L&HNew Yorkmedium
Under NY Insurance Law § 4223 (the standard nonforfeiture law for annuities), the minimum interest rate credited to a deferred annuity's accumulation is determined by a statutory formula. Which statement best describes that formula?
AA fixed 4% minimum applies regardless of market conditions
The 5-year CMT yield less 1.25%, between 1% and 3%
CThe NY DFS sets a single uniform rate every January 1 for all annuity issuers
DThe producer negotiates the rate at point of sale, with no statutory floor
Why this is the answer
NY § 4223 sets the minimum annual effective rate of interest by formula: the lesser of 3% and the 5-year Constant Maturity Treasury rate reduced by 125 basis points, but not less than 1%. The rate is specified in the contract at issue and is redetermined only if, and on the schedule, the contract states. A fixed 4% minimum is not the rule; the Department of Financial Services does not announce a single rate for all issuers; and the floor cannot be negotiated away at the point of sale.
Studying for the New York Life & Health exam?
This question comes from our L&H bank. Take a free practice test — no signup.