R590. Insurance, Administration.
R590-229. Annuity Disclosure. (Effective 10-7-04)
R590-229-1. Authority.
This rule is promulgated pursuant to
Section 31A-22-425 wherein the commissioner is to make rules to establish
standards for buyer's guides and disclosures and Subsection 31A-2-201(3)(a)
wherein the commissioner may make rules to implement the provisions of Title
31A.
R590-229-2. Purpose.
The purpose of this rule is to:
(1) provide standards for the
disclosure of minimum information about annuity contracts to protect consumers
by specifying:
(a) the minimum information that
must be disclosed; and
(b) the method for disclosing it in
connection with the sale of annuity contracts; and
(2) foster consumer education by
ensuring that purchasers of annuity contracts understand certain basic features
of annuity contracts.
R590-229-3. Scope.
(1) This rule applies to individual and group
annuity contracts and certificates except:
(a) registered or non-registered variable annuities or
other registered products;
(b)(i) annuities used to fund:
(A) an employee pension plan that is covered by the
Employee Retirement Income Security Act (ERISA);
(B) a plan described by Internal Revenue Code (IRC)
Sections 401(a), 401(k), or 403(b) where the plan is established or maintained
by an employer;
(C) a government or church plan defined in IRC Section
414 or a deferred compensation plan or a state or local government or a tax
exempt organization under IRC Section 457; or
(D) a nonqualified deferred compensation arrangement
established or maintained by an employer or plan sponsor.
(ii)Notwithstanding Subsection (1)(b)(i)
of this section, this rule shall apply to annuities used to fund a plan or
arrangement that is funded solely by contributions an employee elects to make
whether on a pre-tax or after-tax basis and there is a direct solicitation of an
individual employee by a producer for the purchase of an annuity contract. As
used in this subsection, direct solicitation shall not include any meeting held
by a producer solely for the purpose of educating or enrolling employees in the
plan or arrangement; and
(c) structured settlement annuities;
and
(d) funding agreements.
(2) The disclosure document requirements of this rule do
not apply to immediate and deferred annuities that contain no nonguaranteed
elements.
R590-229-4. Definitions.
In addition to the definitions in
Section 31A-1-301, the following definitions shall apply for the purpose of this
rule:
(1)
“Buyer’s Guide” means a
document which contains, and is limited to, the language contained in the
“Buyer’s Guide to Fixed Deferred Annuities” and its "Appendix I Equity-Indexed
Annuities,” dated 1998, as adopted by, and available from the National
Association of Insurance Commissioners, which are incorporated in this rule by
reference or go to the department's website.
(2) “Contract owner” means the owner named in the annuity
contract or certificate holder in the case of a group annuity contract.
(3) “Determinable elements” means elements that are
derived from processes or methods that are guaranteed at issue and not subject
to company discretion, but where the values or amounts cannot be determined
until some point after issue. These elements include the premiums, credited
interest rates with any applicable bonus, benefits, values, non-interest based
credits, charges or elements of formulas used to determine any of these. These
elements may be described as guaranteed but not determined at issue. An element
is considered determinable if all of the underlying elements that go into its
calculation are either guaranteed or determinable.
(4) "Disclosure document" means the document described in Subsection 6(2)
of this rule.
(5) "Funding agreement" means an agreement for an insurer
to accept and accumulate funds and to make one or more payments at future dates
in amounts that are not based on mortality or morbidity contingencies.
(6) “Generic name” means a short title descriptive of the
annuity contract being applied for such as “single premium deferred annuity.”
(7) “Guaranteed elements” means premiums, credited
interest rates with any applicable bonus, benefits, values, non-interest based
credits, charges or elements of formulas used to determine any of these, that
are guaranteed and determined at issue. An element is considered guaranteed if
all of the underlying elements that go into its calculation are guaranteed.
(8) “Non-guaranteed elements” means the premiums, credited
interest rates with any applicable bonus, benefits, values, non-interest based
credits, charges or elements of formulas used to determine any of these that are
subject to company discretion and are not guaranteed at issue. An element is
considered non-guaranteed if any of the underlying elements that go into its
calculation are non-guaranteed.
(9) “Structured settlement annuity” means a “qualified
funding asset” as defined in IRC Section 130(d) or an annuity that would be a
qualified funding asset under IRC Section 130(d) but for the fact that it is not
owned by an assignee under a qualified assignment.
R590-229-5. Appropriate Buyer's Guide.
