2006 New York Code - Standard Nonforfeiture Law For Annuities.

 
    §  4223. Standard nonforfeiture law for annuities. (a) (1) In the case
  of contracts issued on or after the operative date of this  section,  no
  contract  of  annuity,  except  as  provided  in  subsection (b) of this
  section, shall be delivered or issued for delivery in this state  unless
  it  contains  in  substance  the  following provisions, or corresponding
  provisions that in the opinion of the superintendent  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 value as is specified in subsections (d), (f),  (g)
  and (i) of this section.
    (B)  If  a contract provides for a full or partial lump sum settlement
  at maturity, or at any other time, that upon full or  partial  surrender
  of  the  contract  at  the commencement of any annuity payments or prior
  thereto at times specified in the contract  (which  shall  not  be  less
  frequently  than  once  every  ten  years  after  the  issuance  of  the
  contract), the company will pay in lieu of any paid-up annuity benefit a
  cash surrender benefit (for the portion of the contract surrendered,  if
  the  contract  permits  partial  surrenders)  in  an  amount meeting the
  requirements of paragraph one of subsection (e)  of  this  section.  The
  contract  may  provide for a cash surrender benefit on any other date or
  dates meeting the requirements of paragraph one or two of subsection (e)
  of this section. The company  shall  reserve  the  right  to  defer  the
  payment  of such cash surrender benefit for a period of six months after
  demand therefor with surrender of the contract. This subparagraph  shall
  not  apply  to  any  contract  qualified for special tax treatment under
  subsection (b) of section four hundred three  of  the  Internal  Revenue
  Code to the extent such application would prevent such qualification.
    (C)  A  statement  of  the mortality table, if any, and interest rates
  used in calculating any minimum paid-up annuity during the period it  is
  guaranteed, and any cash surrender or death benefits that are guaranteed
  under  the contract, and any times at which such guaranteed benefits are
  payable, together with sufficient information to determine  the  amounts
  of  such benefits and, if the contract provides for the determination of
  any cash surrender value in accordance with  a  market-value  adjustment
  formula authorized by paragraph two of subsection (e) of this section, a
  brief  description  of  the formula and the circumstances in which it is
  applied, together with a statement that a detailed description has  been
  filed with the superintendent.
    (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  company to the contract, any indebtedness to the company on the
  contract or any prior withdrawals from  or  partial  surrenders  of  the
  contract.
    (E)  A  statement  that  the  annuity  benefits  at  the time of their
  commencement will not be less than those that would be provided  by  the
  application  of  an  amount, hereinafter defined, to purchase any single
  consideration immediate annuity contract offered by the company  at  the
  time  to  the  same class of annuitants. For contracts that provide cash
  surrender benefits, such  amount  shall  be  the  greater  of  the  cash
  surrender  benefit  or  ninety-five  percent  of what the cash surrender
  benefit would be if there were no withdrawal charge. For contracts  that
  do not provide cash surrender benefits, such amount shall be the present
  value  of  the  paid-up  annuity  benefit provided under the contract in
  accordance with subsection (d) of this section. This statement will  not
  affect  the  amount  of  any  benefits required to be provided under any
  other provision of this section.
    (2)  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 three full years and either
  (A) the actual accumulation amount as hereinafter defined would be  less
  than  five  thousand dollars or the dollar limit established pursuant to
  subparagraph A of paragraph 11 of subsection (a) of section four hundred
  eleven of the internal revenue code of 1986,  as  amended,  or  (B)  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 monthly, calculated on the
  basis  of  the  mortality  table, if any, and the interest rate, if any,
  specified in the contract for determining the paid-up annuity  benefits,
  the  company may at its option terminate such contract by payment of the
  actual accumulation amount and by such payment shall be relieved of  any
  further obligation under such contract.
    (b) (1) This section shall not apply to any:
    (A) Reinsurance.
    (B)  Group  annuity  contract purchased in connection with one or more
  retirement plans  or  plans  of  deferred  compensation  established  or
  maintained  by  or  for one or more employers (including partnerships or
  sole  proprietorships),  employee  organizations,  or  any   combination
  thereof, except as otherwise provided in this subsection.
    (C) Premium deposit fund.
    (D) Variable annuity.
    (E) Immediate annuity.
    (F)  Deferred  annuity  contract  or  group  annuity certificate after
  annuity payments have commenced.
    (G) Reversionary annuity.
    (H) Contract delivered outside this state through an  agent  or  other
  representative  of the company issuing the contract or through a broker,
  except as otherwise provided in this subsection.
