Understanding Market Value Adjustment (MVA) in (FIAs)

If you’re exploring Fixed Indexed Annuities (FIAs), you may come across the term Market Value Adjustment (MVA). It’s one of the most frequently asked questions we hear from clients and prospects: “What exactly is an MVA, and how does it affect my annuity?”

The concept may sound complex, but it’s actually straightforward and for many contract owners, it may not apply at all. Let’s break it down.

What is a Market Value Adjustment (MVA)?

A Market Value Adjustment (MVA) is a feature that may adjust the amount you receive if you surrender (cancel) your FIA contract or withdraw more than your penalty-free amount during the surrender charge period.

• When it applies: An MVA applies during the surrender charge period if you take withdrawals exceeding your penalty-free amount or if you surrender your contract in full.
• When it doesn’t apply: After the surrender charge period ends, if the annuity is annuitized or a death claim is paid to the beneficiary. 

In other words: the MVA applies only if you access more of your funds than allowed under the penalty-free withdrawal provisions during the surrender charge period. 

How Does the MVA Work in an FIA?

The MVA is designed to reflect changes in interest rates since the time you purchased your annuity. It’s a mechanism that helps align your surrender value with current market conditions, similar to how the value of bonds changes when interest rates move.

• If interest rates have risen since your FIA contract began, your surrender value could be adjusted downward (negative adjustment).
• If interest rates have fallen since your contract began, your surrender value could be adjusted upward (positive adjustment).

This adjustment helps ensure that the amount available upon early withdrawal reflects the impact of market interest rate changes. 

Why Does This Matter in FIAs?

Unlike MYGAs, FIAs provide market-linked growth potential based on an index (like the S&P 500®) while still protecting your principal. However, similar to MYGAs, they are intended for long-term retirement planning and income planning.

Understanding the MVA matters because:

• It helps keep rates competitive. The MVA allows insurers to offer higher participation rates, caps, or fixed rates than they otherwise could without this feature.
• It generally doesn’t impact your annuity contract. Most FIA owners hold their annuity through the full surrender charge period, meaning the MVA never applies.
• It can sometimes work in your favor. If rates decline after you buy your FIA, the MVA could increase your surrender value.

A Helpful Analogy

Think about selling a bond before maturity:

• If interest rates have gone up, the bond is worth less on the secondary market.
• If interest rates have gone down, the bond is worth more.

An MVA works in a similar way, adjusting the surrender value of your FIA to reflect market interest rate changes if you take a withdrawal or surrender the contract during the surrender charge period. 

Key Takeaways

• The MVA only applies if you surrender your FIA or take withdrawals above your penalty-free amount during the surrender charge period.
• It does not apply after the surrender charge period, upon annuitization, or upon death.
• MVAs can be positive or negative, depending on how interest rates have moved.
• For most FIA owners, the MVA typically does not apply, as they keep their contract for the full surrender charge period.

Disclaimers

Guarantees are based on the financial strength of the issuing carrier. The Single Premium Fixed Indexed Annuity Contract [ICC19 OLA FIA], or variations of such are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California). May not be available in all states. Not available in the state of New York or Vermont.  Product features, limitations and availability may vary. 

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.

Annuities issued by Oceanview Life and Annuity Company, 1331 17th Street, Suite 1050, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.

Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals.  Please review the contract for full details.  

This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company are not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such. 

Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice. 

Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.

The IRS may impose a penalty for withdrawals prior to age 59 ½.

Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.

Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated.  Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed. Funds allocated to an index do not directly participate or invest in the stock market or any index.