(1) Where an
application for an equity-indexed annuity is taken, the "Buyer's Guide to Fixed
Deferred Annuities" with "Appendix I for Equity-Indexed Annuities" shall be the
Buyer's Guide given to the applicant and will be considered the appropriate
Buyer's Guide for the product.
(2) For all other annuity products, the "Buyer's Guide to
Fixed Deferred Annuities" with or without "Appendix I Equity-Indexed Annuities"
will be considered the appropriate Buyer's Guide.
R590-229-6. Standards for the Disclosure Document and Buyer’s Guide.
(1)(a) Where the application for an annuity contract is
taken in a face-to-face meeting, the applicant shall, at or before the time of
application, be given both the disclosure document described in Subsection 6(2)
of this section and the appropriate Buyer’s Guide, as described in Section 5.
(b) Where the application for an annuity contract is taken
by means other than in a face-to-face meeting, the applicant shall be sent both
the disclosure document and the appropriate Buyer’s Guide no later than five
business days after the completed application is received by the insurer.
(i) With respect to an application received as a result of
a direct solicitation through the mail:
(A) providing a Buyer’s Guide in a mailing inviting
prospective applicants to apply for an annuity contract shall be deemed to
satisfy the requirement that the appropriate Buyer’s Guide be provided no later
than five business days after receipt of the application; and
(B) providing a disclosure document in a mailing inviting
a prospective applicant to apply for an annuity contract shall be deemed to
satisfy the requirement that the disclosure document be provided no later than
five business days after receipt of the application.
(ii) With respect to an application received via the
Internet:
(A) taking reasonable steps to make
the appropriate Buyer’s Guide available for viewing and printing on the
insurer’s website shall be deemed to satisfy the requirement that the
appropriate Buyer’s Guide be provided no later than five business days of
receipt of the application; and
(B) taking reasonable steps to make the disclosure
document available for viewing and printing on the insurer’s website shall be
deemed to satisfy the requirement that the disclosure document be provided no
later than five business days after receipt of the application.
(c) A solicitation for an annuity contract provided in
other than a face-to-face meeting shall include a statement that the prospective
applicant can obtain from the insurer a free annuity Buyer’s Guide upon request.
(2) At a minimum, the following information shall be
included in the disclosure document required to be provided under this rule:
(a) the generic name of the contract, the company product
name, if different, the form number, and the fact that it is an annuity;
(b) the insurer’s name and address;
(c) a description of the contract
and its benefits, emphasizing its long-term nature, including examples where
appropriate of:
(i) the guaranteed, non-guaranteed and determinable
elements of the contract, and their limitations, if any, and an explanation of
how they operate;
(ii) an explanation of the initial
crediting rate, specifying any bonus or introductory portion, the duration of
the rate and the fact that rates may change from time to time and are not
guaranteed;
(iii) periodic income options, both
on a guaranteed and non-guaranteed basis;
(iv) any value reductions caused by
withdrawals from or surrender of the contract;
(v) how values in the contract can
be accessed;
(vi) the death benefit, if
available, and how it will be calculated;
(vii) a summary of the federal tax
status of the contract and any penalties applicable on withdrawal of values from
the contract; and
(viii) impact of any rider, such as a long-term care
rider;
(d) specific dollar amount or percentage charges and
fees shall be listed with an explanation of how they apply; and
(e) information about the current guaranteed rate for a
new contract that contains a clear notice that the rate is subject to change.
(3) An insurer shall define terms
used in the disclosure statement in language that facilitates the understanding
by a typical person within the segment of the public to which the disclosure
statement is directed.
R590-229-7. Report to Contract Owners.
For an annuity in the
payout period with changes in non-guaranteed elements and for the accumulation
period of a deferred annuity, the insurer shall provide the contract owner with
a report, at least annually, on the status of the contract that contains at
least the following information:
(1) the beginning and end date of
the current report period;
(2) the accumulation and cash surrender value, if any, at
the end of the previous report period and at the end of the current report
period;
(3) the total amounts, if any, that have been credited,
charged to the contract value, or paid during the current report period; and
(4) the amount of outstanding loans, if any, as of the
end of the current report period.
R590-229-8. Enforcement Date.
The commissioner will begin enforcing
the provisions of this rule on the date this rule
goes into effect.
R590-229-9. Severability.
If any provision or clause of this rule or its
application to any person or situation is held invalid, such invalidity shall
not affect any other provision or application of this rule which can be given
effect without the invalid provision or application, and to this end the
provisions of this rule are declared to be severable.
KEY:
insurance, annuity disclosure
2004
31A-2-201
31A-22-425
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