Life Insurance Law Blog

NY on DOMA Disclosure for Annuities

Cailie Currin — Wed, 27 Jan 2010 19:24:14 -0500

The New York State Department of Insurance (NYSID) demonstrated its flexibility and good sense yesterday when it allowed us to remove two words from its recommended disclosure language regarding the impact of DOMA (the federal Defense of Marriage Act) on annuity products.

As we have discussed here previously, the NYSID now requires that annuity products warn lesbians and gay men who are legally married to their same-sex partners that their tax-related benefits are limited by the federal government. This is because the federal government, including the IRS, defines marriage as between one man and one woman. NYSID recommends that specific disclosure language be included in annuity contracts in its Supplement No. 1 to Circular Letter No. 27 (2008). If different language is used, the product cannot be submitted in a certified filing, but must be submitted for review and approval, which is a much more time-consuming process.

We’ve had numerous endorsements cross our desks that duplicate the required language. When we were reviewing an individual annuity that included the required language right in the contract, we stumbled on this phrase: “To the extent that an annuity contract or certificate accords to spouses other rights or benefits…” (emphasis ours)

We thought it might be confusing to an individual owner to come across the word “certificate” in an annuity that has nothing to do with a group contract. We called Mr. Peter Dumar, an attorney at NYSID, and asked if we could delete the words “or certificate.” Without hesitation, he agreed that these words are irrelevant in this situation. He said we could remove them, and he said he would let others at the Department know that this change would still be considered compliant under the supplement’s guidance.

Thanks Mr. Dumar, you made our day. Sometimes, it’s the little things …

Suzanne Seay, Analyst

NU Reports Study Finds GMWB Use Lower than Expected

Cailie Currin — Fri, 22 Jan 2010 10:57:50 -0500

The National Underwriter's Online News Service is reporting today that Ruark Consulting, LLC out of Simsbury, CT, concludes that use of the guaranteed minimum withdrawal benefit options has been lower than originally expected. If these trends continue, Ruark opines, that could be a favorable development for insurers' reserves and capital levels.

The Ruark study found in the 3 million policy years of data that only 1 in 5 are taking any partial withdrawals. Of those who are taking the partials, only 1 in 3 are taking the maximum amount allowed.

One of the things I would have been interested in that was not reported was how many of those taking partial withdrawals are taking excess withdrawals. Ruark finds 1 in 3 are taking the maximum, but I wonder how many may have gone beyond that maximum withdrawal. I look at a lot of numerical examples explaining how excess withdrawals impact values. It would be interesting to me to know how much of an impact those examples have, if any. I recognize that it is easier to determine the "how many" than the "why," but reading the report of this study made me wonder about the allocation of disclosure resources on excess withdrawals, when in fact such a small percentage of owners are taking withdrawals of any size.

Are you Lobbying in MA When You Talk to the Division?

Cailie Currin — Tue, 12 Jan 2010 10:23:12 -0500

Without specifics, it is very tough to know, so I'll just pass [this] along for your reading pleasure.

Monday Morning Musings

Cailie Currin — Mon, 11 Jan 2010 09:32:43 -0500

For a variety of reasons, over the weekend, I spent a fair amount of time thinking about why I do what I do. Much to the surprise of many, I am quite passionate about my work. I was thinking about that in the context of some recent jobs and posts here. I realized several things, none of which are rocket science, but here they are nonetheless:

1) I totally love what I do. I loved it at the NYSID. I loved it when I was in-house. I have found my place. I am happy to get up every morning and go to work, because I love what I do. I am very lucky.

2) I have tremendous respect for the people I work for and with.

3) I love that I am not asked by my clients to cut corners or find ways around the right way.

4) I believe in regulation, not for the sake of regulation, but in effective regulation.

5) I believe in fairness in regulation.

It is this last point that I really spent time working with, in the context of the others in my list. In my opinion, the most important aspect to fairness in regulation is openness, consistency and predictability. I think in many cases it matters less what the rules are, than that the rules are known and change only with advanced warning.

When the rules change without warning—especially if the changes are applied retroactively—it feels unfair. When negative consequences are imposed for acts that were not against the rules when they were done, but at some unknown point in time became so, it feels incredibly unfair. It starts to feel impossible to stay compliant over time because it is impossible to know what the rules are at any given point in time. It is a short step to an attitude of "why should I bother?" "If I can't succeed, why should I try?" "If I am going to be punished even when I try hard to do things right, why should I try?"

