Current through Register Vol. 46, No. 39, September 25, 2024
(a) An insurance
company issuing a contract to which this Part applies is required, prior to the
commitment by the contractholder to enter into the contract, to provide the
plan sponsor (or persons representing the plan sponsor in the discussions with
the insurance company) or, where no plan sponsor exists, the prospective
contractholder (or persons representing the prospective contractholder in
discussions with the insurance company), with a written statement and/or a
specimen copy of the contract which contains all of the disclosures described
in paragraphs (b)(1) through (13) of this section. If a specimen contract is
provided, then a statement shall be supplied specifying where in the contract
the disclosures referred to in paragraphs (b)(1), (3), (4), (5), (6), (9) and
(10) of this section may be found. However, a written statement must be used in
all situations with less than 50 eligible participants under each pension plan
or governmental plan. If the group contract or funding agreement is issued to a
trust participated in by two or more employers or employee organizations, then
the trustee shall be provided with sufficient copies of the written statement
for distribution to each participating employer or employee organization if
there are less than 50 eligible employees of the employer or members of the
employee organization.
(b) A
written statement and/or contract referred to in subdivision (a) of this
section shall contain the following information to the extent applicable:
(1) a statement indicating restrictions as to
the amounts (whether minimum or maximum), and the timing of the contributions
under the contract (as well as the grace period, if any, for any required
contribution), and the duration of the contributions to be made to the
insurance company under the contract, including, if applicable, a description
of any charges or market value adjustments including liquidated damages which
may become applicable, or a statement that the contract may be terminated or
discontinued, in the event such contributions are not made in the amounts or on
the dates specified;
(2) a
description of the rights of the parties to a contract to cause the payment of
contributions under the contract to be discontinued, including, if applicable,
a description of any charges or market value adjustments including liquidated
damages, or damages on termination or discontinuance of the contract which may
result in the event the payment of contributions under the contract is
discontinued or, if such charges or adjustments are not fully determinable at
the commencement of the contract, a general description of the method to be
used by the insurance company in determining such charges or
adjustments;
(3) a statement of all
current fees and charges that are or may be assessed directly to the
contractholder or directly deducted by the insurance company from the
accumulation fund including a description of the extent and frequency to which
such fees and charges may be modified by the insurance company, and the extent
to which such fees and charges may take precedence over any payments to be made
by the insurance company under the contract;
(4) a statement of the interest rates to be
credited by the insurance company to the accumulation fund, or if such interest
rates are not fully determinable at the commencement of the contract, a general
description of the method to be used by the insurance company in determining
such interest rates stating, if applicable, that such interest rates are
affected by the investment experience of the assets held in the insurance
company's general account, and that the determination of such interest rates is
subject to the insurance company's discretion together with a statement,
describing how any withdrawals, transfers or payments will affect the amount of
interest credited;
(5) a
description of any expense, interest and benefit guarantees provided by the
insurance company under the contract, including a description of the duration
of such guarantees, and, if applicable, a description of the insurance
company's right under the contract to modify or eliminate such guarantees,
including the right in section
40.4(e) of this
Part to apply surrender charges or market value adjustments to withdrawals used
to pay plan benefits if there are plan amendments or changes in the manner in
which the plan is administered that adversely affect the insurance company's
rights or liabilities under the contract;
(6) a description of the rights which the
contractholder and/or participants have to withdraw all or a portion of the
accumulation fund (or to apply such withdrawn amounts to the purchase of
guaranteed benefits or to the payment of benefits), and the terms under which
such withdrawals or applications may be made including a description of any
charges, fees or market value adjustments, both plus or minus, applicable to or
occasioned by such withdrawals or applications, or if such charges, fees, or
adjustments are not fully determinable at the commencement of the contract, a
general description of the method to be used by the insurance company in
determining same or a statement which discloses that no withdrawals or payments
are permitted prior to the maturity of a guarantee or the happening of a
certain event or events. If a full withdrawal by the contractholder is or may
be paid by the insurance company in installments, the description must include:
(i) the duration of the installment period,
or if such duration is not fully determinable at the commencement of the
contract, a general description of the method to be used by the insurance
company in determining such duration;
(ii) the amount, or method to be used by the
insurance company in determining the amount of each installment payment and the
effect of each such payment on the investment income credited to the
accumulation fund;
(iii) the
interest rates to be credited by the insurance company to the accumulation fund
during the installment period, or if such interest rates are not fully
determinable at the commencement of the contract, a general description of the
method to be used by the insurance company in determining such interest rates;
and
(iv) a statement whether a
withdrawal to fund plan benefits is prohibited or restricted during the
installment payout period;
(7) a statement indicating any pro rata,
percentage or other limitations which may apply to benefit payments to be
purchased or provided under the contract when the plan is not funded entirely
under the contract;
(8) a statement
is applicable, that contractholder or participant initiated withdrawals of all
or a portion of the accumulation fund of the contract are to be made on a
"first-in, first-out" (FIFO) or "last-in, first-out" (LIFO) basis or other
applicable basis;
(9) a statement,
if applicable, that the contract may be amended or the insurance company's
contractual rights, if any, to unilaterally modify the terms of the contract
without the consent of the contractholder, including amendments necessary to
keep the contract in compliance with law;
(10) a statement, if applicable, indicating
that the payment and amount of dividends or experience rate credits, if any,
which may be payable by the insurance company under the contract, are subject
to the insurance company's discretion;
(11) a statement, if applicable, that the
duration of the assets supporting the contract's liabilities will affect the
timing of withdrawals under the contract and that general information
describing such assets and the amount of time it will take the contractholder
to withdraw funds from the contract because of such assets, so affecting the
timing of withdrawal rights, will be supplied by the insurance company upon the
contractholder's request;
(12) a
statement that the contractholder or plan sponsor (or the person who is
negotiating the acquisition of the contract) is solely responsible for
determining whether the contract is a suitable funding vehicle and should,
therefore, carefully read the terms of the contract and the disclosure
statement, if any, before entering into the contract; and
(13) a statement, if applicable, that the
insurance company does not have the responsibility to reconcile participants'
individual account balances with the accumulation fund balance where the
insurance company does not maintain individual account balances.
(c) When contracts are submitted
for approval, the superintendent may request the filing of the written
disclosure statement referred to in subdivision (a) of this section.
