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Public Act 92-0541
HB5607 Enrolled LRB9214934JSpcA
AN ACT concerning insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Section 229.4 as follows:
(215 ILCS 5/229.4) (from Ch. 73, par. 841.4)
Sec. 229.4. Standard Non-forfeiture Law for Individual
Deferred Annuities.
(1) No contract of annuity issued on or after the
operative date of this Section except as stated in subsection
(11) 11 shall be delivered or issued for delivery in this
State unless it contains in substance the following
provisions or corresponding provisions which in the opinion
of the Director are at least as favorable to the contract
holder upon cessation of payment of considerations under the
contract:
(a) That upon cessation of payment of
considerations under a contract, the company will grant a
paid-up annuity benefit on a plan stipulated in the
contract of such value as is specified in subsections
(3), (4), (5), (6) and (8).
(b) 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 will pay in lieu of
any paid-up annuity benefit a cash surrender benefit of
such amount as is specified in subsections (3), (4), (6)
and (8). The company shall reserve the right to defer
the payment of such cash surrender benefit for a period
of 6 months after demand therefor with surrender of the
contract.
(c) A statement of the mortality table, if any, and
interest rates used in calculating any minimum paid-up
annuity, cash surrender or death benefits that are
guaranteed under the contract, together with sufficient
information to determine the amount of such benefits.
(d) 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 such benefits are altered by the 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.
Notwithstanding the requirements of this subsection, any
deferred annuity contract may provide that if no
considerations have been received under a contract for a
period of 2 full years and the portion of the paid-up annuity
benefit at maturity on the plan stipulated in the contract
arising from considerations paid prior to such period would
be less than $20.00 monthly, the company may at its option
terminate such contract by payment in cash of the present
value of such portion of the paid-up annuity benefit,
calculated on the basis of the mortality table, if any, and
interest rate specified in the contract for determining the
paid-up annuity benefit, and by such payment shall be
relieved of any further obligation under such contract.
(2) The minimum values as specified in subsections (3),
(4), (5), (6) and (8) of any paid-up annuity, cash surrender
or death benefits available under an annuity contract shall
be based upon minimum nonforfeiture amounts as defined in
this subsection.
(a) With respect to contracts providing for
flexible considerations, 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 a rate of interest of 3% per annum of
percentages of the net considerations, as hereinafter
defined, paid prior to such time, decreased by the sum of
(i) any prior withdrawals from or partial surrenders of
the contract accumulated at a rate of interest of 3% per
annum and (ii) 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.
The net considerations for a given contract year
used to define the minimum nonforfeiture amount shall be
an amount not less than zero and shall be equal to the
corresponding gross considerations credited to the
contract during that contract year less an annual
contract charge of $30.00 and less a collection charge of
$1.25 per consideration credited to the contract during
that contract year. The percentages of net
considerations shall be 65% of the net consideration for
the first contract year and 87 1/2% of the net
considerations for the second and later contract years.
Notwithstanding the provisions of the preceding sentence,
the percentage shall be 65% of the portion of the total
net consideration for any renewal contract year which
exceeds by not more than two times the sum of those
portions of the net considerations in all prior contract
years for which the percentage was 65%.
(a-5) Notwithstanding the provisions of paragraph
(a) of this subsection, the minimum nonforfeiture amount
for any contract issued on or after July 1, 2002 and
before July 1, 2005 shall be based on a rate of interest
of 1.5% per annum.
(b) With respect to contracts providing for fixed
scheduled considerations, minimum nonforfeiture amounts
shall be calculated on the assumption that considerations
are paid annually in advance and shall be defined as for
contracts with flexible considerations which are paid
annually, with two exceptions:
(i) The portion of the net consideration for
the first contract year to be accumulated shall be
the sum of 65% of the net consideration for the
first contract year plus 22 1/2% of the excess of
the net consideration for the first contract year
over the lesser of the net considerations for the
second and third contract years.
(ii) The annual contract charge shall be the
lesser of (A) $30.00 or (B) 10% of the gross annual
consideration.
(c) With respect to contracts providing for a
single consideration, minimum nonforfeiture amounts shall
be defined as for contracts with flexible considerations
except that the percentage of net consideration used to
determine the minimum nonforfeiture amount shall be equal
to 90% and the net consideration shall be the gross
consideration less a contract charge of $75.00.
