SENATORS Nein, Robert Gardner, Armbruster, Schuler, Stivers, Mumper

To amend sections 3915.02, 3915.073, and 3915.14 of

1

the Revised Code to adopt a new formula for

2

determining the minimum nonforfeiture value of an

3

individual deferred annuity, to require insurance

4

companies to obtain the Superintendent of

5

Insurance's approval prior to deferring the

6

payment of a cash surrender benefit, and to

7

prohibit the delivery or use of an annuity

8

contract and its related endorsements for thirty

9

days after the form of the contract or endorsement

10

is filed with the Superintendent, unless earlier

11

approved by the Superintendent, and to amend the

12

version of section 3915.073 of the Revised Code as

13

results from this act two years after the act's

14

effective date.

15

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 3915.02, 3915.073, and 3915.14 of	16
the Revised Code be amended to read as follows:	17

Sec. 3915.02.  This chapter does not apply to annuities	18
except as provided in sections 3915.051, 3915.073, 3915.14, and	19
3915.21 to 3915.24 of the Revised Code, industrial policies except	20
as provided in sections 3915.07 and 3915.071 of the Revised Code,	21
fraternal benefit societies, corporations or associations	22
operating on the assessment plan, or corporations or associations	23
which have been organized under sections 3919.01 to 3919.19 of the	24
Revised Code, except corporations and associations which, as of	25
September 28, 1933, have amended their articles of incorporation	26
under section 3919.13 of the Revised Code.	27

Sec. 3915.073.  (A) This section shall be known as the	28
standard nonforfeiture law for individual deferred annuities.	29

(B) This section does not apply to any reinsurance, group	30
annuity purchased under a retirement plan or plan of deferred	31
compensation established or maintained by an employer, including a	32
partnership or sole proprietorship, or by an employee	33
organization, or by both, other than a plan providing individual	34
retirement accounts or individual retirement annuities under	35
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	36
as amended, premium deposit fund, variable annuity, investment	37
annuity, immediate annuity, any deferred annuity contract after	38
annuity payments have commenced, or reversionary annuity, nor to	39
any contract which is delivered outside this state through an	40
agent or other representative of the company issuing the contract.	41

(C) In the case of contracts issued on or after the operative	42
date of this section as defined in division (L)(M) of this	43
section, no contract of annuity, except as stated in division (B)	44
of this section, shall be delivered or issued for delivery in this	45
state unless itthe contract contains in substance the following	46
provisions, or corresponding provisions that in the opinion of the	47
superintendent of insurance are at least as favorable to the	48
contractholder, uponcontract owners, relative to the cessation of	49
payment of consideration under the contract:	50

(1) That upon cessation of payment of considerations under a	51
contract, or upon the written request of the contract owner, the	52
company willshall grant a paid-up annuity benefit on a plan	53
stipulated in the contract of such value as is specified in	54
divisions (E), (F), (G), (H), and (J) of this section;	55

(2) If a contract provides for a lump sum settlement at	56
maturity, or at any other time, that upon surrender of the	57
contract at or prior to the commencement of any annuity payments,	58
the company willshall pay in lieu of any paid-up annuity benefit	59
a cash surrender benefit of such amount as is specified in	60
divisions (E), (F), (H), and (J) of this section. The company	61
shallmay reserve the right to defer the payment of such cash	62
surrender benefit for a period ofnot to exceed six months after	63
demand therefor with surrender of the contract. The deferral is	64
contingent upon the company's conveyance of a written request for	65
the deferral to the superintendent and the company's receipt of	66
written approval from the superintendent for the deferral. The	67
request shall address the necessity and equitability to all	68
contract owners of the deferral.	69

(3) A statement of the mortality table, if any, and interest	70
rates used in calculating any minimum paid-up annuity, cash	71
surrender, or death benefits that are guaranteed under the	72
contract, together with sufficient information to determine the	73
amounts of such benefits;	74

(4) A statement that any paid-up annuity, cash surrender, or	75
death benefits that may be available under the contract are not	76
less than the minimum benefits required by any statute of the	77
state in which the contract is delivered and an explanation of the	78
manner in which such benefits are altered by the existence of any	79
additional amounts credited by the company to the contract, any	80
indebtedness to the company on the contract, or any prior	81
withdrawals from or partial surrenders of the contract.	82

