Amended in Senate April 14, 2015

Senate Bill No. 426

Introduced by Senator Leyva

February 25, 2015

An act to begin delete amend end delete begin insert repeal and add end insert Section 10168.4 of the Insurance Code, relating to annuities.

LEGISLATIVE COUNSEL’S DIGEST

SB 426, as amended, Leyva. Annuities: cash surrender benefits.

Existing law governs annuities and, for those insurance contracts that provide cash surrender benefits, prescribes the cash surrender benefit available prior to maturity. Existing law also requires the death benefit under these contracts to be at least equal to the cash surrender benefit.

This bill would instead require the death benefit payable under contracts issued begin insert or delivered on or after January 1, 2016, end insert to persons 65 years of age or older to be at least equal to the annuity value or accumulation begin delete value without end delete begin insert value, excluding end insert any surrender charges or penalties upon death. begin insert The bill would also make technical changes. end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 10168.4 of the end insert begin insert Insurance Code end insert begin insert is repealed. end insert

begin delete

10168.4.  

For contracts which provide cash surrender benefits,
such cash surrender benefits available prior to maturity shall 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 which
would be provided under the contract at maturity arising from
considerations paid prior to the time of cash surrender reduced by
the amount appropriate to reflect any prior withdrawals from or
partial surrenders of the contract, such present value being
calculated on the basis of an interest rate not more than 1 percent
higher than the interest rate specified in the contract for
accumulating the net considerations to determine such maturity
value, 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 shall any cash surrender benefit be less than
the minimum nonforfeiture amount at that time. The death benefit
under such contracts shall be at least equal to the cash surrender
benefit.

end delete

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 10168.4 is added to the end insert begin insert Insurance Code end insert begin insert , to
read: end insert

begin insert

begin insert 10168.4. end insert   

Contracts that provide cash surrender benefits shall
comply with all of the following:

(a) Cash surrender benefits available prior to maturity shall
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
which would be provided under the contract at maturity arising
from considerations paid prior to the time of cash surrender
reduced by the amount appropriate to reflect any prior withdrawals
from or partial surrenders of the contract.

(b) For purposes of subdivision (d), the present value shall be
calculated on the basis of an interest rate that is not more than 1
percent higher than the interest rate specified in the contract for
accumulating the net considerations to determine the maturity
value, 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.

(c) The cash surrender benefit shall not be less than the
minimum nonforfeiture amount.

(d) (1) Except as otherwise provided in paragraph (2), the
death benefit shall be at least equal to the cash surrender benefit.

(2) For contracts issued or delivered on or after January 1,
2016, to persons who are 65 years of age or older, the death benefit
shall be at least equal to the annuity value or accumulation value,
excluding any surrender charges or penalties upon death.

end insert

begin delete

SECTION 1.  

Section 10168.4 of the Insurance Code is
amended to read:

10168.4.  

For contracts which provide cash surrender benefits,
the cash surrender benefits available prior to maturity shall 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 which would
be provided under the contract at maturity arising from
considerations paid prior to 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 being calculated
on the basis of an interest rate not more than 1 percent higher than
the interest rate specified in the contract for accumulating the net
considerations to determine the maturity value, 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. The
cash surrender benefit shall not be less than the minimum
nonforfeiture amount at that time. The death benefit under these
contracts shall be at least equal to the cash surrender benefit, except
that the death benefit payable under contracts issued to persons 65
years of age or older shall be at least equal to the annuity value or
accumulation value without any surrender charges or penalties
upon death.

end delete