L&HIllinoismedium
A producer arranges an Internal Revenue Code Section 1035 exchange of an in-force fixed annuity for a new indexed annuity issued by a different Illinois carrier. Which statement best describes how 50 Ill. Adm. Code 917 applies?
Part 917 applies fully; the transaction is an annuity-to-annuity replacement
BPart 917 does not apply because 1035 exchanges are governed only by federal tax law
CPart 917 applies only if the new annuity is variable
DPart 917 applies only if the existing annuity has surrender charges
Why this is the answer
The Illinois replacement regulation applies to annuity contracts as well as life insurance, and a 1035 exchange that surrenders one annuity to fund another is squarely within scope. The federal tax-deferred treatment under IRC 1035 does not exempt the producer from Illinois disclosure duties. Part 917 applies regardless of whether the new annuity is fixed, indexed, or variable, and regardless of whether surrender charges exist.
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