Notwithstanding the requirements of this section, any	83
deferred annuity contract may provide that if no considerations	84
have been received under a contract for a period of two full years	85
and the portion of the paid-up annuity benefit at maturity on the	86
plan stipulated in the contract arising from considerations paid	87
prior to such period would be less than twenty dollars monthly,	88
the company may at its option terminate such contract by payment	89
in cash of the then present value of such portion of the paid-up	90
annuity benefit, calculated on the basis of the mortality table,	91
if any, and interest rate specified in the contract for	92
determining the paid-up annuity benefit, and by such payment shall	93
be relieved of any further obligation under such contract.	94

(D) The minimum values as specified in divisions (E), (F),	95
(G), (H), and (J) of this section of any paid-up annuity, cash	96
surrender, or death benefits available under an annuity contract	97
shall be based upon minimum nonforfeiture amounts as defined in	98
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	99
(7) of this section.	100

(1) With respect to contracts providing for flexible	101
considerations, the minimum nonforfeiture amount at any time at or	102
prior to the commencement of any annuity payments shall be equal	103
to an accumulation up to such time at a rate of interest of three	104
one and one-half per cent per annum of percentages of the net	105
considerations, as defined in division (D)(1) of this section,	106
paid prior to such time, decreased by the sum of:	107

(a) Any prior withdrawals from or partial surrenders of the	108
contract accumulated at a rate of interest of threeone and	109
one-half per cent per annum; and	110

(b) The amount of any indebtedness to the company on the	111
contract, including interest due and accrued; and increased by any	112
existing additional amounts credited by the company to the	113
contract.	114

The net considerations for a given contract year used to	115
define the minimum nonforfeiture amount shall be an amount not	116
less than zero and shall be equal to the corresponding gross	117
considerations credited to the contract during that contract year	118
less an annual contract charge of thirty dollars and less a	119
collection charge of one dollar and twenty-five cents per	120
consideration credited to the contract during that contract year.	121
The percentages of net considerations shall be sixty-five per cent	122
of the net consideration for the first contract year and	123
eighty-seven and one-half per cent of the net considerations for	124
the second and later contract years. Notwithstanding the	125
provisions of the preceding sentence, the percentage shall be	126
sixty-five per cent of the portion of the total net consideration	127
for any renewal contract year that exceeds by not more than two	128
times the sum of those portions of the net considerations in all	129
prior contract years for which the percentage was sixty-five per	130
cent.	131

Notwithstanding any other provision of this section, for any	132
contract issued on or after the effective date of this amendment,	133
and before September 1, 2004, the interest rate at which net	134
considerations, partial withdrawals, and partial surrenders shall	135
be accumulated for purposes of determining minimum nonforfeiture	136
amounts shall be one and one-half per cent per annum.	137

(2) With respect to contracts providing for fixed scheduled	138
considerations, minimum nonforfeiture amounts shall be calculated	139
on the assumption that considerations are paid annually in advance	140
and shall be defined as for contracts with flexible considerations	141
which are paid annually with two exceptions:	142

(a) The portion of the net consideration for the first	143
contract year to be accumulated shall be the sum of sixty-five per	144
cent of the net consideration for the first contract year plus	145
twenty-two and one-half per cent of the excess of the net	146
consideration for the first contract year over the lesser of the	147
net considerations for the second and third contract years;	148

(b) The annual contract charge shall be the lesser of (i)	149
thirty dollars or (ii) ten per cent of the gross annual	150
consideration.	151

(3) With respect to contracts providing for a single	152
consideration, minimum nonforfeiture amounts shall be defined as	153
for contracts with flexible considerations except that the	154
percentage of net consideration used to determine the minimum	155
nonforfeiture amount shall be equal to ninety per cent and the net	156
consideration shall be the gross consideration less a contract	157
charge of seventy-five dollars.	158

(4)(a) The minimum nonforfeiture amount at any time at or	159
prior to the commencement of any annuity payments shall be equal	160
to an accumulation up to such time at rates of interest determined	161
in accordance with division (D)(5) of this section of the net	162
considerations, determined in accordance with division (D)(4)(b)	163
of this section, paid prior to such time, decreased by the sum of:	164

