N.Y. Comp. Codes R. & Regs. Tit. 11 §§ 50-2.9

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

Section 50-2.9 - Standard provisions in separate account contracts

(a) No individual separate account contract providing variable benefits, other than variable benefits as described in section 50-2.3(a)(7)(iii) of this Subpart shall be delivered or issued for delivery in this State unless it contains, with respect to those variable benefits, in substance the following provisions, to the extent that the provisions apply to such contract, or provisions that in the opinion of the superintendent are appropriate to individual separate account contracts and are more favorable to the contractholders:

(1) A provision that there shall be a period of grace, either of 30 days or of one month, within which any stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract shall continue in full force. The contract shall include a statement of the basis for determining the date as of which a payment received during the period of grace shall be applied to produce the values arising therefrom under the contract;

(2) A provision that at any time within one year from the date of default in making stipulated payments to the insurer, during the life of the annuitant and unless the cash surrender value has been paid, the contract will be reinstated, on the application of the person entitled thereto pursuant to the provisions of the contract, upon payment to the insurer of such overdue payments as required by the contract and of all indebtedness to the insurer on the contract. The contract shall include a statement of the basis for determining the date as of which the amount to cover the overdue payments and indebtedness shall be applied to produce the values arising therefrom under the contract. Where appropriate, the contract may contain a provision requiring, as a condition for reinstatement, evidence of insurability, including good health, reasonably satisfactory to the insurer;

(3) A provision specifying the options available, prior to the commencement date of the annuity, in the event of default in a stipulated payment or of surrender of the contract.

(i) Such options in the event of surrender shall include an option to receive the cash surrender value of the contract. Such options in the event of default in a stipulated payment shall include an option to receive the cash surrender value and an option to receive a paid-up annuity to commence at the maturity date provided in the contract if the contract is not surrendered for cash.

(ii) The contract shall specify the method by which, and the date as of which, the accumulated value of the contract shall be determined and may provide for the deduction therefrom of a surrender charge in arriving at the amount of cash surrender value payable. Such surrender charge shall not be greater than the amount produced by the percentages in the following table, less the premium charge percentage, if any, provided for under the contract:

Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8 and Later
8%	8%	7%	6%	5%	4%	3%	0%

(iii) With respect to any additional premium paid under the contract, the insurer may provide for a surrender charge associated with such additional premium, determined as though the contract holder had purchased a separate contract with such additional premium. The contract shall specify whether the surrender charge is applied to the premiums received or the accumulated value or the portion of such amounts associated with a given premium if the contract is premium specific. If the contract is premium specific, the surrender charge shall be applied on a first in, first out basis.

(iv) If the option to receive a paid-up annuity is elected, the accumulated value of the contract in the separate account or accounts of the insurer at the time of default shall, at the option of the contract holder, be transferred to the general account of the insurer to provide a fixed dollar paid-up annuity. Any amounts so transferred may be subject to a deferral as provided in paragraph (4) of this subdivision. The kind and amount of the paid-up annuity and the conditions of its payment shall be in accordance with the provisions of the contract and the purchase rates stipulated therein subject to paragraph (5) of this subdivision;

(4) In connection with a reservation of right to defer cash surrender payments, any individual separate account contract shall provide, if and to the extent permitted or required under the federal Investment Company Act of 1940, as amended, and any other applicable federal or state law, that the insurer reserves the right, at its option, to defer the:

(i) determination and payment of any cash surrender value for a period of six months after demand therefor with surrender of the contract;

(ii) determination and payment of any cash surrender value for a period of nine months in which installments will be paid; or

(iii) payment of any cash surrender value in accordance with the deferment provisions of the federal Investment Company Act of 1940, as amended; and

(5) A provision that the annuity benefits, at the time they are determined, shall not be less than the benefits that would be paid if the accumulated value were used to purchase any single consideration annuity contract then offered by the insurer to the same class of annuitants.

