Empire State insurance regulators say some variable annuity features sold in their state may violate annuity nonforfeiture requirements.
The New York State Insurance Department has issued an alert warning issuers of “separate account annuity contracts,” or variable annuity contracts, with guaranteed minimum withdrawal benefits.
Under Section 4240(d)(1) of the New York Insurance Law, the state’s annuity nonforfeiture law applies to VA contracts that “provide guaranteed benefits that at any time equal or exceed the amounts allocated to a separate account accumulated at 3%,” officials write in the alert.
“It is not clear whether insurers issuing separate account annuity contracts with guaranteed minimum withdrawal benefits have accurately interpreted the 3% guaranteed benefit limitation in Section 4240(d)(1),” officials write.
The section does not refer to letting insurers take mortality, lapses or surrenders into consideration when calculating the 3% guaranteed benefit limitation, officials write.
“Failure to comply with applicable nonforfeiture standards may raise significant market conduct and financial concerns,” officials warn..
New York regulators say they are preparing more guidance on this topic.
A copy of the alert is on the Web at Document Link