If we as a society want insurance and we want a compliant industry, compliance should be made as easy as possible, given that this is a complicated industry. Insurers should have the best possible chance to be compliant while they are doing what they really do, which is sell insurance.

I think a big part of why I like what I do so much is that I get to give some of that. I get to help make it easier for companies be compliant. I can't make it easy, but I can make it easier. I get to help keep good, strong, and intelligent people from getting to the point where they don't think compliance is possible and they stop trying because they can't figure out what the rules are today. I love that!

NY Illustration Annual Certifications

Cailie Currin — Tue, 05 Jan 2010 16:04:43 -0500

Happy New Year!

With the new year upon us, many insurers are working on annual filings. Some companies may have done their annual illustration filings for 1/1/2010, but if your company uses a later date in the year for NY, be sure to consult the [guidance] issued by the NYSID last fall on this topic.

Of particular note is the section titled How Should Policy Forms be Listed? This will come as a surprise to many, I believe. The Department states: "Many certifications only contain lists of policy forms that are currently being issued; however, the certification also pertains to illustrations for existing policies on forms no longer being issued." They emphasize that the list must include all forms for which in-force illustrations subject to the regulation could have been made. The guidance says that the list should distinguish between forms currently being issued and those no longer issued. Note also that all riders "involved" in illustrations must be listed in the annual certification as well as the base policy form.

While guidance setting out best practices and recommendations for clean submissions are always appreciated, this seems to be a new interpretation of this long-standing requirement. Nonetheless, the guidance does indicate that this is one of the Department's "expectations" and it seems likely that those companies submitting lists formatted in ways that have been accepted previously may find they are not accepted this time around.

For those submitting via SERFF, the filing guidance is quite helpful: TOI "Life Insurance & Annuity Products" Sub-TOI "General" and filing type "Life Annual Illustration Certification."

'Twas the night before filing . . .

Cailie Currin — Thu, 24 Dec 2009 15:01:58 -0500

‘Twas the night before filing, and all through the joint,

Not a pencil was moving, ‘cause none had a point.

Every ‘t’ had been crossed, every ‘i’ had been dotted,

All the coffee was drunk, every stomach was knotted.

New York compliance cert’s dated and signed.

We’d assured the signer she’d never get fined.

PDF’s were all ready, uploading begun,

We at Currin Compliance were up for some fun.

But wait, just a minute, something’s not right.

Some brackets are missing, my God, not tonight!

It’s that damn interest rate, with which we’d been fussing.

The percentage is good, but the bracket’s gone missing!

We jumped into action, typing like mad.

We Adobed that thing, putting back what we had.

We quickly revised that bad SOV.

And made it compliant, Cailie and me.

And now we’re so ready, to put it to rest.

Submit it on SERFF. We gave it our best.

We hope when returning the next working day,

The approval we seek, will be heading our way.

But for now we head home, it’s done and we’re leaving.

And to you, Merry Christmas, and to all, a good evening.

...Suzanne Seay

To those who celebrate this week, Happy Holidays...

Cailie Currin — Tue, 22 Dec 2009 15:05:05 -0500

A New Year's resolution (in addition to the usual exercise more and eat less) is to post here more often. I had hoped to get off to an early start by posting more this month, but as some of you know, I had an unfortunate collision with the sidewalk while running with a puppy at Thanksgiving. Bones were broken. As of today I have a cast on my left arm and a splint on my right arm, and I am starting physical therapy for the broken elbow soon. Typing is hard. So, the New Year's resolution will have to wait a bit.

In the meantime, I appreciate all of you; those who read and give me feedback regularly, those who are the more silent type, and those who pop in just occasionally. I like knowing you are there.

For those who celebrate a holiday this week, Merry Christmas or Happy Kwanzaa. For the rest of us, Happy New Year! 2010 is sure to be an interesting one in the world of insurance compliance.

