L&HPennsylvaniamedium
A producer arranges an IRC § 1035 exchange of one PA-issued non-qualified annuity for another. Does 31 Pa. Code Chapter 81 apply?
Yes — Ch. 81 applies to annuity-to-annuity replacements including 1035 exchanges
BNo — § 1035 exchanges are exempt from state replacement rules
COnly if the new contract is a variable annuity issued by a Pennsylvania-admitted carrier
DOnly if the owner is age 65 or older and the exchange involves a qualified contract
Why this is the answer
Federal tax-free treatment under IRC § 1035 does not exempt the transaction from state replacement regulation; Ch. 81 disclosure, notice, conservation, and 20-day free-look all apply.
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