CHAPTER 26.1-34ANNUITIES26.1-34-01. Required annuity contract provisions relating to cessation of paymentof considerations by contractholder. In the case of annuity contracts issued after June 30,<br>1979, unless the company, by written notice filed with the commissioner, opted for an earlier<br>operative date, no annuity contract, except as stated in section 26.1-34-10, may be delivered or<br>issued for delivery in this state unless it contains in substance the following provisions, or<br>corresponding provisions which in the opinion of the commissioner are at least as favorable to<br>the contractholder upon cessation of payment of considerations under the contract:1.Upon cessation of payment of considerations under an annuity contract, the<br>company will grant a paid-up annuity benefit on a plan stipulated in the contract of<br>such value as is specified in sections 26.1-34-03 through 26.1-34-06 and section<br>26.1-34-08.2.If an annuity contract provides for a lump sum settlement at maturity, or at any other<br>time, then upon surrender of the contract at or prior to the commencement of any<br>annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash<br>surrender benefit of such amount as is specified in sections 26.1-34-03, 26.1-34-04,<br>26.1-34-06, and 26.1-34-08.The company shall reserve the right to defer thepayment of the cash surrender benefit for a period of six months after demand for<br>the benefit with surrender of the contract.3.A statement of the mortality table, if any, and interest rates used in calculating any<br>minimum paid-up annuity, cash surrender, or death benefits that are guaranteed<br>under the annuity contract, together with sufficient information to determine the<br>amounts of the benefits.4.A statement that any paid-up annuity, cash surrender, or death benefits that may be<br>available under the annuity contract are not less than the minimum benefits required<br>by any law of this state and an explanation of the manner in which the benefits are<br>altered by the existence of any additional amounts credited by the company to the<br>contract, any indebtedness to the company on the contract, or any prior withdrawals<br>from or partial surrenders of the contract.5.A statement that when an annuity contract becomes a claim by reason of death,<br>settlement:a.If payable in one sum, must be made upon due proof of death, or not later than<br>two months after receipt of the proof, and must include reasonable interest<br>accrued from the date of death; orb.If made under a settlement option other than subdivision a, must include<br>reasonable interest accrued from date of death until such option is made<br>according to the provisions of the contract.As used in this subsection, the term "reasonable interest" means the same rate of<br>interest as paid on death proceeds left on deposit with the insurer.Notwithstanding the requirements of this section, any deferred annuity contract may provide that<br>if no considerations have been received under a contract for a period of two full years and the<br>portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from<br>considerations paid prior to such period would be less than twenty dollars monthly, the company<br>may at its option terminate the contract by payment in cash of the then present value of such<br>portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and<br>interest rate specified in the contract for determining the paid-up annuity benefit, and by such<br>payment is relieved of any further obligation under the contract.Page No. 126.1-34-01.1.Annuity policies and certificates - Right to return.A person whopurchases an annuity policy or certificate issued or delivered in this state may return the policy<br>within twenty days of delivery to the purchaser. If a policy or certificate is returned, the purchaser<br>is entitled to a refund of the premium, except in the sale of variable annuities in which the<br>purchaser is entitled to the value of the annuity plus all expense charges. Every annuity, policy,<br>or certificate issued or delivered in this state must have a notice prominently printed on or<br>attached to the first page of the policy or certificate stating in substance that the purchaser may<br>return the policy or certificate within twenty days of its delivery and have the premium, or such<br>other amount as specified above, refunded if, after examination of the policy or certificate, the<br>applicant is not satisfied for any reason.26.1-34-02.Minimum nonforfeiture amount defined.The minimum values asspecified in sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08 of any paid-up<br>annuity, cash surrender, or death benefits available under an annuity contract must be based<br>upon minimum nonforfeiture amounts as defined in this section.1.For an annuity contract issued before August 1, 2003:a.With respect to annuity contracts providing for flexible considerations, the<br>minimum nonforfeiture amount at any time at or prior to the commencement of<br>any annuity payments must be equal to an accumulation up to such time at a<br>rate of interest of three percent per year of percentages of the net<br>considerations, as hereinafter defined, paid prior to such time, decreased by<br>the sum of any prior withdrawals from or partial surrenders of the contract<br>accumulated at a rate of interest of three percent per year and the amount of<br>any indebtedness to the company on the contract, including interest due and<br>accrued; and increased by any existing additional amounts credited by the<br>company to the contract. The net considerations for a given contract year used<br>to define the minimum nonforfeiture amount must be an amount not less than<br>zero and must equal the corresponding gross considerations credited to the<br>contract during that contract year less an annual contract charge of thirty dollars<br>and less a collection charge of one dollar and twenty-five cents for each<br>consideration credited to the contract during that contract year.Thepercentages of net considerations must be sixty-five percent of the net<br>consideration for the first contract year and eighty-seven and one-half percent<br>ofthenetconsiderationsfor the second and later contract years.Notwithstanding the preceding sentence, the percentage must be sixty-five<br>percent of the portion of the total net consideration for any renewal contract<br>year which exceeds by not more than two times the sum of those portions of<br>the net considerations in all prior contract years for which the percentage was<br>sixty-five percent.b.With respect to contracts providing for fixed scheduled considerations,<br>minimum nonforfeiture amounts must be calculated on the assumption that<br>considerations are paid annually in advance and must be defined as for<br>contracts with flexible considerations which are paid annually, with two<br>exceptions:(1)The portion of the net consideration for the first contract year to be<br>accumulated is the sum of sixty-five percent of the net consideration for<br>the first contract year plus twenty-two and one-half percent of the excess<br>of the net consideration for the first contract year over the lesser of the<br>net considerations for the second and third contract years.