Patent Application
20090030824
1. Field of the Invention
The present invention relates to a method and system for providing a deferred variable annuity with lifetime benefit payments; and more particularly, to a data processing method for administering a deferred variable annuity contract for a relevant life, the annuity contract having a payment base, a contract value, and lifetime benefit payments, wherein the lifetime benefit payment available for each period is equal to: (a withdrawal percent)×(a withdrawal base), the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year following the purchase date of the contract, and at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years following the purchase date of the contract.
2. Description of the Prior Art
An immediate annuity is typically used to provide an income stream within a predetermined length of time from the date the premium is received. The amount of income can be either fixed or variable in nature and typically these products do not provide an account value. A deferred annuity is typically used to provide accumulation and, potentially, a future stream of annuity income. The deferred annuity comprises an accumulation period during which the account value will vary with the underlying investments and an annuitization period where the client purchases an immediate annuity with the account value available. Deferred and immediate annuities typically provide guaranteed income for life, which transfers some portion or all of the risk of outliving one's accumulated assets to the insurer.
One basis for distinguishing commonly available deferred annuities is whether the annuity is classified as a “fixed annuity” or a “variable annuity”.
In a fixed annuity, the insurer guarantees a fixed rate of interest applicable to each annuity deposit. Therefore, a fixed annuity is desirable for those seeking a “safe” investment. The guaranteed interest rate may apply for a specified period of time, often one year or more. Often, a rate guaranteed for more than one year is called a “multi-year guarantee”. The rate credited on a fixed annuity is reset periodically, moving in an amount and a direction that correlate the yields available on fixed-income investments available to the insurer.
With a variable annuity, the annuity contract owner bears the investment risk. The relevant life typically has a choice of funds in which he/she can direct where the annuity deposits will be invested. The various funds or sub-accounts may include stocks, bonds, money market instruments, mutual funds, and the like.
Variable annuity contracts typically provide a death benefit. Oftentimes during the accumulation period this death benefit is related to the contract value. That is, if the sub-accounts backing the contract value have performed poorly, then the death benefit may be reduced to an insignificant amount. After annuitization, the death benefit can be a function of the remaining payments of the annuity at the time of the relevant life's death. Further, if the annuity contract does not provide a guarantee (discussed below), the contract will terminate when the contract value goes to zero or some other amount specified in the contract or rider.
Annuity contracts may also provide guarantees in several different variations. A Guaranteed Minimum Death Benefit (GMDB) is a guarantee that provides a minimum benefit at the death of the relevant life regardless of the performance of the underlying investments. A Guaranteed Minimum Income Benefit (GMIB) is a guarantee that will provide a specified income amount at the time the contract is annuitized. The income payment will be dependent on previously stated details set out in the contract. A Guaranteed Minimum Accumulation Benefit (GMAB) is a benefit that guarantees a specified contract value at a certain date in the future, even if actual investment performance of the contract is less than the guaranteed amount. A Guaranteed Minimum Withdrawal Benefit (GMWB) is a guarantee of income for a specified period of time, and in some versions, the income stream is guaranteed for life without requiring annuitization as in the guaranteed minimum income benefit. However, this guarantee will automatically annuitize the contract if the contract value is reduced to zero or some other amount specified in the contract or rider.
Most deferred variable annuity products in the prior art typically determine the amount of the yearly lifetime benefit payments, if any, to be a predetermined percentage (withdrawal percent) of a withdrawal base. The withdrawal percent is typically determined by a predetermined withdrawal percent table that provides a particular withdrawal percent for each year of the relevant life's life according to each birthday of the relevant life. However, the actual number of years since the purchase date of the annuity contract is typically not taken into consideration when determining the respective withdrawal percents for the predetermined withdrawal percent table.
Many financial products and systems have been disclosed. These include financial products with the following features: providing guaranteed lifetime income with liquidity with calculations based on information profile and stored financial and actuarial data; variable annuity contracts having a bonus investment credit percentage and withdrawal charge percentages that are less than or equally to the bonus investment credit percentage in all contract years, as well as level asset-based compensation to distributors; and administering variable annuity plans with minimum payment features and mechanisms for adjusting current payments responsive to cumulative payment totals. Each one of these prior art references suffers from at least the following disadvantage(s): the annuities do not provide lifetime benefit payments that are based on a withdrawal percent table that provides a particular withdrawal percent for each respective completed year following the purchase date of the contract, and at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years following the purchase date of the contract.
Accordingly, there remains a need in the art for a data processing method for administering a deferred annuity contract for a relevant life wherein the annuity contract has lifetime benefit payments and wherein the lifetime benefit payment for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year following the purchase date of the contract, and at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years following the purchase date of the contract.
