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Life Bureau Filing Guidance Note

Guidance Date: 12/20/2017

Filing Guidance for Changes to Sections 1113(a)(1)(D) and 3230 of the Insurance Law Effective September 12, 2017 (Acceleration of Death Benefits)

Section 1113(a)(1)(D) of the Insurance Law was recently amended by Chapter 300 of the Laws of 2017. The phrase “and the insurer that issues such policy is a qualified long term care insurance carrier under Section 4980C of the Internal Revenue Code” was deleted. Additionally, section 3230(f) was amended and section 3230(g) was repealed so that the requirements of section 3230 now fully apply to life insurance policies that provide for accelerated payment of the death benefit under section 1113(a)(1)(D). These changes became effective September 12, 2017 and do not affect in force issues prior to that date.

Since some accelerated death benefits under section 1113(a)(1)(D) may be intended to qualify as a Qualified Long Term Care Insurance Contract for federal tax purposes and other may not, disclosure of this status to consumers is crucial for consumers to make informed purchase decisions.

While the Department intends to adopt an amendment to 11 NYCRR 41 (Insurance Regulation 143) to reflect the amendments to the Insurance Law and to address the two different types of section 1113(a)(1)(D) benefits (i.e. those intended to be Qualified Long Term Care Insurance Contracts, and those that are not), submissions intended to comply with the revised statute may be made at any time. Until the amendment to Regulation 143 is finalized, insurers should observe the following interim filing guidance:

A.  Generally

  1. All submissions containing benefits pursuant to Insurance Law section 1113(a)(1)(D) must be made on a regular prior approval basis. The Circular Letter No. 6 (2004) certified approval process is not available for forms submitted pursuant to Insurance Law section 1113(a)(1)(D) without prior permission of the Department.
  2. The SERFF filing description (or submission letter for paper filings) must state whether the benefits are intended to qualify as Qualified Long Term Care Insurance Contracts for federal tax purposes.
  3. Any forms containing benefits pursuant to section 1113(a)(1)(D) (including any applications for such forms) must include prominent disclosure stating whether or not the form is intended to be a Qualified Long Term Care Insurance Contract for federal tax purposes.
  4. Due to the statutory amendment, section 3230 now fully applies to all policies containing accelerated death benefits issued after the effective date of the change. Note: In applying section 3230 of the Insurance Law, the Department recognizes that the time limits in section 3230(d) may not be feasible for benefits paid on a cost incurred basis. For benefits paid pursuant to section 1113(a)(1)(D) on a cost incurred basis, the Department finds it acceptable for the documents to be provided after the insurer has received all reimbursements for the applicable period (e.g., that month).

B.  Section 1113(a)(1)(D) Accelerated Death Benefits Intended to Qualify as Qualified Long Term Care Insurance Contracts for Federal Tax Purposes

  1. New Submissions: For insurers whose benefits are intended to qualify as Qualified Long Term Care Insurance Contracts for federal tax purposes, the Department will continue to apply all existing requirements in the Accelerated Death Benefit Product Outline dated 4/20/2016 and Regulation 143 with respect to policy forms, except that disclosure material must now be drafted to also comply with amended Insurance Law section 3230.
  2. Previously Approved Forms: If an insurer has previously approved policy forms that are intended to qualify as Qualified Long Term Care Insurance Contracts for federal tax purposes and the insurer wishes to continue to use those forms, it may do so. However, insurers will need to review current disclosure documents and amend as needed for compliance with section 3230. The revised disclosures should be filed with the Department for informational purposes. The informational filing should identify by form number and Department file number the approved forms with which the revised disclosures will be used.

C.  Section 1113(a)(1)(D) Accelerated Death Benefits NOT Intended to Qualify as Qualified Long Term Care Insurance Contracts for Federal Tax Purposes

New Submissions: For insurers whose benefits are not intended to qualify as Qualified Long Term Care Insurance Contracts for federal tax purposes, the Department will continue to apply all existing requirements in the Accelerated Death Benefit Product Outline dated 4/20/2016 and Regulation 143 except as noted in the attached Appendix. Disclosure material must comply with amended Insurance Law section 3230.



APPENDIX

The Department will not be looking for insurers to show compliance with the below sections of Regulation 143 (in full or in part, as noted) for new submissions of forms that provide for the acceleration of death benefits pursuant to Section 1113(a)(1)(D) that are not intended to be Qualified Long Term Care Insurance Contracts for federal tax purposes.

Section of Reg. 143 In full or in part as noted
41.2(a)(4) Last clause: “and the insurer that issues such policy is a qualified long term care insurance carrier under section 4980C of the Internal Revenue Code.”
41.2(h) In full
41.3(c) Final clause: “except as otherwise provided in section 41.8 of this Part”
41.8(b) Final clause of first paragraph: “and the policy or certificate . . . or payments.”
41.8(b)(1) and (2) In full
41.8(c) Second sentence: “The certification by tax counsel . . . as a qualified long-term care carrier.”
41.8(d) References to “for qualified long-term care services.”
41.8(i) References to “qualified”, “services”, and “long-term care”
41.8(m) Reference to “for qualified long-term care services.”
41.8(s) Middle of second sentence: “for qualified long term care services (The phrase “and “may be substituted for the phrase ‘for qualified long term care services’ for products that accelerate the death benefit pursuant to section 1113(a)(1)(C)”
41.8(s)(1) In full
41.8(s)(2) Middle of sentence: “to pay for qualified long term care services”
41.8(t)(3) In full.  However, companies are expected to comply with the disclosure requirements pursuant to 41.8(t)(4).
41.8(y)(1) Sixth sentence toward the end: “long term care”

These section numbers are current as of the date of this guidance. However, please note, that upon amendment of the regulation, the section numbers may change.

NOTE: Any forms that are intended to be Qualified Long Term Care Insurance Contracts must continue to meet the requirements of all the sections cited above.


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