ENGROSSED
Senate Bill No. 517
(By Senator Minard)
____________
[Introduced February 12, 2004; referred to the Committee on
Banking and Insurance.]
____________
A BILL to amend and reenact §33-13-30a of the code of West
Virginia, 1931, as amended, relating to standard nonforfeiture
law for individual deferred annuities.
Be it enacted by the Legislature of West Virginia:
That §33-13-30a of the code of West Virginia, 1931, as
amended, be amended and reenacted to read as follows:
ARTICLE 13. LIFE INSURANCE.
§33-13-30a. Standard nonforfeiture law for individual deferred
annuities.
(a) This section shall be known as the "Standard Nonforfeiture
Law for Individual Deferred Annuities".
(b) This section may not apply to any reinsurance, group
annuity purchased under a retirement plan or plan of deferred
compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization,
or by both, other than a plan providing individual retirement
accounts or individual retirement annuities under Section 408 of
the Internal Revenue Code, as now or hereafter amended, premium
deposit fund, variable annuity, investment annuity, immediate
annuity, any deferred annuity contract after annuity payments have
commenced or reversionary annuity, nor to any contract which shall
be delivered outside this state through an agent or other
representative of the company issuing the contract.
(c) In the case of contracts issued on or after the operative
date of this section as defined in subsection (l) of this section,
no contract of annuity, except as stated in subsection (b) of this
section, shall be delivered or issued for delivery in this state
unless it contains in substance the following provisions or
corresponding provisions which, in the opinion of the commissioner,
are at least as favorable to the contract holder, upon cessation of
payment of considerations under the contract:
(1) That upon cessation of payment of considerations under a
contract, the company will grant a paid-up annuity benefit on a
plan stipulated in the contract of the value as is specified in
subsections (e), (f), (g), (h) and (j) of this section;
(2) If a contract provides for a lump sum settlement at
maturity or at any other time, that, upon surrender of the contract
at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash
surrender benefit of the amount as is specified in subsections (e),
(f), (h) and (j) of this section. The company shall reserve the
right to defer the payment of the cash surrender benefit for a
period of six months after demand therefor with surrender of the
contract;
(3) A statement of the mortality table, if any, and interest
rates used in calculating any minimum paid-up annuity, cash
surrender or death benefits that are guaranteed under the contract,
together with sufficient information to determine the amounts of
the benefits; and
(4) A statement that any paid-up annuity, cash surrender or
death benefits that may be available under the contract are not
less than the minimum benefits required by any statute of the state
in which the contract is delivered and an explanation of the manner
in which the benefits are altered by the existence of any
additional amounts credited by the company to the contract, any
indebtedness to the company on the contract or any prior
withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this subsection, any
deferred annuity contract may provide that if no considerations
have been received under a contract for a period of two full years
and the portion of the paid-up annuity benefit at maturity on the
plan stipulated in the contract arising from considerations paid prior to the period would be less than twenty dollars monthly, the
company may at its option terminate the contract by payment in cash
of the then present value of the portion of the paid-up annuity
benefit, calculated on the basis of the mortality table, if any,
and interest rate specified in the contract for determining the
paid-up annuity benefit and by the payment shall be relieved of any
further obligation under the contract.
(d) (1) The minimum values as specified in subsections (e),
(f), (g), (h) and (j) of this section of any paid-up annuity, cash
surrender or death benefits available under an annuity contract
shall be based upon minimum nonforfeiture amounts as defined in
this section subdivision:
(1) (A) With respect to contracts providing for flexible
considerations, the minimum nonforfeiture amount at any time at or
prior to the commencement of any annuity payments shall be equal to
an accumulation up to the time at a rate of interest of three
percent per annum of percentages of the net considerations (as
hereinafter defined) paid prior to the time, decreased by the sum
of:
(A) (i) Any prior withdrawals from or partial surrenders of
the contract accumulated at a rate of interest of three percent per
annum; and
(B) (ii) The amount of any indebtedness to the company on the
contract, including interest due and accrued; and increased by any existing additional amounts credited by the company to the
contract;
The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount not less
than zero and shall be equal to the corresponding gross
considerations credited to the contract during that contract year
less than an annual contract charge of thirty dollars and less a
collection charge of one dollar and twenty-five cents per
consideration credited to the contract during that contract year.
