State of Illinois
92nd General Assembly
Legislation

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92_HB5607

 
                                              LRB9214934JSpcA

 1        AN ACT concerning insurance.

 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 229.4 as follows:

 6        (215 ILCS 5/229.4) (from Ch. 73, par. 841.4)
 7        Sec.  229.4.   Standard Non-forfeiture Law for Individual
 8    Deferred Annuities.
 9        (1) No  contract  of  annuity  issued  on  or  after  the
10    operative date of this Section except as stated in subsection
11    (11)  11  shall  be  delivered or issued for delivery in this
12    State  unless  it  contains  in   substance   the   following
13    provisions  or  corresponding provisions which in the opinion
14    of the Director are at least as  favorable  to  the  contract
15    holder  upon cessation of payment of considerations under the
16    contract:
17             (a)  That   upon    cessation    of    payment    of
18        considerations under a contract, the company will grant a
19        paid-up  annuity  benefit  on  a  plan  stipulated in the
20        contract of such value as  is  specified  in  subsections
21        (3), (4), (5), (6) and (8).
22             (b)  If   a   contract   provides  for  a  lump  sum
23        settlement at maturity, or at any other time,  that  upon
24        surrender of the contract at or prior to the commencement
25        of  any annuity payments, the company will pay in lieu of
26        any paid-up annuity benefit a cash surrender  benefit  of
27        such  amount as is specified in subsections (3), (4), (6)
28        and (8).  The company shall reserve the  right  to  defer
29        the  payment  of such cash surrender benefit for a period
30        of 6 months after demand therefor with surrender  of  the
31        contract.
 
                            -2-               LRB9214934JSpcA
 1             (c)  A statement of the mortality table, if any, and
 2        interest  rates  used  in calculating any minimum paid-up
 3        annuity,  cash  surrender  or  death  benefits  that  are
 4        guaranteed under the contract, together  with  sufficient
 5        information to determine the amount of such benefits.
 6             (d)  A  statement  that  any  paid-up  annuity, cash
 7        surrender or death benefits that may be  available  under
 8        the  contract  are  not  less  than  the minimum benefits
 9        required by  any  statute  of  the  state  in  which  the
10        contract is delivered and an explanation of the manner in
11        which  such  benefits are altered by the existence of any
12        additional  amounts  credited  by  the  company  to   the
13        contract, any indebtedness to the company on the contract
14        or  any  prior  withdrawals from or partial surrenders of
15        the contract.
16        Notwithstanding the requirements of this subsection,  any
17    deferred   annuity   contract   may   provide   that   if  no
18    considerations have been received  under  a  contract  for  a
19    period of 2 full years and the portion of the paid-up annuity
20    benefit  at  maturity  on the plan stipulated in the contract
21    arising from considerations paid prior to such  period  would
22    be  less  than  $20.00 monthly, the company may at its option
23    terminate such contract by payment in  cash  of  the  present
24    value  of  such  portion  of  the  paid-up  annuity  benefit,
25    calculated  on  the basis of the mortality table, if any, and
26    interest rate specified in the contract for  determining  the
27    paid-up  annuity  benefit,  and  by  such  payment  shall  be
28    relieved of any further obligation under such contract.
29        (2)  The  minimum values as specified in subsections (3),
30    (4), (5), (6) and (8) of any paid-up annuity, cash  surrender
31    or  death  benefits available under an annuity contract shall
32    be based upon minimum nonforfeiture  amounts  as  defined  in
33    this subsection.
34             (a)  With   respect   to  contracts  providing   for
 
                            -3-               LRB9214934JSpcA
 1        flexible considerations, the minimum nonforfeiture amount
 2        at any time at  or  prior  to  the  commencement  of  any
 3        annuity  payments shall be equal to an accumulation up to
 4        such time at a rate  of  interest  of  3%  per  annum  of
 5        percentages  of  the  net  considerations, as hereinafter
 6        defined, paid prior to such time, decreased by the sum of
 7        (i) any prior withdrawals from or partial  surrenders  of
 8        the  contract accumulated at a rate of interest of 3% per
 9        annum and (ii) the amount  of  any  indebtedness  to  the
10        company  on  the  contract,  including  interest  due and
11        accrued, and increased by any existing additional amounts
12        credited by the company to the contract.
13             The net considerations for  a  given  contract  year
14        used  to define the minimum nonforfeiture amount shall be
15        an amount not less than zero and shall be  equal  to  the
16        corresponding   gross   considerations  credited  to  the
17        contract  during  that  contract  year  less  an   annual
18        contract charge of $30.00 and less a collection charge of
19        $1.25  per  consideration credited to the contract during
20        that   contract   year.    The   percentages    of    net
21        considerations  shall be 65% of the net consideration for
22        the  first  contract  year  and  87 1/2%   of   the   net
23        considerations  for  the second and later contract years.
24        Notwithstanding the provisions of the preceding sentence,
25        the percentage shall be 65% of the portion of  the  total
26        net  consideration  for  any  renewal contract year which
27        exceeds by not more than  two  times  the  sum  of  those
28        portions  of the net considerations in all prior contract
29        years for which the percentage was 65%.
30             (a-5)  Notwithstanding the provisions  of  paragraph
31        (a)  of this subsection, the minimum nonforfeiture amount
32        for any contract issued on or  after  July  1,  2002  and
33        before  July 1, 2005 shall be based on a rate of interest
34        of 1.5% per annum.
 
