Connecticut Seal

General Assembly

 

Raised Bill No. 6772

January Session, 2015

 

LCO No. 3520

 

*03520_______INS*

Referred to Committee on INSURANCE AND REAL ESTATE

 

Introduced by:

 

(INS)

 

AN ACT REQUIRING DISCLOSURES UPON THE PURCHASE OF AN ANNUITY TO FUND PENSION BENEFITS AND EXTENDING CREDITOR PROTECTION TO AMOUNTS PAYABLE TO A PARTICIPANT OF OR BENEFICIARY UNDER SUCH ANNUITY.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2015) (a) As used in this section, (1) "defined benefit plan" has the same meaning as provided in 26 USC 414(j), as amended from time to time, (2) "employer" means any person engaged in a business in this state and employing two or more employees, but does not include the state or a municipality or other political subdivision of the state, and (3) "pension plan" has the same meaning as provided in 29 USC 1002(2)(A), as amended from time to time.

(b) On and after October 1, 2015, each insurance company that issues an allocated or unallocated group annuity contract to an employer or a pension plan for the purpose of providing retirement benefits to employees or retirees of the employer under a defined benefit plan, which retirement benefits were protected under the Employee Retirement Income Security Act of 1974 or the federal Pension Benefit Guaranty Corporation prior to the effective date of the group annuity contract and which group annuity contract benefits will not be protected under the Employee Retirement Income Security Act of 1974 or the federal Pension Benefit Guaranty Corporation on and after the effective date of the group annuity contract, shall provide the following disclosures in writing to each employee and retiree who is an intended participant of or beneficiary under such annuity contract not later than fifteen days after the effective date of such annuity contract:

(1) A statement that amounts payable to a participant of or beneficiary under the group annuity contract are exempt from the claims of all creditors of such participant or beneficiary;

(2) A statement that the employee or retiree will no longer have protection under the Employee Retirement Income Security Act of 1974 or the federal Pension Benefit Guaranty Corporation; and

(3) (A) A statement regarding (i) the existence of the Connecticut Life and Health Insurance Guaranty Association created pursuant to section 38a-863 of the general statutes or any subsequent corresponding guaranty association that provides coverage of annuity contracts to annuitants and beneficiaries residing in this state, and (ii) the coverage that may be provided by the association in the event of the insurance company's financial impairment or insolvency as set forth on the association's Internet web site or in other materials published by the association, and (B) the contact information for the association.

(c) Each insurance company required to provide the disclosures set forth in subsection (b) of this section to an employee or a retiree shall provide an annual statement to each such employee or retiree that discloses (1) the funding levels of the insurance company's assets as compared to such company's expected liabilities under the assumed pension benefit schedules, (2) a summary of investment performance by asset class, (3) a detailed description of investment performance by asset class, (4) any expenses associated with the group annuity contract, and (5) any changes in the actuarial assumptions used by the insurance company with respect to the group annuity contract.

(d) No insurance company may assume from another insurance company or transfer a group annuity contract issued pursuant to subsection (b) of this section without the prior approval of the Insurance Commissioner that the insurance company assuming the obligations of such annuity contract has adequate financial capacity to fulfill the obligations under such annuity contract.

Sec. 2. Subsection (a) of section 52-321a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2015):

(a) Except as provided in subsection (b) of this section, any interest in or amounts payable to a participant or beneficiary from (1) any trust, custodial account, annuity or insurance contract established as part of a Keogh plan or a retirement plan established by a corporation which is qualified under Section 401, 403, 404 or 409 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, (2) any individual retirement account which is qualified under Section 408 of said internal revenue code to the extent funded, including income and appreciation, (A) as a roll-over from a qualified retirement plan, as provided in subdivision (1) of this section, pursuant to Section 402(a)(5), 403(a) or 408(d)(3) of said internal revenue code or (B) by annual contributions which do not exceed the maximum annual limits set forth in Section 219(b) of said internal revenue code, determined without regard to any reduction or limitation for active participants required by Section 219(g) of said internal revenue code, (3) (A) any simple retirement account established and funded pursuant to Section 408(p) of said internal revenue code, (B) any simple plan established and funded pursuant to Section 401(k)(11) of said internal revenue code, (C) any Roth IRA established and funded pursuant to Section 408A of said internal revenue code, (D) any education individual retirement account established and funded pursuant to Section 530 of said internal revenue code, (E) any account established pursuant to any qualified tuition program, as defined in Section 529(b) of the Internal Revenue Code, or (F) any simplified employee pension established under Section 408(k) of said internal revenue code to the extent such pension is funded by annual contributions within the limits of Section 408(j) of said internal revenue code or roll-over contributions from a qualified plan, as provided in subdivision (1) of this subsection, pursuant to Section 402(a)(5), 403(a) or 408(d)(3) of said internal revenue code, (4) any medical savings account established under Section 220 of said internal revenue code, to the extent such account is funded by annual deductible contributions or a roll-over from any other medical savings account as provided in Section 220(f)(5) of said internal revenue code, [or] (5) any pension plan, annuity or insurance contract or similar arrangement not described in subdivision (1) or (2) of this subsection, established by federal or state statute for federal, state or municipal employees for the primary purpose of providing benefits upon retirement by reason of age, health or length of service, or (6) any allocated or unallocated group annuity contract described in subsection (b) of section 1 of this act, shall be exempt from the claims of all creditors of such participant or beneficiary. Any such trust, account, contract, plan or other arrangement shall be (A) conclusively presumed to be a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under the laws of this state, and (B) considered a trust which has been created by or which has proceeded from a person other than such participant or beneficiary, even if such participant or beneficiary is a self-employed individual, a partner of the entity sponsoring the Keogh plan or a shareholder of the corporation sponsoring the retirement plan.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2015

New section

Sec. 2

October 1, 2015

52-321a(a)

Statement of Purpose:

To require an insurance company to provide certain disclosures to employees and retirees of an employer when such company issues a group annuity contract to provide retirement benefits to such employees and retirees, and to protect amounts payable under such annuity contract from creditors of participants and beneficiaries.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]