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92nd General Assembly

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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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