(2)The annual contract charge is the lesser of thirty dollars or ten percent of<br>the gross annual considerations.c.With respect to contracts providing for a single consideration, minimum<br>nonforfeiture amounts must be defined as for contracts with flexiblePage No. 2considerations except that the percentage of net consideration used to<br>determine the minimum nonforfeiture amount must equal ninety percent and<br>the net consideration must be the gross consideration less a contract charge of<br>seventy-five dollars.2.For an annuity contract issued after July 31, 2005:a.Theminimumnonforfeitureamountatanytimeatorbeforethecommencement of any annuity payments must be equal to an accumulation up<br>to such time at rates of interest, as provided under subdivision c, of the net<br>considerations, as defined under subdivision b, paid before such time,<br>decreased by the sum of:(1)Any prior withdrawals from or partial surrenders of the contract<br>accumulated at rates of interest as provided under subdivision c;(2)An annual contract charge of fifty dollars, accumulated at rates of interest<br>as provided under subdivision c;(3)Any premium tax paid by the company for the contract, accumulated at<br>rates of interest as provided under subdivision c; and(4)The amount of any indebtedness to the company on the contract,<br>including interest due and accrued.b.The net considerations for a given contract year used to define the minimum<br>nonforfeiture amount under subdivision a must be an amount equal to<br>eighty-seven and one-half percent of the gross considerations credited to the<br>contract during that contract year.c.The interest rate used in determining minimum nonforfeiture amounts must be<br>determined as the lesser of:(1)Three percent per annum; or(2)The five-year constant maturity rate reported by the federal reserve as of<br>a date or average over a period, reduced by one hundred twenty-five<br>basis points. The rate calculated under this paragraph may not be less<br>than one percent, must be specified in the contract, and must be<br>determined no more than fifteen months before the contract issue date or<br>redemption date.d.The interest rate used in determining minimum nonforfeiture amounts applies<br>for an initial period and may be redetermined for additional periods.Theredetermination date basis and period, if any, must be stated in the contract.<br>The basis is the date or average over a specified period that produces the value<br>of the five-year constant maturity treasury rate to be used at each<br>redetermination date.e.Notwithstanding subdivisions a, b, c, and d, during the period or term that a<br>contract provides substantive participation in an equity indexed benefit, the<br>contract may increase the reduction of one hundred twenty-five basis points<br>under paragraph 2 of subdivision c by an amount not to exceed one hundred<br>basis points, in order to reflect the value of the equity index benefit.Thepresent value at the contract issue date, the present value at each<br>redetermination date, or the additional reduction may not exceed the market<br>value of the benefit. The commissioner may require a demonstration that the<br>present value of the reduction does not exceed the market value of the benefit.Page No. 3Lackingsuchademonstrationacceptabletothecommissioner,thecommissioner may disallow or limit the additional reduction.f.Thecommissioner may adopt rules to implement the provisions ofsubdivision e and to provide further adjustments to the calculation of minimum<br>nonforfeiture amounts for contracts that provide substantive participation in an<br>equity index benefit and for other contracts if the commissioner determines that<br>adjustments are justified.3.For an annuity contract issued after July 31, 2003, and before August 1, 2005, on a<br>contract form by contract form basis, a company may elect to apply the provisions of<br>subsection 1 or 2.26.1-34-03.Value of paid-up annuity benefit to be at least equal to minimumnonforfeiture amount. Any paid-up annuity benefit available under an annuity contract must be<br>such that its present value on the date annuity payments are to commence is at least equal to<br>the minimum nonforfeiture amount on that date. The present value must be computed using the<br>mortality table, if any, and the interest rate specified in the contract for determining the minimum<br>paid-up annuity benefits guaranteed in the contract.26.1-34-04. Cash surrender benefit to be at least equal to value of paid-up annuitybenefit. For annuity contracts that provide cash surrender benefits, the cash surrender benefits<br>available prior to maturity may not be less than the present value as of the date of surrender of<br>that portion of the maturity value of the paid-up annuity benefit which would be provided under<br>the contract at maturity arising from considerations paid prior to the time of cash surrender<br>reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of<br>the contract. The present value must be calculated on the basis of an interest rate not more than<br>one percent higher than the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, decreased by the amount of any indebtedness to<br>the company on the contract, including interest due and accrued, and increased by any existing<br>additional amounts credited by the company to the contract. A cash surrender benefit may not<br>be less than the minimum nonforfeiture amount at that time.The death benefit under thecontracts must at least equal the cash surrender benefit.26.1-34-05.Minimum value of paid-up annuity on cessation of payment ofconsiderations - Cash surrender benefits not provided. For annuity contracts that do not<br>provide cash surrender benefits, the present value of any paid-up annuity benefit available as a<br>nonforfeiture option at any time prior to maturity may not be less than the present value of the<br>portion of the maturity value of the paid-up annuity benefit provided under the contract arising<br>from considerations paid prior to the time the contract is surrendered in exchange for, or changed<br>to, a deferred paid-up annuity. The present value must be calculated for the period prior to the<br>maturity date on the basis of the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, and increased by any existing additional amounts<br>credited by the company to the contract. For contracts that do not provide any death benefits<br>prior to the commencement of any annuity payments, the present values must be calculated on<br>the basis of the interest rate and the mortality table specified in the contract for determining the<br>maturity value of the paid-up annuity benefit. The present value of a paid-up annuity benefit may<br>not be less than