South Carolina § 38-69-245 - Minimum nonforfeiture amounts for contracts issued after June 30, 2007.

§ 38-69-245. Minimum nonforfeiture amounts for contracts issued after June 30, 2007.

(A) This section applies to contracts issued after June 30, 2007, and may be applied by an insurer, on a contract-form-by-contract-form basis, to a contract issued after June 30, 2005, and before July 1, 2007.

(B) The minimum values as specified in Sections 38-69-250, 38-69-260, 38-69-270, 38-69-280, and 38-69-300 of any paid-up annuity, cash surrender, or death benefits available under an annuity contract must be based upon minimum nonforfeiture amounts as defined in this section.

(C) The minimum nonforfeiture amount at any time at or before the commencement of an annuity payment is equal to an accumulation up to that time at a rate of interest as indicated in subsection (E) of the net considerations paid before that time, decreased by the sum of items of (1) through (4):

(1) any previous withdrawals from or partial surrenders of the contract accumulated at a rate of interest as indicated in subsection (E);

(2) an annual contract charge of fifty dollars, accumulated at a rate of interest as indicated in subsection (E);

(3) any premium tax paid by the company for the contract, accumulated at a rate of interest as indicated in subsection (E); and

(4) the amount of any indebtedness to the company on the contract, including interest due and accrued.

(D) The net considerations for a given contract year used to define the minimum nonforfeiture amount must be an amount equal to eighty-seven and one-half percent of the gross considerations credited to the contract during that contract year.

(E)(1) The interest rate used in determining minimum nonforfeiture amounts must be an annual rate of interest determined as the lesser of three percent a year and the following, which must be specified in the contract if the interest rate is reset:

(a) the five-year Constant Maturity Treasury Rate reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than fifteen months before the contract issue date or redetermination date pursuant to subitem (d);

(b) reduced by one hundred twenty-five basis points;

(c) where the resulting interest rate is not less than one percent; and

(d) the interest rate shall apply for an initial period and may be redetermined for additional periods.

(2) The redetermination date, basis, and period, if any, must be stated in the contract. The basis is the date or average over a specified period that produces the value of the five-year Constant Maturity Treasury Rate to be used at each redetermination date.

(F) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in subsection (E)(1)(b) by up to an additional one hundred basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date after that, of the additional reduction must not exceed the market value of the benefit. The director or his designee may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. If a demonstration is not acceptable to the director, or his designee, he may disallow or limit the additional reduction.

(G) The director, or his designee, may adopt rules to implement the provisions of subsection (F) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the director, or his designee, determines adjustments are justified.

HISTORY: 2005 Act No. 43, SECTION 1, eff May 3, 2005.