2005 Idaho Code - 41-1927A — STANDARD NONFORFEITURE LAW FOR INDIVIDUAL DEFERRED ANNUITIES

                                  TITLE  41
                                  INSURANCE
                                  CHAPTER 19
                           LIFE INSURANCE POLICIES
                            AND ANNUITY CONTRACTS
    41-1927A.  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 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 insurer 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
director are at least as favorable to the contractholder, upon cessation of
payment of considerations under the contract.
    (a)  That upon cessation of payment of considerations under a contract,
    the insurer will grant a paid-up annuity benefit on a plan stipulated in
    the contract of such 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 insurer will pay in lieu of any
    paid-up annuity benefit a cash surrender benefit of such amount as is
    specified in subsections (5), (6), (8) and (10) of this section. The
    insurer shall reserve the right to defer the payment of such cash
    surrender benefit for a period of six (6) months after demand therefor
    with surrender of the contract. If the insurer defers payment of a cash
    surrender benefit under this section, the insurer shall pay interest at
    the rate specified in section 28-22-104(2), Idaho Code, as established and
    in existence at the time of the surrender demand.
    (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 benefits.
    (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
    benefits are altered by the existence of any additional amounts credited
    by the insurer to the contract, any indebtedness to the insurer on the
    contract or any prior withdrawals from or partial surrenders of the
    contract.
    Notwithstanding the requirements of this section, any deferred annuity
contract may provide that if no considerations have been received under a
contract for a period of two (2) 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 period would be less than twenty
dollars ($20.00) monthly, the insurer may at its option terminate such
contract by payment in cash of the then present value of such 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 payment shall be relieved of any further
obligation under such 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)  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 subsection (4)(b) of
    this section of the net considerations (as hereinafter defined) paid prior
    to such time, decreased by the sum of subparagraphs (4)(a)(i) through (iv)
    below:
         (i)   Any prior withdrawals from or partial surrenders of the
         contract accumulated at rates of interest as indicated in subsection
         (4)(b) of this section;
         (ii)  An annual contract charge of fifty dollars ($50.00),
         accumulated at rates of interest as indicated in subsection (4)(b) of
         this section;
         (iii) Any premium tax paid by the insurer for the contract,
         accumulated at rates of interest as indicated in subsection (4)(b) of
         this section, provided that the premium tax credit is only permitted
         if the tax is actually paid by the insurer, and provided further that
         if the tax is paid and subsequently credited back to the insurer,
         such as upon early termination of the contract, the tax credit may
         not be taken; and
         (iv)  The amount of any indebtedness to the insurer on the contract,
         including interest due and accrued.
    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 (87.5%) 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 (3%) per annum and the following, which shall be specified in the
    contract if the interest rate will be reset:
         (i)   The five (5) year constant maturity treasury rate reported by
         the federal reserve as of a date, or average over a period, rounded
         to the nearest one-twentieth of one percent (.2%), specified in the
         contract no longer than fifteen (15) months prior to the contract
         issue date or redetermination date under subsection (4)(b)(iv) of
         this section;
         (ii)  Reduced by one hundred twenty-five (125) basis points;
         (iii) Where the resulting interest rate is not less than one percent
         (1%); 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 (5) 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 subsection (4)(b)(ii) of this section by up to an additional
    one hundred (100) 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 shall not
    exceed the market value of the benefit. The director may require a
    demonstration that the present value of the additional reduction does not
    exceed the market value of the benefit. Lacking such a demonstration that
    is acceptable to the director, the director may disallow or limit the
    additional reduction.
    (d)  The director may adopt rules to implement the provisions of
    subsection (4)(c) of this section 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 director determines adjustments are justified.
    (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 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 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 considerations 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 present value
being calculated on the basis of an interest rate not more than one percent
(1%) higher than the interest rate specified in the contract for accumulating
the net considerations to determine such maturity value, decreased by the
amount of any indebtedness to the insurer on the contract, including interest
due and accrued, and increased by any existing additional amounts credited by
the insurer 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 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 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 maturity value, and
increased by any existing additional amounts credited by the insurer to the
contract. For contracts which do not provide any death benefits prior to the
commencement of any annuity payments, such present values shall be calculated
on the basis of such 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 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 (i) in the event of total and
permanent disability, (ii) as reversionary annuity or deferred reversionary
annuity benefits, or (iii) as other policy benefits additional to life
insurance, endowment, and annuity benefits, and considerations for all such
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 additional benefits
shall not be required in any paid-up benefits, unless such 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 insurer may file with
the director 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 notice, then upon
such specified date, which shall be the operative date of this section for
such insurer, this section shall become operative with respect to annuity
contracts thereafter issued by such insurer. If an insurer makes no such
election, the operative date of this section for such insurer shall be the
second anniversary of the effective date of this section.