(i) Any prior withdrawals from or partial surrenders of the	165
contract, accumulated at rates of interest determined in	166
accordance with division (D)(5) of this section;	167

(ii) An annual contract charge of fifty dollars, accumulated	168
at rates of interest determined in accordance with division (D)(5)	169
of this section;	170

(iii) Any premium tax paid by the company for the contract,	171
accumulated at rates of interest determined in accordance with	172
division (D)(5) of this section;	173

(iv) The amount of any indebtedness to the company on the	174
contract, including interest due and accrued.	175

(b) The net considerations for a given contract year used to	176
define the minimum nonforfeiture amount shall be an amount equal	177
to eighty-seven and one-half per cent of the gross considerations	178
credited to the contract during that contract year.	179

(5)(a) The interest rate used in determining minimum	180
nonforfeiture amounts under divisions (D)(4) to (D)(7) of this	181
section shall be an annual rate of interest determined as the	182
lesser of three per cent per annum or the following:	183

(i) The five-year constant maturity treasury rate reported by	184
the federal reserve as of a date or an average over a period, as	185
specified in the contract, rounded to the nearest one-twentieth of	186
one per cent, with a period extending no longer than fifteen	187
months prior to the contract issue date or the redetermination	188
date specified in division (D)(5)(b) of this section;	189

(ii) Reduced by one hundred twenty-five basis points;

190

(iii) Where the resulting interest rate is not less than one	191
per cent.	192

(b) The interest rate determined under division (D)(5)(a) of	193
this section shall apply for an initial period and may be	194
redetermined for additional periods. The redetermination date,	195
basis and period, if any, shall be stated in the contract. The	196
basis is the date or average over a specified period that produces	197
the value of the five-year constant maturity treasury rate to be	198
used at each redetermination date.	199

(6) During the period or term that a contract provides	200
substantative participation in an equity-indexed benefit, the	201
contract may provide for an increase in the reduction described in	202
division (D)(5)(a)(ii) of this section by a maximum of one hundred	203
basis points to reflect the value of the equity-indexed benefit.	204
The present value at the contract issue date, and at each	205
redetermination date thereafter, of the additional reduction shall	206
not exceed the market value of the benefit. The superintendent may	207
require a demonstration that the present value of the additional	208
reduction does not exceed the market value of the benefit. If the	209
demonstration is not acceptable to the superintendent, the	210
superintendent may disallow or limit the additional reduction.	211

(7) The superintendent may adopt rules to implement division	212
(D)(6) of this section and to provide for further adjustments to	213
the calculation of minimum nonforfeiture amounts for contracts	214
that provide substantive participation in an equity-indexed	215
benefit and for other contracts for which the superintendent	216
determines adjustments are justified.	217

(E) Any paid-up annuity benefit available under a contract	218
shall be such that its present value on the date annuity payments	219
are to commence is at least equal to the minimum nonforfeiture	220
amount on that date. Such present value shall be computed using	221
the mortality table, if any, and the interest rate specified in	222
the contract for determining the minimum paid-up annuity benefits	223
guaranteed in the contract.	224

(F) For contracts which provide cash surrender benefits, such	225
cash surrender benefits available prior to maturity shall not be	226
less than the present value as of the date of surrender of that	227
portion of the maturity value of the paid-up annuity benefit that	228
would be provided under the contract at maturity arising from	229
considerations paid prior to the time of cash surrender reduced by	230
the amount appropriate to reflect any prior withdrawals from or	231
partial surrenders of the contract, such present value being	232
calculated on the basis of an interest rate not more than one per	233
cent higher than the interest rate specified in the contract for	234
accumulating the net considerations to determine such maturity	235
value, decreased by the amount of any indebtedness to the company	236
on the contract, including interest due and accrued, and increased	237
by any existing additional amounts credited by the company to the	238
contract. In no event shall any cash surrender benefit be less	239
than the minimum nonforfeiture amount at that time. The death	240
benefit under such contracts shall be at least equal to the cash	241
surrender benefit.	242

