The New York State Insurance Department has drafted a circular letter that could change the way the state treats annuity death benefits.
The circular letter would affect sellers of fixed annuities, or contracts that combine fixed and variable benefits, that offer death benefits and also offer bonuses.
In some cases, annuity holders die before they can begin collecting annuity income payments.
Before 2002, April 30, 2002, the death benefit had to be equal to or greater than the actual accumulation amount, officials write in the draft letter.
Since April 30, 2002, the New York department “permitted insurers to recapture bonus interest rates or credits from a death benefit … when death occurred within the 12 months immediately following the bonus credit,” officials write.