Variable Annuity Assumed Interest Rate (AIR) Impact on Payouts
A variable annuity has an Assumed Interest Rate (AIR) of 4.0%. In January, the underlying sub-account portfolio generates an annualized return of 6.0%. How will the customer's February annuity payment compare to January's payment?
THE AIR RULE: If actual sub-account performance EXCEEDS the AIR, the next annuity payment INCREASES. If actual performance EQUALS the AIR, payment stays FLAT. If actual performance is LESS than AIR, payment DECREASES.
Complete Analysis & Legal Rationale
Since 6% > 4% AIR, the customer's next check increases.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Actual performance (6%) > AIR (4%) -> Payment increases.
Payment decreases only when performance is below the AIR.
Variable annuity payments fluctuate; they are not fixed.
Performance exceeded AIR, so payment cannot decrease.