The percentages of net considerations shall be sixty-five percent
of the net consideration for the first contract year and
eighty-seven and one-half percent of the net considerations for the
second and later contract years. Notwithstanding the provisions of
the preceding sentence, the percentage shall be sixty-five percent
of the portion of the total net consideration for any renewal
contract year which exceeds by not more than two times the sum of
those portions of the net considerations in all prior contract
years for which the percentage was sixty-five percent;
Notwithstanding any other provision of this section, any
contract issued on or after the first day of July, two thousand
three, and before the first day of July, two thousand five six, the
interest rate at which net considerations, prior withdrawals and
partial surrenders shall be accumulated for the purpose of
determining nonforfeiture amounts may not be less than one and one-half percent per annum;
(2) (B) With respect to contracts providing for fixed
scheduled considerations, minimum nonforfeiture amounts shall be
calculated on the assumption that considerations are paid annually
in advance and shall be defined as for contracts with flexible
considerations which are paid annually with two exceptions:
(A) (i) The portion of the net consideration for the first
contract year to be accumulated shall be the sum of sixty-five
percent of the net consideration for the first contract year plus
twenty-two and one-half percent of the excess of the net
consideration for the first contract year over the lesser of the
net considerations for the second and third contract years;
(B) (ii) The annual contract charge shall be the lesser of:
(i) (1) Thirty dollars; or (ii) (2) ten percent of the gross annual
consideration;
(3) (C) With respect to contracts providing for a single
consideration, minimum nonforfeiture amounts shall be defined as
for contracts with flexible considerations except that the
percentage of net consideration used to determine the minimum
nonforfeiture amount shall be equal to ninety percent and the net
consideration shall be the gross consideration less a contract
charge of seventy-five dollars;
(D) This subdivision applies to contracts issued before the
first day of July, two thousand four, and may be applied by a company on a contract-by-contract basis to contracts issued on or
after the first day of July, two thousand four, and before the
first day of July, two thousand six;
(2) The minimum values as specified in subsections (e), (f),
(g), (h) and (j) of any paid-up annuity, cash surrender or death
benefits available under an annuity contract shall be based upon
minimum nonforfeiture amounts as defined in this subdivision;
(A) (i) The minimum nonforfeiture amount at any time at or
prior to the commencement of any annuity payments shall be equal to
an accumulation up to such time at rates of interest as indicated
in paragraph (B) of this subdivision of the net considerations (as
hereinafter defined) paid prior to such time, decreased by the sum
of subparagraphs (I) through (IV) below:
(I) Any prior withdrawals from or partial surrenders of the
contract accumulated at rates of interest as indicated in paragraph
(B);
(II) An annual contract charge of fifty dollars, accumulated
at rates of interest as indicated in paragraph (B) of this
subdivision;
(III) Any premium tax paid by the company for the contract,
accumulated at rates of interest as indicated in subparagraph (ii),
paragraph (B) of this subdivision; and
(IV) The amount of any indebtedness to the company on the
contract, including interest due and accrued;
(ii) The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount equal to
eighty-seven and one-half percent of the gross considerations
credited to the contract during that contract year;
(B) The interest rate used in determining minimum
nonforfeiture amounts shall be an annual rate of interest
determined as the lesser of three percent per annum and the
following, which shall be specified in the contract if the interest
rate will be reset:
(i) The five-year constant maturity treasury rate reported by
the federal reserve as of a date, or average over a period, rounded
to the nearest 1/20th of one percent, specified in the contract no
longer than fifteen months prior to the contract issue date or
redetermination date under subparagraph (iv) of this paragraph;
(ii) Reduced by one hundred twenty-five;
(iii) Where the resulting interest rate is not less than one
percent; and
(iv) The interest rate shall apply for an initial period and
may be redetermined for additional periods. The redetermination
date, basis and period, if any, shall be stated in the contract.
The basis is the date or average over a specified period that
produces the value of the five-year constant maturity treasury rate
to be used at each redetermination date;
(C) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may
increase the reduction described in subparagraph (ii), paragraph
(B) of this subdivision by up to an additional one hundred basis
points to reflect the value of the equity index benefit. The
present value at the contract issue date, and at each
redetermination date thereafter, of the additional reduction may
not exceed the market value of the benefit. The commissioner may
require a demonstration that the present value of the additional
reduction does not exceed the market value of the benefit. Lacking
a determination that is acceptable to the commissioner, the
commissioner may disallow or limit the additional reduction;
(D) The commissioner may adopt rules to implement the
provisions of this subsection and to provide for further
adjustments to the calculation of minimum nonforfeiture amounts for
contracts that provide substantive participation in an equity index
benefit and for other contracts that the commissioner determines
their adjustments are justified;
(E) This subdivision shall apply to contracts outstanding on
the first day of July, two thousand four, and may be applied by a
company on a contract-by-contract basis to any contract issued
after the first day of July, two thousand four, and before the
first day of July, two thousand six.
