20-2636

20-2636. Nonforfeiture benefits; exceptions;
definition

A. This section does not apply to the following:

1. Reinsurance.

2. Group annuity contract purchases that are made in connection with one or more
retirement or deferred compensation plans that are established or maintained by or for
one or more employers, including partnerships or sole proprietorships, employee
organizations or any combination of partnerships, proprietorships and employee
organizations. This exception does not apply to group annuity contract purchases that
are made in connection with plans that provide individual retirement accounts or
individual retirement annuities under section 408 of the internal revenue code.

3. A premium deposit fund.

4. An investment annuity.

5. An immediate annuity.

6. A deferred annuity contract after annuity payments begin.

7. A reversionary annuity.

8. A contract that is delivered outside this state through any insurance producer
or other representative of the company issuing the contract.

B. To the extent that a variable annuity contract provides benefits that do not
vary according to the investment performance of a separate account before the annuity
commencement date, the contract shall contain provisions that satisfy the requirements of
section 20-1232 and the contract is not subject to this section.

C. Except pursuant to subsections A and B of this section, if a contract is issued
on or after January 1, 1998, a variable annuity contract shall not be delivered or issued
for delivery in this state unless it contains in substance the following provisions or
corresponding provisions that the director determines are at least as favorable to the
contract holder:

1. That, on cessation of the payment of considerations under a contract, the
company will grant a paid-up annuity benefit on a plan that is described in the contract
and that complies with subsection G of this section. The description shall include a
statement of the mortality table, if any, and the guaranteed or assumed interest rates
that are used in calculating annuity payments.

2. If a contract provides for a lump sum settlement at maturity or at any other
time, that, on the surrender of the contract at or before the commencement of any annuity
payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender
benefit that is described in the contract and that complies with subsection H of this
section. The contract may provide that the company reserves the right to defer the
determination and payment of any cash surrender benefit for any period during which the
New York stock exchange is closed for trading except for normal holidays or in which the
securities and exchange commission determines that a state of emergency exists.

3. 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 that are required
by the laws of the state in which the contract is delivered and an explanation of the
manner in which the benefits are altered by any of the following:

(a) The existence of any additional amounts the company credited to the contract.

(b) Any indebtedness to the company on the contract.

D. The minimum values under this section of any paid-up annuity, cash surrender or
death benefits that are available under a variable annuity contract shall be based on
nonforfeiture amounts that meet the following requirements:

1. The minimum nonforfeiture amount on any date before the annuity commencement
date shall be an amount that is equal to the percentages of net considerations under
subsection E of this section, and increased or decreased by the net investment return
that is allocated to the percentages of net considerations. This amount shall be reduced
to reflect the effect of:

(a) Any partial withdrawals from or partial surrenders of the contract.

(b) The amount of any indebtedness on the contract, including interest due and
accrued.

(c) An annual contract charge that is not less than zero and that is equal to the
lesser of thirty dollars or two per cent of the end of year contract value, less the
amount of any annual contract charge that is deducted from any gross considerations
credited to the contract during the contract year.

(d) A transaction charge of ten dollars for each transfer to another separate
account or to another investment division within the same separate account.

2. The net investment return to be credited to a contract shall be determined at
least monthly.

3. The annual thirty dollar contract charge and the ten dollar transaction charge
under paragraph 1 of this subsection will be adjusted to reflect changes in the consumer
price index pursuant to subsection F of this section.

For the purposes of this subsection, "net investment return" means the rate of investment
return that is in an amount that does not exceed the actual expense not offset by other
deductions and that is credited to the variable annuity contract according to the terms
of the contract after deductions for tax charges, if any, for asset charges either at a
rate that does not exceed the rate stated in the contract, or if the contract is issued
by a nonprofit corporation under which the contract holder participates fully in the
investment, for mortality and expense experience of the account.

E. The percentages of net considerations that are used to define the minimum
nonforfeiture amount under subsection D of this section shall meet one of the following
requirements:

1. For contracts that provide for periodic considerations, the net considerations
for a given contract year that are used to define the minimum nonforfeiture amount shall
be an amount not less than zero and shall be equal to the corresponding gross
considerations that are credited to the contract during that contract year less an annual
contract charge of thirty dollars, less a collection charge of one dollar twenty-five
cents for each periodic consideration credited to the contract during that contract year,
and less any charges for premium taxes. The percentages used to calculate the minimum
nonforfeiture amount shall be as follows:

(a) For the first contract year, sixty-five per cent of the net considerations.

