Voya Financial Annuities and Retirement Services

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1 COMPLIANCE DEPARTMENT CONTACT INFORMATION Voya Insurance and Annuity Company Kristi Cooper, VP and Chief Compliance Officer, MLRO Phone: , Option 3, Ext Complaint Handling Brad Bax, Compliance Manager Phone: , Option 3, Ext Voya Retirement Insurance and Annuity Company Anne Iezzi, Chief Compliance Officer, MLRO Phone: Complaint Handling and NY Reg. 60 Brian Baranowski, Director Phone: ReliaStar Life Insurance Company Chad Eslinger, VP and Chief Life Compliance Officer, MLRO Phone: Option 1, Ext

2 Annuity Suitability Voya is committed to making sure that every annuity we issue is suitable for our Customers. Voya has developed a broad range of annuity products to serve the financial needs of our Customers. We are also committed to providing our Distributors with the products, information and resources to help their Customers meet their financial goals. Because of this commitment, we are continually reviewing and evaluating our processes to better ensure that our Customers understand and benefit from the annuities they purchase. There is no one-size-fits-all solution for suitable financial strategies. Each Customer has his or her own unique situation, and suitability must be determined on the totality of the Customer s circumstances. Annuities can be a valuable component of a diversified portfolio, but may not be right for everyone. Every recommendation you make must be suitable for the Customer. A decision to recommend an annuity should be based on a careful analysis of the information you gather from the Customer. This means that, before recommending the purchase or replacement of an annuity, you must first obtain a full and accurate picture of the Customer s individual needs, financial status and financial objectives. Voya s suitability forms will help you do this. If you are a Registered Representative and are required to submit annuity business through your broker-dealer, you should follow the guidelines provided to you by your broker-dealer. Understanding Our Annuities We require you, as a Distributor, to discuss the Customer s individual needs, financial status, and financial objectives before recommending an annuity and submitting an application. You must also understand the features and benefits of our annuities. Only when you understand the terms of our annuities can you fully explain them to the Customer(s) and make an educated recommendation. Product training materials and courses are available. We have created Customer materials, including brochures and disclosure forms, to help explain our annuities. You should provide these to Customers and be prepared to discuss them. Once you have made a recommendation to purchase a Voya annuity product you must review the appropriate annuity disclosure form with the Customer. Make sure the Customer understands the annuity, particularly the guaranteed values, surrender charges and withdrawal features before he or she applies for the annuity. If the Customer requests that you discuss your annuity recommendation with one of their family members, you should do so. If your recommendation involves a replacement, make sure the Customer understands the difference between the annuity you are recommending and the product that is being replaced, including any charges and fees, as well as the possible tax implications of the replacement. Once you are confident that the Customer understands the annuity you are recommending, you should obtain all applicable forms. We will: Review the annuity application; Review the suitability form(s); Consider the business not in good order if you fail to complete and submit the required suitability form(s) with the application. Conduct a heightened suitability review in all cases where certain factors are present and request more information where necessary. Visit the Voya for Professionals website at Voyaprofessionals.com to obtain any suitability forms, annuity needs analysis forms, replacement notices or comparison forms applicable for the state of issue. Retirement Services - Signed Acknowledgements of 403(b)(1) Withdrawal Restrictions Section 403(b)(1) of the Internal Revenue Code imposes certain withdrawal restrictions on amounts invested in variable annuity contracts used to fund Section 403(b) retirement plans. These restrictions conflict in certain respects with federal securities laws. To address this conflict, Voya Retirement Insurance and Annuity Company (VRIAC) has chosen to rely on and comply with the conditions of the no-action letter provided by the SEC staff in American Council of Life Insurance (Nov. 28, 1988) (the ACLI Letter ) when it issues variable annuity contracts to 403(b) retirement plans. The ACLI letter requires, among other things, VRIAC to obtain from each plan participant a signed acknowledgement that they understand the 403(b)(1) withdrawal restrictions and the investment options available under the plan. In order to rely on the ACLI Letter, each year VRIAC must represent to the SEC in the registration statement for each variable annuity contract issued to 403(b) plans that it is relying on the ACLI Letter and complies with its terms. In order to make the required representation in each such registration statement, the Company requires evidence showing that each participant signed an acknowledgement of the withdrawal restrictions and investment options. Consequently, we require that copies of these signed acknowledgements be submitted to the New Business team for all 403(b)(1) variable annuity enrollments, including those submitted electronically through Distributor Enroll by Internet (EBI). If the required registration statement representation cannot be made due to inability to provide evidence of compliance with the requirements of the ACLI Letter, the consequences could include the SEC s suspending sales of variable annuity products as well as imposing civil monetary penalties. Repeated inaction by Distributors could subject you to disciplinary action from/by the Company. 2