                            -4-               LRB9214934JSpcA
 1             (b)  With respect to contracts providing  for  fixed
 2        scheduled  considerations,  minimum nonforfeiture amounts
 3        shall be calculated on the assumption that considerations
 4        are paid annually in advance and shall be defined as  for
 5        contracts  with  flexible  considerations  which are paid
 6        annually, with two exceptions:
 7                  (i)  The portion of the net  consideration  for
 8             the  first  contract year to be accumulated shall be
 9             the sum of 65% of  the  net  consideration  for  the
10             first  contract  year  plus 22 1/2% of the excess of
11             the net consideration for the  first  contract  year
12             over  the  lesser  of the net considerations for the
13             second and third contract years.
14                  (ii)  The annual contract charge shall  be  the
15             lesser  of (A) $30.00 or (B) 10% of the gross annual
16             consideration.
17             (c)  With  respect  to  contracts  providing  for  a
18        single consideration, minimum nonforfeiture amounts shall
19        be defined as for contracts with flexible  considerations
20        except  that  the percentage of net consideration used to
21        determine the minimum nonforfeiture amount shall be equal
22        to 90% and the  net  consideration  shall  be  the  gross
23        consideration less a contract charge of $75.00.
24        (3)  Any   paid-up  annuity  benefit  available  under  a
25    contract shall be such that its present  value  on  the  date
26    annuity  payments  are  to  commence is at least equal to the
27    minimum nonforfeiture amount  on  that  date.   Such  present
28    value  shall  be  computed using the mortality table, if any,
29    and  the  interest  rate  specified  in  the   contract   for
30    determining  the  minimum paid-up annuity benefits guaranteed
31    in the contract.
32        (4)  For contracts which provide cash surrender benefits,
33    such cash surrender  benefits  available  prior  to  maturity
34    shall  not  be  less than the present value as of the date of
 
                            -5-               LRB9214934JSpcA
 1    surrender of that  portion  of  the  maturity  value  of  the
 2    paid-up  annuity  benefit  which  would be provided under the
 3    contract at maturity arising from considerations  paid  prior
 4    to   the  time  of  cash  surrender  reduced  by  the  amount
 5    appropriate to reflect any prior withdrawals from or  partial
 6    surrenders   of   the  contract,  such  present  value  being
 7    calculated on the basis of an interest rate not more than  1%
 8    higher  than  the interest rate specified in the contract for
 9    accumulating  the  net  considerations  to   determine   such
10    maturity  value,  decreased by the amount of any indebtedness
11    to the company on the contract, including  interest  due  and
12    accrued,  and  increased  by  any existing additional amounts
13    credited by the company to the contract.  In no  event  shall
14    any   cash   surrender  benefit  be  less  than  the  minimum
15    nonforfeiture amount at that time.  The death  benefit  under
16    such  contracts shall be at least equal to the cash surrender
17    benefit.
18        (5)  For contracts which do not  provide  cash  surrender
19    benefits,  the  present  value of any paid-up annuity benefit
20    available as a nonforfeiture option  at  any  time  prior  to
21    maturity  shall  not  be  less than the present value of that
22    portion of the maturity value of the paid-up benefit provided
23    under the contract arising from considerations paid prior  to
24    the  time  of the contract is surrendered in exchange for, or
25    changed to, a deferred paid-up annuity,  such  present  value
26    being calculated for the period prior to the maturity date on
27    the  basis of the interest rate specified in the contract for
28    accumulating  the  net  considerations  to   determine   such
29    maturity  value,  and  increased  by  any existing additional
30    amounts  credited  by  the  company  to  the  contract.   For
31    contracts which do not provide any death  benefits  prior  to
32    the commencement of any annuity payments, such present values
33    shall  be  calculated  on the basis of such interest rate and
34    the mortality table specified in the contract for determining
 
