BILL NUMBER:  S707

 TITLE OF BILL :  An act to amend the insurance law, in relation to
permissible group annuity contracts

 PURPOSE :

This bill would amend § 4238 of the insurance law to permit life
insurers to issue an additional type of group annuity contract.

 SUMMARY OF PROVISIONS :

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

 JUSTIFICATION :

The amendments to this bill will permit the issuance of a group
annuity contract to another insurer's separate account, as an
alternative to the use of a funding agreement. Separate accounts are
often used by insurers in connection with corporate owned (COLI) and
bank owned (BOLI) life insurance policies, as well as for the benefit
of ERISA plans, employee benefit plans and deferred compensation
arrangements, and other analogous structures. The provisions of this
bill would allow a New York insurer to obtain and implement synthetic
              

stable value mechanics related to: (i) COLI and BOLI insurance
policies issued by such insurer and supported by assets held by such
insurer in a separate account, as well as (ii) separate accounts
established by such New York insurer for the benefit of ERISA plans,
employee benefit plans, or deferred compensation or analogous
structures, through the purchase of a synthetic group annuity contract
from another insurer.

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

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

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

 LEGISLATIVE HISTORY :

S.6562 of 2016.

 EFFECTIVE DATE :
Immediately.