Involuntary Cashout - Small Annuities. (a) A scheduled premium or flexible premium fixed annuity may provide that the insurer may, at its option, cancel the annuity prior to the annuitization date and pay the actual accumulation amount (i.e. no reduction for surrender charges or MVA) to the contractholder if no premium payments have been made for a period of three full years and either (i) the actual accumulation amount is less than $5,000 (or the dollar limit established pursuant to §411(a)(11) of the Internal Revenue Code of 1986, as amended) or (ii) the income payments at maturity would be less than $20 per month calculated on the basis guaranteed in the contract. §4223(a)(2).
(b) A single premium fixed annuity may provide that the insurer may, at its option, cancel the annuity prior to the annuitization date and pay the actual accumulation amount (i.e. no reduction for surrender charges or MVA) to the contractholder after three full years from the issue date of the contract, and either (i) the actual accumulation amount is less than $5,000 (or the dollar limit established pursuant to §411(a)(11) of the Internal Revenue Code of 1986, as amended) or (ii) the income payments at maturity would be less than $20 per month calculated on the basis guaranteed in the contract. §4223(a)(2).
(c) If a fixed annuity permits the insurer to refuse to commence the annuity payments due to minimum size requirements (i.e. the actual accumulation amount is less than $5,000 or the amount of annuity payments would be less than $20 per month calculated on the basis guaranteed in the contract) at the annuity date, the contract must provide for payment by the insurer of the actual accumulation amount (i.e. no reduction for surrender charges or MVA).
(d) A variable annuity may provide that, at the time the annuity becomes payable, the insurer may, at its option, in lieu of commencing annuity payments, cancel the annuity and pay the contractholder its accumulated value (i.e. no reduction for surrender charges or MVA), if such accumulated value is less than $2000, or would provide an income the initial amount of which is less than $20 per month or if the amount of the annuity does not meet other minimum requirements as approved in writing by the superintendent. Section 50.3(a)(9) of Regulation No. 47.
Involuntary Cashout - Small Annuities. The contract and certificate may provide that, at the time the annuity becomes payable, the insurer may, at its option, in lieu of commencing annuity payments, cancel the annuity and pay the accumulated value to the contractholder or certificate holder if the accumulated value is less than $2,000, or would provide an income of less than $20 per month or if the amount of the annuity does not meet other minimum requirements as approved in writing by the Superintendent. Section 50.3(a)(8) of Regulation 47.
(a) ERISA Section 203(e)(1) and IRC Section 411(a)(11) provide for a $5,000 threshold, but involuntary cashout by the contractholder/plan sponsor is permissive, (i.e. not mandated). Federal law does not preempt state law in this case.
(b) If the contract and certificate permit the insurer to refuse to commence the annuity payments due to minimum size requirements (e.g., at least $20 per month), the contract must permit surrender with no withdrawal charges if such refusal takes place. Section 3201(c)(2). C.12) Mortality and Expense Guarantees Contracts and certificates that provide for variable annuity payments must contain a statement that neither expenses actually incurred, other than taxes on the investment return, nor mortality actually experienced, shall adversely affect the dollar amount of variable annuity payments after such payments have commenced. Section 50.6(a)(1) of Regulation 47.
(a) Where a group variable annuity contract provides that the scale of charges to be made against the assets of a separate account may be changed without the consent of the participants for whom variable annuity payments have commenced, the contract and certificate shall provide that changes may not adversely affect the dollar amount of variable annuity payments that have commenced. Section 50.6(a)(1) of Regulation No. 47.
(b) Note that expenses must be allocated to the separate account business in accordance of §4240(a)(6) of the Insurance Law and Regulation No. 33 (11 NYCRR 91). C.13) Variable Annuity Payment Computation Section 50.6(c) of Regulation 47 provides that every variable annuity contract and certificate must contain a concise and clear statement of the method used in computing the dollar amount of the variable benefit.
(a) The method of computing the dollar amount of variable annuity payments shall be such that, if the annual rate of investment return of the separate account were six and one-half percent at all times from the issue of the certificate, such...
Involuntary Cashout - Small Annuities. The contract and certificate may provide that, at the time the annuity becomes payable, the insurer may, at its option, in lieu of commencing annuity payments, cancel the annuity and pay the accumulated value to the contractholder or certificate holder if the accumulated value is less than $2,000, or would provide an income of less than $20 per month or if the amount of the annuity does not meet other minimum requirements as approved in writing by the Superintendent. Section 50.3(a)(9) of Regulation 47.
(a) ERISA Section 203(e)(1) and IRC Section 411(a)(11) provide for a $5,000 threshold, but involuntary cashout by the contractholder/plan sponsor is permissive, (i.e. not mandated). Federal law does not preempt state law in this case.
(b) If the contract and certificate permit the insurer to refuse to commence the annuity payments due to minimum size requirements (e.g., at least $20 per month), the contract must permit surrender with no withdrawal charges if such refusal takes place. (Department Interpretation).