the minimum nonforfeiture amount at that time.26.1-34-06. Definition of maturity date. For the purpose of determining the benefitscalculated under sections 26.1-34-04 and 26.1-34-05, in the case of annuity contracts under<br>which an election may be made to have annuity payments commence at optional maturity dates,<br>the maturity date is deemed to be the latest date for which election is permitted by the contract,<br>but may not be deemed to be later than the anniversary of the contract next following the<br>annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.26.1-34-07.Disclosure if annuity contract does not provide cash surrender ordeath benefits. Any annuity contract that does not provide cash surrender benefits or does not<br>provide death benefits at least equal to the minimum nonforfeiture amounts prior to thePage No. 4commencement of any annuity payments must include a statement in a prominent place in the<br>contract that such benefits are not provided.26.1-34-08.Benefits on cessation of payment of considerations off theanniversary. Any paid-up annuity, cash surrender, or death benefits available at any time, other<br>than on the contract anniversary, under any annuity contract with fixed scheduled considerations,<br>must be calculated with allowance for the lapse of time and the payment of any scheduled<br>considerations beyond the beginning of the contract year in which cessation of payment of<br>considerations under the contract occurs.26.1-34-09.Minimum nonforfeiture benefits for annuity contract providing bothannuity and life insurance benefits - Excepted benefits.For any annuity contract thatprovides within the same contract, by rider or supplemental contract provision, both annuity<br>benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or<br>a return of the gross considerations with interest, the minimum nonforfeiture benefits must equal<br>the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum<br>nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a<br>separate contract.Notwithstanding sections 26.1-34-03 through 26.1-34-06 and section26.1-34-08, additional benefits payable in the event of total and permanent disability, as<br>reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits<br>additional to life insurance, endowment and annuity benefits, and considerations for all such<br>additional benefits, must be disregarded in ascertaining the minimum nonforfeiture amounts,<br>paid-up annuity, cash surrender, and death benefits that may be required by sections 26.1-34-01<br>through 26.1-34-09. The inclusion of such additional benefits may not be required in any paid-up<br>benefits, unless such additional benefits separately would require minimum nonforfeiture<br>amounts, paid-up annuity, cash surrender, or death benefits.26.1-34-10. Exemptions from annuity nonforfeiture provisions. Sections 26.1-34-01through 26.1-34-09 do not apply to any reinsurance, group annuity purchased under a retirement<br>plan or plan of deferred compensation established or maintained by an employer, including a<br>partnership, limited liability company, or sole proprietorship, or by an employee organization, or<br>by both, other than a plan providing individual retirement accounts or individual retirement<br>annuities under section 408 of the federal Internal Revenue Code, as amended, premium deposit<br>fund, variable annuity, investment annuity, immediate annuity, deferred annuity contract after<br>annuity payments have commenced, or reversionary annuity, nor to any contract delivered<br>outside this state.26.1-34-11.Variable annuities authorized - Application of variable life policysections - Rulemaking authority.Any domestic life insurance company, including anydomestic fraternal benefit society which operates on a legal reserve basis, may establish one or<br>more separate accounts and may allocate thereto amounts, including proceeds applied under<br>optional modes of settlement or under dividend options, to provide for annuities, and benefits<br>incidental thereto, payable in fixed or variable amounts or both, subject to the requirements of<br>subsections 1 through 7 of section 26.1-33-13. No company may deliver or issue for delivery in<br>this state variable contracts unless it is licensed or organized to do an annuity business in this<br>state.Except for the requirement that an individual variable life insurance contract containcertain provisions, sections 26.1-33-14, 26.1-33-15, and 26.1-33-16 apply to variable annuities<br>authorized by this section. The commissioner may adopt reasonable rules to implement this<br>section.Page No. 5Document Outlinechapter 26.1-34 annuities
CHAPTER 26.1-34ANNUITIES26.1-34-01. Required annuity contract provisions relating to cessation of paymentof considerations by contractholder. In the case of annuity contracts issued after June 30,<br>1979, unless the company, by written notice filed with the commissioner, opted for an earlier<br>operative date, no annuity contract, except as stated in section 26.1-34-10, may be delivered or<br>issued for delivery in this state unless it contains in substance the following provisions, or<br>corresponding provisions which in the opinion of the commissioner are at least as favorable to<br>the contractholder upon cessation of payment of considerations under the contract:1.Upon cessation of payment of considerations under an annuity contract, the<br>company will grant a paid-up annuity benefit on a plan stipulated in the contract of<br>such value as is specified in sections 26.1-34-03 through 26.1-34-06 and section<br>26.1-34-08.2.If an annuity contract provides for a lump sum settlement at maturity, or at any other<br>time, then upon surrender of the contract at or prior to the commencement of any<br>annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash<br>surrender benefit of such amount as is specified in sections 26.1-34-03, 26.1-34-04,<br>26.1-34-06, and 26.1-34-08.The company shall reserve the right to defer thepayment of the cash surrender benefit for a period of six months after demand for<br>the benefit with surrender of the contract.3.A statement of the mortality table, if any, and interest rates used in calculating any<br>minimum paid-up annuity, cash surrender, or death benefits that are guaranteed<br>under the annuity contract, together with sufficient information to determine the<br>amounts of the benefits.4.A statement that any paid-up annuity, cash surrender, or death benefits that may be<br>available under the annuity contract are not less than the minimum benefits required<br>by any law of this state and an explanation of the manner in which the benefits are<br>altered by the existence of any additional amounts credited by the company to the<br>contract, any indebtedness to the company on the contract, or any prior withdrawals<br>from or partial surrenders of the contract.5.A statement that when an annuity contract becomes a claim by reason of death,<br>settlement:a.If payable in one sum, must be made upon