{"data":{"id":"us-ky/krs-304.15-365","jurisdiction":"us-ky","citation":"KRS 304.15-365","heading":"Standard Nonforfeiture Law for Individual Deferred Annuities of 2005.","body":"(1) This section shall be known as the \"Standard Nonforfeiture Law for Individual\nDeferred Annuities of 2005.\"\n(2) (a) This section shall not apply to any reinsurance gr oup annuity purchased under\na retirement plan or plan of deferred compensation established or maintained\nby an employer, including a partnership or sole proprietorship, or by an\nemployee organization, or by both, other than a plan providing individual\nretirement accounts or individual retirement annuities under Section 408 of\nthe Internal Revenue Code, as now or hereafter amended, premium deposit\nfund, variable annuity, investment annuity, immediate annuity, any deferred\nannuity contract after annuity payme nts have commenced, or reversionary\nannuity, nor to any contract which shall be delivered outside this state through\nan agent or other representative of the insurer issuing the contract.\n(b) However, to the extent that a variable annuity contract provides benefits that\ndo not, before the maturity date, vary in accordance with the investment\nperformance of any separate account or accounts maintained by the insurer as\nto such contract, as provided for in KRS 304.15 -390, the contract shall\ncontain provisions t hat satisfy the requirements of this section and shall not\notherwise be subject to this section.\n(3) (a) In the case of contracts issued on or after July 1, 2006, no contract of annuity,\nexcept as provided in subsection (2) of this section, shall be delive red or\nissued for delivery in this state unless it contains in substance the following\nprovisions, or corresponding provisions which in the opinion of the\ncommissioner are at least as favorable to the contract holder, upon cessation\nof payment of considerations under the contract:\n1. That upon cessation of payment of considerations under a contract, or\nupon the written request of the contract owner, the insurer shall grant a\npaid-up annuity benefit on a plan stipulated in the contract of such value\nas is specified in subsections (8), (9), (10), (11), and (13) of this section;\n2. If a contract provides for a lump sum settlement at maturity, or at any\nother time, that upon surrender of the contract at or prior to the\ncommencement of any annuity payments, the insurer shall pay, in lieu of\nany paid-up annuity benefit, a cash surrender benefit of such amount as\nis specified in subsections (8), (9), (10), (11), and (13) of this section.\nThe insurer may reserve the right to defer the payment of this cash\nsurrender benefit for a period not to exceed six (6) months after demand\ntherefor with surrender of the contract after making written request and\nreceiving written approval of the commissioner. The request shall\naddress the necessity and equitability to all policyholders of the deferral;\n3. A statement of the mortality table, if any, and interest rates used in\ncalculating any minimum paid -up annuity, cash surrender or death\nbenefits that are guaranteed under the contract, together with sufficient\ninformation to determine the amounts of such benefits; and\n4. A statement that any paid -up annuity, cash surrender or death benefits\nthat may be available under the contract are not less than the minimum\nbenefits required by any statute of the state in which the contract is\ndelivered and an explanation of the manner in which these benefits are\naltered by the existence of any additional amounts credited by the\ninsurer to the contract, any indebtedness to the insurer on the contract, or\nany prior withdrawals from or partial surrenders of the contract.\n(b) Notwithstanding the requirements of this subsection, any deferred annuity\ncontract may provide that if no considerations have been received under a\ncontract for a period of two (2) full years and the portion of the paid -up\nannuity benefit at maturity on the plan stipula ted in the contract arising from\nconsiderations paid prior to that period would be less than twenty dollars\n($20) monthly, the insurer may at its option terminate the contract by payment\nin cash of the then -present value of such portion of the paid -up annu ity\nbenefit, calculated on the basis of the mortality table, if any, and interest rate\nspecified in the contract for determining the paid -up annuity benefit, and by\nthis payment shall be relieved of any further obligation under such contract.\n(4) (a) The minimum values as specified in subsections (8), (9), (10), (11), and (13)\nof this section of any paid -up annuity, cash surrender, or death benefits\navailable under an annuity contract shall be based upon minimum\nnonforfeiture amounts as defined in this section.