Section 2522.8 - Filing and Approval of Policy Forms(a) Since an investment annuity policy, the custodian account agreement and other related documents are complex, and since the annuity benefits vary from year to year based upon the premium payable from the segregated account which will reflect the investment performance of the assets in the segregated custodian account, it is in the public interest to require the filing and approval of investment annuity policy forms delivered or issued for delivery in this State and also the filing and approval of all documents whether attached to or used in conjunction with the policy. (1) Investment annuity policy forms, as used in this paragraph and the preceding subsection, mean any individual policy or group policy, any application form and any documents, rider or endorsement attached to and made a part of the policies or used in conjunction with the policies, including the custodian account agreement form, the group certificate, the group enrollment card or form and the form or forms used to direct the investment of account assets. No such form shall be delivered or issued for delivery in this State, after the effective date of this Article, unless and until the policy form and any other documents described in this paragraph have been filed with and approved in writing by the Commissioner.(2) While for the purpose of the insurance laws an investment annuity is not a variable annuity, the fees for approval of such policy forms shall be the same as the fees set forth in Section 2201(10), California Administrative Code, Title 10, Chapter 5, Subchapter 2, whether it is a group or an individual policy. In determining the applicable charge the Commissioner will consider all of the sections of Subchapter 2. The provisions of Insurance Code Section 12957 shall be applicable to withdrawal of approval of such investment annuity policy forms.(3) Investment annuity policy forms shall contain provisions which comply with the following requirements:(A) Group policies may be issued to employers or an association of employers to insure the employees of the employer(s) only, and shall provide that in the event the group policyholder terminates the group policy, the annuitant has the right to obtain an individual policy on terms not less favorable than those of the group policy. Group policies shall not contain any type of an experience rating provision or dividend provision. The approval of a group policy by the Commissioner for issuance to groups other than an employer or an association of employers will be on an instant case filing basis only.(B) The policy shall provide that, in the event a prescribed premium is not received either because of a breach of the custodian's obligations under the custodian agreement or because of loss in the account other than loss from depreciation in the investment value, the insurer shall not be relieved of its obligation to make annuity payments thereunder.(C) Neither the custodian account agreement nor the annuity policy shall impose a penalty on the annuitant for failure or delay of the custodian to pay to the insurer any premiums or taxes due the insurer, except the insurer may defer the payment of annuity benefits or other benefits for a period not to exceed sixty (60) days following receipt of such premium or tax payment, at which time all delayed annuity payments shall be made.(D) All policy forms shall specify that the forms shall be construed according to and be governed by the laws and regulations of the state where the policy is delivered. When the policy or an application attached to the individual policy clearly states the actual state of delivery of the policy, the requirement of the preceding sentence may be complied with by a reference to the documents being construed according to and governed by the laws and regulations of the state where the policy is delivered.(E) An investment annuity policy shall be either a Single Purchase Investment Annuity Policy or a Recurring Purchase Investment Annuity Policy. Single purchase policies shall have a minimum single initial annuity purchase contribution of not less than ten thousand dollars ($10,000.00), and subsequent optional annuity purchase contributions, if any, shall not be less than one thousand dollars ($1,000.00). The insurer may, in the policy, set forth the maximum amounts of permissible additional purchase contributions. Recurring purchase policies shall have anticipated minimum purchase contributions of not less than twelve hundred dollars ($1,200.00) per year, payable at such specified frequencies within each year as permitted by the policy.(F) The insurer may issue recurring purchase annuities of less than twelve hundred dollars ($1,200.00) per year on a payroll deduction or reduction basis or an employer contribution basis, if the insurer files with the Commissioner, in addition to the information otherwise required, a justification of such lower contribution levels, including that the issuance of such annuities will not adversely affect the solvency or operations of the insurer, explaining the relevant characteristics of the market to be serviced, the need for the lower contribution level, and any other information which the Commissioner may require. Such approvals, if granted by the Commissioner, will be granted on an instant case basis only for the employees of the specified employer.(G) Every individual investment annuity policy shall have printed on the application furnished to the applicant a notice stating, in substance, that, at any time within ten (10) days after the signing of the application, the applicant may request cancellation of the application by delivering or mailing notice to that effect to the insurer or to the life insurance agent through whom the policy was purchased, and that all annuity purchase contributions paid shall be returned to the applicant. Neither the insurer nor the custodian shall be required to comply with any investment instructions during such ten (10) day period, and any such annuity purchase contributions which are received may remain unprocessed during such ten (10) day period, unless such ten (10) day period to request cancellation is specifically and separately waived in writing on the application by the applicant.(H) A clear and prominent statement shall appear on the first page of the policy and the group certificate and clearly and prominently in the application stating: 1. That the policy is an investment annuity policy; and2. That the annuity benefits payable will vary at established intervals and are based upon the premiums payable from the segregated account which will reflect the net investment performance of the assets in the segregated custodian account.