due proof of death, or not later than<br>two months after receipt of the proof, and must include reasonable interest<br>accrued from the date of death; orb.If made under a settlement option other than subdivision a, must include<br>reasonable interest accrued from date of death until such option is made<br>according to the provisions of the contract.As used in this subsection, the term "reasonable interest" means the same rate of<br>interest as paid on death proceeds left on deposit with the insurer.Notwithstanding the requirements of this section, any deferred annuity contract may provide that<br>if no considerations have been received under a contract for a period of two full years and the<br>portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from<br>considerations paid prior to such period would be less than twenty dollars monthly, the company<br>may at its option terminate the contract by payment in cash of the then present value of such<br>portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and<br>interest rate specified in the contract for determining the paid-up annuity benefit, and by such<br>payment is relieved of any further obligation under the contract.Page No. 126.1-34-01.1.Annuity policies and certificates - Right to return.A person whopurchases an annuity policy or certificate issued or delivered in this state may return the policy<br>within twenty days of delivery to the purchaser. If a policy or certificate is returned, the purchaser<br>is entitled to a refund of the premium, except in the sale of variable annuities in which the<br>purchaser is entitled to the value of the annuity plus all expense charges. Every annuity, policy,<br>or certificate issued or delivered in this state must have a notice prominently printed on or<br>attached to the first page of the policy or certificate stating in substance that the purchaser may<br>return the policy or certificate within twenty days of its delivery and have the premium, or such<br>other amount as specified above, refunded if, after examination of the policy or certificate, the<br>applicant is not satisfied for any reason.26.1-34-02.Minimum nonforfeiture amount defined.The minimum values asspecified in sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08 of any paid-up<br>annuity, cash surrender, or death benefits available under an annuity contract must be based<br>upon minimum nonforfeiture amounts as defined in this section.1.For an annuity contract issued before August 1, 2003:a.With respect to annuity contracts providing for flexible considerations, the<br>minimum nonforfeiture amount at any time at or prior to the commencement of<br>any annuity payments must be equal to an accumulation up to such time at a<br>rate of interest of three percent per year of percentages of the net<br>considerations, as hereinafter defined, paid prior to such time, decreased by<br>the sum of any prior withdrawals from or partial surrenders of the contract<br>accumulated at a rate of interest of three percent per year and the amount of<br>any indebtedness to the company on the contract, including interest due and<br>accrued; and increased by any existing additional amounts credited by the<br>company to the contract. The net considerations for a given contract year used<br>to define the minimum nonforfeiture amount must be an amount not less than<br>zero and must equal the corresponding gross considerations credited to the<br>contract during that contract year less an annual contract charge of thirty dollars<br>and less a collection charge of one dollar and twenty-five cents for each<br>consideration credited to the contract during that contract year.Thepercentages of net considerations must be sixty-five percent of the net<br>consideration for the first contract year and eighty-seven and one-half percent<br>ofthenetconsiderationsfor the second and later contract years.Notwithstanding the preceding sentence, the percentage must be sixty-five<br>percent of the portion of the total net consideration for any renewal contract<br>year which exceeds by not more than two times the sum of those portions of<br>the net considerations in all prior contract years for which the percentage was<br>sixty-five percent.b.With respect to contracts providing for fixed scheduled considerations,<br>minimum nonforfeiture amounts must be calculated on the assumption that<br>considerations are paid annually in advance and must be defined as for<br>contracts with flexible considerations which are paid annually, with two<br>exceptions:(1)The portion of the net consideration for the first contract year to be<br>accumulated is the sum of sixty-five percent of the net consideration for<br>the first contract year plus twenty-two and one-half percent of the excess<br>of the net consideration for the first contract year over the lesser of the<br>net considerations for the second and third contract years.(2)The annual contract charge is the lesser of thirty dollars or ten percent of<br>the gross annual considerations.c.With respect to contracts providing for a single consideration, minimum<br>nonforfeiture amounts must be defined as for contracts with flexiblePage No. 2considerations except that the percentage of net consideration used to<br>determine the minimum nonforfeiture amount must equal ninety percent and<br>the net consideration must be the gross consideration less a contract charge of<br>seventy-five dollars.2.For an annuity contract issued after July 31, 2005:a.Theminimumnonforfeitureamountatanytimeatorbeforethecommencement of any annuity payments must be equal to an accumulation up<br>to such time at rates of interest, as provided under subdivision c, of the net<br>considerations, as defined under subdivision b, paid before such time,<br>decreased by the sum of:(1)Any prior withdrawals from or partial surrenders of the contract<br>accumulated at rates of interest as provided under subdivision c;(2)An annual contract charge of fifty dollars, accumulated at rates of interest<br>as provided under subdivision c;(3)Any premium tax paid by the company for the contract, accumulated at<br>rates of interest as provided under subdivision c; and(4)The amount of any indebtedness to the company on the contract,<br>including interest due and accrued.b.The net considerations for a given contract year used to define the minimum<br>nonforfeiture amount under subdivision a must be an amount equal to<br>eighty-seven and one-half percent of the gross considerations credited to the<br>contract during that contract year.c.The interest rate used in determining minimum nonforfeiture amounts must be<br>determined as the lesser of:(1)Three percent per annum; or(2)The five-year constant maturity rate reported by the federal reserve as of<br>a date or average over a period, reduced by one hundred twenty-five<br>basis points. The rate calculated under this paragraph may not be less<br>than one percent, must be specified in the contract, and must be<br>determined no more than fifteen months before the contract issue date or<br>redemption date.d.The interest rate used in determining minimum nonforfeiture amounts applies<br>for an initial period and may be redetermined for additional periods.Theredetermination date basis and period, if any, must be stated in the contract.