Cailie

Article in Best's Review Makes Life Settlement Confusion Clear

Cailie Currin — Wed, 09 Dec 2009 17:08:09 -0500

In the December 2009 edition of Best's Review, Al Slavin wrote an article entitled "Settlement Strategies" in which the confusing state of life settlement regulation is made a bit clearer. There are helpful charts and tables setting out the differences between the NCOIL and NAIC models and indicating which states have gone in what directions. One thing he touches on, but does not focus on as much as I think he could, is the possible relationship between increasingly red state budgets, due to the recession, and the changing perspective of state regulators to sales of life insurance policies.

It is in quoting Scott Hawkins of Conning Research that this connection is made. He states: "Unfortunately, a lot of people will impoverish themselves in order to qualify for medicaid to have the state support them in the nursing homes...So to the extent that life settlements are one more option among many that a person may turn to at this point in their life, the states may be interested in expanding that discussion."

That seems to directly relate to the lead in Mr. Slavin's article where he describes ME and WA's new requirement that senior citizens and chronically ill individuals, who are about to surrender their policies, be told of the option to sell their life insurance policies to a third party. And that made me think a little differently about some of the issues presented. In addition to the tables and graphs mentioned above, two actual life settlements are sketched.

In one settlement a 54-year old in poor health settled his/her $928,526 face amount policy for $590,000 when the cash surrender value was $6,145. The article states that "The policy owner used the proceeds of the settlement to get out of personal bankruptcy and save her house." While no one wants to see someone lose their house while they are in poor health, the personal bankruptcy is what got my attention. How much of those proceeds are going to pay off creditors with unsecured claims? If any of those are health care related, a whole other set of public policy issues arise: Given the number of personal bankruptcy cases that are a direct result of health crises, that seems quite possible for a 54 year old. If the debts leading to the bankruptcy were not paid, what would have happened? Would any heirs have been responsible? Would s/he have been eligible for medicaid? If all the proceeds of the life insurance policy were used to pay these debts, what is left for the beneficiaries? Who are they and what are their needs?

I don't pretend to know what is right for this individual, or any other specific instance of a life settlement. And as a general rule, I am wary of paternalistic determinations of what is right for consumers. I don't usually support taking options away from individuals if they are capable of making reasonable decisions.

However, when issues converge as they do in life settlement cases like this one, it is very hard to be sure what any interested party's motives might be. And when medicaid and nursing home costs are involved, states are also interested parties. In the past, I would have been much more inclined to view this as a dispute between life settlement and life insurance companies than I do now after reading Mr. Slavin's article. I never thought these were simple issues, but I did not fully realize how truly complicated they can be.

Federal Insurance Office Act approved unanimously by House Financial Services Committee today

Cailie Currin — Wed, 02 Dec 2009 14:46:47 -0500

As a quick FYI, today the House Financial Services Committee unanimously passed, by voice vote, H.R. 2609, the Federal Insurance Office Act. "Today, the Financial Services Committee completed its initial work to reform the regulatory structure of the financial services industry by passing my Federal Insurance Office Act," said Chairman Kanjorski. "I have been working on this bipartisan bill since 2008, and I am pleased that the new Administration recognizes the importance of ensuring that the federal government has a knowledge base on insurance. With the improvements made to the bill today through amendments, we can now continue to move this important bill and the other regulatory reform bills through the legislative process. I am eager to pass these bills in the House." The bill is available [here.]

Surprising Post-Approval Review Objection from NYSID

Cailie Currin — Mon, 30 Nov 2009 09:00:00 -0500

As we all know, post-approval reviews often reveal new and unexpected positions on the part of the New York State Insurance Department. However, some are just downright astonishing—especially when accompanied by a demand for a "corrective endorsement" for in-force policies.

If your company issues UL policies, you are advised to note the following objection: "Minimum loan amounts are not authorized by statute and are not permitted. Please provide a corrective endorsement." The Department does not say that there is a statutory PROHIBITION against a minimum loan amount. There is simply no specific authorization for a minimum loan amount on UL policies. The legislature did not address this issue at all and there is no NYSID regulation governing UL products.

The Department did, however, draft a regulation regarding VUL products and guess what? Minimum loans are expressly permitted. Section 54.6(b)(10)(vii) of regulation 77 states: "The policy may specify a reasonable minimum amount which may be borrowed at any time, but such minimum shall not apply to any automatic premium loan provision." Can a company really be faulted for thinking the same standard would apply to UL policies absent anything in a law or regulation to the contrary? The Department created that standard for VUL itself, wouldn't you rationally think it would apply to UL policies too?