(G) For contracts that do not provide cash surrender	243
benefits, the present value of any paid-up annuity benefit	244
available as a nonforfeiture option at any time prior to maturity	245
shall not be less than the present value of that portion of the	246
maturity value of the paid-up annuity benefit provided under the	247
contract arising from considerations paid prior to the time the	248
contract is surrendered in exchange for, or changed to, a deferred	249
paid-up annuity, such present value being calculated for the	250
period prior to the maturity date on the basis of the interest	251
rate specified in the contract for accumulating the net	252
considerations to determine such maturity value, and increased by	253
any existing additional amounts credited by the company to the	254
contract. For contracts that do not provide any death benefits	255
prior to the commencement of any annuity payments, such present	256
values shall be calculated on the basis of such interest rate and	257
the mortality table specified in the contract for determining the	258
maturity value of the paid-up annuity benefit. However, in no	259
event shall the present value of a paid-up annuity benefit be less	260
than the minimum nonforfeiture amount at that time.	261

(H) For the purpose of determining the benefits calculated	262
under divisions (F) and (G) of this section, in the case of	263
annuity contracts under which an election may be made to have	264
annuity payments commence at optional maturity dates, the maturity	265
date shall be deemed to be the latest date for which election	266
shall be permitted by the contract, but shall not be deemed to be	267
later than the anniversary of the contract next following the	268
annuitant's seventieth birthday or the tenth anniversary of the	269
contract, whichever is later.	270

(I) Any contract that does not provide cash surrender	271
benefits or does not provide death benefits at least equal to the	272
minimum nonforfeiture amount prior to the commencement of any	273
annuity payments shall include a statement in a prominent place in	274
the contract that such benefits are not provided.	275

(J) Any paid-up annuity, cash surrender, or death benefits	276
available at any time, other than on the contract anniversary	277
under any contract with fixed scheduled considerations, shall be	278
calculated with allowance for the lapse of time and the payment of	279
any scheduled considerations beyond the beginning of the contract	280
year in which cessation of payment of considerations under the	281
contract occurs.	282

(K) For any contract that provides, within the same contract	283
by rider or supplemental contract provision, both annuity benefits	284
and life insurance benefits that are in excess of the greater of	285
cash surrender benefits or a return of the gross considerations	286
with interest, the minimum nonforfeiture benefit shall be equal to	287
the sum of the minimum nonforfeiture benefits for the annuity	288
portion and the minimum nonforfeiture benefits, if any, for the	289
life insurance portion computed as if each portion were a separate	290
contract. Notwithstanding the provisions of divisions (E), (F),	291
(G), (H), and (J) of this section, additional benefits payable:	292

(1) In the event of total and permanent disability;

293

(2) As reversionary annuity or deferred reversionary annuity	294
benefits; or	295

(3) As other policy benefits additional to life insurance,	296
endowment and annuity benefits, and considerations for all such	297
additional benefits shall be disregarded in ascertaining the	298
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	299
and death benefits that may be required by this section.	300

The inclusion of such additional benefits shall not be	301
required in any paid-up benefits, unless such additional benefits	302
separately would require minimum nonforfeiture amounts, paid-up	303
annuity, cash surrender, and death benefits.	304

(L) Any company may file with the superintendent a written	305
notice of its election to comply with the provisions of this	306
section on or before July 1, 1980. The date specified in the	307
notice shall be the operative date of this section for such	308
company. If a company makes no such election, the operative date	309
of this section for the company shall be July 1, 1980.The	310
superintendent may adopt rules in accordance with Chapter 119. of	311
the Revised Code to implement this section.	312

(M) Before the second anniversary of the effective date of	313
this amendment, a company may elect to apply this section to	314
annuity contracts on a contract-form-by-contract-form basis by	315
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	316
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	317
of this section shall be repealed on the second anniversary date	318
of the effective date of this amendment.	319

Sec. 3915.14. (A) No policy of life insurance, nor any	320
indorsement, rider, or application which becomes or is designed to	321
become a part of any such policy, shall be delivered, issued for	322
delivery, or used in this state, or be issued by a life insurance	323
company organized under the laws of this state, until thirty days	324
after the form of said policy, indorsement, rider, or application	325
has been filed with the superintendent of insurance, unless within	326
suchthat time the superintendent gives the insurerinsurance	327
company written approval for the use of suchthe form. When	328

