February 5, 2010

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Procedures for Redirections of Flow — Learn more

Roth 403(b) Now Available in Houston ISD — Learn more

Procedures for Redirections of Flow

A "Flow" scenario includes any situation with recurring payments including Salary Reduction/Deduction, Pre-authorized Check Plan (PAC) and Periodic Payments (i.e. 5-year Annuitization).

A "Redirection of Flow" occurs when these payments are stopped or reduced in order to start or increase flow on another policy. When this type of transaction is requested, LSW will follow procedures to make sure the transaction meets certain guidelines.

Key Points to Consider When Advising to Redirect Flow:

  1. Compare length of surrender periods on policies involved
  2. Compare policy provisions
  3. Evaluate age of the Policyowner
  4. Evaluate the reason for the request
  5. The transaction must be financially acceptable to the company after considering:
    • Surrender Charges
    • Unrealized Option Costs
    • Commissions (A redirection will result in reduced commissions)

Conservation:

If we receive a request to redirect flow from one annuity (written by a different agent) to another new or existing annuity, LSW will contact the original agent, if active, to allow for a 5-day conservation period. A letter of instruction from the Policyowner will be required to cancel the new redirection request.

Replacement Regulations for Redirections

Most states include redirections in their definition of a replacement. This is any transaction that will cause the discontinuation of premium payments to an existing annuity. Discontinuation of premium payments is one type of transaction that is often over-looked or not understood to be a replacement. Below is a typical example of how a redirection replacement might occur:
A participant is making regularly scheduled payments into a policy. You meet with the participant and together decide that payments will stop going into the original policy and instead will be redirected into a new policy. This is considered a “redirection” and is also a replacement, which requires proper state replacement paperwork.

To prevent delays in the processing of your business, and to make sure we are all in compliance with state regulations, please be sure to complete the appropriate forms, if applicable. See the State Required Forms listing #2630 for your state’s replacement form requirements.

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Roth 403(b) Now Available in Houston ISD

We are excited to announce the addition of Roth 403(b) after-tax contributions to the Houston Independent School District (HISD) 403(b) Retirement Plan.

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