    (2) This section shall apply to any certificate issued, or issued  for
  delivery,  under  a  group  annuity contract (other than a group annuity
  contract issued to an employee benefit plan within the  meaning  of  the
  federal employee retirement income security act of 1974, 29 U.S.C. &#1671001
  et  seq.) to a person solicited for the sale of such certificate in this
  state if:
    (A) such certificate provides benefits under an individual  retirement
  account  or  is  issued  as  an  individual  retirement annuity, both as
  defined in section four hundred eight  of  the  Internal  Revenue  Code,
  except for a simplified employee pension as defined in subsection (k) of
  section four hundred eight of such code; or
    (B)  such  certificate  is issued as an annuity contract in accordance
  with subsection (b) of section four hundred three of such code  under  a
  program for the purchase of such annuity contract where the payments are
  derived  wholly  from  a  salary  reduction agreement or an agreement to
  forego an increase in salary; or
    (C) the benefits  provided  under  such  group  annuity  contract  are
  derived wholly from funds contributed by the persons covered thereunder.
    (c)  (1) The minimum values as specified in subsections (d), (e), (f),
  (g) and (i) of this section of any paid-up annuity,  cash  surrender  or
  death  benefits  available  under  an  annuity  contract  shall be based
  (except as provided in subsection (e) of this section  with  respect  to
  the   use   of  a  market-value  adjustment  formula)  upon  the  actual
  accumulation amount computed as provided in this subsection.
    (2) The "actual accumulation amount" with respect to any  contract  at
  any time at or prior to the commencement of any annuity payments is:
    (A) the net considerations credited to such contract; minus
    (B) premium taxes and premium charges; plus
    (C) additional amounts, including interest (which shall not be less in
  any year than the minimum annual effective rate of interest as specified
  in  subparagraph  (F) of this paragraph applied to the sum of the actual
  accumulation amount and the amount of any indebtedness to the company on
  the contract) and dividends, credited by the company  to  the  contract;
  minus
    (D)  administrative  charges (which shall not exceed fifty dollars per
  year); minus
    (E) the sum of (i) the amount appropriate according to  the  terms  of
  the contract to reflect any prior withdrawals from or partial surrenders
  of  the  contract and (ii) the amount of any indebtedness to the company
  on the contract, including interest due and accrued.
    (F) the minimum annual effective rate of interest shall be the  lesser
  of three percent and the following:
    (i)  the  five-year  constant  maturity  treasury rate reported by the
  federal reserve as of a date, or  average  over  a  period,  within  the
  fifteen  months  prior  to  the  contract  issue or redetermination date
  rounded to the nearest one-twentieth of one percent;
    (ii) reduced by one hundred twenty-five basis points; and
    (iii) where the resulting minimum guaranteed interest rate is not less
  than one percent. The minimum annual effective rate of interest at issue
  shall be specified in  the  contract.  The  basis  and  calculation  for
  setting  the  minimum  annual  effective  rate of interest at issue of a
  contract shall  be  filed  with  the  superintendent.  If  the  contract
  provides  that  the  minimum  annual  effective  rate of interest may be
  redetermined, the redetermination date, basis,  calculation  and  period
  shall be stated in the contract. The basis is the date or average over a
  specified  period  that  produces  the  values of the five-year constant
  maturity treasury rate to be used at each  redetermination  date  or  at
  issue.
    (3)(A) "Net considerations" means the gross considerations credited to
  the  contract  less  contract charges, but net considerations shall not,
  for any contract year, be less than zero.
    (B) "Contract charges" means the fixed dollar charges provided for  in
  the contract (subject to any maximum limit based on the amount of annual
  considerations  credited  to  the  contract)  but shall not exceed fifty
  dollars in any year.
    (C) "Premium charge percentage" means a charge  provided  for  in  the
  contract  based  on  a  percentage of net considerations credited to the
  contract but shall not exceed (i) ten percent of any  net  consideration
  so  credited  if the contract does not contain a market-value adjustment
  formula or (ii) seven percent of any net consideration  so  credited  if
  the contract contains a market-value adjustment formula.
    (D) "Premium  specific" when applied to a contract means that each net
  consideration credited to the contract is associated with a  portion  of
  the  actual  accumulation amount under the contract and of the amount of
  any indebtedness under the contract to the company and that  a  separate
  withdrawal charge percentage is applicable to each such portion.
    (d)  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 actual accumulation amount on that  date.  Such
  present  value  shall be computed using the mortality table, if any, and
  the interest rate, if any, specified in the contract for determining any
  minimum paid-up annuity benefits guaranteed in the contract.
    (e) (1) A cash surrender benefit that meets the requirements  of  this
  paragraph  shall  not  be  less  than  the  excess  of  (i)  the  actual
  accumulation amount over (ii) the withdrawal charge percentage times the
  sum of (I) the actual accumulation amount and (II)  the  amount  of  any
  indebtedness under the contract to the company. Subject to the foregoing
  sentence  and  section  four  thousand  two  hundred  thirty-two of this
  article, such benefit  may  be  determined  in  any  manner  established
  pursuant  to  authority granted by the board of directors of the company
  or a committee thereof (including any formula that  takes  into  account
  changes  in  interest  rates  of  publicly-traded  obligations  or other
  investments).
