Life Bureau Filing Guidance Note

Guidance Date: 10/16/2008

Guidance for Illustrations of Variable Annuity Contracts


Subsection 50.8 of Regulation 47, Illustrations of benefits payable under separate account annuity contracts, states:

  • “Except as approved by the superintendent, no hypothetical return in excess of eight percent may be used in such illustrations.”

Investment Return is defined in Subsection 50.1 of Regulation 47 as investment income plus capital gains less capital losses, whether realized or unrealized, on the assets of the separate account, less taxes incurred thereon (adjusted for any increase or decrease in reserves for potential taxes).

Variation in the eight percent rate in illustrations

The Department has received inquiries regarding this eight percent rate, specifically whether it must be a flat rate or whether it can vary from year to year. 

Gross rates in excess of 8% may be used in an illustration provided that in any year the accumulation at the gross rates used in the illustration does not exceed the accumulation at an 8% gross rate. 

For example, if the gross rate of 5% is used in the first year, a gross rate of 11% may be used in the second year.  This is permissible because 1.05 multiplied by 1.11 is 1.1655 and is less than 1.08 multiplied by 1.08 or 1.1664.

After the second year, gross rates other than 8% may be used provided the accumulation does not exceed the accumulation at 8%.

Filing of policy forms for approval

Circular Letter 6 of 2004 may be used for filings with illustrated forms that conform to the above guidance regarding variation in the eight percent rate in illustrations.  The submission letter should indicate that the forms are illustrated and this Guidance should be cited.

If there are any questions regarding this Guidance, e-mail Michael Cebula, Deputy Chief Life Actuary, Life Bureau or call 518-474-7929.