<br>The basis is the date or average over a specified period that produces the value<br>of the five-year constant maturity treasury rate to be used at each<br>redetermination date.e.Notwithstanding subdivisions a, b, c, and d, during the period or term that a<br>contract provides substantive participation in an equity indexed benefit, the<br>contract may increase the reduction of one hundred twenty-five basis points<br>under paragraph 2 of subdivision c by an amount not to exceed one hundred<br>basis points, in order to reflect the value of the equity index benefit.Thepresent value at the contract issue date, the present value at each<br>redetermination date, or the additional reduction may not exceed the market<br>value of the benefit. The commissioner may require a demonstration that the<br>present value of the reduction does not exceed the market value of the benefit.Page No. 3Lackingsuchademonstrationacceptabletothecommissioner,thecommissioner may disallow or limit the additional reduction.f.Thecommissioner may adopt rules to implement the provisions ofsubdivision e and to provide further adjustments to the calculation of minimum<br>nonforfeiture amounts for contracts that provide substantive participation in an<br>equity index benefit and for other contracts if the commissioner determines that<br>adjustments are justified.3.For an annuity contract issued after July 31, 2003, and before August 1, 2005, on a<br>contract form by contract form basis, a company may elect to apply the provisions of<br>subsection 1 or 2.26.1-34-03.Value of paid-up annuity benefit to be at least equal to minimumnonforfeiture amount. Any paid-up annuity benefit available under an annuity contract must be<br>such that its present value on the date annuity payments are to commence is at least equal to<br>the minimum nonforfeiture amount on that date. The present value must be computed using the<br>mortality table, if any, and the interest rate specified in the contract for determining the minimum<br>paid-up annuity benefits guaranteed in the contract.26.1-34-04. Cash surrender benefit to be at least equal to value of paid-up annuitybenefit. For annuity contracts that provide cash surrender benefits, the cash surrender benefits<br>available prior to maturity may not be less than the present value as of the date of surrender of<br>that portion of the maturity value of the paid-up annuity benefit which would be provided under<br>the contract at maturity arising from considerations paid prior to the time of cash surrender<br>reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of<br>the contract. The present value must be calculated on the basis of an interest rate not more than<br>one percent higher than the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, decreased by the amount of any indebtedness to<br>the company on the contract, including interest due and accrued, and increased by any existing<br>additional amounts credited by the company to the contract. A cash surrender benefit may not<br>be less than the minimum nonforfeiture amount at that time.The death benefit under thecontracts must at least equal the cash surrender benefit.26.1-34-05.Minimum value of paid-up annuity on cessation of payment ofconsiderations - Cash surrender benefits not provided. For annuity contracts that do not<br>provide cash surrender benefits, the present value of any paid-up annuity benefit available as a<br>nonforfeiture option at any time prior to maturity may not be less than the present value of the<br>portion of the maturity value of the paid-up annuity benefit provided under the contract arising<br>from considerations paid prior to the time the contract is surrendered in exchange for, or changed<br>to, a deferred paid-up annuity. The present value must be calculated for the period prior to the<br>maturity date on the basis of the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, and increased by any existing additional amounts<br>credited by the company to the contract. For contracts that do not provide any death benefits<br>prior to the commencement of any annuity payments, the present values must be calculated on<br>the basis of the interest rate and the mortality table specified in the contract for determining the<br>maturity value of the paid-up annuity benefit. The present value of a paid-up annuity benefit may<br>not be less than the minimum nonforfeiture amount at that time.26.1-34-06. Definition of maturity date. For the purpose of determining the benefitscalculated under sections 26.1-34-04 and 26.1-34-05, in the case of annuity contracts under<br>which an election may be made to have annuity payments commence at optional maturity dates,<br>the maturity date is deemed to be the latest date for which election is permitted by the contract,<br>but may not be deemed to be later than the anniversary of the contract next following the<br>annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.26.1-34-07.Disclosure if annuity contract does not provide cash surrender ordeath benefits. Any annuity contract that does not provide cash surrender benefits or does not<br>provide death benefits at least equal to the minimum nonforfeiture amounts prior to thePage No. 4commencement of any annuity payments must include a statement in a prominent place in the<br>contract that such benefits are not provided.26.1-34-08.Benefits on cessation of payment of considerations off theanniversary. Any paid-up annuity, cash surrender, or death benefits available at any time, other<br>than on the contract anniversary, under any annuity contract with fixed scheduled considerations,<br>must be calculated with allowance for the lapse of time and the payment of any scheduled<br>considerations beyond the beginning of the contract year in which cessation of payment of<br>considerations under the contract occurs.26.1-34-09.Minimum nonforfeiture benefits for annuity contract providing bothannuity and life insurance benefits - Excepted benefits.For any annuity contract thatprovides within the same contract, by rider or supplemental contract provision, both annuity<br>benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or<br>a return of the gross considerations with interest, the minimum nonforfeiture benefits must equal<br>the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum<br>nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a<br>separate contract.Notwithstanding sections 26.1-34-03 through 26.1-34-06 and section26.1-34-08, additional benefits payable in the event of total and permanent disability, as<br>reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits<br>additional to life insurance, endowment and annuity benefits, and considerations for all such<br>additional