And of course here we are talking about having to do a "corrective" endorsement? What is being corrected? The Department permits reasonable minimum loans on VUL, but having a minimum loan amount is so egregious a "violation of law, regulation, or circular letter" that a corrective endorsement must be provided to all in-force business. But what law; regulation or circular letter you might ask? The silent law, the silent regulation, the silent circular letter.

Missouri's Requirements Regarding Variable Material Combinations

Cailie Currin — Tue, 24 Nov 2009 11:35:01 -0500

Remember factorials? Brush off your 9^th-grade math book, because [Missouri recently began requiring that companies report the total number of form combinations that are possible, given all the text bracketed as variable material.]

We have received several inquiries regarding our experience and recent e-mail list exchanges have suggested there is much confusion out there. However, it's not as daunting as it may sound. The number indicated should represent the number of TYPES of insurance (on the life side), or types of PLANS (on the health side), being offered, according to a representative of the Missouri Department of Insurance, Financial Institutions, and Professional Registration. So, for example, on a variable annuity contract with lots of bracketing of the usual items on the specifications page, it's a "1" because it's a variable annuity with a particular set of charges that happen to be variable. One type of insurance.

A variable annuity contract with six optional riders, each of them bracketed? Still a "1." Still a variable annuity. It is not the number of items bracketed that they care about, but whether additional types of products are created by the use of bracketing.

Of course, it may not be as hard as it sounds, but it isn't completely easy either. There is room for error. The variable annuity with the six riders could be identified as a "6" (although we believe the Department would prefer a "1"). But let's say five of the riders address tax-related issues, and one offers Guaranteed Minimum Withdrawal Benefits. A reasonable person could identify this as "2" types of insurance being offered: a plain VA and a VA with GMWB.

Ok, so what if you're wrong? No worries. The number designation is not a compliance issue. The Department is not presently regulating the assigning of the number of combinations; it's just requiring that it be calculated. However, because of this new requirement, they do seem to be looking more carefully at variable material, so other problems are coming to light for some companies.

We specifically asked if an explanation accompanying the number might be helpful for the reviewer? Answer: No, just the number, please.

By way of context, the Department is using the information it collects to identify trends. The rule was inspired by the overwhelming amount of bracketing on health policies being filed recently, where it’s clear that a wide variety of plans, offering a wide variety of benefits, is being offered through one "form." So, be careful with variable material, prepare it well, and assign the number of types/plans of insurance as accurately as possible, but do not lose sleep over whether this new requirement will result in your file being closed. All else being correctly done, it will not.

NY Ins. Dep't Cites 2 Life Ins. Complaints in 11/20 Press Release

Cailie Currin — Fri, 20 Nov 2009 15:47:29 -0500

Historically, life insurance has resulted in few complaints to Insurance Departments when compared to property/casualty or health insurance. However a [press release] issued today by the New York State Insurance Department discusses three complaints, two of which are life insurance complaints.

The press release touts $8.12 million in funds returned to consumers in the third quarter 2009 as a result of NYSID intervention. The two life insurance complaints together amounted to less than $60,000. Both complaints involved pretty small face amount policies. Despite the low dollar amounts involved, they are featured prominently in the release suggesting that perhaps life insurance complaints are more common and are higher on the Department's radar than they have been in the past.

Insurers would be very well served by making sure, in these difficult times when budgets are under great pressure but regulatory attention is heightened, that compliance, market conduct, claims and complaint handling do not get short shrift. The reputational harm to the company and the industry far outweighs the short-term budget relief that may result from cuts to these areas. A quick look at this press release is a good reminder for life insurers.

UPDATE: PIMCO is NAIC's Choice

Cailie Currin — Tue, 17 Nov 2009 18:26:45 -0500

The NAIC announced late today that PIMCO has been selected as the third party financial modeler to assist state regulators in their determination of the risk based capital (RBC) requirements for residential mortgage-backed securities (RMBS).

In today's press release, Roger Sevigny, NAIC President stated: “Creating this new assessment process is an important step toward providing more transparency about these complex securities. This unique treatment of residential mortgage-backed securities distinguishes the NAIC as the only regulator to analyze these securities and require capital based upon the expected loss amount for a particular company. ”

An open Valuation of Securities Task Force call is scheduled to take place on November 30 as the next step. There will also be a task force briefing at the NAIC Winter National Meeting on December 7 in San Francisco. Because companies need to begin reporting under the appropriate designation in early 2010, the pressure will remain to keep this process moving quickly.

