MetLife to bar new additions to VAs with old income riders

Changes keep coming in the variable annuity space, as MetLife Inc. will stop taking additional contributions to VAs with legacy living and death benefits next Monday.
The insurer posted a series of filings with the Securities and Exchange Commission on July 2, blocking swathes of legacy variable annuity clients from making additional payments to their contract if it was issued with past renditions of its Guaranteed Minimum Income Benefit Plus (or GMIB Plus) I through IV, plus a slate of other product features that are no longer available, including the guaranteed-minimum-accumulation benefit and its guaranteed-withdrawal benefits.
The following VA contracts are affected: Series C (offered between Sept. 4, 2001, and Oct. 7, 2011); Series L, Series L-4 Year (sold between Nov. 22, 2004, and Oct. 7, 2011); Series VA (sold between March 22, 2001, and Oct. 7, 2011); Series VA-4 (sold between May 1, 2011, and Oct. 7, 2011); Series XC, Series XTRA and Series XTRA 6.
Clients with contracts sold after Oct. 7, 2011, as Series C, Series L-4 Year, Series S, Series S-L Share Option, Series VA and Series VA-4 won’t be able to allocate more money toward their contract if the VA was sold with the GMIB Plus III or Plus IV or the Enhanced Death Benefit II or III.
This Friday is the last day contract holders can add money to these VAs, according to the filing.
The restrictions don’t apply to those whose contracts were issued in Connecticut, Florida, Massachusetts, Maryland, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Texas, Utah or Washington.
“We continually review all of our product features to maintain a disciplined balance between customer value, risk and return,” said MetLife spokeswoman Meghan Lantier. “Recent product changes help us achieve these goals, and allow us to remain committed to the annuity business.”
Such changes — which moderate VA exposure by slowing volume — affect clients and advisers because the older contracts gave clients access to over 50 different fund options, and investors could keep piling cash into these VAs, increasing the amount of money protected under the rider.
“When they limit what you can add to the contract, it affects plan design,” said Judson Forner, an investment analyst at ValMark Securities Inc.
Meanwhile, the latest offerings, such as the GMIB Max IV rider, limit fund choices to a handful of tactically managed portfolios.
Advisers also make a commission when clients add to their VAs, so limiting those contributions keeps them from receiving that compensation.

Related Topics: Metropolitan Life Insurance Co. (MetLife)