(e) Any paid-up annuity benefit available under a contract
shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture
amount on that date. The present value shall be computed using the
mortality table, if any, and the interest rate specified in the
contract for determining the minimum paid-up annuity benefits
guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, the
cash surrender benefits available prior to maturity shall may not
be less than the present value as of the date of surrender of that
portion of the maturity value of the paid-up annuity benefit which
would be provided under the contract at maturity arising from
consideration paid prior to the time of cash surrender reduced by
the amount appropriate to reflect any prior withdrawals from or
partial surrenders of the contract, the present value being
calculated on the basis of an interest rate not more than one
percent higher than the interest rate specified in the contract for
accumulating the net considerations to determine the maturity
value, decreased by the amount of any indebtedness to the company
on the contract, including interest due and accrued, and increased
by any existing additional amounts credited by the company to the
contract. In no event shall any cash surrender benefit be less
than the minimum nonforfeiture amount at that time. The death
benefit under the contracts shall be at least equal to the cash
surrender benefit.
(g) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit
available as a nonforfeiture option at any time prior to maturity
shall may not be less than the present value of that portion of the
maturity value of the paid-up annuity benefit provided under the
contract arising from considerations paid prior to the time the
contract is surrendered in exchange for, or changed to, a deferred
paid-up annuity, the present value being calculated for the period
prior to the maturity date on the basis of the interest rate
specified in the contract for accumulating the net considerations
to determine the maturity value and increased by any existing
additional amounts credited by the company to the contract. For
contracts which do not provide any death benefits prior to the
commencement of any annuity payments, the present values shall be
calculated on a basis of the interest rate and the mortality table
specified in the contract for determining the maturity value of the
paid-up annuity benefit. However, in no event shall the present
value of a paid-up annuity benefit be less than the minimum
nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated
under subsections (f) and (g) of this section, in the case of
annuity contracts under which an election may be made to have
annuity payments commence at optional maturity dates, the maturity
date shall be deemed is considered to be the latest date for which
election shall be is permitted by the contract, but shall is not be deemed considered to be later than the anniversary of the contract
next following the annuitant's seventieth birthday or the tenth
anniversary of the contract, whichever is later.
(i) Any contract which does not provide cash surrender
benefits or does not provide death benefits at least equal to the
minimum nonforfeiture amount prior to the commencement of any
annuity payments shall include a statement in a prominent place in
the contract that the benefits are not provided.
(j) Any paid-up annuity, cash surrender or death benefits
available at any time, other than on the contract anniversary under
any contract with fixed scheduled considerations, shall be
calculated with allowance for the lapse of time and the payment of
any scheduled considerations beyond the beginning of the contract
year in which cessation of payment of considerations under the
contract occurs.
(k) For any contract which provides, within the same contract
by rider or supplemental contract provision, both annuity benefits
and life insurance benefits that are in excess of the greater of
cash surrender benefits or a return of the gross considerations
with interest, the minimum nonforfeiture benefits shall be equal to
the sum of the minimum nonforfeiture benefits for the annuity
portion and the minimum nonforfeiture benefits, if any, for the
life insurance portion computed as if each portion were a separate
contract. Notwithstanding the provisions of subsections (e), (f), (g), (h) and (j) of this section, additional benefits payable: (1)
In the event of total and permanent disability; (2) as reversionary
annuity or deferred reversionary annuity benefits; or (3) as other
policy benefits additional to life insurance, endowment and annuity
benefits and considerations for all the additional benefits shall
be disregarded in ascertaining the minimum nonforfeiture amounts,
paid-up annuity, cash surrender and death benefits that may be
required by this section. The inclusion of the additional benefits
shall may not be required in any paid-up benefits unless the
additional benefits separately would require minimum nonforfeiture
amounts, paid-up annuity, cash surrender and death benefits.
(l) After the effective date of this section, any company may
file with the commissioner a written notice of its election to
comply with the provisions of this section after a specified date
before the second anniversary of the effective date of this
section. After the filing of the notice, then upon the specified
date which shall be the operative date of this section for the
company, this section shall become operative with respect to
annuity contracts thereafter issued by the company. If a company
makes no election, the operative date of this section for the
company shall be is the second anniversary of the effective date of
this section.
(m) (1) During the period from the first day of July, two
thousand four, through the first day of July, two thousand six, an insurer may elect on a contract-by-contract basis to apply the
provisions of either subdivision (1) or (2), subsection (d) of this
section to any annuity contract issued during that period of time;
(2) The provisions of subdivision (1), subsection (d) of this
section expires the first day of July, two thousand six.