\n(b) The minimum nonforfeiture amount at any time at or prior to the\ncommencement of any annuity payments shall be equal to an accumulation up\nto that time at rates of interest as indicated in subsection (5) of this section of\nthe net considerations, a s defined in paragraph (c) of this subsection, paid\nprior to that time, decreased by the sum of:\n1. Any prior withdrawals from or partial surrenders of the contract\naccumulated at a rate of interest as indicated in subsection (5) of this\nsection;\n2. An annual contract charge of fifty dollars ($50) accumulated at rates of\ninterest as indicated in subsection (5) of this section; and\n3. The amount of any indebtedness to the insurer on the contract, including\ninterest due and accrued.\n(c) The net considerations  for a given contract year used to define the minimum\nnonforfeiture amount shall be an amount equal to eighty -seven and one -half\npercent (87.5%) of gross considerations credited to the contract during that\ncontract year.\n(5) The interest rate used in deter mining minimum nonforfeiture amounts shall be an\nannual rate of interest determined as the lesser of three percent (3%) per annum and\nthe following, which shall be specified in the contract if the interest rate will be\nreset:\n(a) The five (5) year Constant  Maturity Treasury Rate reported by the Federal\nReserve as of a date or average over a period rounded to the nearest one -\ntwentieth of one percent (0.05%), specified in the contract no longer than\nfifteen (15) months prior to the contract issue date or rede termination date\nunder paragraph (d) of this subsection;\n(b) Reduced by one hundred twenty-five (125) basis points;\n(c) Where the resulting interest rate is not less than one percent (1%); and\n(d) The interest rate shall apply for an initial period and may  be redetermined for\nadditional periods. The redetermination date basis and period, if any, shall be\nstated in the contract. The basis is the date or average over a specified period\nthat produces the value of the five (5) year Constant Maturity Treasury Ra te\nto be used at each redetermination date.\n(6) (a) During the period or term that a contract provides substantive participation in\nan equity indexed benefit, it may increase the reduction described in\nsubsection (5)(b) of this section up to an additional one hundred (100) basis\npoints to reflect the value of the equity index benefit.\n(b) The present value at the contract issue date and at each redetermination date\nthereafter of the additional reduction shall not exceed the market value of the\nbenefit.\n(c) The commissioner may require a demonstration that the present value of the\nadditional reduction does not exceed the market value of the benefit.\n(d) Lacking such demonstration that is acceptable to the commissioner, the\ncommissioner may disallow or limit the additional reduction.\n(7) The commissioner may promulgate administrative regulations in accordance with\nKRS Chapter 13A that:\n(a) Implement the provisions of subsection (6) of this section; and\n(b) Provide for further adjustments to the calculation of m inimum nonforfeiture\namounts for:\n1. Contracts that provide substantive participation in an equity index\nbenefit; and\n2. Other contracts for which the commissioner determines adjustments are\njustified.\n(8) (a) Any paid-up annuity benefit available under a contract shall be such that its\npresent value on the date annuity payments are to commence is at least equal\nto the minimum nonforfeiture amount on that date.\n(b) This present value shall be computed using the mortality table, if any, and the\ninterest rates specified in the contract for determining the minimum paid -up\nannuity benefits guaranteed in the contract.\n(9) (a) For contracts which provide cash surrender benefits, the cash surrender\nbenefits available prior to maturity shall not be less than the pre sent value as\nof the date of surrender of that portion of the maturity value of the paid -up\nannuity benefit which would be provided under the contract at maturity\narising from considerations paid prior to the time of cash surrender reduced by\nthe amount ap propriate to reflect any prior withdrawals from or partial\nsurrenders of the contract, the present value being calculated on the basis of\nan interest rate not more than one percent (1%) higher than the interest rate\nspecified in the contract for accumulati ng the net considerations to determine\nthe maturity value, decreased by the amount of any indebtedness to the insurer\non the contract, including interest due and accrued, and increased by any\nexisting additional amounts credited by the insurer to the contract.\n(b) In no event shall any cash surrender benefit be less than the minimum\nnonforfeiture amount at that time.\n(c) The death benefit under the contracts shall be at least equal to the cash\nsurrender benefit.