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Fixed Account Availability Restrictions

Section 4223(c)(2)(C) of the Insurance Law was recently amended by § 29 of Chapter 62 of the Laws of 2003 to reduce the minimum interest rate for annuity contracts subject to standard nonforfeiture law for annuities from 3.00% to 1.50%. The change in the minimum interest rate is effective until May 15, 2005.

The Department has also approved product submissions that include fixed account availability restrictions in variable annuity contracts. The restrictions generally give insurers discretion with respect to the establishment and continuing availability of fixed account options in variable annuity contracts.

The restrictions in variable annuity contracts and corresponding notice and disclosure requirements that have been approved for both individual and group annuity contracts with fixed accounts subject to Section 4223 include the following types of provisions:

1. Deposit Restrictions

2. Involuntary Transfer of Fixed Account Funds on Renewal from Modified Guaranteed Annuity Option in Variable Annuity Contracts.

3. Right to Reduce the Minimum Interest Rate

4. Underwriting Safeguards

[1] Section 44.5(b)(3)(iv) of Regulation No. 127 requires disclosure when new guarantee periods differ from the maturing guarantee period. See also § 44.9(b)(6) of Regulation No. 127.

[2] If the variable contract provides for dollar cost averaging and the dollar cost averaging is not available at issue, similar disclosure must be provided. For variable annuity contracts with a fixed account option consisting solely of amounts allocated to dollar cost averaging, insurers should make every effort to ensure that consumers are not misled as to nature of the fixed account investment option available under the contract.

Department of Financial Services


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