Full Text of SB2917 94th General Assembly
SB2917eng 94TH GENERAL ASSEMBLY
|
|
|
SB2917 Engrossed |
|
LRB094 19125 LJB 54646 b |
|
| 1 |
| AN ACT concerning insurance.
| 2 |
| Be it enacted by the People of the State of Illinois,
| 3 |
| represented in the General Assembly:
| 4 |
| Section 5. The Illinois Insurance Code is amended by | 5 |
| changing Section 229.4a as follows: | 6 |
| (215 ILCS 5/229.4a)
| 7 |
| (Section scheduled to be repealed on July 1, 2007) | 8 |
| Sec. 229.4a. Standard Non-forfeiture Law for Individual | 9 |
| Deferred
Annuities. | 10 |
| (1)
Title.
This Section shall be known as the Standard | 11 |
| Nonforfeiture Law for Individual Deferred Annuities. | 12 |
| (2) Applicability.
This Section shall not apply to any | 13 |
| reinsurance, group annuity purchased under a retirement plan or | 14 |
| plan of deferred compensation established or maintained by an | 15 |
| employer (including a partnership or sole proprietorship) or by | 16 |
| an employee organization, or by both, other than a plan | 17 |
| providing individual retirement accounts or individual | 18 |
| retirement annuities under Section 408 of the Internal Revenue | 19 |
| Code, as now or hereafter amended, premium deposit fund, | 20 |
| variable annuity, investment annuity, immediate annuity, any | 21 |
| deferred annuity contract after annuity payments have | 22 |
| commenced, or reversionary annuity, nor to any contract which | 23 |
| shall be delivered outside this State through an agent or other | 24 |
| representative of the company issuing the contract. | 25 |
| (3) Nonforfeiture Requirements. | 26 |
| (A) In the case of contracts issued on or after the | 27 |
| operative date of this Section
as defined in subsection | 28 |
| (13), no contract of annuity, except as stated in | 29 |
| subsection (2), shall be delivered or issued for delivery | 30 |
| in this State unless it contains in substance the following | 31 |
| provisions, or corresponding provisions which in the | 32 |
| opinion of the Director of Insurance are at least as |
|
|
|
SB2917 Engrossed |
- 2 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| favorable to the contract holder, upon cessation of payment | 2 |
| of considerations under the contract: | 3 |
| (i) That upon cessation of payment of | 4 |
| considerations under a contract, or upon the written | 5 |
| request of the contract owner, the company shall grant | 6 |
| a paid-up annuity benefit on a plan stipulated in the | 7 |
| contract of such value as is specified in subsections | 8 |
| (5), (6), (7), (8) and (10); | 9 |
| (ii)
If a contract provides for a lump sum | 10 |
| settlement at maturity, or at any other time, that upon | 11 |
| surrender of the contract at or prior to the | 12 |
| commencement of any annuity payments, the company | 13 |
| shall pay in lieu of a paid-up annuity benefit a cash | 14 |
| surrender benefit of such amount as is
specified in | 15 |
| subsections (5), (6), (8) and (10). The company may | 16 |
| reserve the right to
defer the payment of the cash | 17 |
| surrender benefit for a period not to exceed 6 months | 18 |
| after demand therefor with surrender of the contract | 19 |
| after making written request and receiving written | 20 |
| approval of the Director. The request shall address the | 21 |
| necessity and equitability to all policyholders of the | 22 |
| deferral; | 23 |
| (iii) A statement of the mortality table, if any, | 24 |
| and interest rates used calculating any minimum | 25 |
| paid-up annuity, cash surrender, or death benefits | 26 |
| that are guaranteed under the contract, together with | 27 |
| sufficient information to determine the amounts of the | 28 |
| benefits; and | 29 |
| (iv)
A statement that any paid-up annuity, cash | 30 |
| surrender or death benefits that may be available under | 31 |
| the contract are not less than the minimum benefits | 32 |
| required by any statute of the state in which the | 33 |
| contract is delivered and an explanation of the manner | 34 |
| in which the benefits are altered by the existence of | 35 |
| any additional amounts credited by the company to the | 36 |
| contract, any indebtedness to the company on the |
|
|
|
