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89(R) HB 4386 - Enrolled version - Bill Text
H.B. No. 4386
AN ACT
relating to the exchange or surrender of an annuity contract.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 1114, Insurance Code, is
amended by adding Sections 1114.0541 and 1114.0542 to read as
follows:
Sec.
1114.0541.
PROCESSING OF ANNUITY CONTRACT EXCHANGES.
(a)
In this section, "exchange" means an annuity replacement
transaction:
(1)
in which the money in an existing annuity contract
must pass directly from the existing annuity contract and existing
insurer to a new annuity contract and a replacing insurer; and
(2)
in which the owner and annuitant of the new
contract are the same as the owner and annuitant of the existing
contract, regardless of whether the owner or annuitant may be
changed after completion of the transaction.
(b)
If a transaction involves an exchange of an annuity
contract, the existing insurer and the replacing insurer shall
comply with this section.
(c)
To initiate an exchange of an annuity contract, the
replacing insurer shall provide the existing insurer an exchange
request notice of the proposed exchange.
(d) An exchange request notice:
(1) must include:
(A)
all information necessary for the exchange to
qualify as a tax-free exchange under 26 U.S.C. Section 1035; and
(B) any information required by state law; and
(2)
may be provided on a form promulgated by the
Association for Cooperative Operations Research and Development or
another generally accepted form or in any other manner used by an
insurer.
(e)
An existing insurer that receives an exchange request
notice shall:
(1)
not later than the fifth business day after the
date the existing insurer received the notice, send a letter to the
contract owner, as required under Section 1114.054(c), unless the
existing insurer has previously provided it; and
(2)
subject to Subsection (f), transfer the contract
value of the existing annuity to the replacing insurer not later
than the 30th business day after the date the existing insurer
receives the notice unless:
(A)
the existing annuity contract being
exchanged has a provision that gives the existing insurer the right
to defer payment for a different period;
(B)
the existing insurer, replacing insurer, and
contract owner agree to a different transfer period, including an
agreement to make the transfer on a specific future date;
(C)
a different transfer period is required under
state or federal law; or
(D)
the existing insurer makes a determination or
reasonably suspects the exchange involves a fraudulent insurance
act the insurer is required to report under Section 701.051.
(f)
If an exchange request notice provided to an existing
insurer under Subsection (c) does not include all required
information necessary to complete the exchange, the applicable
period to transfer the contract value does not begin until the day
the existing insurer receives all required information from the
replacing insurer or contract owner, as applicable.
(g)
If a required transfer payment is not completed within
the period provided by Subsection (e)(2) or the existing annuity
contract, as applicable, the existing insurer shall pay penalty
interest on the unpaid amount at an annual rate of 10 percent
accruing from the first business day after the date the contract
value was required to be transferred until the contract value is
transferred to the replacing insurer in full.
(h) Nothing in this section is intended to:
(1)
change the suitability requirements applicable to
an agent or insurer seeking to replace an annuity under Chapter
1115; or
(2)
prohibit a replacing insurer and existing insurer
from agreeing to use different formats or modes for assisting
contract owners in the timely and efficient processing of
replacements or exchanges of annuity contracts.
Sec.
1114.0542.
PROCESSING OF SURRENDER REQUESTS FOR
ANNUITY CONTRACTS. (a)
To initiate a surrender of an annuity
contract, a contract owner must submit a surrender request to the
insurer in the form and manner required by the insurer.
An insurer
that issues an annuity contract shall make available to the
contract owner the form and manner in which the contract owner may
submit the surrender request.
(b)
An insurer that receives a surrender request from a
contract owner shall, subject to Subsection (c), transfer the
current cash surrender value of the annuity contract to the
contract owner not later than the 30th business day after the date
the insurer receives the request unless:
(1)
the contract being surrendered has a provision
that gives the insurer the right to defer payment for a different
period;
(2)
the insurer and contract owner agree to a
different transfer period, including an agreement to make the
transfer on a specific future date;
(3)
a different transfer period is required under
state or federal law; or
(4)
the insurer makes a determination or reasonably
suspects the surrender request involves a fraudulent insurance act
the insurer is required to report under Section 701.051.
(c)
If a surrender request submitted to an insurer under
Subsection (a) does not include all required information, the
applicable period to transfer the cash surrender value does not
begin until the day the insurer receives all required information
from the contract owner.
(d)
If a required payment of a cash surrender value is not
completed within the period provided by Subsection (b) or the
annuity contract, as applicable, the insurer shall pay penalty
interest on the unpaid amount at an annual rate of 10 percent
accruing from the first business day after the date the cash
surrender value was required to be transferred until the cash
surrender value is transferred to the contract owner in full.
(e)
Nothing in this section is intended to change the
suitability requirements applicable to an agent or other person
advising a contract owner to surrender an annuity under Chapter
1115.
SECTION 2. Sections 1114.0541 and 1114.0542, Insurance
Code, as added by this Act, apply only to an exchange or surrender
of an annuity contract initiated on or after January 1, 2026.
SECTION 3. This Act takes effect September 1, 2025.
______________________________
______________________________
President of the Senate
Speaker of the House
I certify that H.B. No. 4386 was passed by the House on May 6,
2025, by the following vote: Yeas 145, Nays 1, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 4386 on May 28, 2025, by the following vote: Yeas 135, Nays 0,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 4386 was passed by the Senate, with
amendments, on May 22, 2025, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor