption process varies widely by state and typically takes additional time after NAIC approval.
In the meantime, the illustrations being handed to buyers today remain built under the rules regulators have already decided to change.
Key Takeaway
If you’re currently being shown a fixed indexed annuity or RILA illustration, the projected return column is built under rules regulators have formally identified as broken. Ask your agent to run a scenario at half the illustrated rate and show you what the guaranteed column looks like.
