Weekly Tip: Amendments to the Additional Standards for Index-Linked Payment Adjustment Benefit

 

Weekly Tips

Amendments to the Additional Standards for Index-Linked Payment Adjustment Benefit

4/02/2015

The Insurance Compact reviewed and amended the first of the individual annuity Uniform Standards in the second half of 2014 as part of phases 2, 3, and 4 of the five-year review.  These amendments became effective on March 5th.  Over the course of the next three weeks we will provide some highlights of some of the changes that were made to individual annuity Uniform Standards.  This week we will focus on the amendments made to the Additional Standards for Index-Linked Payment Adjustment Benefit.

The amendments made to the Additional Standards for Index-Linked Payment Adjustment Benefit were substantive in nature.  These amendments expanded the Scope of the Uniform Standards to include individual deferred paid-up non-variable annuities that are in the income payment phase.   These benefits may be added to the contract at issue by rider, amendment or endorsement.  The reasons supporting this change were (1) deferred income annuities were not in the marketplace in 2008 when these standards were developed, and (2) deferred income annuities in the income payment phase are comparable to individual immediate non-variable annuities, to which the standards initially applied.  The Scope of the Uniform Standards has been amended to read:

These standards apply to index-linked annuity payment adjustment benefits that are built-in to individual immediate non-variable annuity contracts or individual deferred paid-up non-variable annuity contracts that are in the income payment phase or that are added to such contracts at issue by rider, amendment or endorsement.  These standards apply to any adjustments to annuity payments that are triggered by a change in an index one or more times during the life of the contract.

Section 1 Additional Submission Requirements B. Actuarial Memorandum (1)(C) has been amended as well to include deferred paid-up non-variable annuities.

If you have any questions regarding the amendments to the Additional Standards for Index-Linked Payment Adjustment Benefit or this Weekly Tip, please reach out to Karen Givens.   If you have any questions regarding the Insurance Compact, please contact the Office.