\n(10) (a) For contracts which do not provide cash surrender benefits, the present value\nof any paid-up annuity benefit available as a nonforfeiture option at any ti me\nprior to maturity shall not be less than the present value of that portion of the\nmaturity value of the paid -up annuity benefit provided under the contract\narising from considerations paid prior to the time the contract is surrendered\nin exchange for, o r changed to, a deferred paid -up annuity, the present value\nbeing calculated for the period prior to the maturity date on the basis of the\ninterest rate specified in the contract for accumulating the net considerations\nto determine the maturity value, and increased by any existing additional\namounts credited by the insurer to the contract.\n(b) For contracts which do not provide any death benefits prior to the\ncommencement of any annuity payments, the present values shall be\ncalculated on the basis of the in terest rate and the mortality table specified in\nthe contract for determining the maturity value of the paid-up annuity benefit.\n(c) However, in no event shall the present value of a paid -up annuity benefit be\nless than the minimum nonforfeiture amount at that time.\n(11) For the purpose of determining the benefits calculated under subsections (9) and\n(10) of this section, in the case of annuity contracts under which an election may be\nmade to have annuity payments commence at optional maturity dates, the ma turity\ndate shall be deemed to be the latest date for which election shall be permitted by\nthe contract, but shall not be deemed to be later than the anniversary of the contract\nnext following the annuitant's seventieth birthday or the tenth anniversary of  the\ncontract, whichever is later.\n(12) Any contract which does not provide cash surrender benefits or does not provide\ndeath benefits at least equal to the minimum nonforfeiture amount prior to the\ncommencement of any annuity payments shall include a stat ement in a prominent\nplace in the contract that such benefits are not provided.\n(13) Any paid-up annuity, cash surrender or death benefits available at any time, other\nthan on the contract anniversary under any contract with fixed scheduled\nconsiderations, shall be calculated with allowance for the lapse of time and the\npayment of any scheduled considerations beyond the beginning of the contract year\nin which cessation of payment of considerations under the contract occurs.\n(14) (a) For any contract which p rovides, within the same contract by rider or\nsupplemental contract provision, both annuity benefits and life insurance\nbenefits that are in excess of the greater of cash surrender benefits or a return\nof the gross considerations with interest, the minimum  nonforfeiture benefits\nshall be equal to the sum of the minimum nonforfeiture benefits for the\nannuity portion and the minimum nonforfeiture benefits, if any, for the life\ninsurance portion computed as if each portion were a separate contract.\n(b) Notwithstanding the provisions of subsections (8), (9), (10), (11), and (13) of\nthis section, additional benefits payable:\n1. In the event of total and permanent disability;\n2. As reversionary annuity or deferred reversionary annuity benefits; or\n3. As other poli cy benefits additional to life insurance, endowment and\nannuity benefits, and considerations for all such additional benefits;\nshall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-\nup annuity, cash surrender and death benefits that may be required by this\nsection. The inclusion of these additional benefits shall not be required in any\npaid-up benefits, unless these additional benefits separately would require\nminimum nonforfeiture amounts, paid -up annuity, cash surrender and death\nbenefits.\n(15) Any optional maturity date offered for an annuity contract issued pursuant to this\nsection shall:\n(a) Not impose a surrender charge that is longer than ten (10) years beyond the\noptional maturity date agreed to by the annuitant and the insurer; and\n(b) Be offered to an annuitant before the annuitant attains seventy (70) years of\nage.\n(16) (a) After August 1, 2005, any insurer may file with the commissioner a written\nnotice of its election to apply the provisions of this section on a contract -form\nby contract -form basis to annuity contracts issued by the insurer during the\nperiod from the date of the election through June 30, 2006.\n(b) Insurers shall apply the provisions of this section to annuity contracts issued\non or after July 1, 2006.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57340","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:44Z","sha256":"e218d4937f28b665afec2997a901776783763cc4620f3f77d66d08fc3e5011dc","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.15-360","next":"us-ky/krs-304.15-370"},"notice":"GroundRules: Original legal text. Not legal advice."}