OGC Opinion No. 06-06-01

The Office of General Counsel issued the following opinion on June 5, 2006 representing the position of the New York State Insurance Department.

Re: Treatment of Government Plans Under N.Y. Ins. Law § 4223.


Has the recent amendment to N.Y. Ins. Law § 4223 (McKinney Supp. 2006) eliminated the requirement that participant consent be obtained prior to the moving of assets from a group annuity contract?


Yes, the recent amendment of N.Y. Ins. Law § 4223 (McKinney Supp. 2006) has eliminated the requirement that participant consent be obtained prior to the moving of assets from a group annuity contract. However, this change in the law applies only to contracts issued after the enactment date. Provisions in existing contracts that contain language requiring participant consent are not obviated by the amended statute.


The inquirer represents the ABC Corporation (the "Corporation"), which he states is a governmental agency and which operates an employee benefit plan that is a "governmental plan" as that term is defined under the Employee Retirement and Income Security Act of 1974, 29 U.S.C. § 101 et seq. ("ERISA"). The inquirer is writing on their behalf with respect to the applicability of N.Y. Ins. Law § 4223 to certain group annuity contracts under which the Blue Long-Term Growth Account and Gold Accounts are offered to employees of the Corporation. The inquiry specifically concerns the Department's position as set forth in the June 2, 2004 opinion which held that a participant's consent must be obtained by the employer prior to the moving of assets from a contract subject to § 4223.


On June 2, 2004 this Office issued an Opinion concluding that N.Y. Ins. Law §4223 (McKinney 2000 & 2004 Supp.) required that an employer that has purchased a group annuity contract is obligated to obtain the consent of individual employees prior to moving assets from one insurer to another. Later that year, Senate Bill 6208, containing several amendments to § 4223, was enacted into law (Ch. 596, L.2004). Among the changes to § 4223 was the insertion of additional language into paragraph 2 of subsection (b) thereof which excludes group annuity contracts issued to employee benefit plans "within the meaning of ERISA" from the application of the section. The paragraph now reads, in pertinent part, as follows:

(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. § 1001et seq.) to a person solicited for the sale of such certificate in this state. . . . (emphasis added).

N.Y. Ins. Law § 4223(b)(2) (McKinney Supp. 2006).

As noted in the inquiry, in the Department's letter1 to the Governor's Counsel on the legislation, then-Superintendent Serio expressly noted that the Department supported the bill's aim of removing group annuity contracts that fund employee benefit plans from the application of § 4223. This view was stated as being based on (1) the impracticality of applying the section where a plan sponsor is subject to fiduciary rules in the selection and monitoring of investment options and (2) the fact that the protections available to plan participants under group annuity contracts are generally better than those under contracts subject to the standard nonforfeiture provisions of § 4223.

In addition, the Department's letter noted as significant the fact that a plan sponsor is subject to "fiduciary rules" in general and not specifically the fiduciary rules of ERISA. Although the use of the phrase "within the meaning of" could be viewed as limiting the change in the law to such plans as are in fact subject to or governed by ERISA, it is the Department's view that the change in N.Y. Ins. Law § 4223 was not intended to be so limited and that the intent of the statutory reform was to include all employee benefit plans as defined in ERISA whether or not subject to the substantive provisions thereof. 2

Although the reform effected by Ch. 596, L. 2004 does in fact change the law so as to exclude plans such as those of the Corporation from the application of N.Y. Ins. Law § 4223, Section 10 of that legislation expressly stated that it was to take effect 180 days from the date of enactment and that it "... shall apply to annuity contracts issued on or after such date." The contracts in question presently contain language requiring notification and consent. Thus, the revised law cannot alter the requirements of the existing contracts.

The inquirer's letter mentioned the alternative possibility of receiving "expedited approval to re-issue a new contract" removing the requirement of notification to and consent of policyholders. There exists no authority under the Insurance Law for allowing the unilateral termination of existing contracts and subsequent re-issue of replacements. However, if the existing contract language permits, the proposed fund substitutions may be made using a "negative election" approach, whereby the changes can be made following notification of the policyholders and the elapsing of a certain period of time. Implementation of such a "negative election" plan would be subject to Departmental approval.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City office.

1  Letter to Hon. Richard Platkin, Counsel to the Governor, from Superintendent of Insurance Gregory V. Serio (October 13, 2004).

2  In fact, the initial version of the bill contained the wording “as defined in” and not “within the meaning of”.  No explanation was given for the change in wording.