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SB2872 Enrolled LRB104 16830 BAB 30239 b
1 AN ACT concerning regulation.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Illinois Insurance Code is amended by
5 changing Section 229.4a as follows:
6 (215 ILCS 5/229.4a)
7 Sec. 229.4a. Standard Nonforfeiture Law for Individual
8 Deferred Annuities.
9 (1) Title. This Section shall be known as the Standard
10 Nonforfeiture Law for Individual Deferred Annuities.
11 (2) Applicability.
12 (A) This Section shall not apply to any reinsurance,
13 group annuity purchased under a retirement plan or plan of
14 deferred compensation established or maintained by an
15 employer (including a partnership or sole proprietorship)
16 or by an employee organization, or by both, other than a
17 plan providing individual retirement accounts or
18 individual retirement annuities under Section 408 of the
19 Internal Revenue Code, as now or hereafter amended,
20 premium deposit fund, variable annuity, investment
21 annuity, immediate annuity, any deferred annuity contract
22 after annuity payments have commenced, or reversionary
23 annuity, nor to any contract which shall be delivered
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1 outside this State through an agent or other
2 representative of the company issuing the contract.
3 (B) Subsections (3) through (8) shall not apply to
4 contingent deferred annuities. Notwithstanding this
5 exemption, the Director shall have the authority to adopt,
6 by rule, nonforfeiture benefits for contingent deferred
7 annuities that are, in the opinion of the Director,
8 equitable to the contract holder, appropriate given the
9 risks insured, and, to the extent possible, consistent
10 with the general intent of this Section.
11 (3) Nonforfeiture Requirements.
12 (A) In the case of contracts issued on or after the
13 operative date of this Section as defined in subsection
14 (13), no contract of annuity, except as stated in
15 subsection (2), shall be delivered or issued for delivery
16 in this State unless it contains in substance the
17 following provisions, or corresponding provisions which in
18 the opinion of the Director of Insurance are at least as
19 favorable to the contract holder, upon cessation of
20 payment of considerations under the contract:
21 (i) That upon cessation of payment of
22 considerations under a contract, or upon the written
23 request of the contract owner, the company shall grant
24 a paid-up annuity benefit on a plan stipulated in the
25 contract of such value as is specified in subsections
26 (5), (6), (7), (8), and (10);
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1 (ii) If a contract provides for a lump sum
2 settlement at maturity, or at any other time, that
3 upon surrender of the contract at or prior to the
4 commencement of any annuity payments, the company
5 shall pay in lieu of a paid-up annuity benefit a cash
6 surrender benefit of such amount as is specified in
7 subsections (5), (6), (8), and (10). The company may
8 reserve the right to defer the payment of the cash
9 surrender benefit for a period not to exceed 6 months
10 after demand therefor with surrender of the contract
11 after making written request and receiving written
12 approval of the Director. The request shall address
13 the necessity and equitability to all policyholders of
14 the deferral;
15 (iii) A statement of the mortality table, if any,
16 and interest rates used calculating any minimum
17 paid-up annuity, cash surrender, or death benefits
18 that are guaranteed under the contract, together with
19 sufficient information to determine the amounts of the
20 benefits; and
21 (iv) A statement that any paid-up annuity, cash
22 surrender, or death benefits that may be available
23 under the contract are not less than the minimum
24 benefits required by any statute of the state in which
25 the contract is delivered and an explanation of the
26 manner in which the benefits are altered by the
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1 existence of any additional amounts credited by the
2 company to the contract, any indebtedness to the
3 company on the contract, or any prior withdrawals from
4 or partial surrenders of the contract.
5 (B) Notwithstanding the requirements of this Section,
6 a deferred annuity contract may provide that if no
7 considerations have been received under a contract for a
8 period of 2 full years and the portion of the paid-up
9 annuity benefit at maturity on the plan stipulated in the
10 contract arising from prior considerations paid would be
11 less than $20 monthly, the company may at its option
12 terminate the contract by payment in cash of the then
13 present value of the portion of the paid-up annuity
14 benefit, calculated on the basis on the mortality table,
15 if any, and interest rate specified in the contract for
16 determining the paid-up annuity benefit, and by this
17 payment shall be relieved of any further obligation under
18 the contract.