(b) No group separate account contract providing variable benefits shall be delivered or issued for delivery in this State and no certificate shall be used in connection therewith unless it contains, with respect to such variable benefits, in substance the following provisions to the extent that such provisions apply to such contract or certificate, as the case may be, or provisions that in the opinion of the superintendent are appropriate to group separate account contracts and are more favorable to certificate holders or annuitants, or not less favorable to certificate holders or annuitants and more favorable to contractholders:

(1) A provision that there shall be a period of grace either of 30 days or of one month, within which any stipulated payment to be remitted by the holder to the insurer, falling due after one year from date of issue may be made, during which period of grace the contract shall continue in full force. The contract shall include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values arising therefrom under the contract; and

(2) A provision, with an appropriate reference thereto in the certificate specifying the options available to the certificate holder or an annuitant who contributes to the cost of the annuity, or to the certificate holders or annuitant's beneficiary or beneficiaries in the event of:

(i) the termination of the employee's employment or the termination of the group separate account annuity contract, while the certificate holder or annuitant is alive and prior to the commencement date of the annuity; or

(ii) the death of the certificate holder or annuitant prior to the commencement date of the annuity. Such options shall, in any case, include:

(a) an option to receive a cash payment at least equal to the aggregate amount of the certificate holder's or annuitant's contributions made under the contract, without interest; or

(b) an option to receive a cash payment equal to the accumulated value of the certificate holder's or annuitant's contributions made under the contract.

(c) No separate account contract providing fixed benefits, whether amounts are allocated to the general account or separate account, shall be delivered or issued for delivery in this State unless it contains, with respect to the fixed benefits, the provisions required by law and regulation applicable to contracts funded through the insurer's general account.

(d) No separate account contract providing non-guaranteed index benefits shall be delivered or issued for delivery in this State unless it contains, with respect to the non-guaranteed index benefits, the provisions required by law and regulation applicable to contracts funded through the insurer's general account except that:

(1) the values as specified in Insurance Law section 4223(d), (e), (f), (g) and (i) of any paid-up annuity, cash surrender or death benefits shall be based upon the non-guaranteed index value as defined herein, provided that a separate account contract providing non-guaranteed index benefits may provide incidental death benefits that comply with section 50-2.5(g) of this Subpart and Insurance Law section 4240(d)(2);

(2) the non-guaranteed index value on the maturity date of the index crediting period shall be equal to the actual accumulation amount as defined in Insurance Law section 4223(c)(2) with the following adjustments:

(i) amounts, if any, pursuant to Insurance Law section 4223(c)(2)(C) shall not include any interest but shall include amounts credited to or deducted from the accumulation amount based on an equity index formula specified in the contract meeting the requirements of Insurance Law section 4223(c)(4)(D), except as otherwise provided in paragraph (4) of this subdivision with respect to the length of index crediting periods; and

(ii) the formula may provide for:

(a) a buffer that guarantees there will be no reduction to the accumulated value for initial losses in the index during the index crediting period up to a specified percentage. The buffer percentage shall not exceed 30 percent or be less than 10 percent; or

(b) a floor that guarantees there will be no reduction to the accumulated value for losses in the index during the index crediting period that exceed a specified percentage. The floor percentage shall not be less than 15 percent (i.e., the guarantee may not apply to losses less than 15 percent) nor greater than 25 percent;

(3) the non-guaranteed index value on any date other than the maturity date of the index crediting period shall at least equal either:

(i) the current fair market value of the maturity date guarantees of the segment; or

(ii) any other method of calculation that, in the opinion of the superintendent, provides reasonable equity to terminating and continuing contract holders and to the insurer;

(4) non-guaranteed index crediting periods shall not exceed six years in duration and the cap on the index credit shall not decrease during the index crediting period;

(5)

(i) the minimum cap, net of fees, on the index credit shall not be less than:

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(ii) for contracts with buffers between 10 percent and 30 percent and contracts with floors between 25 percent and 15 percent, the applicable minimum cap shall be derived by linear interpolation of the table in subparagraph (i) of this paragraph;

(6) the minimum participation rate shall not be less than 100 percent;

(7)

(i) if the index formula provides a step credit subject to a buffer or floor, the minimum step credit rate shall not be less than:

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(ii) for contracts with buffers between 10 percent and 30 percent and contracts with floors between 25 percent and 15 percent, the applicable minimum step credit rate shall be derived by linear interpolation of the table in subparagraph (i) of this paragraph;