(B) No individual or group annuity policy or contract,	329
including, but not limited to, a guaranteed investment contract,	330
deposit administration contract, funding agreement, structured	331
settlement agreement, or similar types, excluding those required	332
to be filed with the superintendent pursuant to section 3911.011	333
of the Revised Code, and no certificate, endorsement, rider, or	334
application which becomes or is designed to become a part of any	335
such policy, contract, or agreement, shall be delivered, issued	336
for delivery, or used in this state, or shall be issued by a life	337
insurance company organized under the laws of this state, until	338
thirty days after the form of the policy, contract, agreement,	339
certificate, endorsement, rider, or application has been filed	340
with the superintendent, unless within that time the	341
superintendent gives the insurance company written approval for	342
the use of the form.	343

(C) When the superintendent finds within such thirty-day	344
period that the form filed contains any language whichthat is	345
prohibited by any law of this state, including any rule of the	346
superintendent, or is inconsistent, ambiguous, misleading,	347
deceptive, or likely to mislead an applicant or policyholder, he	348
the superintendent shall give written notice of such finding to	349
any insurer whichthe insurance company that filed suchthe form,	350
and thereafter itthe insurance company shall not deliver, issue	351
for delivery, or use suchthe form.	352

The superintendent's action is subject to review by any court	353
of competent jursdictionjurisdiction, subject to Chapter 119. of	354
the Revised Code.	355

Section 2. That existing sections 3915.02, 3915.073, and	356
3915.14 of the Revised Code are hereby repealed.	357

Section 3. That section 3915.073 of the Revised Code as it	358
results from Section 1 of this act be amended to read as follows:	359

Sec. 3915.073.  (A) This section shall be known as the	360
standard nonforfeiture law for individual deferred annuities.	361

(B) This section does not apply to any reinsurance, group	362
annuity purchased under a retirement plan or plan of deferred	363
compensation established or maintained by an employer, including a	364
partnership or sole proprietorship, or by an employee	365
organization, or by both, other than a plan providing individual	366
retirement accounts or individual retirement annuities under	367
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A. 408,	368
as amended, premium deposit fund, variable annuity, investment	369
annuity, immediate annuity, any deferred annuity contract after	370
annuity payments have commenced, or reversionary annuity, nor to	371
any contract which is delivered outside this state through an	372
agent or other representative of the company issuing the contract.	373

(C) In the case of contracts issued on or after the operative	374
date of this section as defined in division (M) of this section,	375
noNo contract of annuity, except as stated in division (B) of	376
this section, shall be delivered or issued for delivery in this	377
state unless the contract contains in substance the following	378
provisions, or corresponding provisions that in the opinion of the	379
superintendent of insurance are at least as favorable to the	380
contract owners, relative to the cessation of payment of	381
consideration under the contract:	382

(1) That upon cessation of payment of considerations under a	383
contract, or upon the written request of the contract owner, the	384
company shall grant a paid-up annuity benefit on a plan stipulated	385
in the contract of such value as is specified in divisions (E),	386
(F), (G), (H), and (J) of this section;	387

(2) If a contract provides for a lump sum settlement at	388
maturity, or at any other time, that upon surrender of the	389
contract at or prior to the commencement of any annuity payments,	390
the company shall pay in lieu of any paid-up annuity benefit a	391
cash surrender benefit of such amount as is specified in divisions	392
(E), (F), (H), and (J) of this section. The company may reserve	393
the right to defer the payment of such cash surrender benefit for	394
a period not to exceed six months after demand therefor with	395
surrender of the contract. The deferral is contingent upon the	396
company's conveyance of a written request for the deferral to the	397
superintendent and the company's receipt of written approval from	398
the superintendent for the deferral. The request shall address the	399
necessity and equitability to all contract owners of the deferral.	400

(3) A statement of the mortality table, if any, and interest	401
rates used in calculating any minimum paid-up annuity, cash	402
surrender, or death benefits that are guaranteed under the	403
contract, together with sufficient information to determine the	404
amounts of such benefits;	405

(4) A statement that any paid-up annuity, cash surrender, or	406
death benefits that may be available under the contract are not	407
less than the minimum benefits required by any statute of the	408
state in which the contract is delivered and an explanation of the	409
manner in which such benefits are altered by the existence of any	410
additional amounts credited by the company to the contract, any	411
indebtedness to the company on the contract, or any prior	412
withdrawals from or partial surrenders of the contract.	413