(3) Any paid-up annuity benefit available under a
contract shall be such that its present value on the date
annuity payments are to commence is at least equal to the
minimum nonforfeiture amount on that date. Such present
value shall be computed using the mortality table, if any,
and the interest rate specified in the contract for
determining the minimum paid-up annuity benefits guaranteed
in the contract.
(4) For contracts which provide cash surrender benefits,
such 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 which 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 rate not more than 1%
higher than the interest rate specified in the contract for
accumulating the net considerations to determine such
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. In no event shall
any cash surrender benefit be less than the minimum
nonforfeiture amount at that time. The death benefit under
such contracts shall be at least equal to the cash surrender
benefit.
(5) For contracts which do not provide cash surrender
benefits, the present value of any paid-up annuity benefit
available as a nonforfeiture option at any time prior to
maturity shall not be less than the present value of that
portion of the maturity value of the paid-up benefit provided
under the contract arising from considerations paid prior to
the time of the contract is surrendered in exchange for, or
changed to, a deferred paid-up annuity, such present value
being calculated for the period prior to the maturity date on
the basis of the interest rate specified in the contract for
accumulating the net considerations to determine such
maturity value, and increased by any existing additional
amounts credited by the company to the contract. For
contracts which do not provide any death benefits prior to
the commencement of any annuity payments, such present values
shall be calculated on the basis of such interest rate and
the mortality table specified in the contract for determining
the maturity value of the paid-up annuity benefit. However,
in no event shall the present value of a paid-up annuity
benefit be less than the minimum nonforfeiture amount at that
time.
(6) For the purpose of determining the benefits
calculated under subsections (4) and (5), in the case of
annuity contracts under which an election may be made to have
annuity payments commence at optional maturity dates, the
maturity date shall be deemed to be the latest date for which
election shall be permitted by the contract, but shall not be
deemed to be later than the anniversary of the contract next
following the annuitant's seventieth birthday or the tenth
anniversary of the contract, whichever is later.
(7) Any contract which does not provide cash surrender
benefits or does not provide death benefits at least equal to
the minimum nonforfeiture amount prior to the commencement of
any annuity payments shall include a statement in a prominent
place in the contract that such benefits are not provided.
(8) 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 of the contract year in which cessation
of payment of considerations under the contract occurs.
(9) For any contract which provides, within the same
contract by rider or supplemental contract provision, both
annuity benefits and life insurance benefits that are in
excess of the greater of cash surrender benefits or a return
of the gross considerations with interest, the minimum
nonforfeiture benefits shall be equal to the sum of the
minimum nonforfeiture benefits for the annuity portion and
the minimum nonforfeiture benefits, if any, for the life
insurance portion computed as if each portion were a separate
contract. Notwithstanding the provisions of subsections (3),
(4), (5), (6) and (8), additional benefits payable (a) in the
event of total and permanent disability, (b) as reversionary
annuity or deferred reversionary annuity benefits, or (c) as
other policy benefits additional to life insurance,
endowment, and annuity benefits, and considerations for all
such additional benefits, shall be disregarded in
ascertaining the minimum nonforfeiture amounts, paid-up
annuity, cash surrender and death benefits that may be
required by this section. The inclusion of such additional
benefits shall not be required in any paid-up benefits,
unless such additional benefits separately would require
minimum nonforfeiture amounts, paid-up annuity, cash
surrender and death benefits.
(10) After the effective date of this Section, any
company may file with the Director a written notice of its
election to comply with the provisions of this Section after
a specified date before the second anniversary of the
effective date of this Section. After the filing of such
notice, then upon such specified date, which shall be the
operative date of this section for such company, this Section
shall become operative with respect to annuity contracts
thereafter issued by such company. If a company makes no
such election, the operative date of this section for such
company shall be the second anniversary of the effective date
of this Section.
(11) 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 outside this State through an agent
or other representative of the company issuing the contract.
(Source: P.A. 90-655, eff. 7-30-98.)
Section 99. Effective date. This Act takes effect on
July 1, 2002.
Passed in the General Assembly April 18, 2002.
Approved June 12, 2002.
Effective July 01, 2002.
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