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- Alaska Statutes.
- Title 21. Insurance
- Chapter 45. Life Insurance and Annuities
- Section 305. Standard Nonforfeiture Law For Individual Deferred Annuities.
previous: Section 300
. Standard Nonforfeiture Law For Life Insurance.
next: Section 310
. Prohibited Policy Plans.
AS 21.45.305. Standard Nonforfeiture Law For Individual Deferred Annuities.
- (a) This section does 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 26 U.S.C. 408 (Internal Revenue Code), as 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 that shall be delivered outside this state through an agent or other representative of the
company issuing the contract.
- (b) In the case of contracts issued on or after the operative date of this section as defined in (k) of this section, no
contract of annuity, except as stated in (a) of this section, may be delivered or issued for delivery in this state
unless it contains in substance the following provisions, or corresponding provisions that, in the opinion of the
director, are at least as favorable to the contract holder, upon cessation of payment of considerations under the
contract: (1) that, upon cessation of payment of considerations under a contract or upon the written request of the contract holder, the
company will grant a paid-up
annuity benefit on a plan stipulated in the contract of the value specified in (d) - (g) and (i) of this
section; (2) if a contract provides for a lump sum settlement at maturity, or at any other time, that, upon surrender of
the contract at or before the commencement of any annuity payments, the company will pay, in lieu of any paid-up annuity
benefit, a cash surrender benefit of the amount specified in (d), (e), (g) and (i) of this section; the company
may reserve the right to defer the payment of that cash surrender benefit for a period not to exceed six months after demand for
the payment with surrender of the contract after making a written request that addresses the necessity and equitableness to all contract
holders of the deferral and after receiving written approval by the director; (3) 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 amounts of those benefits; (4) 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 those 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 two full years and the portion of the paid-up
annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid before that period
would be less than $20 monthly, the company may, at its option, terminate the contract by payment in cash of the then
present value of the 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 that payment shall be
relieved of any further obligation under the contract.
- (c) The minimum values as specified in (d) - (g) and (i) of this section 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
- (1) The minimum nonforfeiture amount at any time at or before the commencement of any annuity payments shall be equal to
an accumulation up to that time at a rate of interest established under (2) of this subsection of the net
considerations as defined in this paragraph paid before that time, decreased by the sum of (A) any prior withdrawals
from or partial surrenders of the contract accumulated at a rate of interest established under (2) of this subsection;
(B) the amount of any indebtedness to the company on the contract, including interest due and accrued; (C) an annual
contract charge of $50, accumulated at a rate of interest established under (2) of this subsection; and (D) any premium
tax paid by the company for the contract, accumulated at a rate of interest established under (2) of this subsection.
The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount
equal to 871/2 percent of the corresponding gross considerations credited to the contract during that contract year.
- (2) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as
the lesser of three percent a year or the following, which shall be specified in the contract if the interest rate will
be reset: (A) the five-year constant maturity treasury rate reported by the federal reserve as of a date, or average
over a period, rounded to the nearest 1/20 of one percent, specified in the contract not more than 15 months before the
contract issue date or redetermination date under (D) of this paragraph; (B) reduced by 125 basis points; (C) where the
resulting interest rate is not less than one percent; and (D) the interest rate must apply for an initial period and
may be redetermined for additional periods; the redetermination date, basis, and period, if any, must be stated in the
contract; the basis is the date or average over a specified period that produces the value of the five-year constant
maturity treasury rate to be used at each redetermination date.
- (3) During the period or term that a contract provides substantive participation in an equity indexed benefit, the
contract may increase the reduction described in (2)(B) of this subsection by up to an additional 100 basis points to
reflect the value of the equity index benefit. The present value at the contract issue date, and at each following
redetermination date, of the additional reduction may not exceed the market value of the benefit. The director may
require a demonstration of the present value of the additional reduction and may disallow or limit the additional
reduction if the demonstration does not prove that the present value of the additional reduction does not exceed the
market value of the benefit.
- (4) The director may by regulation provide for further adjustments to the calculation of minimum nonforfeiture amounts for
contracts that provide substantive participation in an equity index benefit or for other contracts that the director
determines require adjustment. An adjustment to the calculation of minimum nonforfeiture amounts authorized under this
subsection may not result in an interest rate of less than one percent.
- (d) 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.
- (e) For contracts that provide cash surrender benefits, the cash surrender benefits available before maturity may 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 before the time of cash
surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the
contract. The present value shall be calculated on the basis of an interest rate not more than one percent higher than
the interest rate specified in the contract for accumulating considerations to determine the maturity value, unless a higher rate is approved
by the director under AS 21.42.120, 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 may any cash
surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under those contracts
shall be at least equal to the cash surrender benefit.
- (f) 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 before maturity may not be less than the present value of that portion of the
maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid before the
time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity. The present value shall
be calculated for the period before the maturity date on the basis of the interest rate specified in the contract for
accumulating the net considerations to determine the 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 before the commencement
of any annuity payments, the present values shall be calculated on the basis of the 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 may the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
- (g) For the purpose of determining the benefits calculated under (e) and (f) of this section,
- (1) the maturity date shall be the latest date for which election is permitted by the contract, but not later
than the anniversary of the contract next following the annuitant's 70th birthday or the 10th anniversary of the contract, whichever is
- (2) a surrender charge may not be imposed on or past the maturity date of the contract, except that, for annuity
contracts with one or more renewable guaranteed periods, a new surrender charge schedule may be imposed for each new guaranteed period
- (A) the surrender charge is zero at the end of each guaranteed period and remains zero for at least 30 days;
- (B) the contract provides for continuation of the contract without surrender charges, unless the contract
holder specifically elects a new guaranteed period with a new surrender charge schedule; and
- (C) the renewal period does not exceed 10 years and the maturity date complies with (1) of this subsection;
- (3) a contract that provides for flexible considerations may have separate surrender charge schedules associated
with each consideration; for purposes of determining the maturity date, the 10th anniversary of the contract is determined separately
for each consideration.
- (h) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the
minimum nonforfeiture amount before the commencement of any annuity payments shall include a statement in a prominent
place in the contract that such benefits are not provided.
- (i) 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.
- (j) 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 (d) - (g) and (i) of
this section, additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary
annuity or deferred reversionary annuity benefits, or (3) 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 is not required in any paid-up benefits, unless
those additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and
- (k) After July 6, 1978, 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 July 6, 1980. After the filing of the notice, then upon the
specified date, which shall be the operative date of this section for the company, this section shall become operative
with respect to annuity contracts thereafter issued by the company. If a company makes no such election, the operative
date of this section for the company shall be July 6, 1980.
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