State Codes and Statutes

Statutes > California > Ins > 10168-10168.93

INSURANCE CODE
SECTION 10168-10168.93



10168.  This article 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.



10168.1.  In the case of contracts issued on or after the operative
date of this article as defined in Section 10168.10, no contract of
annuity, except as stated in Section 10168, 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
contractholder, upon cessation of payment of considerations under the
contract.
   (a) That upon cessation of payment of considerations under a
contract, or upon the written request of the contract owner, the
company shall grant a paid-up annuity benefit on a plan stipulated in
the contract of the value specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8.
   (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 shall pay
in lieu of any paid-up annuity benefit a cash surrender benefit in
the amount specified in Sections 10168.3, 10168.4, 10168.6, and
10168.8. The company may, after making written request and receiving
the written approval of the commissioner, reserve the right to defer
the payment of the cash surrender benefit for a period not to exceed
six months after demand therefor with surrender of the contract. The
request shall address the necessity and equitability to all
policyholders of the deferral.
   (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 those benefits.
   (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
the 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 section, 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
that period would be less than twenty dollars ($20) monthly, the
company may at its option terminate the contract by payment in cash
of the then present value of that portion of the paid-up annuity
benefit, calculated on the basis of the mortality table, if any, and
the interest rate specified in the contract for determining the
paid-up annuity benefit, and by that payment shall be relieved of any
further obligation under the contract.



10168.2.  (a) This section shall apply to contracts issued before
January 1, 2004, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006. This section shall
not apply to any contract issued on or after January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) 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 that time at a rate of interest of 3 percent
per annum of percentages of the net considerations (as hereinafter
defined) paid prior to that time, decreased by the sum of (i) any
prior withdrawals from or partial surrenders of the contract
accumulated at a rate of interest of 3 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 an annual
contract charge of thirty dollars ($30) and less a collection charge
of one dollar and twenty-five cents ($1.25) per consideration
credited to the contract during that contract year. The percentages
of net considerations shall be 65 percent of the net consideration
for the first contract year and 87 1/2 percent of the net
considerations for the second and later contract years.
Notwithstanding the provisions of the preceding sentence, the
percentage shall be 65 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 65 percent.
   (d) 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 65 percent of the net
consideration for the first contract year plus 22 1/2 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 thirty
dollars ($30) or 10 percent of the gross annual consideration.
   (e) 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 90 percent and the net consideration shall be the
gross consideration less a contract charge of seventy-five dollars
($75).



10168.25.  (a) This section shall apply to contracts issued on and
after January 1, 2006, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) (1) 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 that time, at the rates of interest indicated in
subdivision (d), of the net considerations (as hereafter defined)
paid prior to that time, decreased by the sum of all of the
following:
   (A) Any prior withdrawals from or partial surrenders of the
contract, accumulated at the rates of interest indicated in
subdivision (d).
   (B) An annual contract charge of fifty dollars ($50), accumulated
at the rates of interest indicated in subdivision (d).
   (C) Any state premium tax paid by the company for the contract,
accumulated at the rates of interest indicated in subdivision (d).
However, the minimum nonforfeiture amount may not be decreased by
this amount if the premium tax is subsequently credited back to the
company.
   (D) The amount of any indebtedness to the company on the contract,
including interest due and accrued.
   (2) The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount equal to
87.5 percent of the gross considerations credited to the contract
during that contract year.
   (d) The interest rate used in determining minimum nonforfeiture
amounts shall be an annual rate of interest determined as the lesser
of 3 percent per annum and the following, which shall be specified in
the contract if the interest rate will be reset:
   (1) The five-year Constant Maturity Treasury Rate reported by the
Federal Reserve as of a date, or averaged over a period, rounded to
the nearest one-twentieth of 1 percent, specified in the contract no
longer than 15 months prior to the contract issue date or
redetermination date under paragraph (2), reduced by 125 basis
points, where the resulting rate is not less than 1 percent.
   (2) The interest rate shall apply for an initial period and may be
redetermined for additional periods. The redetermination date,
basis, and period, if any, shall be stated in the contract. The basis
is the date, or average over a specified period, that produces the
value of the five-year Constant Maturity Treasury Rate to be used at
each redetermination date.
   (e) During the period or term that a contract provides substantive
participation in an equity indexed benefit, it may increase the
reduction described in paragraph (1) of subdivision (d) by up to an
additional 100 basis points to reflect the value of the equity index
benefit. The present value at the contract issue date, and at each
redetermination date thereafter, of the additional reduction shall
not exceed the market value of the benefit. The commissioner may
require a demonstration that the present value of the additional
reduction does not exceed the market value of the benefit. Lacking a
demonstration that is acceptable to the commissioner, the
commissioner may disallow or limit the additional reduction.
   (f) The commissioner may adopt regulations to implement the
provisions of subdivision (e) and to provide for further adjustments
to the calculation of minimum nonforfeiture amounts for contracts
that provide substantive participation in an equity index benefit and
for other contracts with respect to which the commissioner
determines adjustments are justified.



