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78R5648 KCR-D
By: Eiland H.B. No. 1561
A BILL TO BE ENTITLED
AN ACT
relating to nonforfeiture amounts of certain annuities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1107.003(c), Insurance Code, as
effective June 1, 2003, is amended to read as follows:
(c) An annuity contract that provides for a lump-sum
settlement at maturity or at any other time must provide that on
surrender of the contract on or before the time annuity payments
begin, the company that issues the contract must [will] pay a cash
surrender benefit in an amount that complies with this chapter in
lieu of a paid-up annuity benefit. A company may [shall] reserve
the right to defer payment of any cash surrender benefit for a
period not to exceed [of] six months after demand for payment of the
benefit is made with surrender of the contract.
SECTION 2. Subchapter B, Chapter 1107, Insurance Code, as
effective June 1, 2003, is amended by adding Section 1107.055 to
read as follows:
Sec. 1107.055. EXPIRATION OF SUBCHAPTER. This subchapter
expires August 31, 2005.
SECTION 3. Chapter 1107, Insurance Code, as effective June
1, 2003, is amended by adding Subchapter D to read as follows:
SUBCHAPTER D. COMPUTATION OF MINIMUM NONFORFEITURE AMOUNT
Sec. 1107.151. MINIMUM NONFORFEITURE AMOUNT. (a) The
minimum value under Subchapter C of a paid-up annuity, cash
surrender benefit, or death benefit shall be computed according to
the minimum nonforfeiture amount prescribed by this subchapter.
(b) The minimum nonforfeiture amount on or before the time
annuity payments begin is an amount equal to the accumulation of the
prescribed percentages of the amount of net considerations paid to
the date of computation, which are accumulated at an interest rate
determined in accordance with this subchapter, plus any additional
amount credited to the contract by the company, less the amount of:
(1) any withdrawal from or partial surrender of the
contract made before the minimum nonforfeiture amount is computed,
accumulated at interest rates determined in accordance with this
subchapter;
(2) an annual contract charge of $50, accumulated at
interest rates determined in accordance with this subchapter;
(3) any premium tax paid by the company for the
contract that is not subsequently credited back to the company,
accumulated at interest rates determined in accordance with this
subchapter; and
(4) any indebtedness to the company on the contract,
including any accrued interest due on the indebtedness.
(c) For purposes of this section, the amount of net
consideration for a contract year is an amount equal to 87.5 percent
of the gross considerations credited to the contract during that
contract year.
Sec. 1107.152. INTEREST RATES. (a) The interest rate used
in determining the minimum nonforfeiture amount under this
subchapter on or before annuity payments begin is the lesser of:
(1) three percent per year; or
(2) except as provided by Subsection (b), the
five-year constant maturity treasury rate published by the Board of
Governors of the Federal Reserve as of a date certain, or an average
over a period, specified in the contract that is not more than 15
months before the contract issue date or the redetermination date
under Subsection (d), which rate is rounded to the nearest 0.0005
percent and reduced by 125 basis points.
(b) The minimum interest rate allowable under Subsection
(a)(2) is one percent.
(c) An annuity contract in which the interest rate used in
determining the nonforfeiture amount may be redetermined on or
before annuity payments begin must specify the terms and conditions
of a permissible redetermination of an interest rate.
(d) The interest rate determined under Subsection (a) shall
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. As used in this subsection, "basis" is
the date, or average over a specified period, that produces the
five-year constant maturity treasury rate to be used at each
redetermination.
Sec. 1107.153. ADDITIONAL INTEREST RATE ADJUSTMENTS. The
commissioner by rule may adopt interest rates other than those
established under Section 1107.152 for annuity contracts that
provide substantial participation in an equity index benefit scheme
or other benefit schemes as the commissioner determines to be
appropriate.
Sec. 1107.154. RULES. The commissioner may adopt rules
necessary to implement this subchapter.
Sec. 1107.155. USE OF SUBCHAPTER B PROCEDURE. (a) Until
August 31, 2005, a company may issue and the department may review
annuity contracts under this subchapter or Subchapter B.
(b) This section expires August 31, 2005.
SECTION 4. This Act takes effect June 1, 2003, if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on June
1, 2003, this Act takes effect September 1, 2003.