SB2917 Engrossed |
- 3 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| contract or any prior withdrawals from or partial | 2 |
| surrenders of the contract. | 3 |
| (B) Notwithstanding the requirements of this Section, | 4 |
| a deferred annuity contract may provide that if no | 5 |
| considerations have been received under a contract for a | 6 |
| period of 2 full years and the portion of the paid-up | 7 |
| annuity benefit at maturity on the plan stipulated in the | 8 |
| contract arising from prior considerations paid would be | 9 |
| less than $20 monthly, the company may at its option | 10 |
| terminate the contract by payment in cash of the then | 11 |
| present value of the portion of the paid-up annuity | 12 |
| benefit, calculated on the basis on the mortality table, if | 13 |
| any, and interest rate specified in the contract for | 14 |
| determining the paid-up annuity benefit, and by this | 15 |
| payment shall be relieved of any further obligation under | 16 |
| the contract. | 17 |
| (4) Minimum values. The minimum values as specified in | 18 |
| subsections (5), (6), (7), (8) and (10) of any paid-up annuity, | 19 |
| cash surrender or death benefits available under an annuity | 20 |
| contract shall be based upon minimum nonforfeiture amounts as | 21 |
| defined in this subsection.
| 22 |
| (A)(i) The minimum nonforfeiture amount at any time at | 23 |
| or prior to the commencement of any annuity payments shall | 24 |
| be equal to an accumulation up to such time at rates of | 25 |
| interest as indicated in subdivision (4)(B) of the net | 26 |
| considerations (as hereinafter defined) paid prior to such | 27 |
| time, decreased by the sum of paragraphs (a) through (d) | 28 |
| below: | 29 |
| (a) Any prior withdrawals from or partial | 30 |
| surrenders of the contract accumulated at rates of | 31 |
| interest as indicated in subdivision (4)(B);
| 32 |
| (b) An annual contract charge of $50, | 33 |
| accumulated at rates of interest as indicated in | 34 |
| subdivision (4)(B);
| 35 |
| (c) Any premium tax paid by the company for the | 36 |
| contract, accumulated at rates of interest as |
|
|
|
SB2917 Engrossed |
- 4 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| indicated in subdivision (4)(B); and
| 2 |
| (d) The amount of any indebtedness to the | 3 |
| company on the contract, including
interest due and | 4 |
| accrued. | 5 |
| (ii) The net considerations for a given contract year | 6 |
| used to define the minimum nonforfeiture amount shall be an | 7 |
| amount
equal to 87.5% of the gross considerations,
credited | 8 |
| to the contract during that contract year. | 9 |
| (B) The interest rate used in determining minimum | 10 |
| nonforfeiture amounts shall be an
annual rate of interest | 11 |
| determined as the lesser of 3% per annum
and the following, | 12 |
| which shall be specified in the contract if the interest | 13 |
| rate will be reset: | 14 |
| (i) The five-year Constant Maturity Treasury Rate | 15 |
| reported by the Federal Reserve as of a date, or | 16 |
| average over a period, rounded to the nearest 1/20th of | 17 |
| one percent, specified in the contract no longer than | 18 |
| 15 months prior to the contract issue date or | 19 |
| redetermination date under subdivision (4)(B)(iv); | 20 |
| (ii) Reduced by 125 basis points; | 21 |
| (iii) Where the resulting interest rate is not less | 22 |
| than l%; and | 23 |
| (iv) The interest rate shall apply for an initial | 24 |
| period and may be redetermined for additional periods. | 25 |
| The redetermination date, basis and period, if any, | 26 |
| shall be stated in the contract. The basis is the date | 27 |
| or average over a specified period that produces the | 28 |
| value of the 5-year Constant Maturity Treasury Rate to | 29 |
| be used at each redetermination date. | 30 |
| (C) During the period or term that a contract provides | 31 |
| substantive participation in an equity indexed benefit, it | 32 |
| may increase the reduction described in subdivision | 33 |
| (4)(B)(ii)
above by up to an additional 100 basis points to | 34 |
| reflect the value of the equity
index benefit. The present | 35 |
| value at the contract issue date, and at each