10168.3.  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.



10168.4.  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 considerations
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 1 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.


10168.5.  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 the 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.



10168.6.  For the purpose of determining the benefits calculated
under Sections 10168.4 and 10168.5, 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.



10168.7.  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.



10168.8.  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.



10168.9.  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 Sections 10168.3, 10168.4, 10168.5,
10168.6, and 10168.8, 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 article. 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.



10168.10.  After the effective date of this article, any company may
file with the commissioner a written notice of its election to
comply with the provisions of this article after a specified date
before the second anniversary of the effective date of this article.
After the filing of such notice, then upon such specified date, which
shall be the operative date of this article for such company, this
article 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 article for such company shall
be the second anniversary of the effective date of this article.




10168.92.  The commissioner may adopt regulations to implement the
provisions of this article.



10168.93.  (a) Notwithstanding any other provision of law, the form
of any annuity contract that is subject to this article shall be
filed by the obligor under the contract with the commissioner before
it is marketed, issued, delivered, or used in this state.
   (b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual annuity contracts prior to the time the forms are
marketed, issued, delivered, or used in this state.


State Codes and Statutes

Statutes > California > Ins > 10168-10168.93

INSURANCE CODE
SECTION 10168-10168.93



10168.  This article 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.



10168.1.  In the case of contracts issued on or after the operative
date of this article as defined in Section 10168.10, no contract of
annuity, except as stated in Section 10168, 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
contractholder, upon cessation of payment of considerations under the
contract.
   (a) That upon cessation of payment of considerations under a
contract, or upon the written request of the contract owner, the
company shall grant a paid-up annuity benefit on a plan stipulated in
the contract of the value specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8.
   (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 shall pay
in lieu of any paid-up annuity benefit a cash surrender benefit in
the amount specified in Sections 10168.3, 10168.4, 10168.6, and
10168.8. The company may, after making written request and receiving
the written approval of the commissioner, reserve the right to defer
the payment of the cash surrender benefit for a period not to exceed
six months after demand therefor with surrender of the contract. The
request shall address the necessity and equitability to all
policyholders of the deferral.
   (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 those benefits.
   (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
the 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 section, 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
that period would be less than twenty dollars ($20) monthly, the
company may at its option terminate the contract by payment in cash
of the then present value of that portion of the paid-up annuity
benefit, calculated on the basis of the mortality table, if any, and
the interest rate specified in the contract for determining the
paid-up annuity benefit, and by that payment shall be relieved of any
further obligation under the contract.



10168.2.  (a) This section shall apply to contracts issued before
January 1, 2004, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006. This section shall
not apply to any contract issued on or after January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) 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 that time at a rate of interest of 3 percent
per annum of percentages of the net considerations (as hereinafter
defined) paid prior to that time, decreased by the sum of (i) any
prior withdrawals from or partial surrenders of the contract
accumulated at a rate of interest of 3 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 an annual
contract charge of thirty dollars ($30) and less a collection charge
of one dollar and twenty-five cents ($1.25) per consideration
credited to the contract during that contract year. The percentages
of net considerations shall be 65 percent of the net consideration
for the first contract year and 87 1/2 percent of the net
considerations for the second and later contract years.
Notwithstanding the provisions of the preceding sentence, the
percentage shall be 65 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 65 percent.
   (d) 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 65 percent of the net
consideration for the first contract year plus 22 1/2 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 thirty
dollars ($30) or 10 percent of the gross annual consideration.
   (e) 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 90 percent and the net consideration shall be the
gross consideration less a contract charge of seventy-five dollars
($75).



