§431:10D-107  Standard nonforfeiture law;
individual deferred annuities.  [This section is effective July 1, 2006
but may be applied to annuity contracts on a contract form-by-contract form
basis beginning July 1, 2004.  L 2004, c 15, §4(2), (3).]  (a)  This
section shall be known as the Standard Nonforfeiture Law for Individual
Deferred Annuities.



(b)  This section shall not apply to:



(1)  Any reinsurance;



(2)  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 amended;



(3)  Any premium deposit fund, variable annuity,
investment annuity, immediate annuity, any deferred annuity contract after
annuity payments have commenced, or reversionary annuity; or



(4)  Any contract which shall be delivered outside this
State through a producer or other representative of the insurer issuing the
contract.



(c)  In the case of contracts issued on or
after July 1, 2006, no contract of annuity, except as stated in subsection (b),
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 contract holder
upon cessation of payment of considerations under the contract:



(1)  That upon cessation of payment of considerations
under a contract, or upon the written request of the contract owner, the
insurer will grant a paid-up annuity benefit on a plan stipulated in the
contract of such value as is specified in subsections (g), (h), (i), (j), and
(l);



(2)  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 insurer will pay in lieu
of any paid-up annuity benefit a cash surrender benefit of the amount as
specified in subsections (g), (h), (j), and (l).  The insurer shall reserve the
right to defer the payment of the cash surrender benefit for a period not
exceeding six months after demand therefor with surrender of the contract after
making written request and receiving written approval of the commissioner.  The
request shall address the necessity and equitability to all policyholders of
the deferral;



(3)  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 the benefits; and



(4)  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
insurer to the contract, any indebtedness to the insurer on the contract, or
any prior withdrawals from or partial surrenders of the contract.



Notwithstanding the requirements of this subsection,
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 would be less than $20 monthly, the insurer
may at its option terminate the contract by payment in cash of the then present
value of the portion of the paid-up annuity benefit, calculated on the basis of
the mortality table, if any, and interest rate specified in the contract for
determining the paid-up annuity benefit, and by the payment shall be relieved
of any further obligation under the contract.



(d)  The minimum values as specified in
subsections (g), (h), (i), (j), and (l), 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 subsection.  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 rates of interest
as indicated in subsection (e) of the net considerations paid prior to that
time, decreased by the sum of:



(1)  Any prior withdrawals from or partial surrenders
of the contract accumulated at a rate of interest as indicated in subsection
(e);



(2)  An annual contract charge of $50, accumulated at
rates of interest as indicated in subsection (e);



(3)  Any premium tax paid by the insurer for the
contract, accumulated at rates of interest as indicated in subsection (e); and



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



The net considerations for a given contract
year used to define the minimum nonforfeiture amount shall be an amount equal
to eighty-seven and five-tenths per cent of the gross considerations credited
to the contract during the contract year.



(e)  The interest rate used in determining
minimum nonforfeiture amounts shall be an annual rate of interest determined as
the lesser of three per cent a year 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 average over a period, rounded
to the nearest one-twentieth of one per cent, specified in the contract not
later than fifteen months prior to the contract issue date or redetermination
date under paragraph (4);



(2)  Reduced by one hundred twenty-five basis points;



(3)  Where the resulting interest rate is not less
than one per cent; and



(4)  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.  As used in
this paragraph, "basis" means 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.



(f)  During the period or term that a contract
provides substantive participation in an equity indexed benefit, it may
increase the reduction described in subsection (e)(2) by up to an additional
one hundred basis points to reflect the value of the equity index benefit.  The
present value at the contract issue date, and at each subsequent
redetermination date, 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 such a demonstration that is acceptable to the
commissioner, the commissioner may disallow or limit the additional reduction. 
The commissioner may adopt rules to implement this subsection and 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 that the commissioner determines adjustments are justified.



(g)  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.  The 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.



(h)  For contracts which provide cash surrender
benefits, the 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, the present value being calculated
on the basis of an interest rate not more than one per cent higher than the
interest rate specified in the contract for accumulating the net considerations
to determine the maturity value, decreased by the amount of any indebtedness to
the insurer on the contract, including interest due and accrued, and increased
by any existing additional amounts credited by the insurer 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 these contracts
shall be at least equal to the cash surrender benefit.



(i)  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, the 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 the maturity value, and
increased by any existing additional amounts credited by the insurer to the
contract.  For contracts which do not provide any death benefits prior to the
commencement of any annuity payments, the present values shall be calculated on
the basis of the 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.



(j)  For the purpose of determining the
benefits calculated under subsections (h) and (i), 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 the latest date for
which election shall be permitted by the contract, but shall not 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.



(k)  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 the
benefits are not provided.



(l)  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
consideration beyond the beginning of the contract year in which cessation of
payment of considerations under the contract occurs.



(m)  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 subsections (g), (h), (i), (j), and
(l), additional benefits payable in the event of total and permanent
disability, as reversionary annuity or deferred reversionary annuity benefits,
or as other policy benefits additional to life insurance, endowment, and
annuity benefits, and considerations for all such additional benefits, shall be
disregarded in ascertaining minimum nonforfeiture amounts, paid-up annuity,
cash surrender, and death benefits that may be required by this section.  The
inclusion of additional benefits shall not be required in any paid-up benefits,
unless these additional benefits separately would require minimum nonforfeiture
amounts, paid-up annuity, cash surrender, and death benefits. [L 1987, c 347,
pt of §2; am L 2002, c 155, §70 and c 210, §1; am L 2004, c 15, §2]