376.669. Annuity contract requirements--paid-up annuity benefits, how calculated--cash surrender benefits, how calculated--applicable, when.
Annuity contract requirements--paid-up annuity benefits, howcalculated--cash surrender benefits, how calculated--applicable,when.
376.669. 1. This section shall not apply to any reinsurance, groupannuity purchased under a retirement plan, or plan of deferred compensationestablished or maintained by an employer (including a partnership or soleproprietorship) or by an employee organization, or by both, other than aplan providing individual retirement accounts or individual retirementannuities under Section 408 of the Internal Revenue Code of 1986, asamended, premium deposit fund, variable annuity, investment annuity,immediate annuity, any deferred annuity contract after annuity paymentshave commenced, or reversionary annuity, nor to any contract which shall bedelivered outside this state through an agent or other representative ofthe company issuing the contract.
2. In the case of contracts issued on or after the effective date ofthis section as defined in subsection 11 of this section, no contract ofannuity, except as stated in subsection 1 of this section, shall bedelivered or issued for delivery in this state unless it contains insubstance the following provisions, or corresponding provisions which inthe opinion of the director are at least as favorable to the contractholder, upon cessation of payment of considerations under the contract:
(1) That upon cessation of payment of considerations under acontract, or upon the written request of the contract owner, the companyshall grant a paid-up annuity benefit on a plan stipulated in the contractof such value as is specified in subsections 4, 5, 6, 7, and 9 of thissection;
(2) If a contract provides for a lump sum settlement at maturity, orat any other time, that upon surrender of the contract at or prior to thecommencement of any annuity payments, the company shall pay in lieu of apaid-up annuity benefit a cash surrender benefit of such amount as isspecified in subsections 4, 5, 7, and 9 of this section. The company mayreserve the right to defer the payment of the cash surrender benefit for aperiod not to exceed six months after demand therefor with surrender of thecontract after making written request and receiving written approval of thedirector. The request shall address the necessity and equitability to allpolicyholders of the deferral;
(3) A statement of the mortality table, if any, and interest ratesused in calculating any minimum paid-up annuity, cash surrender or deathbenefits that are guaranteed under the contract, together with sufficientinformation to determine the amounts of the benefits; and
(4) A statement that any paid-up annuity, cash surrender or deathbenefits that may be available under the contract are not less than theminimum benefits required by any statute of the state in which the contractis delivered and an explanation of the manner in which the benefits arealtered by the existence of any additional amounts credited by the companyto the contract, any indebtedness to the company on the contract or anyprior withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this subsection, a deferred annuitycontract may provide that if no considerations have been received under acontract for a period of two full years and the portion of the paid-upannuity benefit at maturity on the plan stipulated in the contract arisingfrom prior considerations paid would be less than twenty dollars monthly,the company may at its option terminate the contract by payment in cash ofthe then present value of the portion of the paid-up annuity benefit,calculated on the basis on the mortality table, if any, and interest ratespecified in the contract for determining the paid-up annuity benefit, andby this payment shall be relieved of any further obligation under thecontract.
3. The minimum values as specified in subsections 4, 5, 6, 7, and 9of this section of any paid-up annuity, cash surrender or death benefitsavailable under an annuity contract shall be based upon minimumnonforfeiture amounts as defined in this section.
(1) The minimum nonforfeiture amount at any time at or prior to thecommencement of any annuity payments shall be equal to an accumulation upto such time at rates of interest as indicated in subdivision (3) of thissubsection of the net considerations (as hereinafter defined) paid prior tosuch time, decreased by the sum of paragraphs (a) to (d) below:
(a) Any prior withdrawals from or partial surrenders of the contractaccumulated at rates of interest as indicated in subdivision (3) of thissubsection; and
(b) An annual contract charge of fifty dollars, accumulated at ratesof interest as indicated in subdivision (3) of this subsection;
(c) Any premium tax paid by the company for the contract, accumulatedat rates of interest as indicated in subdivision (3) of this subsection;and
(d) The amount of any indebtedness to the company on the contract,including interest due and accrued.
(2) The net considerations for a given contract year used to definethe minimum nonforfeiture amount shall be an amount equal to eighty-sevenand one-half percent of the gross considerations credited to the contractduring that contract year.
(3) The interest rate used in determining minimum nonforfeitureamounts shall be an annual rate of interest determined as the lesser ofthree percent per annum and the following, which shall be specified in thecontract if the interest rate will be reset:
(a) The five-year Constant Maturity Treasury Rate reported by theFederal Reserve as of a date, or average over a period, rounded to thenearest one-twentieth of one percent, specified in the contract no longerthan fifteen months prior to the contract issue date or redeterminationdate under paragraph (d) of this subdivision;
(b) Reduced by one hundred twenty-five basis points;
(c) Where the resulting interest rate is not less than one percent;and
(d) The interest rate shall apply for an initial period and may beredetermined for additional periods. The redetermination date, basis andperiod, if any, shall be stated in the contract. The basis is the date oraverage over a specified period that produces the value of the five-yearConstant Maturity Treasury Rate to be used at each redetermination date.