Tele-Applications and Underwriting for Smoking

Cailie Currin — Fri, 13 Nov 2009 08:00:00 -0500

Currin Compliance has seen an increase lately in the number of telephone applications crossing our desks for review. A recent article in the National Underwriter (Nov. 2, 2009) may offer one reason why:

Hank George offers a nicely written piece titled [“Cigarette Smoking: Time to Upgrade the Underwriting.”] He suggests that in telephone interviews, applicants are more likely to be forthcoming in answering smoking-related questions than in the traditional application-taking process.

George goes on to offer an example of a person who smoked for 2 years as a young adult, quit for the next 60 years, then started smoking recently as a result of a personal loss. He’s classified as a smoker. Yet the person who smoked 2 packs a day for those 6 decades, but has been nicotine-free for the last 5 years, is classified as a non-smoker. Who is the greater life insurance risk? he asks. George says framing questions to determine “pack years” makes more sense for underwriting purposes. And asking those questions over the telephone is a better way to get truthful answers.

Based on George's assertions, which certainly seem reasonable, it seems the applications we've been reviewing and filing will contribute to more accurate underwriting of smoking risk. Assuming of course, that they are approved.

NAIC Announces Rating Model for Mortgage-Backed Securities

Cailie Currin — Mon, 09 Nov 2009 10:57:28 -0500

Earlier this year the NAIC formed the Rating Agency Working Group to look at the use of ratings by state insurance regulators and the risk posed by the use of these ratings in the regulatory process. Last week a [proposal was approved] by the NAIC membership that will result in a new model for determining the treatment of residential mortgage-back securities. In addition, it will produce ratings designations for roughly 18,000 of these securities for year-end 2009 RBC calculations. An independent third party will be partnering with the NAIC to develop the model and responses to an RFP were due last week. The selection will be announced mid-November according to a [press release] issued by the NAIC.

Time is of the essence as we rapidly approach year-end. Taking on a project of this scope on such a short timeline could be significant in demonstrating the effectiveness of state regulation over the solvency of insurers. NAIC President Roger Sevigny stated in the press release: "Compared to the rest of financial services, the insurance industry has weathered the impact of the credit crisis extremely well." This project could tell us quite a bit about how state insurance regulators are weathering the resulting regulatory challenges.

AICP National Conference in Phoenix

Cailie Currin — Thu, 15 Oct 2009 10:26:20 -0500

I can't believe it has already been more than a week since I returned from the great AICP conference in Phoenix. This was the first time that Currin Compliance was a sponsor of this conference and it made for quite a different experience. Anne Martin, who heads our Iowa office, and I went together so we could take turns being at the booth and it was really interesting seeing the conference from that perspective. I also presented on Rule 151A and annexed is a copy of an [excerpted presentation]. I shared the allotted time with Sheryl Moore from AnnuitySpecs.com and Eric Nordman from the NAIC.

I want to thank all of the volunteers who made the conference such a success even in these tough times when many were unable to travel for the event. It still felt well-attended and there were many interesting discussions during the conference - not to mention plenty of fun. I look forward to next years' event in Dallas!

Another Insurance Commissioner Heads to Academia

Cailie Currin — Tue, 15 Sep 2009 08:58:33 -0500

Last week Massachusetts Insurance Commissioner Nonnie Burnes announced that she was stepping down at the end of this month to take a fellowship position at Northeastern University in Boston. This announcement came in the same week that Superintendent James J. Wrynn was confirmed by the New York State Senate after his predecessor, Eric R. Dinallo, resigned to become the Henry Kaufman Visiting Professor of Finance at New York University. Both Burnes and Dinallo have studied at the institutions where they now teach.

I find it interesting to note these two top insurance regulators are not going to private industry at a time when there has been much made of the revolving door between industry and regulators in the financial sector. Instead both of these individuals are going from being public servants to teach the next generation of both regulators and industry leaders.