10168.25.  (a) This section shall apply to contracts issued on and
after January 1, 2006, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) (1) 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 that time, at the rates of interest indicated in
subdivision (d), of the net considerations (as hereafter defined)
paid prior to that time, decreased by the sum of all of the
following:
   (A) Any prior withdrawals from or partial surrenders of the
contract, accumulated at the rates of interest indicated in
subdivision (d).
   (B) An annual contract charge of fifty dollars ($50), accumulated
at the rates of interest indicated in subdivision (d).
   (C) Any state premium tax paid by the company for the contract,
accumulated at the rates of interest indicated in subdivision (d).
However, the minimum nonforfeiture amount may not be decreased by
this amount if the premium tax is subsequently credited back to the
company.
   (D) The amount of any indebtedness to the company on the contract,
including interest due and accrued.
   (2) The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount equal to
87.5 percent of the gross considerations credited to the contract
during that contract year.
   (d) The interest rate used in determining minimum nonforfeiture
amounts shall be an annual rate of interest determined as the lesser
of 3 percent per annum and the following, which shall be specified in
the contract if the interest rate will be reset:
   (1) The five-year Constant Maturity Treasury Rate reported by the
Federal Reserve as of a date, or averaged over a period, rounded to
the nearest one-twentieth of 1 percent, specified in the contract no
longer than 15 months prior to the contract issue date or
redetermination date under paragraph (2), reduced by 125 basis
points, where the resulting rate is not less than 1 percent.
   (2) The interest rate shall apply for an initial period and may be
redetermined for additional periods. The redetermination date,
basis, and period, if any, shall be stated in the contract. The basis
is the date, or average over a specified period, that produces the
value of the five-year Constant Maturity Treasury Rate to be used at
each redetermination date.
   (e) During the period or term that a contract provides substantive
participation in an equity indexed benefit, it may increase the
reduction described in paragraph (1) of subdivision (d) by up to an
additional 100 basis points to reflect the value of the equity index
benefit. The present value at the contract issue date, and at each
redetermination date thereafter, of the additional reduction shall
not exceed the market value of the benefit. The commissioner may
require a demonstration that the present value of the additional
reduction does not exceed the market value of the benefit. Lacking a
demonstration that is acceptable to the commissioner, the
commissioner may disallow or limit the additional reduction.
   (f) The commissioner may adopt regulations to implement the
provisions of subdivision (e) and to provide for further adjustments
to the calculation of minimum nonforfeiture amounts for contracts
that provide substantive participation in an equity index benefit and
for other contracts with respect to which the commissioner
determines adjustments are justified.



10168.3.  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.



10168.4.  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 considerations
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 1 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.


10168.5.  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 the 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.



10168.6.  For the purpose of determining the benefits calculated
under Sections 10168.4 and 10168.5, 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.



10168.7.  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.



10168.8.  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.



10168.9.  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 Sections 10168.3, 10168.4, 10168.5,
10168.6, and 10168.8, 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 article. 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.



10168.10.  After the effective date of this article, any company may
file with the commissioner a written notice of its election to
comply with the provisions of this article after a specified date
before the second anniversary of the effective date of this article.
After the filing of such notice, then upon such specified date, which
shall be the operative date of this article for such company, this
article 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 article for such company shall
be the second anniversary of the effective date of this article.




10168.92.  The commissioner may adopt regulations to implement the
provisions of this article.



10168.93.  (a) Notwithstanding any other provision of law, the form
of any annuity contract that is subject to this article shall be
filed by the obligor under the contract with the commissioner before
it is marketed, issued, delivered, or used in this state.
   (b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual annuity contracts prior to the time the forms are
marketed, issued, delivered, or used in this state.



State Codes and Statutes

State Codes and Statutes

Statutes > California > Ins > 10168-10168.93

INSURANCE CODE
SECTION 10168-10168.93



10168.  This article 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.



10168.1.  In the case of contracts issued on or after the operative
date of this article as defined in Section 10168.10, no contract of
annuity, except as stated in Section 10168, 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
contractholder, upon cessation of payment of considerations under the
contract.
   (a) That upon cessation of payment of considerations under a
contract, or upon the written request of the contract owner, the
company shall grant a paid-up annuity benefit on a plan stipulated in
the contract of the value specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8.
   (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 shall pay
in lieu of any paid-up annuity benefit a cash surrender benefit in
the amount specified in Sections 10168.3, 10168.4, 10168.6, and
10168.8. The company may, after making written request and receiving
the written approval of the commissioner, reserve the right to defer
the payment of the cash surrender benefit for a period not to exceed
six months after demand therefor with surrender of the contract. The
request shall address the necessity and equitability to all
policyholders of the deferral.
   (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 those benefits.
   (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
the 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 section, 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
that period would be less than twenty dollars ($20) monthly, the
company may at its option terminate the contract by payment in cash
of the then present value of that portion of the paid-up annuity
benefit, calculated on the basis of the mortality table, if any, and
the interest rate specified in the contract for determining the
paid-up annuity benefit, and by that payment shall be relieved of any
further obligation under the contract.