    (2) A cash surrender benefit  that  meets  the  requirements  of  this
  paragraph  shall  not  be  less  than  the  excess  of  (i)  the  actual
  accumulation amount, as adjusted by a market-value  adjustment  formula,
  over,  if  the  contract  is  not  premium specific, (ii) the withdrawal
  charge percentage times the sum of (I) the actual  accumulation  amount,
  as  adjusted by such market-value adjustment formula and (II) the amount
  of any indebtedness under  the  contract  to  the  company  or,  if  the
  contract  is  premium  specific,  (iii) the aggregate of such withdrawal
  charge  percentage  under  the  contract  times  the  sum  of  (I)   the
  corresponding  portion of the actual accumulation amount, as adjusted by
  such market-value adjustment formula, and (II) the corresponding portion
  of the amount of any indebtedness under the contract to the company.
    (3) If the cash surrender benefit is computed  on  the  basis  of  the
  actual   accumulation   amount  without  adjustment  by  a  market-value
  adjustment formula, "withdrawal charge percentage"  means  a  percentage
  not greater than ten percent less the premium charge percentage, if any,
  provided for under the contract.
    (4)  If  the  cash  surrender  benefit is computed on the basis of the
  actual  accumulation  amount  adjusted  by  a  market  value  adjustment
  formula,  "withdrawal  charge percentage" means a percentage not greater
  than seven percent reduced by one percent for each year the contract has
  been in force or, if the contract is premium  specific,  for  each  year
  after  the  net  consideration  associated  with  such withdrawal charge
  percentage was credited to the contract  and  less  the  premium  charge
  percentage,  if  any, provided in the contract (but not less than zero).
  After any period during which interest was credited to the contract at a
  specified rate and the company, pursuant to  the  contract,  set  a  new
  specified  rate  and  a  new  period  during which such rate is to be so
  credited, the withdrawal charge percentage for such new period shall  be
  a  percentage  not  in  excess  of  the  greater  of  (A)  any remaining
  withdrawal charge percentage at the beginning of the new period and  (B)
  the  lesser of (i) five percent and (ii) one percent times the number of
  years in such new period, reduced (but not below zero)  by  one  percent
  for  each  year  the  contract  remains  in  force  during  such period,
  provided, however, that the withdrawal charge percentage  for  such  new
  period  shall  be  zero  unless the contract provides for a date, within
  thirty days of the last day of such new period, on  which  the  contract
  may  be  surrendered for a cash surrender benefit determined without the
  use of a market-value adjustment formula.
    (5) "Market-value  adjustment  formula"  means  a  formula  which   is
  described  in  the  contract  for  increasing  and decreasing the actual
  accumulation amount in order to determine cash surrender values  payable
  in  accordance  with subparagraph (B) of paragraph one of subsection (a)
  of this section and which takes into account  (i)  changes  in  interest
  rates on publicly-traded obligations or other investments or in interest
  rates  provided in, or declared pursuant to, contracts of the same class
  as the contract being surrendered and (ii) the length  of  time  between
  the date on which the contract is surrendered and the next date on which
  the  contract  would  have  provided  cash surrender benefits determined
  without  the  use  of   any   market-value   adjustment   formula.   The
  superintendent   may   promulgate   reasonable   regulations  to  define
  permissible forms of market-value adjustment formulae.
    (f) 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 accumulation interest rate as defined in subsection (c)  of
  this  section, 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
  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.
    (g) For the purpose  of  determining  the  benefits  calculated  under
  subsections  (e)  and  (f)  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.
    (h)  If  the  contract  fails at any time prior to the commencement of
  annuity payments to provide cash surrender benefits or to provide  death
  benefits  at  least  equal  to  the actual accumulation amount, it shall
  contain a statement in a prominent place  that  such  benefits  are  not
  provided.
    (i) 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.
    (j) 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  (d), (e), (f), (g) and (i) of this section,
  additional  benefits  payable  in  the  event  of  total  and  permanent
  disability,  as  reversionary  annuity  or deferred reversionary annuity
  benefits, or 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
  accumulation  amounts, and the 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 paid-up
  annuity, cash surrender or death benefits.
    (k) (1) At least once in each contract year, the company shall mail to
  each holder of a contract subject to this section  under  which  benefit
  payments  have  not  yet  commenced a statement as of a date during such
  year as to any paid-up  annuity  benefit  or  the  amount  available  to
  provide  a  paid-up  annuity benefit, any cash surrender benefit and any
  death benefit, under the contract. If the minimum annual effective  rate
  of  interest  is  subject  to  redetermination, then the statement shall
  include the current minimum annual effective rate of  interest  and  the
  next  redetermination date. The statement shall be addressed to the last
  post-office address of the contractholder known to the company.
    (2) This subsection shall not apply to any contract  providing  for  a
  single consideration if the paid-up annuity benefits, any cash surrender
  benefits  and  any  death  benefits  under the contract are identical in
  amount to those specified at issue.
    (l) The operative date of this section shall be:
    (1) as to a company which filed  with  the  superintendent  a  written
  notice  of  its  election  to comply with this section after a specified
  date before January first, nineteen hundred eighty-one,  such  specified
  date; and
    (2)  as  to  a  company  which  made  no such election, January first,
  nineteen hundred eighty-one.