H. B. 2969
(By Delegates H. White and R. M. Thompson)
[Introduced February 11, 2003; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact section thirty-a, article thirteen,
chapter thirty-three of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, relating to the
standard nonforfeiture law for individual deferred annuities.
Be it enacted by the Legislature of West Virginia:
That section thirty-a, article thirteen, chapter thirty-three
of the code of West Virginia, one thousand nine hundred thirty-one,
as amended, be amended and reenacted to read as follows:
ARTICLE 13. LIFE INSURANCE.
§33-13-30a. 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 company issuing the contract.
(3) In the case of contracts issued on or after the operative
date of this section as defined in subsection (12), no contract of
annuity, except as stated in subsection (2), 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 company 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);
(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
company 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). 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;
(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; and
(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.
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 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 monthly, the
company 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 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 per annum of percentages of the net considerations (as
hereinafter defined) paid prior to such time, decreased by the sum
of:
(i) Any prior withdrawals from or partial surrenders of the
contract accumulated at a rate of interest of three percent per
annum; and
(ii) The amount of any indebtedness to the company on the
contract, including interest due and accrued; and increased by any
existing additional amounts credited by the company 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
considerations credited to the contract during that contract year
less than an annual contract charge of thirty dollars and less a
collection charge of one dollar and twenty-five cents per
consideration credited to the contract during that contract year.
The percentages of net considerations shall be sixty-five percent
of the net consideration for the first contract year and eighty-seven and one-half percent 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 of
the portion of the total net consideration for any renewal contract
year which exceeds by not more than two times the sum of those
portions of the net considerations in all prior contract years for
which the percentage was sixty-five percent.
Notwithstanding any other provision of this section to the
contrary, for any contract issued on or after the first day of
July, two thousand three, and before the first day of July, two
thousand five, the interest rate at which net considerations, prior
withdrawals and partial surrenders shall be accumulated for the
purpose of determining nonforfeiture amounts shall be not less than
one and one-half percent per annum.
(b) 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 exceptions:
(1) The portion of the net consideration for the first
contract year to be accumulated shall be the sum of sixty-five percent of the net consideration for the first contract year plus
twenty-two and one-half percent 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.
(2) The annual contract charge shall be the lesser of: (i)
Thirty dollars; or (ii) ten percent of the gross annual
consideration.
(c) 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 and the net
consideration shall be the gross consideration less a contract
charge of seventy-five dollars.
(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
consideration 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 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 company
on the contract, including interest due and accrued, and increased
by any existing additional amounts credited by the company 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 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 a 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), 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), 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) After the effective date of this section, any company may
file with the commissioner 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 company, this section shall become operative with respect to
annuity contracts thereafter issued by such company. If a company
makes no such election, the operative date of this section for such
company shall be the second anniversary of the effective date of
this section.
NOTE: The purpose of this bill is to provide a rate reduction
in individual fixed annuity contracts for purposes of determining
the nonforfeiture amount until a more permanent solution is
developed by the National Association of Insurance Commissioners.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.