Notwithstanding the requirements of this section, any	414
deferred annuity contract may provide that if no considerations	415
have been received under a contract for a period of two full years	416
and the portion of the paid-up annuity benefit at maturity on the	417
plan stipulated in the contract arising from considerations paid	418
prior to such period would be less than twenty dollars monthly,	419
the company may at its option terminate such contract by payment	420
in cash of the then present value of such portion of the paid-up	421
annuity benefit, calculated on the basis of the mortality table,	422
if any, and interest rate specified in the contract for	423
determining the paid-up annuity benefit, and by such payment shall	424
be relieved of any further obligation under such contract.	425

(D) The minimum values as specified in divisions (E), (F),	426
(G), (H), and (J) of this section of any paid-up annuity, cash	427
surrender, or death benefits available under an annuity contract	428
shall be based upon minimum nonforfeiture amounts as defined in	429
divisions (D)(1), (2), and (3) or divisions (D)(4), (5), (6), and	430
(7) of this sectiondivision.	431

(1) With respect to contracts providing for flexible	432
considerations, the minimum nonforfeiture amount at any time at or	433
prior to the commencement of any annuity payments shall be equal	434
to an accumulation up to such time at a rate of interest of one	435
and one-half per cent per annum of percentages of the net	436
considerations, as defined in division (D)(1) of this section,	437
paid prior to such time, decreased by the sum of:	438

(a) Any prior withdrawals from or partial surrenders of the	439
contract accumulated at a rate of interest of one and one-half per	440
cent per annum;	441

(b) The amount of any indebtedness to the company on the	442
contract, including interest due and accrued; and increased by any	443
existing additional amounts credited by the company to the	444
contract.	445

The net considerations for a given contract year used to	446
define the minimum nonforfeiture amount shall be an amount not	447
less than zero and shall be equal to the corresponding gross	448
considerations credited to the contract during that contract year	449
less an annual contract charge of thirty dollars and less a	450
collection charge of one dollar and twenty-five cents per	451
consideration credited to the contract during that contract year.	452
The percentages of net considerations shall be sixty-five per cent	453
of the net consideration for the first contract year and	454
eighty-seven and one-half per cent of the net considerations for	455
the second and later contract years. Notwithstanding the	456
provisions of the preceding sentence, the percentage shall be	457
sixty-five per cent of the portion of the total net consideration	458
for any renewal contract year that exceeds by not more than two	459
times the sum of those portions of the net considerations in all	460
prior contract years for which the percentage was sixty-five per	461
cent.	462

(2) With respect to contracts providing for fixed scheduled	463
considerations, minimum nonforfeiture amounts shall be calculated	464
on the assumption that considerations are paid annually in advance	465
and shall be defined as for contracts with flexible considerations	466
which are paid annually with two exceptions:	467

(a) The portion of the net consideration for the first	468
contract year to be accumulated shall be the sum of sixty-five per	469
cent of the net consideration for the first contract year plus	470
twenty-two and one-half per cent of the excess of the net	471
consideration for the first contract year over the lesser of the	472
net considerations for the second and third contract years;	473

(b) The annual contract charge shall be the lesser of (i)	474
thirty dollars or (ii) ten per cent of the gross annual	475
consideration.	476

(3) With respect to contracts providing for a single	477
consideration, minimum nonforfeiture amounts shall be defined as	478
for contracts with flexible considerations except that the	479
percentage of net consideration used to determine the minimum	480
nonforfeiture amount shall be equal to ninety per cent and the net	481
consideration shall be the gross consideration less a contract	482
charge of seventy-five dollars.	483

(4)(a) The minimum nonforfeiture amount at any time at or	484
prior to the commencement of any annuity payments shall be equal	485
to an accumulation up to such time at rates of interest determined	486
in accordance with division (D)(5)(2) of this section of the net	487
considerations, determined in accordance with division	488
(D)(4)(1)(b) of this section, paid prior to such time, decreased	489
by the sum of:	490

(i) Any prior withdrawals from or partial surrenders of the	491
contract, accumulated at rates of interest determined in	492
accordance with division (D)(5)(2) of this section;	493

