376.671. Provisions which shall be contained in annuity contracts--expiration date.
Provisions which shall be contained in annuity contracts--expirationdate.
376.671. 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, as now orhereafter amended, premium deposit fund, variable annuity, investmentannuity, immediate annuity, any deferred annuity contract after annuitypayments have commenced, or reversionary annuity, nor to any contract whichshall be delivered outside this state through an agent or otherrepresentative of the company issuing the contract.
2. In the case of contracts issued on or after the operative 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 thecontractholder, upon cessation of payment of considerations under thecontract:
(1) That upon cessation of payment of considerations under acontract, the company will grant a paid-up annuity benefit on a planstipulated in the contract of such value as is specified in subsections 4,5, 6, 7, and 9 of this section;
(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 will pay in lieu of anypaid-up annuity benefit a cash surrender benefit of such amount as isspecified in subsections 4, 5, 7, and 9 of this section. The company shallreserve the right to defer the payment of such cash surrender benefit for aperiod of six months after demand therefor with surrender of the contract;
(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 such benefits;
(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 such 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 section, any 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 considerations paid prior to such period would be less than twentydollars monthly, the company may at its option terminate such contract bypayment in cash of the then present value of such portion of the paid-upannuity benefit, calculated on the basis of the mortality table, if any,and interest rate specified in the contract for determining the paid-upannuity benefit, and by such payment shall be relieved of any furtherobligation under such contract.
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) With respect to contracts providing for flexible considerations,the minimum nonforfeiture amount at any time at or prior to thecommencement of any annuity payment shall be equal to an accumulation up tosuch time at a rate of interest of three percent per annum of percentagesof the net considerations (as hereinafter defined) paid prior to such time,decreased by the sum of:
(a) Any prior withdrawals from or partial surrenders of the contractaccumulated at a rate of interest of three percent per annum; and
(b) The amount of any indebtedness to the company on the contract,including interest due and accrued and increased by any existing additionalamounts credited by the company to the contract. The net considerationsfor a given contract year used to define the minimum nonforfeiture amountshall be an amount not less than zero and shall be equal to thecorresponding gross considerations credited to the contract during thatcontract year less an annual contract charge of thirty dollars and less acollection charge of one dollar and twenty-five cents per considerationcredited to the contract during that contract year. The percentages of netconsiderations shall be sixty-five percent of the net consideration for thefirst contract year and eighty-seven and one-half percent of the netconsiderations for the second and later contract years. Notwithstandingthe provisions of the preceding sentence, the percentage shall besixty-five percent of the portion of the total net consideration for anyrenewal contract year which exceeds by not more than two times the sum ofthose portions of the net considerations in all prior contract years forwhich the percentage was sixty-five percent;
(2) With respect to contracts providing for fixed scheduledconsiderations, minimum nonforfeiture amounts shall be calculated on theassumption that considerations are paid annually in advance and shall bedefined as for contracts with flexible considerations which are paidannually with two exceptions:
(a) The portion of the net consideration for the first contract yearto be accumulated shall be the sum of sixty-five percent of the netconsideration for the first contract year plus twenty-two and one-halfpercent of the excess of the net consideration for the first contract yearover the lesser of the net considerations for the second and third contractyears;
(b) The annual contract charge shall be the lesser of thirty dollarsor ten percent of the gross annual consideration;
(3) With respect to contracts providing for a single consideration,minimum nonforfeiture amounts shall be defined as for contracts withflexible considerations except that the percentage of net considerationused to determine the minimum nonforfeiture amount shall be equal to ninetypercent, and the net consideration shall be the gross consideration less acontract charge of seventy-five dollars;
(4) Notwithstanding any other provision of this subsection, for anycontract issued on or after July 1, 2002, and before July 1, 2006, theinterest rate at which net considerations, prior withdrawals, and partialsurrenders shall be accumulated, for the purpose of determining minimumnonforfeiture amounts, shall be one and one-half percent per annum.
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. Suchpresent value shall be computed using the mortality table, if any, and theinterest rate specified in the contract for determining the minimum paid-upannuity benefits guaranteed in the contract.
5. For contracts which provide cash surrender benefits, such 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 which 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 such maturity value, decreased by theamount of any indebtedness to the company on the contract, includinginterest due and accrued, and increased by any existing additional amountscredited by the company to the contract. In no event shall any cashsurrender benefit be less than the minimum nonforfeiture amount at thattime. The death benefit under such contracts shall be at least equal tothe cash surrender benefit.
6. For contracts which 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 such maturityvalue, and increased by any existing additional amounts credited by thecompany to the contract. For contracts which do not provide any deathbenefits prior to the commencement of any annuity payments, such presentvalues shall be calculated on the basis of such interest rate and themortality table specified in the contract for determining the maturityvalue of the paid-up annuity benefit. However, in no event shall thepresent value of a paid-up annuity benefit be less than the minimumnonforfeiture 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 date, 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. Any contract which does not provide cash surrender benefits ordoes not 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 available atany 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 any contract which provides, within the same contract byrider or 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 additional benefits shall not be required in any paid-upbenefits, unless such additional benefits separately would require minimumnonforfeiture amounts, paid-up annuity, cash surrender and death benefits.
11. After September 28, 1979, any company may file with the directora written notice of its election to comply with the provisions of thissection after a specified date before September 28, 1981. After the filingof such notice, then upon such specified date, which shall be the operativedate of this section for such company, this section shall become operativewith respect to annuity contracts thereafter issued by such company. If acompany makes no such election, the operative date of this section for suchcompany shall be September 28, 1981.
12. The provisions of this section shall expire on July 1, 2006.
(L. 1979 S.B. 325, A.L. 2002 H.B. 1568 merged with S.B. 1009, A.L. 2004 H.B. 938 merged with S.B. 1188)Effective 6-21-04 (S.B. 1188) 8-28-04 (H.B. 938)
Expires 7-01-06