10168.2.  (a) This section shall apply to contracts issued before
January 1, 2004, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006. This section shall
not apply to any contract issued on or after January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) 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 that time at a rate of interest of 3 percent
per annum of percentages of the net considerations (as hereinafter
defined) paid prior to that time, decreased by the sum of (i) any
prior withdrawals from or partial surrenders of the contract
accumulated at a rate of interest of 3 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 an annual
contract charge of thirty dollars ($30) and less a collection charge
of one dollar and twenty-five cents ($1.25) per consideration
credited to the contract during that contract year. The percentages
of net considerations shall be 65 percent of the net consideration
for the first contract year and 87 1/2 percent of the net
considerations for the second and later contract years.
Notwithstanding the provisions of the preceding sentence, the
percentage shall be 65 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 65 percent.
   (d) 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 65 percent of the net
consideration for the first contract year plus 22 1/2 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 thirty
dollars ($30) or 10 percent of the gross annual consideration.
   (e) 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 90 percent and the net consideration shall be the
gross consideration less a contract charge of seventy-five dollars
($75).



10168.25.  (a) This section shall apply to contracts issued on and
after January 1, 2006, and may be applied by a company, on a
contract-form-by-contract-form basis, to any contract issued on or
after January 1, 2004, and before January 1, 2006.
   (b) The minimum values as specified in Sections 10168.3, 10168.4,
10168.5, 10168.6, and 10168.8 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.
   (c) (1) 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 that time, at the rates of interest indicated in
subdivision (d), of the net considerations (as hereafter defined)
paid prior to that time, decreased by the sum of all of the
following:
   (A) Any prior withdrawals from or partial surrenders of the
contract, accumulated at the rates of interest indicated in
subdivision (d).
   (B) An annual contract charge of fifty dollars ($50), accumulated
at the rates of interest indicated in subdivision (d).
   (C) Any state premium tax paid by the company for the contract,
accumulated at the rates of interest indicated in subdivision (d).
However, the minimum nonforfeiture amount may not be decreased by
this amount if the premium tax is subsequently credited back to the
company.
   (D) The amount of any indebtedness to the company on the contract,
including interest due and accrued.
   (2) The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount equal to
87.5 percent of the gross considerations credited to the contract
during that contract year.
   (d) The interest rate used in determining minimum nonforfeiture
amounts shall be an annual rate of interest determined as the lesser
of 3 percent per annum and the following, which shall be specified in
the contract if the interest rate will be reset:
   (1) The five-year Constant Maturity Treasury Rate reported by the
Federal Reserve as of a date, or averaged over a period, rounded to
the nearest one-twentieth of 1 percent, specified in the contract no
longer than 15 months prior to the contract issue date or
redetermination date under paragraph (2), reduced by 125 basis
points, where the resulting rate is not less than 1 percent.
   (2) The interest rate shall apply for an initial period and may be
redetermined for additional periods. The redetermination date,
basis, and period, if any, shall be stated in the contract. The basis
is the date, or average over a specified period, that produces the
value of the five-year Constant Maturity Treasury Rate to be used at
each redetermination date.
   (e) During the period or term that a contract provides substantive
participation in an equity indexed benefit, it may increase the
reduction described in paragraph (1) of subdivision (d) by up to an
additional 100 basis points to reflect the value of the equity index
benefit. The present value at the contract issue date, and at each
redetermination date thereafter, of the additional reduction shall
not exceed the market value of the benefit. The commissioner may
require a demonstration that the present value of the additional
reduction does not exceed the market value of the benefit. Lacking a
demonstration that is acceptable to the commissioner, the
commissioner may disallow or limit the additional reduction.
   (f) The commissioner may adopt regulations to implement the
provisions of subdivision (e) and to provide for further adjustments
to the calculation of minimum nonforfeiture amounts for contracts
that provide substantive participation in an equity index benefit and
for other contracts with respect to which the commissioner
determines adjustments are justified.



10168.3.  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.



10168.4.  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 considerations
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 1 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.


10168.5.  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 the 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.



10168.6.  For the purpose of determining the benefits calculated
under Sections 10168.4 and 10168.5, 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.



10168.7.  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.



10168.8.  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.



10168.9.  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 Sections 10168.3, 10168.4, 10168.5,
10168.6, and 10168.8, 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 article. 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.



10168.10.  After the effective date of this article, any company may
file with the commissioner a written notice of its election to
comply with the provisions of this article after a specified date
before the second anniversary of the effective date of this article.
After the filing of such notice, then upon such specified date, which
shall be the operative date of this article for such company, this
article 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 article for such company shall
be the second anniversary of the effective date of this article.




10168.92.  The commissioner may adopt regulations to implement the
provisions of this article.



10168.93.  (a) Notwithstanding any other provision of law, the form
of any annuity contract that is subject to this article shall be
filed by the obligor under the contract with the commissioner before
it is marketed, issued, delivered, or used in this state.
   (b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual annuity contracts prior to the time the forms are
marketed, issued, delivered, or used in this state.