(ii) An annual contract charge of fifty dollars, accumulated	494
at rates of interest determined in accordance with division	495
(D)(5)(2) of this section;	496

(iii) Any premium tax paid by the company for the contract,	497
accumulated at rates of interest determined in accordance with	498
division (D)(5)(2) of this section;	499

(iv) The amount of any indebtedness to the company on the	500
contract, including interest due and accrued.	501

(b) The net considerations for a given contract year used to	502
define the minimum nonforfeiture amount shall be an amount equal	503
to eighty-seven and one-half per cent of the gross considerations	504
credited to the contract during that contract year.	505

(5)(2)(a) The interest rate used in determining minimum	506
nonforfeiture amounts under divisions (D)(4)(1) to (7)(4) of this	507
section shall be an annual rate of interest determined as the	508
lesser of three per cent per annum andor the following:	509

(i) The five-year constant maturity treasury rate reported by	510
the federal reserve as of a date or an average over a period, as	511
specified in the contract, rounded to the nearest one-twentieth of	512
one per cent, with a period extending no longer than fifteen	513
months prior to the contract issue date or the redetermination	514
date specified in division (D)(5)(2)(b) of this section;	515

(ii) Reduced by one hundred twenty-five basis points;

516

(iii) Where the resulting interest rate is not less than one	517
per cent.	518

(b) The interest rate determined under division (D)(5)(2)(a)	519
of this section shall apply for an initial period and may be	520
redetermined for additional periods. The redetermination date,	521
basis and period, if any, shall be stated in the contract. The	522
basis is the date or average over a specified period that produces	523
the value of the five-year constant maturity treasury rate to be	524
used at each redetermination date.	525

(6)(3) During the period or term that a contract provides	526
substantative participation in an equity-indexed benefit, the	527
contract may provide for an increase in the reduction described in	528
division (D)(5)(2)(a)(ii) of this section by a maximum of one	529
hundred basis points to reflect the value of the equity-indexed	530
benefit. The present value at the contract issue date, and at each	531
redetermination date thereafter, of the additional reduction shall	532
not exceed the market value of the benefit. The superintendent may	533
require a demonstration that the present value of the additional	534
reduction does not exceed the market value of the benefit. If the	535
demonstration is not acceptable to the superintendent, the	536
superintendent may disallow or limit the additional reduction.	537

(7)(4) The superintendent may adopt rules to implement	538
division (D)(6)(3) of this section and to provide for further	539
adjustments to the calculation of minimum nonforfeiture amounts	540
for contracts that provide substantive participation in an	541
equity-indexed benefit and for other contracts for which the	542
superintendent determines adjustments are justified.	543

(E) Any paid-up annuity benefit available under a contract	544
shall be such that its present value on the date annuity payments	545
are to commence is at least equal to the minimum nonforfeiture	546
amount on that date. Such present value shall be computed using	547
the mortality table, if any, and the interest rate specified in	548
the contract for determining the minimum paid-up annuity benefits	549
guaranteed in the contract.	550

(F) For contracts which provide cash surrender benefits, such	551
cash surrender benefits available prior to maturity shall not be	552
less than the present value as of the date of surrender of that	553
portion of the maturity value of the paid-up annuity benefit that	554
would be provided under the contract at maturity arising from	555
considerations paid prior to the time of cash surrender reduced by	556
the amount appropriate to reflect any prior withdrawals from or	557
partial surrenders of the contract, such present value being	558
calculated on the basis of an interest rate not more than one per	559
cent higher than the interest rate specified in the contract for	560
accumulating the net considerations to determine such maturity	561
value, decreased by the amount of any indebtedness to the company	562
on the contract, including interest due and accrued, and increased	563
by any existing additional amounts credited by the company to the	564
contract. In no event shall any cash surrender benefit be less	565
than the minimum nonforfeiture amount at that time. The death	566
benefit under such contracts shall be at least equal to the cash	567
surrender benefit.	568