(8) the contract may include a reserved right for the insurer to temporarily suspend the availability of all renewal index options if, due to yield on investments or the availability or cost of hedging, the insurer is unable to support the minimum guarantees in this subdivision provided that the contract offers an account crediting non-market value adjusted fixed benefits or a money market account as an alternative to the index options and further provided that the cover page of the contract and the application disclose the reserved right and explain the circumstances under which the reserved right would be exercised. An unqualified reserved right to suspend all renewal index options shall not be permitted. Contracts issued without this right shall not be amended to add it. No transfer or other charges or negative adjustments shall apply to transfers resulting from the insurer's exercise of this reserved right; and

(9) the cover page of the separate account contract shall include the following disclosure: "THE INDEX RETURN MAY BE POSITIVE, NEGATIVE OR ZERO AND INVESTMENT IN THIS CONTRACT MAY RESULT IN A LOSS OF PRINCIPAL. IN SOME INSTANCES, THE POTENTIAL INVESTMENT LOSS FOR THIS PRODUCT MAY BE SIGNIFICANTLY GREATER THAN THE POTENTIAL INVESTMENT GAIN."

(e) In addition to the requirements of Insurance Law section 3209(b)(2), no separate account contract providing non-guaranteed index benefits shall be delivered or issued for delivery in this State unless, no later than at the time of application, the prospective purchaser has been provided with the disclosure form set forth in Appendix 28 to this Title, which shall be set forth in at least 12-point type. The disclosure form in Appendix 28 shall not be combined with other disclosure, such as a prospectus, except that it may be combined with the disclosure statement required by Insurance Law section 3209(b)(2).

(f) For a separate account contract providing index benefits, the index used in the index crediting formula shall be an independent, external, publicly available index such as the Standard & Poor's 500 Composite Stock Price Index, Dow Jones Industrial Average, NYSE Composite Index, Russell 2000 Index, and EURO STOXX 50 Index. Proprietary indices and those based on portfolios designed to replicate a publicly available index, such as exchange traded funds, are prohibited.

(g) A separate account contract providing guaranteed withdrawal benefits that would extend beyond the scheduled annuity commencement date in the contract, such as guaranteed lifetime withdrawals, shall include a provision that preserves the withdrawal guarantee by:

(1) permitting the contractholder or certificate holder to further defer the annuity payment commencement date; or

(2) providing that the amount of the annuity payments shall not be less than the amount of the guaranteed withdrawals, under the same payment option; or

(3) any other method found acceptable to the superintendent.

(h) A separate account contract providing guaranteed lifetime withdrawal benefits that are determined by applying withdrawal rates (i.e. percentages) to a defined income base shall comply with the following:

(1) withdrawal rates may vary by attained age or by age grouping provided that an age grouping shall not span more than 5 years, except that the final age grouping may apply to all ages 95 and older;

(2) increases in withdrawal rates and/or the defined income base shall be structured so that the resulting amounts of withdrawal benefits increase by age at least as rapidly as shown in the table below (for example, the rate for age 67 shall be at least 106% of the rate for age 62 and the rate for age 82 shall be at least 109% of the rate for age 77) or pursuant to any other approach approved by the superintendent upon determining that the slope of the scale of increases is fair and equitable to contractholders. For benefits covering joint lives, the age of the younger life would be used; and

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(3) withdrawal rates shall not decrease due to reduction or depletion of the contract's accumulated value and the amount of the withdrawal benefit shall not decrease due to reduction or depletion of the contract's accumulated value except:

(i) for an annuity providing only fixed benefits, reduction of the accumulated value by the contractholder prior to commencement of guaranteed withdrawal payments may result in reduction of the withdrawal benefit since the withdrawal benefit is, in accordance with Insurance Law section 4223, based on the accumulated value;

(ii) after commencement of guaranteed withdrawal payments, the contract may provide for a proportionate reduction of the withdrawal benefit for withdrawals in excess of guaranteed withdrawals; and

(iii) in such other instances as approved by the superintendent upon finding that the decrease is not misleading and the decrease is fair and equitable to contractholders.

(i) No separate account contract shall include investment funds that purport to provide benefits, features, or investment strategies that are, in the opinion of the superintendent, similar to non-guaranteed index benefits with buffer and floor features as discussed in this section.

N.Y. Comp. Codes R. & Regs. Tit. 11 §§ 50-2.9

Adopted New York State Register August 31, 2022/Volume XLIV, Issue 35, eff. 8/31/2022