SB 2872 — CONTINGENT DEFERRED ANNUITIES

SB2872 EngrossedEnrolled LRB104 16830 BAB 30239 b AN ACT concerning regulation.

(A) This Section 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 SB2872 EngrossedEnrolled - 2 - LRB104 16830 BAB 30239 b outside this State through an agent or other representative of the company issuing the contract.

SB2872 EngrossedEnrolled - 3 - LRB104 16830 BAB 30239 b (ii) 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 a paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (5), (6), (8), and (10).

and (iv) 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 SB2872 EngrossedEnrolled - 4 - LRB104 16830 BAB 30239 b 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.

(A)(i) 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 such time at rates of SB2872 EngrossedEnrolled - 5 - LRB104 16830 BAB 30239 b interest as indicated in subdivision (4)(B) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of paragraphs (a) through (d) below:

(i) The 5-year Constant Maturity Treasury Rate reported by the Federal Reserve as of a date, or SB2872 EngrossedEnrolled - 6 - LRB104 16830 BAB 30239 b average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under subdivision (4)(B)(iv);

Lacking such a demonstration that is acceptable to the Director, the Director may SB2872 EngrossedEnrolled - 7 - LRB104 16830 BAB 30239 b disallow or limit the additional reduction.

For contracts that 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 that 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 SB2872 EngrossedEnrolled - 8 - LRB104 16830 BAB 30239 b rate not more than 1% higher than the interest rate specified in the contract for accumulating the net considerations to determine 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.

For contracts that do not provide any death benefits prior to the commencement of any annuity payments, present values shall be calculated on the basis of such interest rate SB2872 EngrossedEnrolled - 9 - LRB104 16830 BAB 30239 b and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit.

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 SB2872 EngrossedEnrolled - 10 - LRB104 16830 BAB 30239 b of the contract year in which cessation of payment of considerations under the contract occurs.

The Director may adopt rules to implement the SB2872 EngrossedEnrolled - 11 - LRB104 16830 BAB 30239 b provisions of this Section.