N.Y. Comp. Codes R. & Regs. tit. 11 § 40.4

Current through Register Vol. 46, No. 51, December 18, 2024

Section 40.4 - Certain contract withdrawals to pay plan benefits

(a) Subject to subdivisions (b) through (f) of this section, to the extent that a defined contribution plan provides for the payment of a participant's individual account balance under the plan in a lump sum to a plan participant or beneficiary of a plan participant upon bona fide termination of employment of such participant, any contract to which this Part applies which is issued in connection with such a plan and which provides the contractholder with the right to withdraw from the contract the amounts required to pay such lump sum benefits as they arise in accordance with the provisions of the plan, must provide for such withdrawals to be made on a basis pursuant to which neither the amount withdrawn from the contract nor the amount of the remaining principal balance of the accumulation fund following such withdrawal is adjusted to reflect changes in interest rates or asset values since receipt of contract funds.

(b) Subject to subdivisions (c) through (f) of this section, for any group annuity contract funding a defined contribution plan, the contract shall provide that any annuity benefit purchased with respect to an amount equal to the plan participant's account value as determined at the time of its commencement shall not be less than that which would be provided by the application of such amount to purchase a single consideration immediate annuity offered by the company at that time for the same class of contracts.

(c) In the event that contributions under a defined contribution plan are allocated to more than one funding vehicle or to the extent there is cash available under the plan, this Part shall not require any insurance company issuing a contract in connection with such plan to provide for withdrawals in accordance with subdivision (a) of this section in any amount in excess of the contract's allocated share of benefit payments as determined pursuant to the agreement of the insurance company and contractholder.

(d) In the case of a contract which funds a participant directed investment option under which each contribution allocated to such option is credited with a specified rate of interest to a stated maturity date which rate and maturity date are disclosed to the participant prior to the allocation, such contract may require that any withdrawals referred to in subdivision (a) of this section (other than withdrawals on account of bona fide termination of employment due to death or disability of the plan participant on whose behalf the withdrawal is made) be postponed until the stated maturity date for the contribution. Notwithstanding the above, the insurance company may permit withdrawals under such a contract prior to the maturity date for the contribution subject to a negative market value adjustment and/or surrender charge. Such withdrawals shall be considered partial surrenders of the contract for purposes of the definition of market value adjustment in section 40.2(o) of this Part. Contracts subject to this subdivision must have at least one option for participants age 55 and over on the date contributions are received where the maturity date will not exceed five years.

(e) This section shall not apply to any withdrawal from a contract to pay plan benefits under circumstances or conditions if the terms of the relevant plans are materially different from the terms or the manner in which the plans are administered as made known to the insurance company as of the date upon which the contract is issued. This section shall, however, continue to apply to any withdrawal pursuant to a plan amendment entered into, or pursuant to a change in the manner of administration made, subsequent to the issuance of the contract, provided that the insurance company, in its sole discretion, determines that the amendment or change will not adversely affect the insurance company's rights and liabilities under the contract.

(f) The insurance company may provide for such procedures or conditions as the insurance company reasonably requires in order to establish that a requested contractual withdrawal is being made in connection with a bona fide termination of employment and in accordance with the provisions of the relevant plan.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 40.4