(b) For each renewal contract year, eighty-seven and one-half per cent of the net
considerations, except that for any portion of the total net consideration for a renewal
contract year that 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
per cent, the percentage to be applied to this amount shall be sixty-five per cent.

2. For contracts that provide for a single consideration, the net consideration
that is used to define the minimum nonforfeiture amount shall be the gross consideration
less a seventy-five dollar contract charge and less any charges for premium taxes. The
percentage of the net consideration shall be ninety per cent. The annual thirty dollar
contract charge, the collection charge of one dollar twenty-five cents per collection and
the seventy-five dollar single consideration contract charge will be adjusted to reflect
changes in the consumer price index pursuant to subsection F of this section.

F. A demonstration that a contract's nonforfeiture amounts comply with this section
shall be based on the following assumptions, unless the company demonstrates the
suitability of alternative assumptions:

1. The testing of values shall occur at the end of each of the first twenty
contract years.

2. A net investment return of seven per cent per year.

3. If the contract provides for transfers to another separate account or to another
investment division within the same separate account, one transfer per contract year.

4. In determining the state premium tax that applies to the contract, the state of
residence is the state of delivery.

5. With respect to contracts that provide for periodic considerations, monthly
considerations of one hundred dollars for each of the first two hundred forty months.

6. With respect to contracts that provide for a single consideration, a ten
thousand dollar single consideration.

7. The following contract charges:

(a) For contracts that are filed in 1980 or earlier, the annual thirty dollar
contract charge, the charge of ten dollars per transfer, the collection charge of one
dollar twenty-five cents per consideration and the seventy-five dollar contract charge.

(b) For contracts that are filed in 1981 or after, the contract charges listed in
subdivision (a) of this paragraph multiplied by the ratio of the consumer price index
for June of the calendar year preceding the date of filing to the consumer price index
for June, 1979.

8. If the contract provides for the allocation of considerations to both fixed and
variable accounts, allocate one hundred per cent of the considerations to the variable
account.

G. A paid-up annuity benefit that is available under a variable annuity contract
shall be in an amount so that its present value on the annuity commencement date is at
least equal to the minimum nonforfeiture amount on the annuity commencement date. The
insurer shall compute the present value by using the mortality table, if any, and the
guaranteed or assumed interest rates that are used in calculating the annuity payments.

H. For variable annuity contracts that provide cash surrender benefits, at any time
before the annuity commencement date the cash surrender benefit shall not be less than
the minimum nonforfeiture amount next computed after the company receives the request for
surrender. The death benefit under the contracts shall be at least equal to the cash
surrender benefit.

I. A variable annuity contract that does not provide cash surrender benefits or
that does not provide death benefits that are at least equal to the minimum nonforfeiture
amount before the annuity commencement date shall prominently state in the contract that
these benefits are not provided.

J. Notwithstanding the requirements of this section, a variable annuity contract
may provide that the company may cancel the annuity and pay the contract holder its
accumulated value and that on the payment of its accumulated value the company is
released from any further obligation under the contract if either:

1. At the time the annuity becomes payable the accumulated value is less than two
thousand dollars, or would provide an income the initial amount of which is less than
twenty dollars per month.

2. Before the annuity becomes payable under a periodic payment variable annuity
contract, considerations have not been received under the contract for the two full years
preceding the cancellation and both:

(a) The considerations were paid before the annuity became payable and were reduced
to reflect any partial withdrawals from or partial surrenders of the contract.

(b) The accumulated value amounted to less than two thousand dollars.

K. For a variable annuity contract that 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 the 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 subsection D of this section, in
ascertaining the minimum nonforfeiture amounts and paid-up annuity, cash surrender and
death benefits that may be required by this section, the insurer shall disregard any
additional benefits that are payable in the event of a total and permanent disability, as
reversionary annuity or deferred reversionary annuity benefits or as other policy
benefits in addition to life insurance, endowment and annuity benefits, and the
considerations for all of the additional benefits. The inclusion of the additional
benefits is not required in any paid-up benefits, unless the additional benefits
separately would require minimum nonforfeiture amounts and paid-up annuity, cash
surrender and death benefits.

L. For the purposes of this section, "consumer price index" means the index for all
urban consumers for all items that is published by the bureau of labor statistics of the
United States department of labor or its successor.