New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on April 13, 2005 representing the position of the New York State Insurance Department.

Re: Group Annuity Contracts, Transfer of Assets

Issue

Does the requirement in New York Insurance Law § 4223 (McKinney 2000 and 2005 Supplement) that an employer/contractholder must obtain consent from plan participants prior to transfer of assets of an allocated group annuity contract apply to such contracts which are not fully funded by employee contributions?

Conclusion

No. New York Insurance Law § 4223 does not apply to an allocated group annuity contract which is not fully funded by employee contributions.

Facts

By letter of June 2, 2004, the Department indicated that New York Insurance Law § 4223 has been interpreted to require that an employer that had purchased a group annuity contract was obliged to obtain the consent of individual employees before moving assets from one insurer to another. Subsequently, 2004 N.Y. Laws 596 amended New York Insurance Law § 4223(b)(2), to be effective on April 17, 2005, to exempt group annuities issued to employee benefit plans, as defined in the Employee Retirement Income Security Act, 29 U.S.C.A. § 1002 (West 1999), from the requirements of New York Insurance Law § 4223. By letter of November 22, 2004, the Department modified the June 2, 2004 opinion to state that, with respect to such contracts which were issued subsequent to the effective date of the amendment, the consent would not be required.

The inquirer now seeks further Insurance Department clarification of the June and November 2004 opinions.

Analysis

New York Insurance Law § 4223(b)(2), as modified by 2004 N.Y. Laws 596 § 2, provides:

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) 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. (emphasis added)

As provided in New York Insurance Law § 4223(b)(2)(B) & (C), New York Insurance Law § 4223 does not apply to allocated group annuity contracts which are not fully funded by employee contributions. Accordingly, the letters of June 2 and November 22, 2004 are deemed modified to be in agreement with this letter; however, contracts which are not subject to New York Insurance Law § 4223 must still comply with all other appropriate requirements of the New York Insurance Law (McKinney 2000 and 2005 Supplement) and the regulations promulgated thereunder.

For further information one may contact Principal Attorney Alan Rachlin at the New York City Office.