2014 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 15 - Life Insurance and Annuity Contracts 15.15-315 Standard Nonforfeiture Law for Individual Deferred Annuities.
Download as PDF
304.15-315 Standard Nonforfeiture Law for Individual Deferred Annuities.
(1)
(2)
(3)
This section shall be known as the "Standard Nonforfeiture Law for Individual
Deferred Annuities."
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. However, to the extent
that a variable annuity contract provides benefits that do not, before the
maturity date, vary in accordance with the investment performance of any
separate account or accounts maintained by the insurer as to such contract, as
provided for in KRS 304.15-390, the contract shall contain provisions that
satisfy the requirements of this section and shall not otherwise be subject to
this section.
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
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.
(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
(4)
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 subsection, 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)
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.
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 time at a rate of interest of three percent (3%)
per annum of percentages of the net considerations (as hereinafter
defined) paid prior to such time, decreased by the sum of:
1.
Any prior withdrawals from or partial surrenders of the contract
accumulated at a rate of interest of three percent (3%) per annum;
and
2.
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. 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 consideration
credited to the contract during that contract year less an annual contract
charge of thirty dollars ($30) and less a collection charge of one dollar
and twenty-five cents ($1.25) per consideration credited to the contract
during that contract year. The percentages of net considerations shall be
sixty-five percent (65%) of the net consideration for the first contract year
and eighty-seven and one-half percent (87.5%) 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 (65%)
of the portion of the total net consideration for any renewal contract year
which exceeds by not more than two (2) times the sum of those portions
of the net considerations in all prior contract years for which the
percentage was sixty-five percent (65%).
(b) Notwithstanding any other provision of this subsection, for any contract
issued on or after July 1, 2003, and before July 1, 2006, the interest rate
at which net considerations, prior withdrawals, and partial surrenders shall
be accumulated for the purpose of determining nonforfeiture amounts
(5)
(6)
(7)
shall be no less than one and one-half percent (1.5%) per annum.
(c) 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
(2) exceptions:
1.
The portion of the net consideration for the first contract year to be
accumulated shall be the sum of sixty-five percent (65%) of the net
consideration for the first contract year plus twenty-two and one-half
percent (22.5%) 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; and
2.
The annual contract charge shall be the lesser of,
a.
Thirty dollars ($30), or
b.
Ten percent (10%) of the gross annual consideration.
(d) 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 (90%) and the net consideration shall be the gross consideration
less a contract charge of seventy-five dollars ($75).
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.
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.
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:
(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 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) (a)
(b)
1.
After August 1, 2005, any insurer may file with the commissioner a
written notice of its election to apply the provisions of KRS
304.15-365 on a contract-form by contract-form basis to annuity
contracts issued by the insurer during the period from the date of the
election through June 30, 2006;
2.
In all other instances, insurers shall apply the provisions of KRS
304.15-315 to annuity contracts issued through June 30, 2006; and
Insurers shall apply the provisions of KRS 304.15-365 to all annuity
contracts issued on or after July 1, 2006.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1183, effective July 15, 2010. -Amended 2005 Ky. Acts ch. 47, sec. 2, effective June 20, 2005. -- Amended
2003 Ky. Acts ch. 55, sec. 1, effective June 24, 2003. -- Created 1978 Ky. Acts
ch. 40, sec. 1, effective June 17, 1978.
Disclaimer: These codes may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.