Requisite Contents of an Individual Retirement Account Advertisement
In my capacity as a regulator of banks, this Office has seen significant interest by Wisconsin citizens in pursuing the opportunities provided by Individual Retirement Accounts, known simply as IRA's. Due to the revisions in federal laws which made IRA's an attractive and accessible planning devise for retirement, Wisconsin's banks, savings and loan associations, credit unions, insurers and other financial intermediaries such as mutual funds and brokerage firms have sought to make such IRA's available to their customers.
Regrettably, the major marketing efforts launched for IRA opportunities have on occasions led to certain abuses in the use of advertising for IRA programs. The Commissioners of Securities, Savings and Loan, Insurance, Credit Unions, and this agency have observed, from time to time, certain advertising problems involving the institutions and firms under our regulation. We have concurred that to alleviate future problems of this nature that each IRA advertisement should contain the following specific information:
- Withdrawal Penalties: All Advertisements should disclose that withdrawals from an IRA prior to age 59-1/2 may subject the participant to an income tax liability, a federal penalty and an interest penalty on early withdrawal of the underlying certificate of deposit funding the IRA.
- Deposit Insurance Coverage: Each advertisement by a bank, savings and loan association, and credit union should mention that coverage extends only to deposits of $100,000 or less, by Federal Deposit Insurance Corporation, Federal Savings and Loan Insurance Corporation, or Wisconsin Credit Union Share Insurance Corporation.
- Proper Identification of the IRA: All advertisements should state the account is an "Individual Retirement Account," rather than, for example, "Individual Retirement Annuity."
- Name and Address of Principal: All advertisements should clearly disclose the name and address of the institution offering the IRA account.
In addition to the above, banks should include the following information in an IRA advertisement:
A. Rates of Return and Payouts: Advertisements displaying accumulated funds over various periods of time should indicate the assumed interest rate on which the projected accumulation is based. If the rates of return are non-guaranteed, that fact should be stated. In addition, advertisements displaying how much per month may be withdrawn from the IRA should indicate how long such withdrawals may continue until the IRA is depleted.
B. Participant's Age at Time of Commencement of Deposits and at Time of Withdrawals: Advertisements giving examples of the total IRA amount accumulated or withdrawn should disclose at what age the participant began making deposits or at what age the participant began making withdrawals.
C. Tax-Advantage Projections: Advertisements containing tax-advantage projections should state what tax bracket the projection is based on and that all individuals may not be in the same tax bracket.
D. References to Wealthy Status: Advertisements which claim that a person can, for example, deposit $20 a month today and collect $2,000 a month when they retire or that "You can be a millionaire" should state that such may not be the result for everyone who establishes an IRA.
Each of the Commissioners mentioned in paragraph two are forwarding letters to the entities regulated by their agency in hopes that a joint effort may enhance the accuracy of IRA advertising in this state. The end result of these efforts, we hope, will be that Wisconsin citizens who may wish to utilize IRA's will be properly informed of the potential benefits and risks involved.
I am seeking your cooperation in abiding with the contents of this letter. Should you have questions, feel free to contact this agency.
Banking Letter 34, November 30, 1982, Commissioner Pederson