| 36 |
| redetermination date thereafter, of the additional |
|
|
|
SB2917 Engrossed |
- 5 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| reduction shall not exceed market value of the benefit. The | 2 |
| Director may require a demonstration that the present value | 3 |
| of the additional reduction does not exceed the market | 4 |
| value of the benefit. Lacking such a demonstration that is | 5 |
| acceptable to the Director, the Director may disallow or | 6 |
| limit the additional reduction. | 7 |
| (D) The Director may adopt rules to implement the | 8 |
| provisions of subdivision (4)(C) and to provide for further | 9 |
| adjustments to the calculation of minimum nonforfeiture | 10 |
| amounts for contracts that provide substantive | 11 |
| participation in an equity index benefit and for other | 12 |
| contracts that the Director determines adjustments are | 13 |
| justified. | 14 |
| (5) Computation of Present Value.
Any paid-up annuity | 15 |
| benefit available under a contract shall be such that its | 16 |
| present value on the date annuity payments are to commence is | 17 |
| at least equal to the minimum nonforfeiture amount on that | 18 |
| date. Present value shall be computed using the mortality | 19 |
| table, if any, and the interest rates specified in the contract | 20 |
| for determining the minimum paid-up annuity benefits | 21 |
| guaranteed in the contract. | 22 |
| (6) Calculation of Cash Surrender Value.
For contracts that | 23 |
| provide cash surrender benefits, the cash surrender benefits | 24 |
| available prior to maturity shall not be less than the present | 25 |
| value as of the date of surrender of that portion of the | 26 |
| maturity value of the paid-up annuity benefit that would be | 27 |
| provided under the contract at maturity arising from | 28 |
| considerations paid prior to the time of cash surrender reduced | 29 |
| by the amount appropriate to reflect any prior withdrawals from | 30 |
| or partial surrenders of the contract, such present value being | 31 |
| calculated on the basis of an interest rate not more than 1% | 32 |
| higher than the interest rate specified in the contract for | 33 |
| accumulating the net considerations to determine maturity | 34 |
| value, decreased by the amount of any indebtedness to the | 35 |
| company on the contract, including interest due and accrued, | 36 |
| and increased by any existing additional amounts credited by |
|
|
|
SB2917 Engrossed |
- 6 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| the company to the contract. In no event shall any cash | 2 |
| surrender benefit be less than the minimum nonforfeiture amount | 3 |
| at that time. The death benefit under such contracts shall be | 4 |
| at least equal to the cash surrender benefit. | 5 |
| (7) Calculation of Paid-up Annuity Benefits.
For contracts | 6 |
| that do not provide cash surrender benefits, the present value | 7 |
| of any paid-up annuity benefit available as a nonforfeiture | 8 |
| option at any time prior to maturity shall not be less than the | 9 |
| present value of that portion of the maturity value of the | 10 |
| paid-up annuity benefit provided under the contract arising | 11 |
| from considerations paid prior to the time the contract is
| 12 |
| surrendered in exchange for, or changed to, a deferred paid-up | 13 |
| annuity, such present value being calculated for the period | 14 |
| prior to the maturity date on the basis of the interest rate | 15 |
| specified in the contract for accumulating the net | 16 |
| considerations to determine maturity value, and increased by | 17 |
| any additional amounts credited by the company to the contract. | 18 |
| For contracts that do not provide any death benefits prior to | 19 |
| the commencement of any annuity payments, present values shall | 20 |
| be calculated on the basis of such interest rate and the | 21 |
| mortality table specified in the contract for determining the | 22 |
| maturity value of the paid-up annuity benefit. However, in no | 23 |
| event shall the present value of a paid-up annuity benefit be | 24 |
| less than the minimum nonforfeiture amount at that time. | 25 |
| (8) Maturity Date.