(4) During the period or term that a contract provides substantiveparticipation in an equity indexed benefit, it may increase the reductiondescribed in paragraph (b) of subdivision (3) of this subsection by up toan additional one hundred basis points to reflect the value of the equityindex benefit. The present value at the contract issue date, and at eachredetermination date thereafter, of the additional reduction shall notexceed the market value of the benefit. The director may require ademonstration that the present value of the additional reduction does notexceed the market value of the benefit. Lacking such a demonstration thatis acceptable to the director, the director may disallow or limit theadditional reduction.
(5) The director may adopt rules to implement the provisions ofsubdivision (4) of this subsection and to provide for further adjustmentsto the calculation of minimum nonforfeiture amounts for contracts thatprovide substantive participation in an equity index benefit and for othercontracts that the director determines adjustments are justified.
4. Any paid-up annuity benefit available under a contract shall besuch that its present value on the date annuity payments are to commence isat least equal to the minimum nonforfeiture amount on that date. Presentvalue shall be computed using the mortality table, if any, and the interestrates specified in the contract for determining the minimum paid-up annuitybenefits guaranteed in the contract.
5. For contracts that provide cash surrender benefits, the cashsurrender benefits available prior to maturity shall not be less than thepresent value as of the date of surrender of that portion of the maturityvalue of the paid-up annuity benefit that would be provided under thecontract at maturity arising from considerations paid prior to the time ofcash surrender reduced by the amount appropriate to reflect any priorwithdrawals from or partial surrenders of the contract, such present valuebeing calculated on the basis of an interest rate not more than one percenthigher than the interest rate specified in the contract for accumulatingthe net considerations to determine maturity value, decreased by the amountof any indebtedness to the company on the contract, including interest dueand accrued, and increased by any existing additional amounts credited bythe company to the contract. In no event shall any cash surrender benefitbe less than the minimum nonforfeiture amount at that time. The deathbenefit under such contracts shall be at least equal to the cash surrenderbenefit.
6. For contracts that do not provide cash surrender benefits, thepresent value of any paid-up annuity benefit available as a nonforfeitureoption at any time prior to maturity shall not be less than the presentvalue of that portion of the maturity value of the paid-up annuity benefitprovided under the contract arising from considerations paid prior to thetime the contract is surrendered in exchange for, or changed to, a deferredpaid-up annuity, such present value being calculated for the period priorto the maturity date on the basis of the interest rate specified in thecontract for accumulating the net considerations to determine maturityvalue, and increased by any additional amounts credited by the company tothe contract. For contracts that do not provide any death benefits priorto the commencement of any annuity payments, present values shall becalculated on the basis of such interest rate and the mortality tablespecified in the contract for determining the maturity value of the paid-upannuity benefit. However, in no event shall the present value of a paid-upannuity benefit be less than the minimum nonforfeiture amount at that time.
7. For the purpose of determining the benefits calculated undersubsections 5 and 6 of this section, in the case of annuity contracts underwhich an election may be made to have annuity payments commence at optionalmaturity dates, the maturity date shall be deemed to be the latest date forwhich election shall be permitted by the contract, but shall not be deemedto be later than the anniversary of the contract next following theannuitant's seventieth birthday or the tenth anniversary of the contract,whichever is later.
8. A contract that does not provide cash surrender benefits or doesnot provide death benefits at least equal to the minimum nonforfeitureamount prior to the commencement of any annuity payments shall include astatement in a prominent place in the contract that such benefits are notprovided.
9. Any paid-up annuity, cash surrender, or death benefits availableat any time, other than on the contract anniversary under any contract withfixed scheduled considerations, shall be calculated with allowance for thelapse of time and the payment of any scheduled considerations beyond thebeginning of the contract year in which cessation of payment ofconsiderations under the contract occurs.
10. For a contract which provides, within the same contract by rideror supplemental contract provision, both annuity benefits and lifeinsurance benefits that are in excess of the greater of cash surrenderbenefits or a return of the gross considerations with interest, the minimumnonforfeiture benefits shall be equal to the sum of the minimumnonforfeiture benefits for the annuity portion and the minimumnonforfeiture benefits, if any, for the life insurance portion computed asif each portion were a separate contract. Notwithstanding the provisionsof subsections 4, 5, 6, 7, and 9 of this section, additional benefitspayable in the event of total and permanent disability, as reversionaryannuity or deferred reversionary annuity benefits, or as other policybenefits additional to life insurance, endowment, and annuity benefits, andconsiderations for all such additional benefits shall be disregarded inascertaining the minimum nonforfeiture amounts, paid-up annuity, cashsurrender, and death benefits that may be required by this section. Theinclusion of such benefits shall not be required in any paid-up benefits,unless the additional benefits separately would require minimumnonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
11. Notwithstanding the provisions of section 376.671, after theeffective date of this section*, a company may elect to apply theprovisions of this section in lieu of section 376.671 to annuity contractson a contract form-by-contract form basis before July 1, 2006. In allother instances, this section shall become operative with respect toannuity contracts issued by the company after July 1, 2006.
(L. 2004 H.B. 938 merged with S.B. 1188)*Effective 6-21-04 (S.B. 1188) 8-28-04 (H.B. 938)