(I) The policy shall contain a provision which clearly specifies and defines the assumed investment increment factor to be used in computing the dollar amount of investment annuity benefits or other contractual payments or value thereunder, and a provision which shall guarantee that neither the expenses of the insurer nor the mortality experience of the insurer shall adversely affect such dollar amounts. "Expenses," as used herein, may exclude some or all taxes, as stipulated in the policy.(J) The policy shall contain a provision which provides that in computing the dollar amount of investment annuity benefits or other contractual payments or values under an investment annuity policy, the assumed investment increment rate established by the insurer shall not exceed 6% per annum. A higher rate or lower rate may be selected by the policyowner, subject to the approval of the insurer.(K) The policy shall contain a table of the premiums payable and the annuity benefits provided during the lifetime of the annuitant and, if the policy or annuity continues after the death of the annuitant, the premiums payable, if any, and the annuity benefits provided. Such table shall specify the net assumed investment increment rate used by the insurer. In the event the policyowner selects an assumed investment increment rate higher or lower than the rate stated in the policy, an appropriate premium and annuity schedule, based upon the rate selected, shall be issued by the insurer as an amendment to the policy and furnished to the policyowner and to the annuitant if the annuitant is a person other than the policyowner.(L) The policy and the group certificate shall contain a provision stating that annuity benefits are based upon premiums paid from the segregated custodian account.(M) The policy shall contain a provision that the policyowner, or the policyowner's chosen investment manager, and not the insurer, shall direct the custodian as to the investment of the assets in the account from time to time during the time the annuity policy remains in force.(N) In the event a policy provides any penalty for a default in the payment of annuity purchase contributions or of premiums from the account, the following non-forfeiture provisions shall be included in the policy giving the policyowner the right to correct such default.1. A provision that there shall be a period of grace of one (1) month within which any payment may be made and during which period of grace the policy shall continue in force. The policy shall include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values, if any, under the policy and arising therefrom.2. A provision providing that at any time within two (2) years from the date of default in making payments during the life of the annuitant under a recurring purchase contract, unless the policy has been surrendered and the surrender value has been paid, the policy may be reinstated upon payment of such overdue payments, and of any indebtedness to the insurer on the policy, including interest on such indebtedness at a rate not to exceed 6%. The policy shall include a statement of the basis for determining the date as of which the amount to cover such overdue payments and indebtedness shall be applied to produce the values under the policy and arising therefrom. In lieu of a reinstatement provision, the policy may contain another provision more favorable to the policyowner and annuitant.3. A provision specifying the options available in the event of default in annuity purchase contributions or premium payments. Such provision may include an option to request either a partial or a complete surrender of the policy for account market value, less a surrender charge to the insurer. Such a provision may also include an option to receive a paid-up annuity if the policy has not been surrendered. The amount of such paid-up annuity may be subject to a minimum established by the insurer and shall be determined by applying the account market value at the annuity commencement date. The minimum partial cash surrender may be a reasonable amount of the market value of the segregated account of the annuitant, and the policy may contain other reasonable restrictions if the market value of the segregated account is less than five thousand dollars ($5,000.00).(O) The policy shall contain a provision that it is incontestable by the insurer after the policy has been in force for two (2) years during the lifetime of the annuitant.(P) The policy shall contain a provision or provisions clearly stating the premiums charged on annuity purchase contributions, the premiums charged on the account market value and the calculation of any other premiums or charges made by the insurer to provide benefits under the policy.(Q) The policy shall contain in addition to the other provisions required by this Article, but not necessarily limited to, the following appropriate provisions relating to: Entire Contract; Beneficiary Designation; Ownership; Assignment; Misstatement of Age or Sex; Proof of Death; Proof of Survival and Identity, and Facility of Payment.(R) Subject to other provisions of this Article the policy shall contain a provision for the partial or the complete surrender of the policy prior to the commencement of life contingency annuity benefits.(S) Each group certificate shall contain in addition to other group certificate provisions required by this Article, but not necessarily limited to, the following: 1. The name and home office address of the insurer;2. Identification of the master policy;3. A description of the coverages and benefits offered thereunder together with any exceptions, limitations, and restrictions;4. Appropriate provisions with respect to assignment and beneficiary designations, incontestability and conversion;5. Provisions with respect to the right to terminations, withdrawal and cash surrender benefits, if any, of the certificateholders;6. Optional annuity date provisions, if any, and(T) A group investment annuity policy shall not contain any provision which permits or provides in any manner whatsoever for any reimbursement to the group policyholder or certificateholder of the expenses of administration or any other form of compensation, directly or indirectly, from the insurer. This provision shall not prohibit the payment of commission to a life agent who may be a policyholder or certificateholder.(U)1. If the policyowner is other than the annuitant, the policy shall state (i) whether the policyowner or the annuitant shall select the investments, and (ii) whether the policyowner, the annuitant, or both, may make annuity purchase contributions under the policy.2. All custodian reports shall be furnished to the person who has the right to direct the investments in the account.3. In the event the policy is a group policy, the group policyholder shall not exercise the right of selection of investments unless the group policyholder makes a contribution to the segregated custodian account.Cal. Code Regs. Tit. 10, § 2522.8