By: Wharton (Senate Sponsor - Parker) H.B. No. 4386          (In the Senate - Received from the House May 6, 2025;   May 7, 2025, read first time and referred to Committee on Business &   Commerce; May 20, 2025, reported adversely, with favorable   Committee Substitute by the following vote:  Yeas 11, Nays 0;   May 20, 2025, sent to printer.)Click here to see the committee vote     COMMITTEE SUBSTITUTE FOR H.B. No. 4386 By:  King     A BILL TO BE ENTITLED   AN ACT     relating to the exchange or surrender of an annuity contract.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subchapter B, Chapter 1114, Insurance Code, is   amended by adding Sections 1114.0541 and 1114.0542 to read as   follows:          Sec. 1114.0541.  PROCESSING OF ANNUITY CONTRACT EXCHANGES.   (a)  In this section, "exchange" means an annuity replacement   transaction:                (1)  in which the money in an existing annuity contract   must pass directly from the existing annuity contract and existing   insurer to a new annuity contract and a replacing insurer; and                (2)  in which the owner and annuitant of the new   contract are the same as the owner and annuitant of the existing   contract, regardless of whether the owner or annuitant may be   changed after completion of the transaction.          (b)  If a transaction involves an exchange of an annuity   contract, the existing insurer and the replacing insurer shall   comply with this section.          (c)  To initiate an exchange of an annuity contract, the   replacing insurer shall provide the existing insurer an exchange   request notice of the proposed exchange.          (d)  An exchange request notice:                (1)  must include:                      (A)  all information necessary for the exchange to   qualify as a tax-free exchange under 26 U.S.C. Section 1035; and                      (B)  any information required by state law; and                (2)  may be provided on a form promulgated by the   Association for Cooperative Operations Research and Development or   another generally accepted form or in any other manner used by an   insurer.          (e)  An existing insurer that receives an exchange request   notice shall:                (1)  not later than the fifth business day after the   date the existing insurer received the notice, send a letter to the   contract owner, as required under Section 1114.054(c), unless the   existing insurer has previously provided it; and                (2)  subject to Subsection (f), transfer the contract   value of the existing annuity to the replacing insurer not later   than the 30th business day after the date the existing insurer   receives the notice unless:                      (A)  the existing annuity contract being   exchanged has a provision that gives the existing insurer the right   to defer payment for a different period;                      (B)  the existing insurer, replacing insurer, and   contract owner agree to a different transfer period, including an   agreement to make the transfer on a specific future date;                      (C)  a different transfer period is required under   state or federal law; or                      (D)  the existing insurer makes a determination or   reasonably suspects the exchange involves a fraudulent insurance   act the insurer is required to report under Section 701.051.          (f)  If an exchange request notice provided to an existing   insurer under Subsection (c) does not include all required   information necessary to complete the exchange, the applicable   period to transfer the contract value does not begin until the day   the existing insurer receives all required information from the   replacing insurer or contract owner, as applicable.          (g)  If a required transfer payment is not completed within   the period provided by Subsection (e)(2) or the existing annuity   contract, as applicable, the existing insurer shall pay penalty   interest on the unpaid amount at an annual rate of 10 percent   accruing from the first business day after the date the contract   value was required to be transferred until the contract value is   transferred to the replacing insurer in full.          (h)  Nothing in this section is intended to:                (1)  change the suitability requirements applicable to   an agent or insurer seeking to replace an annuity under Chapter   1115; or                (2)  prohibit a replacing insurer and existing insurer   from agreeing to use different formats or modes for assisting   contract owners in the timely and efficient processing of   replacements or exchanges of annuity contracts.          Sec. 1114.0542.  PROCESSING OF SURRENDER REQUESTS FOR   ANNUITY CONTRACTS. (a)  To initiate a surrender of an annuity   contract, a contract owner must submit a surrender request to the   insurer in the form and manner required by the insurer.  An insurer   that issues an annuity contract shall make available to the   contract owner the form and manner in which the contract owner may   submit the surrender request.          (b)  An insurer that receives a surrender request from a   contract owner shall, subject to Subsection (c), transfer the   current cash surrender value of the annuity contract to the   contract owner not later than the 30th business day after the date   the insurer receives the request unless:                (1)  the contract being surrendered has a provision   that gives the insurer the right to defer payment for a different   period;                (2)  the insurer and contract owner agree to a   different transfer period, including an agreement to make the   transfer on a specific future date;                (3)  a different transfer period is required under   state or federal law; or                (4)  the insurer makes a determination or reasonably   suspects the surrender request involves a fraudulent insurance act   the insurer is required to report under Section 701.051.          (c)  If a surrender request submitted to an insurer under   Subsection (a) does not include all required information, the   applicable period to transfer the cash surrender value does not   begin until the day the insurer receives all required information   from the contract owner.          (d)  If a required payment of a cash surrender value is not   completed within the period provided by Subsection (b) or the   annuity contract, as applicable, the insurer shall pay penalty   interest on the unpaid amount at an annual rate of 10 percent   accruing from the first business day after the date the cash   surrender value was required to be transferred until the cash   surrender value is transferred to the contract owner in full.          (e)  Nothing in this section is intended to change the   suitability requirements applicable to an agent or other person   advising a contract owner to surrender an annuity under Chapter   1115.          SECTION 2.  Sections 1114.0541 and 1114.0542, Insurance   Code, as added by this Act, apply only to an exchange or surrender   of an annuity contract initiated on or after January 1, 2026.          SECTION 3.  This Act takes effect September 1, 2025.     * * * * *