New York's new Superintendent, Mr. Wrynn had a short tenure as the Executive Director of the New York State Insurance Fund, preceded by a career as a trial attorney. Both he and First Deputy Superintendent Kermitt Brooks had served as Acting Superintendent prior to the Senate confirmation.

Supp. 1 to CL27 (2008) Same-Sex Marriage Disclosures

Cailie Currin — Wed, 12 Aug 2009 09:21:12 -0500

Yesterday I posted about the new [Supplement No. 1 to Circular Letter 27 (2008)] related to same-sex spouses and annuity contract language. The NYSID has now posted [Filing Guidance] for companies needing to file policy forms to comply with the requirements found in the Circular Letter. "Any revisions needed to address the concerns raised in the supplement concerning default options must be made to both in-force and new issue starting November 1, 2009." This post addresses issues I see in the disclosure portion of the Guidance. A future post will address the more general filing issues for policy forms.

It is interesting to note that the guidance appears to assert approval jurisdiction over the disclosures as well as any required policy form language needed to address the default options. According to the [Office of General Counsel], disclosures are generally not considered policy forms as that term is defined by statute in section 3201.

The filing guidance provides template disclosure language:

"Pursuant to the Federal Defense of Marriage Act, same-sex marriages are not recognized for purposes of federal law. Therefore, the favorable tax treatment provided by federal tax law to an opposite-sex spouse is NOT available to a same-sex spouse. Same-sex spouses should consult a tax advisor prior to purchasing annuity products that provide benefits based upon status as a spouse, and prior to exercising any spousal rights under an annuity."

If this disclosure is used exactly, then the certified, or CL6, process can be used by a company going forward for form filings. If there is any deviation from this text, then the forms may not be submitted on a certified basis because the disclosure will need review on a case-by-case basis, according to the Department's Guidance.

This is an interesting assertion of authority. On its face, it would seem that this disclosure is not different than many other types of disclosure mandated by the Department where they think it important for consumer protection. However, unlike those other instances, here if a company deviates in any way from prescribed text, full prior approval is required. This should not be understood as an objection to this disclosure as a way to resolve this challenging issue posed by a conflict between state and federal law. My concern is that this approach of mandating specific and exact and keying it to approval methods takes state-oversight of drafting to unusual, and in my opinion, unnecessary, heights.

Why can't a company use the following without losing the right to use an expedited process?

PLEASE NOTE: the Federal Defense of Marriage Act does not allow recognition of same-sex marriages for purposes of federal law. As a result, any favorable tax treatment provided by federal tax law to an opposite-sex spouse under this and other deferred annuity contracts is NOT available to a same-sex spouse in the same situation. We recommend that same-sex spouses consult their personal tax advisor prior to purchasing annuity products that provide benefits based upon status as a spouse. Further, we recommend that an advisor be consulted prior to exercising any spousal rights under an annuity to determine if it is right for you in your situation.

All the requirements of the applicable Circular Letter are addressed, but in different words. Nonetheless, if a company adopts alternative language that, for example, their in-house legal counsel likes better, they lose the option of a certified process. Instead, a non-substantive change in disclosure language results in the mandate of a prolonged and non-expedited filing process.

Further, does this mandated language mean that if a company elects a non-contractual disclosure form - say a stand-alone disclosure, where perhaps the text could be in a larger or alternative colored font - that form, otherwise not a policy form under the OGC opinion, now needs approval which can only be certified if it mirrors the guidance's text?

Is that really a necessary assertion of approval authority?

Revised Circular Letter Creates 3 Requirements for Annuity Contracts that Involve Same-Sex Spouses

Cailie Currin — Tue, 11 Aug 2009 08:15:36 -0500

On August 10, 2009, the New York State Insurance Department officially responded to inquiries regarding the application of Circular Letter 27 (2008) to annuity contracts that must comply with federal law, including DOMA, to receive tax-advantaged treatment. A [Supplement to CL 27 (2008)] was issued to address the apparent conflict between state and federal law. The conclusion is that: "a same-sex spouse must follow the same rules that apply to any natural person who is not the spouse" in several circumstances, or "be subject to detriment in the form of taxes or penalties." From this conclusion flow 3 Department directives set out in the Circular Letter:

1) No later than 11/1/2009, any new annuity contract/certificate with spousal rights or benefits, "should include a clear an conspicuous disclosure to consumers that explains that favorable tax treatment provided by federal law to opposite-sex spouses is not available to same-sex spouses because of DOMA." That disclosure must also advise same-sex spouses to consult a tax advisor prior to purchase of an annuity providing rights/benefit based on spousal status, AND prior to the exercise of any spousal rights under the annuity contract.

