§ 27-4.4-4 - Minimum values.
SECTION 27-4.4-4
§ 27-4.4-4 Minimum values. – (a) The minimum values as specified in §§ 27-4.4-5 – 27-4.4-8and 27-4.4-10 of any paid-up annuity, cash surrender, or death benefitsavailable under an annuity contract shall be based upon minimum nonforfeitureamounts as defined in this section.
(b) The minimum nonforfeiture amount at any time at or priorto the commencement of any annuity payments shall be equal to an accumulationup to that time at rates of interest as provided in subsection (d) of thissection, the net considerations as defined in this section paid prior to thattime, decreased by the sum of:
(1) Any prior withdrawals from or partial surrenders of thecontract accumulated at rates of interest as provided in subsection (d) of thissection; and
(2) The amount of any indebtedness to the company on thecontract, including interest due and accrued;
(3) An annual contract charge of fifty dollars ($50.00),accumulated at rates of interest as provided in subsection (d) of this section;and
(4) Any premium tax paid by the company for the contract,accumulated at rates of interest as provided in subsection (d) of this section.
(c) The net considerations for a given contract year used todefine the minimum nonforfeiture amount shall be an amount equal toeighty-seven and one-half percent (87.5%) of the gross considerations creditedto the contract during that contract year.
(d) The interest rate used in determining minimumnonforfeiture amounts shall be an annual rate of interest determined as thelesser of three percent (3%) per annum and the following, which shall bespecified in the contract if the interest rate will be reset:
(1) The five (5) year Constant Maturity Treasury Ratereported by the Federal Reserve as of a date, or average over a period, roundedto the nearest one twentieth of one percent (1/20%), specified in the contractno longer than fifteen (15) months prior to the contract issue date orredetermination date under subdivision (4) of this subsection;
(2) Reduced by one hundred twenty-five (125) basis points;
(3) Where the resulting interest rate is not less than onepercent (1%); and
(4) The interest rate shall apply for an initial period andmay be redetermined for additional periods. The redetermination date, basis andperiod, if any, shall be stated in the contract. The basis is the date oraverage over a specified period that produces the value of the five (5) yearConstant Maturity Treasury Rate to be used at each redetermination date.
(e) During the period or term that a contract providessubstantive participation in an equity indexed benefit, it may increase thereduction described in subsection (d)(2) of this section above by up to anadditional one hundred (100) basis points to reflect the value of the equityindex benefit. The present value at the contract issue date, and at eachredetermination date thereafter, of the additional reduction shall not exceedthe market value of the benefit. The commissioner of insurance may require ademonstration that the present value of the reduction does not exceed themarket value of the benefit. Lacking such a demonstration that is acceptable tothe commissioner, the commissioner may disallow or limit the additionalreduction.
(f) The commissioner of insurance may adopt rules toimplement the provisions of subsection (e) of this section and to provide forfurther adjustments to the calculation of minimum nonforfeiture amounts forcontracts that provide substantive participation in an equity index benefit andfor other contracts that the commissioner determines adjustments are justified.