For the purpose of determining the | 26 |
| benefits calculated under subsections (6) and (7), in the case | 27 |
| of annuity contracts under which an election may be made to | 28 |
| have annuity payments commence at optional maturity dates, the | 29 |
| maturity date shall be deemed to be the latest date for which | 30 |
| election shall be permitted by the contract, but shall not be | 31 |
| deemed to be later than the anniversary of the contract next | 32 |
| following the annuitant's seventieth birthday or the tenth | 33 |
| anniversary of the contract, whichever is later. | 34 |
| (9) Disclosure of Limited Death Benefits.
A contract that | 35 |
| does not provide cash surrender benefits or does not provide | 36 |
| death benefits at least equal to the minimum nonforfeiture |
|
|
|
SB2917 Engrossed |
- 7 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| amount prior to the commencement of any annuity payments shall | 2 |
| include a statement in a prominent place in the contract that | 3 |
| such benefits are not
provided. | 4 |
| (10) Inclusion of Lapse of Time Considerations.
Any paid-up | 5 |
| annuity, cash surrender or death benefits available at any | 6 |
| time, other than on the contract anniversary under any contract | 7 |
| with fixed scheduled considerations, shall be calculated with | 8 |
| allowance for the lapse of time and the payment of any | 9 |
| scheduled considerations beyond the beginning of the contract | 10 |
| year in which cessation of payment of considerations under the | 11 |
| contract occurs. | 12 |
| (11) Proration of Values; Additional Benefits.
For a | 13 |
| contract which provides, within the same contract by rider or | 14 |
| supplemental contract provision, both annuity benefits and | 15 |
| life insurance benefits that are in excess of the greater of | 16 |
| cash surrender benefits or a return of the gross considerations | 17 |
| with interest, the minimum nonforfeiture benefits shall be | 18 |
| equal to the sum of the minimum nonforfeiture benefits for the | 19 |
| annuity portion and the minimum nonforfeiture benefits, if any, | 20 |
| for the life insurance portion computed as if each portion were | 21 |
| a separate contract. Notwithstanding the provisions of | 22 |
| subsections (5), (6), (7), (8) and (10), additional benefits | 23 |
| payable in the event of total and permanent disability, as | 24 |
| reversionary annuity or deferred reversionary annuity | 25 |
| benefits, or as other policy benefits additional to life | 26 |
| insurance, endowment and annuity benefits, and considerations | 27 |
| for all such additional benefits, shall be disregarded in | 28 |
| ascertaining the minimum nonforfeiture amounts,
paid-up | 29 |
| annuity, cash surrender and death benefits that may be required | 30 |
| under this Section. The inclusion of such benefits shall not be | 31 |
| required in any paid-up benefits, unless the additional | 32 |
| benefits separately would require minimum nonforfeiture | 33 |
| amounts, paid-up annuity, cash surrender and death benefits. | 34 |
| (12) Rules. The Director may adopt rules to implement the | 35 |
| provisions of this Section. | 36 |
| (13) Effective Date. After the effective date of this |
|
|
|
SB2917 Engrossed |
- 8 - |
LRB094 19125 LJB 54646 b |
|
| 1 |
| amendatory Act of the 93rd General Assembly, a company may | 2 |
| elect to apply its provisions to annuity
contracts on a | 3 |
| contract form-by-contract form basis before July 1, 2006. In | 4 |
| all other instances, this Section shall become operative with | 5 |
| respect to annuity contracts issued by the company on or after | 6 |
| July 1, 2006.
| 7 |
| (14) (Blank)
This Section is repealed on July 1, 2007 .
| 8 |
| (Source: P.A. 93-873, eff. 8-6-04.)
| 9 |
| Section 99. Effective date. This Act takes effect upon | 10 |
| becoming law.
|
|