L&HOhiomedium
An Ohio client exchanges one non-qualified deferred annuity for another under IRC Section 1035. For purposes of OH's annuity best-interest rule, this transaction is treated as:
AA new sale, not subject to replacement disclosure
BExempt because no taxable event occurs under federal tax law, so Ohio rules do not apply
A replacement requiring a suitability/best-interest analysis and replacement disclosure
DExempt because the client initiated it, so no best-interest analysis is required
Why this is the answer
Even though IRC Section 1035 provides federal tax deferral, the Ohio replacement regulation (OAC 3901-6-05) and the 2022 best-interest annuity rule (OAC 3901-6-13) treat any transaction in which an existing annuity is surrendered, lapsed, reduced, borrowed against, or otherwise used to fund a new annuity as a replacement requiring full disclosure, notice to the existing insurer, and a documented best-interest analysis.
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