BILL NUMBER: S2793

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law, in relation to permissible group
annuity contracts

 
PURPOSE:

This bill would amend S 4238 of the insurance law to permit life insur-
ers to issue an additional type of group annuity contract.

 
SUMMARY OF PROVISIONS:

This bill would amend subsection (b) of S 4238 of the insurance law by
adding a new paragraph (12) to permit the issuance of a synthetic group
annuity contract to another insurer's separate account.

 
JUSTIFICATION:

              

The amendments to this bill will permit the issuance of a group annuity
contract to another insurer's separate account, as an alternative to the
use of a funding agreement. Separate accounts are often used by insurers
in connection with corporate owned (COLT) and bank owned (BOLT) life
insurance policies, as well as for the benefit of ERISA plans, employee
benefit plans and deferred compensation arrangements, and other analo-
gous structures. The provisions of this bill would allow a New York
insurer to obtain and implement synthetic stable value mechanics related
to: (i) COLT and BOLL insurance policies issued by such insurer and
supported by assets held by such insurer in a separate account, as well
as (ii) separate accounts established by such New York insurer for the
benefit of ERISA plans, employee benefit plans, or deferred compensation
or analogous structures, through the purchase of a synthetic group annu-
ity contract from another insurer.

Synthetic group annuity contracts do not clearly fit within any of the
current eligible categories for the group annuity contracts identified
in S 4238(b) of New York Insurance Law. Adding an additional eligible,
category to the law that expressly permits the use of a synthetic group
annuity contract would give New'York insurers engaged in the business of
providing stable value wraps greater flexibility in offering these
products when addressing the needs of a prospective New York customer
(generally, a stable value wrap is a contract issued by an insurer that
provides for a specified rate of return for a specific period of time,
provides book value accounting, and may make payments in the event of
certain qualifying redemptions).

Business clients often prefer synthetic group annuity contracts for
various reasons, which include (i) greater flexibility and the potential
for lower asset management fees, (ii) reduced asset risk because the
assets are not transferred to the wrap provider, (iii) reduced credit
exposure and (iv) greater ability to replace the asset manager given
that they will not maintain the assets. According to the Stable Value
Investment Association, as of December 31, 2012, approximately 40' of
all stable value investments in the U.S. were in synthetic investment
contracts.


The proposal would bring New York law in line with the prevailing use of
synthetic group annuity contracts in the 401(k) plan and would facili-
tate compliance with tax diversification requirements applicable to
funds or divisions underlying variable products which, have stable value
wraps associated with them.

 
LEGISLATIVE HISTORY:

S.3768 of 2021-22;

S.3503 of 2019-20;

S.707 of 2018;

S.6562 of 2016.

 
EFFECTIVE DATE:
Immediately.