Senate Bill No. 357
(By Senators Minard, Jenkins, Sharpe and Minear)
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[Introduced January 24, 2003; referred to the Committee on
Banking and Insurance.]
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A BILL to amend and reenact section thirty-a, article thirteen,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to the
standard nonforfeiture law for individual deferred annuities.
Be it enacted by the Legislature of West Virginia:
That section thirty-a, article thirteen, chapter thirty-three
of the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted to read as follows:
ARTICLE 13. LIFE INSURANCE.
§33-13-30a. Standard nonforfeiture law for individual deferred
annuities.
(1) This section shall be known as the "Standard Nonforfeiture
Law for Individual Deferred Annuities".
(2) This section shall 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.
(3) In the case of contracts issued on or after the operative
date of this section as defined in subsection (12) of this section,
no contract of annuity, except as stated in subsection (2) 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:
(a) 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 such the value as is specified
in subsections (5), (6), (7), (8) and (10) of this section;
(b) 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 such the amount as is specified in subsections
(5), (6), (8) and (10) of this section. The company shall reserve
the right to defer the payment of such the cash surrender benefit
for a period of six months after demand therefor with surrender of
the contract;
(c) 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
such the benefits; and
(d) 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 such 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 such the period would be less than twenty dollars monthly,
the company may at its option terminate such the contract by
payment in cash of the then present value of such 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 such
the payment shall be relieved of any further obligation under such
the contract.
(4) The minimum values as specified in subsections (5), (6),
(7), (8) and (10) 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:
(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 such the time at a rate of interest of three
percent per annum of percentages of the net considerations (as
hereinafter defined) paid prior to such the time, decreased by the
sum of:
(i) Any prior withdrawals from or partial surrenders of the
contract accumulated at a rate of interest of three percent per annum; and
(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,
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.
(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:
(1) 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.
(2) The annual contract charge shall be the lesser of: (i)
Thirty dollars; or (ii) ten percent of the gross annual
consideration.
(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.
(5) 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. Such 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.
(6) For contracts which provide cash surrender benefits, such
the cash surrender benefits available prior to maturity shall 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, such 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 such 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 such the contracts shall be at least equal to the
cash surrender benefit.
(7) 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 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, such 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 such 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, such the present values shall
be calculated on a basis of such 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.
(8) For the purpose of determining the benefits calculated
under subsections (6) and (7) 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 to be the latest date for which election shall
be permitted by the contract, but shall not be deemed 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.
(9) 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 such the benefits are not provided.
(10) 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.
(11) 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 (5), (6),
(7), (8) and (10) of this section, additional benefits payable: (a)
In the event of total and permanent disability; (b) as reversionary
annuity or deferred reversionary annuity benefits; or (c) as other
policy benefits additional to life insurance, endowment and annuity
benefits and considerations for all such 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 such the
additional benefits shall not be required in any paid-up benefits
unless such the additional benefits separately would require
minimum nonforfeiture amounts, paid-up annuity, cash surrender and
death benefits.
(12) 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 such the notice, then upon such the
specified date which shall be the operative date of this section
for such the company, this section shall become operative with
respect to annuity contracts thereafter issued by such the company.
If a company makes no such election, the operative date of this section for such the company shall be the second anniversary of the
effective date of this section.
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(NOTE: The purpose of this bill is to provide a rate
reduction in individual fixed annuity contracts for purposes of
determining the nonforfeiture amount until a more permanent
solution is developed by the national association of insurance
commissioners.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.)
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