benefits, must be disregarded in ascertaining the minimum nonforfeiture amounts,<br>paid-up annuity, cash surrender, and death benefits that may be required by sections 26.1-34-01<br>through 26.1-34-09. The inclusion of such additional benefits may not be required in any paid-up<br>benefits, unless such additional benefits separately would require minimum nonforfeiture<br>amounts, paid-up annuity, cash surrender, or death benefits.26.1-34-10. Exemptions from annuity nonforfeiture provisions. Sections 26.1-34-01through 26.1-34-09 do not apply to any reinsurance, group annuity purchased under a retirement<br>plan or plan of deferred compensation established or maintained by an employer, including a<br>partnership, limited liability company, or sole proprietorship, or by an employee organization, or<br>by both, other than a plan providing individual retirement accounts or individual retirement<br>annuities under section 408 of the federal Internal Revenue Code, as amended, premium deposit<br>fund, variable annuity, investment annuity, immediate annuity, deferred annuity contract after<br>annuity payments have commenced, or reversionary annuity, nor to any contract delivered<br>outside this state.26.1-34-11.Variable annuities authorized - Application of variable life policysections - Rulemaking authority.Any domestic life insurance company, including anydomestic fraternal benefit society which operates on a legal reserve basis, may establish one or<br>more separate accounts and may allocate thereto amounts, including proceeds applied under<br>optional modes of settlement or under dividend options, to provide for annuities, and benefits<br>incidental thereto, payable in fixed or variable amounts or both, subject to the requirements of<br>subsections 1 through 7 of section 26.1-33-13. No company may deliver or issue for delivery in<br>this state variable contracts unless it is licensed or organized to do an annuity business in this<br>state.Except for the requirement that an individual variable life insurance contract containcertain provisions, sections 26.1-33-14, 26.1-33-15, and 26.1-33-16 apply to variable annuities<br>authorized by this section. The commissioner may adopt reasonable rules to implement this<br>section.Page No. 5Document Outlinechapter 26.1-34 annuities
CHAPTER 26.1-34ANNUITIES26.1-34-01. Required annuity contract provisions relating to cessation of paymentof considerations by contractholder. In the case of annuity contracts issued after June 30,<br>1979, unless the company, by written notice filed with the commissioner, opted for an earlier<br>operative date, no annuity contract, except as stated in section 26.1-34-10, may be delivered or<br>issued for delivery in this state unless it contains in substance the following provisions, or<br>corresponding provisions which in the opinion of the commissioner are at least as favorable to<br>the contractholder upon cessation of payment of considerations under the contract:1.Upon cessation of payment of considerations under an annuity contract, the<br>company will grant a paid-up annuity benefit on a plan stipulated in the contract of<br>such value as is specified in sections 26.1-34-03 through 26.1-34-06 and section<br>26.1-34-08.2.If an annuity contract provides for a lump sum settlement at maturity, or at any other<br>time, then upon surrender of the contract at or prior to the commencement of any<br>annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash<br>surrender benefit of such amount as is specified in sections 26.1-34-03, 26.1-34-04,<br>26.1-34-06, and 26.1-34-08.The company shall reserve the right to defer thepayment of the cash surrender benefit for a period of six months after demand for<br>the benefit with surrender of the contract.3.A statement of the mortality table, if any, and interest rates used in calculating any<br>minimum paid-up annuity, cash surrender, or death benefits that are guaranteed<br>under the annuity contract, together with sufficient information to determine the<br>amounts of the benefits.4.A statement that any paid-up annuity, cash surrender, or death benefits that may be<br>available under the annuity contract are not less than the minimum benefits required<br>by any law of this state and an explanation of the manner in which the benefits are<br>altered by the existence of any additional amounts credited by the company to the<br>contract, any indebtedness to the company on the contract, or any prior withdrawals<br>from or partial surrenders of the contract.5.A statement that when an annuity contract becomes a claim by reason of death,<br>settlement:a.If payable in one sum, must be made upon due proof of death, or not later than<br>two months after receipt of the proof, and must include reasonable interest<br>accrued from the date of death; orb.If made under a settlement option other than subdivision a, must include<br>reasonable interest accrued from date of death until such option is made<br>according to the provisions of the contract.As used in this subsection, the term "reasonable interest" means the same rate of<br>interest as paid on death proceeds left on deposit with the insurer.Notwithstanding the requirements of this section, any deferred annuity contract may provide that<br>if no considerations have been received under a contract for a period of two full years and the<br>portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from<br>considerations paid prior to such period would be less than twenty dollars monthly, the company<br>may at its option terminate the contract by payment in cash of the then present value of such<br>portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and<br>interest rate specified in the contract for determining the paid-up annuity benefit, and by such<br>payment is relieved of any further obligation under the contract.Page No. 126.1-34-01.1.Annuity policies and certificates - Right to return.A person whopurchases an annuity policy or certificate issued or delivered in this state may return the policy<br>within twenty days of delivery to the purchaser. If a policy or certificate is returned, the purchaser<br>is entitled to a refund of the premium, except in the sale of variable annuities in which the<br>purchaser is entitled to the value of the annuity plus all expense charges. Every annuity, policy,<br>or certificate issued or delivered in this state must have a notice prominently printed on or<br>attached to the first page of the policy or certificate stating in substance that the purchaser may<br>return the policy or certificate within twenty days of its delivery and have the premium, or such<br>other amount as specified above, refunded if, after examination of the policy or certificate, the<br>applicant is not satisfied for any reason.26.1-34-02.Minimum nonforfeiture amount defined.The minimum values asspecified in sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08 of any paid-up<br>annuity, cash surrender, or death benefits available under an annuity contract