3 VOYA POLICIES Producer Commission Payment Policy Commission payments on certain contracts written by newly contracted Distributors will be delayed to account for the contract free look period and time for funds to clear the payor s bank. Generally, commissions will be paid approximately 15 days after the contract is in active status. Criteria for this payment schedule include the Distributor s length of time contracted with Voya and commission payout thresholds. For additional questions regarding this policy please contact the Commissions Department at Voya AFFILIATED COMPANY EXCHANGE RULES In an ongoing effort to bring Voya together as one company and make doing business with us easier, the following is presented regarding standardizing the exchange rules among all Voya companies. Exchanges, whether involving fixed or variable annuities, are a primary focus of regulatory activity. In addition to your normal suitability determination for annuity and securities sales, you and your firm, if applicable, should ensure that transactions are being evaluated specifically for the benefit of the exchange to your Customer. If questions arise during Voya s review of the exchange request, we may require you or a principal of your firm to provide verification that he or she believes that the proposed annuity is a suitable exchange and has approved the transaction. All applicable replacement notices and forms are to be submitted with each request. These rules are subject to change from time to time and do not provide any rights or guarantees beyond what is in any insurance or Distributor s contract. Voya ANNUITY CONTRACTS Surrender Charges on the Original Contract Applicable surrender charges and/or market value adjustments (MVAs) will NOT be waived. These charges will be applied upon transfer and not carried over to the new contract. There are no special exchange fees. Refunds of Sales Charges If the prior contract has a refund of sales charge feature, the refund will be included in the rollover amount. If the new contract has a refund of sales charge feature, refund of sales charges will apply to the extent that loads are charged. Commissions For VIAC (Voya Insurance and Annuity Company) and/or VRIAC (Voya Retirement Insurance and Annuity Company) contracts: Commissions on the Internal Transfer: Only trail commission options are available for internal transfers. Please note that some internal transfers do not qualify for a commission. Commissions on New Money: Trail commissions will be paid on the amount of new money received at the time of the exchange and/or during the life of the contract. For ReliaStar Life Insurance Company: For commission information and guidelines for internal and/or affiliate exchanges involving ReliaStar Life Insurance Company please refer to the Voya for Professionals Website at Voyaprofessionals.com; the document title is: Internal Exchange Guidelines; A reference guide for annuity products issued by ReliaStar Life Insurance Company, a member of the Voya family of companies. Another way to access the document is to select the Retirement & Rollover tab within the Voya for Professionals Website at Voyaprofessionals.com and enter Internal Exchanges in the Keyword Search field. Loans Any outstanding loan on the existing contract must be repaid upon surrender and transfer. 3