19 (4) Minimum values. The minimum values as specified in
20 subsections (5), (6), (7), (8), and (10) of any paid-up
21 annuity, cash surrender, or death benefits available under an
22 annuity contract shall be based upon minimum nonforfeiture
23 amounts as defined in this subsection.
24 (A)(i) The minimum nonforfeiture amount at any time at
25 or prior to the commencement of any annuity payments shall
26 be equal to an accumulation up to such time at rates of
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1 interest as indicated in subdivision (4)(B) of the net
2 considerations (as hereinafter defined) paid prior to such
3 time, decreased by the sum of paragraphs (a) through (d)
4 below:
5 (a) Any prior withdrawals from or partial
6 surrenders of the contract accumulated at rates of
7 interest as indicated in subdivision (4)(B);
8 (b) An annual contract charge of $50, accumulated
9 at rates of interest as indicated in subdivision
10 (4)(B);
11 (c) Any premium tax paid by the company for the
12 contract, accumulated at rates of interest as
13 indicated in subdivision (4)(B); and
14 (d) The amount of any indebtedness to the company
15 on the contract, including interest due and accrued.
16 (ii) The net considerations for a given contract year
17 used to define the minimum nonforfeiture amount shall be
18 an amount equal to 87.5% of the gross considerations,
19 credited to the contract during that contract year.
20 (B) The interest rate used in determining minimum
21 nonforfeiture amounts shall be an annual rate of interest
22 determined as the lesser of 3% per annum and the
23 following, which shall be specified in the contract if the
24 interest rate will be reset:
25 (i) The 5-year Constant Maturity Treasury Rate
26 reported by the Federal Reserve as of a date, or
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1 average over a period, rounded to the nearest 1/20th
2 of one percent, specified in the contract no longer
3 than 15 months prior to the contract issue date or
4 redetermination date under subdivision (4)(B)(iv);
5 (ii) Reduced by 125 basis points;
6 (iii) Where the resulting interest rate is not
7 less than 0.15%; and
8 (iv) The interest rate shall apply for an initial
9 period and may be redetermined for additional periods.
10 The redetermination date, basis, and period, if any,
11 shall be stated in the contract. The basis is the date
12 or average over a specified period that produces the
13 value of the 5-year Constant Maturity Treasury Rate to
14 be used at each redetermination date.
15 (C) During the period or term that a contract provides
16 substantive participation in an equity indexed benefit, it
17 may increase the reduction described in subdivision
18 (4)(B)(ii) above by up to an additional 100 basis points
19 to reflect the value of the equity index benefit. The
20 present value at the contract issue date, and at each
21 redetermination date thereafter, of the additional
22 reduction shall not exceed market value of the benefit.
23 The Director may require a demonstration that the present
24 value of the additional reduction does not exceed the
25 market value of the benefit. Lacking such a demonstration
26 that is acceptable to the Director, the Director may
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1 disallow or limit the additional reduction.
2 (D) The Director may adopt rules to implement the
3 provisions of subdivision (4)(C) and to provide for
4 further adjustments to the calculation of minimum
5 nonforfeiture amounts for contracts that provide
6 substantive participation in an equity index benefit and
7 for other contracts that the Director determines
8 adjustments are justified.
9 (5) Computation of Present Value. Any paid-up annuity
10 benefit available under a contract shall be such that its
11 present value on the date annuity payments are to commence is
12 at least equal to the minimum nonforfeiture amount on that
13 date. Present value shall be computed using the mortality
14 table, if any, and the interest rates specified in the
15 contract for determining the minimum paid-up annuity benefits
16 guaranteed in the contract.
17 (6) Calculation of Cash Surrender Value. For contracts
18 that provide cash surrender benefits, the cash surrender
19 benefits available prior to maturity shall not be less than
20 the present value as of the date of surrender of that portion
21 of the maturity value of the paid-up annuity benefit that
22 would be provided under the contract at maturity arising from
23 considerations paid prior to the time of cash surrender
24 reduced by the amount appropriate to reflect any prior
25 withdrawals from or partial surrenders of the contract, such
26 present value being calculated on the basis of an interest
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1 rate not more than 1% higher than the interest rate specified
2 in the contract for accumulating the net considerations to
3 determine maturity value, decreased by the amount of any
4 indebtedness to the company on the contract, including
5 interest due and accrued, and increased by any existing
6 additional amounts credited by the company to the contract. In
7 no event shall any cash surrender benefit be less than the
8 minimum nonforfeiture amount at that time. The death benefit
9 under such contracts shall be at least equal to the cash
10 surrender benefit.