must be based<br>upon minimum nonforfeiture amounts as defined in this section.1.For an annuity contract issued before August 1, 2003:a.With respect to annuity contracts providing for flexible considerations, the<br>minimum nonforfeiture amount at any time at or prior to the commencement of<br>any annuity payments must be equal to an accumulation up to such time at a<br>rate of interest of three percent per year of percentages of the net<br>considerations, as hereinafter defined, paid prior to such time, decreased by<br>the sum of any prior withdrawals from or partial surrenders of the contract<br>accumulated at a rate of interest of three percent per year and the amount of<br>any indebtedness to the company on the contract, including interest due and<br>accrued; and increased by any existing additional amounts credited by the<br>company to the contract. The net considerations for a given contract year used<br>to define the minimum nonforfeiture amount must be an amount not less than<br>zero and must equal the corresponding gross considerations credited to the<br>contract during that contract year less an annual contract charge of thirty dollars<br>and less a collection charge of one dollar and twenty-five cents for each<br>consideration credited to the contract during that contract year.Thepercentages of net considerations must be sixty-five percent of the net<br>consideration for the first contract year and eighty-seven and one-half percent<br>ofthenetconsiderationsfor the second and later contract years.Notwithstanding the preceding sentence, the percentage must be sixty-five<br>percent of the portion of the total net consideration for any renewal contract<br>year which exceeds by not more than two times the sum of those portions of<br>the net considerations in all prior contract years for which the percentage was<br>sixty-five percent.b.With respect to contracts providing for fixed scheduled considerations,<br>minimum nonforfeiture amounts must be calculated on the assumption that<br>considerations are paid annually in advance and must be defined as for<br>contracts with flexible considerations which are paid annually, with two<br>exceptions:(1)The portion of the net consideration for the first contract year to be<br>accumulated is the sum of sixty-five percent of the net consideration for<br>the first contract year plus twenty-two and one-half percent of the excess<br>of the net consideration for the first contract year over the lesser of the<br>net considerations for the second and third contract years.(2)The annual contract charge is the lesser of thirty dollars or ten percent of<br>the gross annual considerations.c.With respect to contracts providing for a single consideration, minimum<br>nonforfeiture amounts must be defined as for contracts with flexiblePage No. 2considerations except that the percentage of net consideration used to<br>determine the minimum nonforfeiture amount must equal ninety percent and<br>the net consideration must be the gross consideration less a contract charge of<br>seventy-five dollars.2.For an annuity contract issued after July 31, 2005:a.Theminimumnonforfeitureamountatanytimeatorbeforethecommencement of any annuity payments must be equal to an accumulation up<br>to such time at rates of interest, as provided under subdivision c, of the net<br>considerations, as defined under subdivision b, paid before such time,<br>decreased by the sum of:(1)Any prior withdrawals from or partial surrenders of the contract<br>accumulated at rates of interest as provided under subdivision c;(2)An annual contract charge of fifty dollars, accumulated at rates of interest<br>as provided under subdivision c;(3)Any premium tax paid by the company for the contract, accumulated at<br>rates of interest as provided under subdivision c; and(4)The amount of any indebtedness to the company on the contract,<br>including interest due and accrued.b.The net considerations for a given contract year used to define the minimum<br>nonforfeiture amount under subdivision a must be an amount equal to<br>eighty-seven and one-half percent of the gross considerations credited to the<br>contract during that contract year.c.The interest rate used in determining minimum nonforfeiture amounts must be<br>determined as the lesser of:(1)Three percent per annum; or(2)The five-year constant maturity rate reported by the federal reserve as of<br>a date or average over a period, reduced by one hundred twenty-five<br>basis points. The rate calculated under this paragraph may not be less<br>than one percent, must be specified in the contract, and must be<br>determined no more than fifteen months before the contract issue date or<br>redemption date.d.The interest rate used in determining minimum nonforfeiture amounts applies<br>for an initial period and may be redetermined for additional periods.Theredetermination date basis and period, if any, must be stated in the contract.<br>The basis is the date or average over a specified period that produces the value<br>of the five-year constant maturity treasury rate to be used at each<br>redetermination date.e.Notwithstanding subdivisions a, b, c, and d, during the period or term that a<br>contract provides substantive participation in an equity indexed benefit, the<br>contract may increase the reduction of one hundred twenty-five basis points<br>under paragraph 2 of subdivision c by an amount not to exceed one hundred<br>basis points, in order to reflect the value of the equity index benefit.Thepresent value at the contract issue date, the present value at each<br>redetermination date, or the additional reduction may not exceed the market<br>value of the benefit. The commissioner may require a demonstration that the<br>present value of the reduction does not exceed the market value of the benefit.Page No. 3Lackingsuchademonstrationacceptabletothecommissioner,thecommissioner may disallow or limit the additional reduction.f.Thecommissioner may adopt rules to implement the provisions ofsubdivision e and to provide further adjustments to the calculation of minimum<br>nonforfeiture amounts for contracts that provide substantive participation in an<br>equity index benefit and for other contracts if the commissioner determines that<br>adjustments are justified.3.For an annuity contract issued after July 31, 2003, and before August 1, 2005, on a<br>contract form by contract form basis, a company may elect to apply the provisions of<br>subsection 1 or 2.26.1-34-03.Value of paid-up annuity benefit to be at least equal to minimumnonforfeiture amount. Any paid-up annuity benefit available under an annuity contract must be<br>such that its present value on the date annuity payments are to commence is at least equal to<br>the minimum nonforfeiture amount on that date. The present value must be computed using the<br>mortality table, if any, and the interest rate specified in the contract for determining the minimum<br>paid-up annuity benefits guaranteed in the contract.26.1-34-04. Cash surrender