4 REGULATORY Retirement Services - ERISA Prohibited Transaction Warning If a Customer is a participant in a qualified plan, they should contact their employer or their administrator for information on how those changes affect them. Neither Voya nor its Distributors give legal, tax, or accounting advice. We strongly recommend that Customers consult their own attorney or tax advisor for guidance in these situations. If you sell life insurance or annuities to an employee benefit plan, you will need to know about prohibited transactions under ERISA, the federal Employee Retirement Income Security Act of ERISA regulates employee pension benefit plans and employee welfare benefit plans such as medical and disability benefit plans, vacation and sick leave plans and certain non-qualified deferred compensation arrangements. Under certain circumstances, life insurance policies or annuities may be purchased within pension benefit plans. Welfare benefit plans are commonly funded by group insurance policies. Some key words with respect to ERISA prohibited transactions are fiduciary and party in interest. A fiduciary includes anyone who exercises discretionary authority over a plan s management or administration, or exercises any authority or control over the management of its assets, or renders investment advice for a fee or compensation, either direct or indirect, with respect to the plan s moneys or other property. A party in interest includes, among other persons, a fiduciary, a person providing services to the plan, an employer whose employees are covered by the plan, and other persons related to the foregoing through blood, stock ownership, or partnership. Depending upon the services you provide to an employee benefit plan you may be a fiduciary or a party in interest. ERISA imposes many obligations on a fiduciary, including a duty of prudence in the investment of plan assets. Prohibited transactions with respect to a fiduciary include a fiduciary dealing with plan assets in his own interest, acting in a transaction with the plan on behalf of a party whose interests are adverse to those of the plan, and receiving consideration from any party dealing with the plan in connection with plan assets. For a party in interest who is not a fiduciary, prohibited transactions include a sale of property to the plan, the furnishing of services (including as an insurance consultant) to the plan, and the transfer of plan assets to or for the benefit of the party in interest. Example #1: A Customer who owns a small business wants to set up a pension plan for his employees. If your only connection with the plan is the sale of insurance, you may not have an ERISA problem (but see Example 2). But suppose that the client turns over to you the responsibility for selecting the type of funding for the plan and gives you complete discretion over the investment of plan funds. Under those circumstances you are a fiduciary of the plan. As a fiduciary you are strictly forbidden to engage in any transaction with the plan from which you personally profit. If you sell insurance to the plan under those circumstances, you can be required to refund any commission on the sale and to make good any loss incurred by the plan on account of the insurance purchase. Criminal prosecution and excise tax penalties are also a possibility. Example #2: A pension plan pays you a fee to act as its insurance consultant. In this case you are what is known as a service provider and thus are a party in interest. If you sell insurance to the plan, you are engaging in a prohibited transaction. A party in interest who engages in a prohibited transaction is subject to severe civil penalties, excise taxes, and possible criminal prosecution. However, an exemption may be available under Prohibited Transaction Exemption 77-9, as amended by PTE 84-24, a copy of which can be found on the Compliance Section of Voya for Professionals under ERISA Prohibited Transactions. This exemption is not automatic. It requires compliance with some tough conditions, as set forth in Sections IV and V of the Exemption, which must be documented and retained for six years after the transaction. Even if you are not a fiduciary or a party in interest, you could incur a civil penalty by knowingly participating in a breach of trust by a fiduciary. This could occur where a Distributor sells whole life policies to the trustee of a section 125 death benefit only cafeteria plan. The purchase is a breach of trust by the trustee because the purchase of whole life insurance is not a proper use of the assets of this particular plan. Voya urges you to consult competent ERISA counsel in any case where you are selling to an ERISA plan with which you have any connection other than that of a Distributor. The same applies where you have any doubt as to the appropriateness of the purchase of your product by the plan. Remember, ERISA compliance is your responsibility. 4

5 Guidance Under Section 409A For Correcting Nonqualified Deferred Compensation Plan Documents (IRS NOTICE ) On January 5, 2010, the Treasury and the IRS issued Notice (the Notice ) which provides an additional opportunity for employers and plan administrators to bring nonqualified deferred compensation (NQDC) plans into compliance with IRC 409A. Correctable Violations Examples of document failures that may be corrected under the Notice include: (1) impermissible definitions of separation from service, disability, or change in control; (2) impermissible payment events or payment schedules; (3) impermissible payment periods following a permissible payment event; (4) impermissible initial or subsequent deferral election procedures; and (5) a failure to include the six-month delay of payment for specified employees of publicly traded companies. The relief provided under IRS Notice is available only if certain requirements are met, including: (1) the specified notice and reporting requirements (to the IRS and to the service provider) are met by the service provider and the service recipient; (2) the service recipient takes commercially reasonable steps to avoid a recurrence of the failure; (3) the service provider is not under examination (for example, under a Form 1040 audit) for the year that the failure occurred; (4) the failure is inadvertent and unintentional and is not related to any listed transaction under section (b)(2) ; and (5) if repayment by the service provider is required, the repayment is made by the applicable deadline and the service recipient does not pay or provide a substitute benefit for the amount the service provider must repay. Under the reporting requirements, the service recipient must prepare a statement that includes information specified in IRS Notice and file the statement with its federal income tax return for the year the failure is discovered, and provide a similar statement to the service provider (typically by the January 31 following the year the failure is discovered). In addition, a W-2 (or W-2c) or 1099 (or corrected 1099) may need to be filed, and the service provider may be required to file an amended tax return. 5