October 9, 1991
TO: CONTRACTUAL PLANS COMMITTEE NO. 17-91
RE: INSTITUTE SUBMITS LETTER TO NASAA COMMITTEE REGARDING
PERSISTENCY PROPOSAL
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As we previously informed you, the Institute was informally
advised that the NASAA Investment Company Registration/Trading
Practices would be proposing a policy guideline whereby any
contractual plan whose persistency rate fell below 80% in a
particular state would be required to cease sales in that state.
(See Memorandum to Contractual Plan Committee No. 12-91, dated
September 10, 1991.)
The Institute submitted the attached letter to the NASAA
Committee outlining its objection to this persistency proposal.
As a preliminary matter, the Institute strongly objected to the
application of any persistency standard that would require the
cessation of sales if such a target was not met. In addition,
the Institute noted that this proposal would not accomplish the
Committee's goal of leading to greater persistency. In
particular, if an unsatisfactory persistency rate did exist, the
proposed automatic cessation of sales would prevent the plan
sponsor from taking steps to raise the persistency rate to an
acceptable level.
The Institute also reaffirmed its support for development
of a system to track persistency on a consistent basis. In
addition, the Institute recommended that the Committee consider
formation of a task force, consisting of representatives of the
NASAA Committee and contractual plan sponsors. The purpose of
the task force would be to serve as an informal "peer review"
group to examine the persistency rates of all contractual plan
sponsors and the steps taken by such plan sponsors to remedy
unacceptably low persistency rates. The task force would also
provide the NASAA Committee with the ability to be apprised of
persistency rates on an ongoing basis and the actions taken to
address any rates that might be too low.
It is anticipated that the NASAA Committee will be
publishing its report and proposed recommendations for public
comment in the near future. At that time, the Institute will be
submitting an additional comment letter which specifically
addresses the proposals contained in the NASAA report. A copy of
the NASAA Committee's report will be distributed to you as soon
as it becomes available.
Patricia Louie
Assistant General Counsel
Attachment