                            -6-               LRB9214934JSpcA
 1    the maturity value of the paid-up annuity benefit.   However,
 2    in  no  event  shall  the  present value of a paid-up annuity
 3    benefit be less than the minimum nonforfeiture amount at that
 4    time.
 5        (6)  For  the  purpose  of   determining   the   benefits
 6    calculated  under  subsections  (4)  and  (5), in the case of
 7    annuity contracts under which an election may be made to have
 8    annuity payments commence at  optional  maturity  dates,  the
 9    maturity date shall be deemed to be the latest date for which
10    election shall be permitted by the contract, but shall not be
11    deemed  to be later than the anniversary of the contract next
12    following the annuitant's seventieth birthday  or  the  tenth
13    anniversary of the contract, whichever is later.
14        (7)  Any  contract  which does not provide cash surrender
15    benefits or does not provide death benefits at least equal to
16    the minimum nonforfeiture amount prior to the commencement of
17    any annuity payments shall include a statement in a prominent
18    place in the contract that such benefits are not provided.
19        (8)  Any  paid-up  annuity,  cash  surrender   or   death
20    benefits  available  at  any time, other than on the contract
21    anniversary  under  any   contract   with   fixed   scheduled
22    considerations,  shall  be  calculated with allowance for the
23    lapse of time and the payment of any scheduled considerations
24    beyond the beginning of the contract year in which  cessation
25    of payment of considerations under the contract occurs.
26        (9)  For  any  contract  which  provides, within the same
27    contract by rider or supplemental  contract  provision,  both
28    annuity  benefits  and  life  insurance  benefits that are in
29    excess of the greater of cash surrender benefits or a  return
30    of  the  gross  considerations  with  interest,  the  minimum
31    nonforfeiture  benefits  shall  be  equal  to  the sum of the
32    minimum nonforfeiture benefits for the  annuity  portion  and
33    the  minimum  nonforfeiture  benefits,  if  any, for the life
34    insurance portion computed as if each portion were a separate
 
                            -7-               LRB9214934JSpcA
 1    contract.  Notwithstanding the provisions of subsections (3),
 2    (4), (5), (6) and (8), additional benefits payable (a) in the
 3    event of total and permanent disability, (b) as  reversionary
 4    annuity  or deferred reversionary annuity benefits, or (c) as
 5    other  policy  benefits   additional   to   life   insurance,
 6    endowment,  and  annuity benefits, and considerations for all
 7    such   additional   benefits,   shall   be   disregarded   in
 8    ascertaining  the  minimum  nonforfeiture  amounts,   paid-up
 9    annuity,  cash  surrender  and  death  benefits  that  may be
10    required by this section.  The inclusion of  such  additional
11    benefits  shall  not  be  required  in  any paid-up benefits,
12    unless such  additional  benefits  separately  would  require
13    minimum   nonforfeiture   amounts,   paid-up   annuity,  cash
14    surrender and death benefits.
15        (10)  After the  effective  date  of  this  Section,  any
16    company  may  file  with the Director a written notice of its
17    election to comply with the provisions of this Section  after
18    a  specified  date  before  the  second  anniversary  of  the
19    effective  date  of  this  Section.  After the filing of such
20    notice, then upon such specified date,  which  shall  be  the
21    operative date of this section for such company, this Section
22    shall  become  operative  with  respect  to annuity contracts
23    thereafter issued by such company.  If  a  company  makes  no
24    such  election,  the  operative date of this section for such
25    company shall be the second anniversary of the effective date
26    of this Section.
27        (11)  This Section shall not apply  to  any  reinsurance,
28    group  annuity  purchased  under a retirement plan or plan of
29    deferred  compensation  established  or  maintained   by   an
30    employer  (including a partnership or sole proprietorship) or
31    by an employee organization, or by both, other  than  a  plan
32    providing   individual   retirement  accounts  or  individual
33    retirement  annuities  under  Section  408  of  the  Internal
34    Revenue Code, as now or hereafter  amended,  premium  deposit
 
                            -8-               LRB9214934JSpcA
 1    fund,   variable   annuity,   investment  annuity,  immediate
 2    annuity, any deferred annuity contract after annuity payments
 3    have commenced, or reversionary annuity, nor to any  contract
 4    which  shall be delivered outside this State through an agent
 5    or other representative of the company issuing the contract.
 6    (Source: P.A. 90-655, eff. 7-30-98.)

 7        Section 99.  Effective date.  This Act  takes  effect  on
 8    July 1, 2002.

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