2) For contracts issued prior to 11/1/2009, insurers should provide the disclosure on or before that date, or in the alternative, provide the disclosure to the beneficiary upon the death of the contract holder or certificate holder.

3) Insurers should review their policy forms to ascertain if there are any revisions needed so that a same-sex spouse "will not be defaulted to the spousal continuation option, and to ensure that the default option for a same-sex spouse is adequately disclosed."

The Department indicates that they will post details of an expedited approval process for form filings made solely to comply with this Supplement on their website. Peter Dumar is listed as the contact in the Life Bureau.

-----

The NYSID seems to be walking a very tough line here trying to reconcile state law prohibiting discrimination and federal law, which mandates discrimination against same-sex spouses. The interpretation of policy provisions may be a challenge as a result. It appears that the word spouse will be interpreted under NY law to include same-sex spouses, so contractual references to "spouse", without more, will include same-sex spouses.

It is less clear whether the now- common definition of "spouse" to be "as defined by federal law" will be permissible without limiting that definition to provisions of the contract where DOMA comes into play. If DOMA does not create adverse tax consequences, state law and this Circular Letter mandate that spouse include same-sex spouses and those spouses cannot be excluded by such a definition.

Further it is important to note that the disclosure requirement is not limited to same-sex spousal situations: All annuity contracts must get these disclosures and all are subject to the November 1, 2009 deadline. Therefore, with less than 90 days until that date, there is no time to waste in beginning the review of contracts and drafting the required disclosures so that they can be ready for use on time.

Finally, there is much confusion out there in the country at large and in compliance departments of insurers as well about the differences between various states on this issue. In looking at your company's policies and its definitions and various usages, you should be aware that the state of New York does not offer either civil unions or same-sex marriage itself. NY recognizes same-sex marriages performed in other states or countries, but civil unions performed elsewhere do not fall into the same category and are not similarly recognized.

Somewhat off topic, but related: My personal opinion is that the government should not be involved in "marriage", which should become exclusively a religious institution. Legal rights should flow for everyone from civil unions. Straight or gay, civil unions should grant the legal, civil, and governmental status of a couple. In my world view, all unions would involve a civil component and then some might, if the couple so desired, also include a religious component. This could still be "marriage" or be described by some other term to denote a sanction by whatever religious authority would grant that status. That status would have no civil impact, it would apply solely to religious matters of the political religion or denomination.

The use of a religious concept that has, over time, come to be entangled with public policy, as the basis for civil and secular rights causes policy confusion such as this Circular Letter tries to deal with. Tax policy should be separate from religious policy. Those of us who pay equal taxes to our government should be entitled to equal benefits from our government. Those of us to tithe to a particular religious institution or otherwise affirmatively seek the benefits of that institution should be entitled to those very different benefits. In my view, religious institutions would continue to be able to discriminate based on any number of factors including sexual orientation, if they so chose, based on their religious beliefs. Not every religious institution would have to perform "marriages" at all or they could have policies with respect to who would be eligible under their religious beliefs. I believe that would honor the genuine beliefs of those who hold them. I believe those beliefs are deserving of respect.

But equally in my view, that religious institution should not be granted the civil and political authority to limit the civil and political benefits of those who do not share their religious beliefs. DOMA resulted from religious not civil concerns. Tax-advantages are civil and political. They should not flow discriminatorily from religious beliefs. Isn't there a constitutional amendment that is on point here?

ACLI Compliance and Legal Section Conference

Cailie Currin — Mon, 27 Jul 2009 09:01:06 -0500

Last week I attended the ACLI Compliance and Legal Section conference in Boston. Although the ACLI reported attendance was just about the same as last year, it seemed lighter to me than previous years when I have gone. I also heard rumblings about the content not being as strong as in past years. I thought there was lots of good information shared in the formal sessions but as is so often the case, the informal discussions were the most productive and informative for me. I saw folks I haven't seen in years and that was wonderful as well. I am looking forward to staying in contact and continuing some of the discussions begun in Boston over the coming months!