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ADI 2018-05 - Use of rate sheet supplements in connection with variable insurance products

April 3, 2018

Variable Insurance Products (“VIPs”) often provide various insurance features, such as living benefits and death benefits.  The level of benefits provided and the fees for those benefits may need to change frequently in response to changing market conditions.  Historically, material changes to these benefits, like other material changes, were required to be disclosed in post-effective amendments filed pursuant to rule 485(a) under the Securities Act.  These filings would be subject to staff review and comment.  However, the staff will not object if, instead of making a filing under rule 485(a) of the Securities Act of 1933 to change disclosure regarding certain terms of these benefits, the fund instead makes use of a rate sheet supplement.

A rate sheet is a short document that can be used to provide disclosure regarding items such as current fees,[1] withdrawal rates, and crediting rates associated with various contract benefits (for new sales) that change so frequently as to make filing of post-effective amendments with each change impractical.  Instead, disclosure of changes solely to the numeric value of these fees and rates can then be accomplished by filing a rate sheet supplement under rule 497 of the Securities Act.[2] 

The staff will not object to the use of a rate sheet if the rate sheet uses one of two approaches:

  • Under alternative one, a rate sheet must establish a rate for a set period (by disclosing a start date and an end date).  This end date cannot be superseded by a subsequent filing. 
  • Under alternative two, a fund must specify a rate that applies beginning on a specified date without specifying an end date.  Under this second approach, the supplement must prominently disclose that the rate can be superseded at any time and identify how and when (i.e., how far in advance of the change) investors will be notified of the current rates.[3]  A fund must file a superseding rate sheet a reasonable time prior to its effective date.

For VIPs using rate sheets, the prospectus should describe how the rate sheet works; that the fees and rates may change; how to obtain the current rates; and how existing contract owners can obtain the rate applicable to them (e.g., non-EDGAR website or phone number).  Historic rates should be disclosed in an appendix to the prospectus. 

The rate sheet should identify its purpose (e.g., to update a fee or withdrawal rate information), the date of applicability and whether it can be superseded (if applicable), and clearly disclose the rider fees or withdrawal percentages just as though they were included in the body of the filing.  The rate sheet should also describe how a current investor can obtain the rate applicable to him or her. 

The rate sheet supplement itself should be on top of the prospectus and delivered to new contract owners with the prospectus.  Because a rate sheet could become lost or otherwise separated from the prospectus, the body of the prospectus should not identify the rates applicable on the date of the prospectus; instead, it should make clear that the rate sheet discloses the current rates.

Finally, the staff believes that best practice would have current rates also identified on the fund’s website.  In that case, the prospectus and rate sheet should state that information about current rates is available on the insurance company’s website at a specified internet address.

VIPs wishing to make use of a rate sheet should make a rule 485(a) filing the first time a rate sheet is used so that the staff can review and comment on the form of the rate sheet proposed to be used and the way it is described in the body of the prospectus.[4]  A filing under rule 485(a) should also be made for any material changes to the prospectus disclosure relating to the rate sheet, or the rate sheet itself other than to change the applicable date, and the numeric values of the fees or rates disclosed on the rate sheet.[5]

The staff believes that highlighting disclosure of VIP features that are both material and subject to frequent change by use of a rate sheet can ease administrative burdens for VIPs, and can also allow investors to more easily find this information and make more informed investment decisions.

The delivery obligation with respect to a rate sheet supplement is the same as the delivery obligation associated with any other change to a VIP’s prospectus.

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ADI are recurring publications that summarize the staff’s views regarding various requirements of the federal securities laws.

The statements in this ADI represent the views of the Division of Investment Management. This update is not a rule, regulation or statement of the Securities and Exchange Commission.  Further, the Commission has neither approved nor disapproved its content.  Future changes in rules, regulations, and/or staff no-action and interpretive positions may supersede some or all of the information in a particular ADI.

We hope that this ADI will assist registrants in preparing their filings.  We also welcome feedback on this ADI and on any disclosure matters.  If you have any questions or feedback, please contact:

Disclosure Review and Accounting Office

Phone: 202.551.6921



[1] A rate sheet cannot be used to change disclosure regarding the maximum fees to be charged under the contract.  If an issuer changes the maximum fees, it would need to file a post-effective amendment under rule 485(a).

[2] This is similar to the approach highlighted in IMGU 2016-06, which permits funds to include sales charge variations in an appendix to its prospectus.  For similar reasons, we believe that this approach will benefit investors by making it easier for contract owners to find current information about a rider.

[3] Any date range specified in a rate sheet should relate to the date the contract application or benefit election form is signed by the contract owner.

[4] A rule 485(a) filing is not required if the rate sheet procedure is established through an initial registration statement.   

[5] A form of rate sheet should be included with any such filing.

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