(G) For contracts that do not provide cash surrender	569
benefits, the present value of any paid-up annuity benefit	570
available as a nonforfeiture option at any time prior to maturity	571
shall not be less than the present value of that portion of the	572
maturity value of the paid-up annuity benefit provided under the	573
contract arising from considerations paid prior to the time the	574
contract is surrendered in exchange for, or changed to, a deferred	575
paid-up annuity, such present value being calculated for the	576
period prior to the maturity date on the basis of the interest	577
rate specified in the contract for accumulating the net	578
considerations to determine such maturity value, and increased by	579
any existing additional amounts credited by the company to the	580
contract. For contracts that do not provide any death benefits	581
prior to the commencement of any annuity payments, such present	582
values shall be calculated on the basis of such interest rate and	583
the mortality table specified in the contract for determining the	584
maturity value of the paid-up annuity benefit. However, in no	585
event shall the present value of a paid-up annuity benefit be less	586
than the minimum nonforfeiture amount at that time.	587

(H) For the purpose of determining the benefits calculated	588
under divisions (F) and (G) of this section, in the case of	589
annuity contracts under which an election may be made to have	590
annuity payments commence at optional maturity dates, the maturity	591
date shall be deemed to be the latest date for which election	592
shall be permitted by the contract, but shall not be deemed to be	593
later than the anniversary of the contract next following the	594
annuitant's seventieth birthday or the tenth anniversary of the	595
contract, whichever is later.	596

(I) Any contract that does not provide cash surrender	597
benefits or does not provide death benefits at least equal to the	598
minimum nonforfeiture amount prior to the commencement of any	599
annuity payments shall include a statement in a prominent place in	600
the contract that such benefits are not provided.	601

(J) Any paid-up annuity, cash surrender, or death benefits	602
available at any time, other than on the contract anniversary	603
under any contract with fixed scheduled considerations, shall be	604
calculated with allowance for the lapse of time and the payment of	605
any scheduled considerations beyond the beginning of the contract	606
year in which cessation of payment of considerations under the	607
contract occurs.	608

(K) For any contract that provides, within the same contract	609
by rider or supplemental contract provision, both annuity benefits	610
and life insurance benefits that are in excess of the greater of	611
cash surrender benefits or a return of the gross considerations	612
with interest, the minimum nonforfeiture benefit shall be equal to	613
the sum of the minimum nonforfeiture benefits for the annuity	614
portion and the minimum nonforfeiture benefits, if any, for the	615
life insurance portion computed as if each portion were a separate	616
contract. Notwithstanding the provisions of divisions (E), (F),	617
(G), (H), and (J) of this section, additional benefits payable:	618

(1) In the event of total and permanent disability;

619

(2) As reversionary annuity or deferred reversionary annuity	620
benefits; or	621

(3) As other policy benefits additional to life insurance,	622
endowment and annuity benefits, and considerations for all such	623
additional benefits shall be disregarded in ascertaining the	624
minimum nonforfeiture amounts, paid-up annuity, cash surrender,	625
and death benefits that may be required by this section.	626

The inclusion of such additional benefits shall not be	627
required in any paid-up benefits, unless such additional benefits	628
separately would require minimum nonforfeiture amounts, paid-up	629
annuity, cash surrender, and death benefits.	630

(L) The superintendent may adopt rules in accordance with	631
Chapter 119. of the Revised Code to implement this section.	632

(M) Before the second anniversary of the effective date of	633
this amendment, a company may elect to apply this section to	634
annuity contracts on a contract-form-by-contract-form basis by	635
using either divisions (D)(1), (2), and (3) or divisions (D)(4),	636
(5), (6), and (7) of this section. Divisions (D)(1), (2), and (3)	637
of this section shall be repealed on the second anniversary date	638
of the effective date of this amendment.	639

Section 4. That existing section 3915.073 of the Revised Code	640
as it results from Section 1 of this act is hereby repealed.	641

Section 5. Sections 3 and 4 of this act shall take effect two	642
years after the effective date of this act.	643

Section 6.  Section 3915.02 of the Revised Code is presented	644
in this act as a composite of the section as amended by both Sub.	645
H.B. 16 and Sub. S.B. 137 of the 119th General Assembly. The	646
General Assembly, applying the principle stated in division (B) of	647
section 1.52 of the Revised Code that amendments are to be	648
harmonized if reasonably capable of simultaneous operation, finds	649
that the composite is the resulting version of the section in	650
effect prior to the effective date of the section as presented in	651
this act.	652