Sec. 3. (a) The minimum values as specified in sections 4, 5, 6, 7, and 9 of this chapter of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this section.

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Terms Used In Indiana Code 27-1-12.5-3

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • annuity contract: as used in this chapter means:

    Indiana Code 27-1-12.5-1

  • Commissioner: means the "insurance commissioner" of this state. See Indiana Code 27-1-2-3
  • Contract: A legal written agreement that becomes binding when signed.
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Year: means a calendar year, unless otherwise expressed. See Indiana Code 1-1-4-5
     (b) With respect to any annuity contract, the minimum nonforfeiture amounts at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at an annual rate of interest determined under subsections (d) and (e) of the net considerations as set forth in subsection (c) paid prior to such time, decreased by the sum of the following:

(1) Any prior withdrawals from or partial surrenders of the annuity contract accumulated at an annual rate of interest determined under subsections (d) and (e).

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

(3) An annual contract charge of fifty dollars ($50), accumulated at the annual rate of interest determined under subsections (d) and (e).

     (c) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent (87.5%) of the gross considerations credited to the annuity contract during that contract year.

     (d) Except as provided in subsection (e), the interest rate used in determining minimum nonforfeiture amounts is an annual rate of interest determined under either of the following methods:

(1) The five-year constant maturity treasury rate, rounded to the nearest five-hundredths of one percent (0.05%), as reported by the Federal Reserve as of a date specified in the annuity contract. Reduce this amount by one hundred twenty-five (125) basis points.

(2) An average of the five-year constant maturity treasury rate as reported by the Federal Reserve, rounded to the nearest five-hundredths of one percent (0.05%), over a specified period as set forth in the annuity contract. Reduce this amount by one hundred twenty-five (125) basis points.

The date under subdivision (1) or the average period used under subdivision (2) may not be longer than fifteen (15) months before the annuity contract issue date or the redetermination date as determined under subsection (f).

     (e) If the rate of interest determined under subsection (d) is:

(1) less than one percent (1%), the interest rate used in determining minimum nonforfeiture amounts is fifteen one-hundredths of one percent (0.15%); or

(2) greater than three percent (3%), the interest rate used in determining minimum nonforfeiture amounts is three percent (3%).

     (f) The interest rate determined under subsections (d) and (e) applies for an initial period and may be redetermined for subsequent periods. The redetermination date, basis, and period, if any, must be specified in the annuity contract. The basis is:

(1) the date; or

(2) an average calculated over a specified period;

that produces the value of the five-year constant maturity treasury rate reported by the Federal Reserve to be used at each redetermination date.

     (g) During the period or term that an annuity contract provides substantive participation in an equity index benefit, the contract may increase the basis point reduction described in subsection (d) by not more than an additional one hundred (100) basis points to reflect the value of the equity index benefit. The present value at the annuity contract issue date, and at each redetermination date after the annuity contract issue date, of the additional reduction may not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. If the demonstration is not acceptable to the commissioner, the commissioner may disallow or limit the additional reduction.

     (h) The commissioner may adopt rules under IC 4-22-2 to provide for further adjustments to the calculation of minimum nonforfeiture amounts for:

(1) annuity contracts that provide participation in an equity index benefit; and

(2) other annuity contracts for which the commissioner determines adjustments are justified.

As added by Acts 1977, P.L.286, SEC.1. Amended by P.L.130-2002, SEC.1; P.L.59-2004, SEC.2; P.L.165-2022, SEC.3.

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