CHAPTER 292
FORMERLY
HOUSE BILL NO. 374
AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO THE STANDARD NONFORFEITURE LAW FOR INDIVIDUAL DEFERRED ANNUITIES.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :
Section 1. Amend §2929A(c), Title 18 of the Delaware Code by deleting the subsection designation "(1)" and inserting in lieu thereof "(d)".
Section 2. Amend §2929A(c)(1), Title 18 of the Delaware Code by striking the phrase "contract, the company will" and substituting in lieu thereof: "contract, upon the written request of the contract owner the company shall".
Section 3. Amend §2929A(c)(2), Title 18 of the Delaware Code by deleting the word "will" and substituting in lieu thereof the word "shall"; by deleting the word "shall" and substituting in lieu thereof the word "may"; by deleting the phrase "surrender benefit of" and substituting in lieu thereof "surrender benefit not to exceed"; and by deleting "contract;" where it appears at the end of paragraph (2) and substituting in lieu thereof: "contract, after making written request and receiving written approval of the commissioner. The request must address the necessity and equitability of the deferral to all policyholders;".
Section 4. Amend §2929A(d)(1)b., Title 18 of the Delaware Code by deleting the phrase "for any guarantee of 3 years or less in a contract issued on or after July 1, 2002, and before July 1, 2005,".
Section 5. Amend §2929A(d), Title 18 of the Delaware Code by adding thereto a new paragraph (4) to read: "(4) Prior to July 1, 2006, a company may elect to comply with the provisions of either subsection (d)(1)-(3) or (d)(5) of this section. On and after July 1, 2006, all companies shall comply with the provisions of subsection (d)(5) of this section.".
Section 6. Amend §2929A(d), Title 18 of the Delaware Code by adding thereto a new paragraph (5) to read: "(5) The minimum values as specified in subsections (e), (f), (g), (h) and (j) of this section of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforteiture amounts as defined in this paragraph.
a. (i) The minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments is equal to an accumulation up to such time, at rates of interest as indicated in subparagraph b. of this paragraph of the net considerations, as defined in subsubparagraph (ii) of this subparagraph, paid prior to such time, decreased by the sum of (A) through (D) as follows:
(A) any prior withdrawals from or partial surrenders of the contract, accumulated at rates of interest as indicated in subparagraph b. of this paragraph;
(B) an annual contract charge of $50, accumulated at rates of interest as indicated in subparagraph b. of this paragraph;
(C) any premium tax paid by the company for the contract, accumulated at rates of interest as indicated in subparagraph b. of this paragraph; and
(D) the amount of any indebtedness to the company on the contract, including interest due and accrued.
(ii) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent (87.5%) of the gross considerations credited to the contract during that contract year.
b. (i) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three percent (3%) per annum and (A) through (C) as follows, which must be specified in the contract if the interest rate will be reset:
(A) the five-year Constant Maturity Treasury Rate reported by the Federal Reserve as of a date, or as an average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than fifteen (15) months prior to the contract issue date or redetermination date under subsubparagraph (ii) of this subparagraph;
(B) reduced by 125 basis points;
(C) where the resulting interest rate is not less than one percent (1%).
b. (ii) The above 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 rate on a date or the rate averaged over a specified period that produces the value of the five-year Constant Maturity Treasury Rate to be used at each redetermination date.
c. During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in subparagraph b.(i)(B) of this paragraph by up to an additional 100 basis points to reflect the value of the equity indexed benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction may 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.
d. The Commissioner may adopt rules to implement subparagraph c. of this paragraph and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity indexed benefit and for other contracts that the Commissioner determines adjustments are justified.".