11 (7) Calculation of Paid-up Annuity Benefits. For contracts
12 that do not provide cash surrender benefits, the present value
13 of any paid-up annuity benefit available as a nonforfeiture
14 option at any time prior to maturity shall not be less than the
15 present value of that portion of the maturity value of the
16 paid-up annuity benefit provided under the contract arising
17 from considerations paid prior to the time the contract is
18 surrendered in exchange for, or changed to, a deferred paid-up
19 annuity, such present value being calculated for the period
20 prior to the maturity date on the basis of the interest rate
21 specified in the contract for accumulating the net
22 considerations to determine maturity value, and increased by
23 any additional amounts credited by the company to the
24 contract. For contracts that do not provide any death benefits
25 prior to the commencement of any annuity payments, present
26 values shall be calculated on the basis of such interest rate
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1 and the mortality table specified in the contract for
2 determining the maturity value of the paid-up annuity benefit.
3 However, in no event shall the present value of a paid-up
4 annuity benefit be less than the minimum nonforfeiture amount
5 at that time.
6 (8) Maturity Date. For the purpose of determining the
7 benefits calculated under subsections (6) and (7), in the case
8 of annuity contracts under which an election may be made to
9 have annuity payments commence at optional maturity dates, the
10 maturity date shall be deemed to be the latest date for which
11 election shall be permitted by the contract, but shall not be
12 deemed to be later than the anniversary of the contract next
13 following the annuitant's seventieth birthday or the tenth
14 anniversary of the contract, whichever is later.
15 (9) Disclosure of Limited Death Benefits. A contract that
16 does not provide cash surrender benefits or does not provide
17 death benefits at least equal to the minimum nonforfeiture
18 amount prior to the commencement of any annuity payments shall
19 include a statement in a prominent place in the contract that
20 such benefits are not provided.
21 (10) Inclusion of Lapse of Time Considerations. Any
22 paid-up annuity, cash surrender, or death benefits available
23 at any time, other than on the contract anniversary under any
24 contract with fixed scheduled considerations, shall be
25 calculated with allowance for the lapse of time and the
26 payment of any scheduled considerations beyond the beginning
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1 of the contract year in which cessation of payment of
2 considerations under the contract occurs.
3 (11) Proration of Values; Additional Benefits. For a
4 contract which provides, within the same contract by rider or
5 supplemental contract provision, both annuity benefits and
6 life insurance benefits that are in excess of the greater of
7 cash surrender benefits or a return of the gross
8 considerations with interest, the minimum nonforfeiture
9 benefits shall be equal to the sum of the minimum
10 nonforfeiture benefits for the annuity portion and the minimum
11 nonforfeiture benefits, if any, for the life insurance portion
12 computed as if each portion were a separate contract.
13 Notwithstanding the provisions of subsections (5), (6), (7),
14 (8), and (10), additional benefits payable in the event of
15 total and permanent disability, as reversionary annuity or
16 deferred reversionary annuity benefits, or as other policy
17 benefits additional to life insurance, endowment, and annuity
18 benefits, and considerations for all such additional benefits,
19 shall be disregarded in ascertaining the minimum nonforfeiture
20 amounts, paid-up annuity, cash surrender, and death benefits
21 that may be required under this Section. The inclusion of such
22 benefits shall not be required in any paid-up benefits, unless
23 the additional benefits separately would require minimum
24 nonforfeiture amounts, paid-up annuity, cash surrender, and
25 death benefits.
26 (12) Rules. The Director may adopt rules to implement the
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1 provisions of this Section.
2 (13) Effective Date. After August 6, 2004 (the effective
3 date of Public Act 93-873), a company may elect to apply its
4 provisions to annuity contracts on a contract form-by-contract
5 form basis before July 1, 2006. In all other instances, this
6 Section shall become operative with respect to annuity
7 contracts issued by the company on or after July 1, 2006.
8 (14) (Blank).
9 (Source: P.A. 102-775, eff. 5-13-22; 103-154, eff. 6-30-23.)
10 Section 99. Effective date. This Act takes effect upon
11 becoming law.Every fact on this page links to its source, starting with the official bill record.