Commissioner’s Bulletin # B-0036-98

Roth IRAs are individual retirement plans, as defined in 26 U.S.C. § 7701(a)(37), which are designated at the time of the establishment of the plan as a Roth IRA. In December 1997, the Internal Revenue Service (IRS) published Announcement 97-122, providing transitional relief to sponsors of Roth IRAs so long as they meet certain conditions, including clearly designating the product as a Roth IRA at the time of establishment and having the contract subsequently approved by the IRS. Some life insurance companies may have misinterpreted Announcement 97-122 to mean that their adherence to IRS guidelines set forth in the announcement obviates the need to comply with applicable State requirements. It does not.

Tex. Ins. Code, art. 21.24 requires that every policy of insurance [which may include the application] issued or delivered in the state by any life insurance company doing business in this state contain the entire contract between the parties.

Despite the fact that the IRS is conditionally permitting the marketing and sale of non-conforming annuity products as Roth IRAs, it is the Department´s position that such sales violate Article 21.24 to the extent that what is being sold does not conform to the written contract. If you plan to sell products purporting to qualify for Roth treatment, existing contract forms must be appropriately modified by endorsement or otherwise reworked and approved by the Department prior to sale. The Department has developed guidelines for Roth IRA products to assist you in developing contract forms conforming to Roth requirements. The guidelines can be found on the Department´s Internet page, http://www.tdi.state.tx.us.

The Texas Department of Insurance directs each insurer to comply with Article 21.24. Please remind your employees and staff of these requirements for business in Texas.

Please understand that the Texas Department of Insurance will closely monitor compliance with Tex. Ins. Code art. 21.24 and will take enforcement action where appropriate.

For inquiries please contact Beth Hill of the Life/Health Group at 512-322-3406, or refer to the Department´s Internet page for more detailed requirements pertaining to Roth IRAs.