S. 2071-A(Seward)/A. 8343-A(Sweeney)

Equity Index Accounts; Annuities

Summary:  The bill amends the standard nonforfeiture law for annuities to allow for an alternative approach to determining minimum values for paid-up annuity, cash surrender, and death benefits in equity indexed annuity contracts.  The bill also makes technical amendments to the nonforfeiture law, and adds disclosure requirements to Insurance Law § 3209 for equity indexed annuity contracts.  Specifically:

• Insurance Law § 4223(c) is amended to explicitly make the standard nonforfeiture law for annuities applicable to each fixed account option available under a deferred annuity contract; include language to reflect transfers among these accounts within the contract; and codify the Insurance Department’s interpretation that death benefits are not surrenders subject to surrender charges.

•  A new basis for determining minimum values for paid-up annuity, cash surrender, and death benefits in equity indexed annuity contracts is established.

• The withdrawal charge provision set forth in Insurance Law § 4223(e)(3) is amended to require a 1% reduction in the withdrawal charge each year after the third year reducing to zero after the tenth year.

• Insurance Law § 4223(f) is amended to clarify how the present value of any paid-up annuity benefit available as a nonforfeiture option is calculated for contracts that do not provide cash surrender benefits and contracts that do not provide any death benefits prior to the commencement of annuity payments.

• Insurance Law § 4223(k)(1) is amended to require the annual report to identify the minimum accumulation value, equity index value, and any changes in the participation rate, margin, cap, floor, or other factor used in the equity index formula.

• Insurance Law § 3209(b) is amended to establish disclosure requirements for deferred annuities with an equity index account.  

Effective Date:  The bill is effective ninety days after it becomes law, and authorizes the Superintendent to promulgate rules and regulations necessary for implementation.

Last Action: Approved and signed by the Governor on July 7, 2008 (Chapter 170 of the Laws of 2008).