benefit to be at least equal to value of paid-up annuitybenefit. For annuity contracts that provide cash surrender benefits, the cash surrender benefits<br>available prior to maturity may not be less than the present value as of the date of surrender of<br>that portion of the maturity value of the paid-up annuity benefit which would be provided under<br>the contract at maturity arising from considerations paid prior to the time of cash surrender<br>reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of<br>the contract. The present value must be calculated on the basis of an interest rate not more than<br>one percent higher than the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, decreased by the amount of any indebtedness to<br>the company on the contract, including interest due and accrued, and increased by any existing<br>additional amounts credited by the company to the contract. A cash surrender benefit may not<br>be less than the minimum nonforfeiture amount at that time.The death benefit under thecontracts must at least equal the cash surrender benefit.26.1-34-05.Minimum value of paid-up annuity on cessation of payment ofconsiderations - Cash surrender benefits not provided. For annuity contracts that do not<br>provide cash surrender benefits, the present value of any paid-up annuity benefit available as a<br>nonforfeiture option at any time prior to maturity may not be less than the present value of the<br>portion of the maturity value of the paid-up annuity benefit provided under the contract arising<br>from considerations paid prior to the time the contract is surrendered in exchange for, or changed<br>to, a deferred paid-up annuity. The present value must be calculated for the period prior to the<br>maturity date on the basis of the interest rate specified in the contract for accumulating the net<br>considerations to determine the maturity value, and increased by any existing additional amounts<br>credited by the company to the contract. For contracts that do not provide any death benefits<br>prior to the commencement of any annuity payments, the present values must be calculated on<br>the basis of the interest rate and the mortality table specified in the contract for determining the<br>maturity value of the paid-up annuity benefit. The present value of a paid-up annuity benefit may<br>not be less than the minimum nonforfeiture amount at that time.26.1-34-06. Definition of maturity date. For the purpose of determining the benefitscalculated under sections 26.1-34-04 and 26.1-34-05, in the case of annuity contracts under<br>which an election may be made to have annuity payments commence at optional maturity dates,<br>the maturity date is deemed to be the latest date for which election is permitted by the contract,<br>but may not be deemed to be later than the anniversary of the contract next following the<br>annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.26.1-34-07.Disclosure if annuity contract does not provide cash surrender ordeath benefits. Any annuity contract that does not provide cash surrender benefits or does not<br>provide death benefits at least equal to the minimum nonforfeiture amounts prior to thePage No. 4commencement of any annuity payments must include a statement in a prominent place in the<br>contract that such benefits are not provided.26.1-34-08.Benefits on cessation of payment of considerations off theanniversary. Any paid-up annuity, cash surrender, or death benefits available at any time, other<br>than on the contract anniversary, under any annuity contract with fixed scheduled considerations,<br>must be calculated with allowance for the lapse of time and the payment of any scheduled<br>considerations beyond the beginning of the contract year in which cessation of payment of<br>considerations under the contract occurs.26.1-34-09.Minimum nonforfeiture benefits for annuity contract providing bothannuity and life insurance benefits - Excepted benefits.For any annuity contract thatprovides within the same contract, by rider or supplemental contract provision, both annuity<br>benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or<br>a return of the gross considerations with interest, the minimum nonforfeiture benefits must equal<br>the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum<br>nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a<br>separate contract.Notwithstanding sections 26.1-34-03 through 26.1-34-06 and section26.1-34-08, additional benefits payable in the event of total and permanent disability, as<br>reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits<br>additional to life insurance, endowment and annuity benefits, and considerations for all such<br>additional benefits, must be disregarded in ascertaining the minimum nonforfeiture amounts,<br>paid-up annuity, cash surrender, and death benefits that may be required by sections 26.1-34-01<br>through 26.1-34-09. The inclusion of such additional benefits may not be required in any paid-up<br>benefits, unless such additional benefits separately would require minimum nonforfeiture<br>amounts, paid-up annuity, cash surrender, or death benefits.26.1-34-10. Exemptions from annuity nonforfeiture provisions. Sections 26.1-34-01through 26.1-34-09 do not apply to any reinsurance, group annuity purchased under a retirement<br>plan or plan of deferred compensation established or maintained by an employer, including a<br>partnership, limited liability company, or sole proprietorship, or by an employee organization, or<br>by both, other than a plan providing individual retirement accounts or individual retirement<br>annuities under section 408 of the federal Internal Revenue Code, as amended, premium deposit<br>fund, variable annuity, investment annuity, immediate annuity, deferred annuity contract after<br>annuity payments have commenced, or reversionary annuity, nor to any contract delivered<br>outside this state.26.1-34-11.Variable annuities authorized - Application of variable life policysections - Rulemaking authority.Any domestic life insurance company, including anydomestic fraternal benefit society which operates on a legal reserve basis, may establish one or<br>more separate accounts and may allocate thereto amounts, including proceeds applied under<br>optional modes of settlement or under dividend options, to provide for annuities, and benefits<br>incidental thereto, payable in fixed or variable amounts or both, subject to the requirements of<br>subsections 1 through 7 of section 26.1-33-13. No company may deliver or issue for delivery in<br>this state variable contracts unless it is licensed or organized to do an annuity business in this<br>state.Except for the requirement that an individual variable life insurance contract containcertain provisions, sections 26.1-33-14, 26.1-33-15, and 26.1-33-16 apply to variable annuities<br>authorized by this section. The commissioner may adopt reasonable rules to implement this<br>section.Page No. 5Document Outlinechapter 26.1-34 annuities