The present invention provides a data processing method for administering a deferred variable annuity contract during the accumulation phase for a relevant life wherein the annuity contract has lifetime benefit payments, and wherein the lifetime benefit payment for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year following the purchase date of the contract, and at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years following the purchase date of the contract. The withdrawal percent table represents a function for computing the values associated therein. In prior art annuity products, the withdrawal percent is typically determined by a predetermined withdrawal percent table that provides a particular withdrawal percent for each year of the relevant life's life according to each birthday of the relevant life. The present data processing method administers an annuity contract having a payment base, a contract value, together with lifetime benefit payments.
Generally stated, the method of the invention calculates a payment base for the annuity contract that is preferably a function of the previous premium payments and withdrawals by the relevant life, and could include investment performance on an annual or other basis (daily, monthly, etc.). The method of the invention performs the following steps: (i) calculates a contract value for the annuity contract; and (ii) determines a withdrawal percent table for the annuity contract that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract. In one embodiment, during the accumulation phase the system performs the following steps: (i) if requested by the relevant life, periodically accepting premium payments from the relevant life which increase the payment base and the contract value; (ii) if requested by the relevant life, or if other defined criteria are reached, periodically calculating a lifetime benefit payment withdrawal for the relevant life which decreases the contract value, wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iii) if requested by the relevant life, periodically calculating a withdrawal payment—that is in excess of the lifetime benefit payment—for the relevant life, which decreases each of: the contract value and the payment base. Upon the death of the relevant life, the present method calculates a death benefit for a beneficiary, wherein the death benefit is the greater of: (a) the guaranteed death benefit amount; and (b) the present contract value.
Preferably, the annuity contract of the data processing method is a deferred variable annuity and further includes sub-accounts whose market performance can cause the contract value to increase or decrease. In other aspects of the invention, the annuity contract may be selected from the group of fixed, combination variable/fixed, and equity indexed annuities.
In addition, the account may be subject to M, E & A, 12 b−1 and fund level charges. These charges may or may not be assessed against the contract value.
The guaranteed death benefit is paid to the beneficiary only if the relevant life dies during the accumulation phase. However, a guaranteed death benefit may also be payable during annuitization as well. The lifetime benefit payment may be paid once yearly or periodically throughout the year; however, there is a maximum lifetime benefit payment for any given year. In one embodiment, the present method allows the relevant life to have the opportunity to request a lifetime benefit payment during each period that is up to the greater of (i) (the Payment Base)×(the Withdrawal Percent); and (ii) (the Contract Value)×(the Withdrawal Percent). Therefore, in this embodiment, the lifetime benefit payment is not based on a percentage of a fixed withdrawal base amount, and the withdrawal base amount may increase depending on the performance of the underlying investments of the annuity product and if the contract value is greater than the payment base during a given period. However, if the contract value is less than the payment base, then the available lifetime benefit payment is a percentage (Withdrawal Percent) of the payment base.
The relevant life is eligible to take advantage of the withdrawal percent provided by the predetermined withdrawal percent table and is preferably based on the number of years, which have completed since the purchase date of the annuity contract. In another embodiment, the withdrawal percent table is based on the number of the current contract year since the purchase date of the annuity contract. The withdrawal percents provided by the withdrawal percent table are irrespective of the age of the relevant life. Accordingly, the relevant life has the opportunity to request a lifetime benefit payment that has the potential to afford a greater monetary value at an earlier point in time than prior art annuity products and at an earlier age than prior art annuity products.
In one aspect, the value of the annuity payments, if necessary, equals the value of the most recent lifetime benefit payment. In other aspects, excess withdrawals, required minimum distributions or step-ups could cause the value of the annuity payments or guaranteed lifetime benefit payments to change.
In another aspect of the invention, there is provided a data processing method for administering a deferred variable annuity contract for a relevant life, the annuity contract having a payment base, a contract value and lifetime benefit payments, comprising the steps of: (i) calculating a payment base; (ii) calculating a contract value; (iii) determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iv) calculating a lifetime benefit payment, wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is determined by said withdrawal percent table.
The invention can comprise a deferred variable annuity contract having: (i) means for calculating a payment base; (ii) means for calculating a contract value; (iii) means for determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; (iv) means for calculating a lifetime benefit payment; wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to the withdrawal percent table.
In another embodiment, the present invention comprises a system for administering a deferred variable annuity contract during the accumulation phase for a relevant life, the annuity contract having a payment base value, a contract value, and lifetime benefit payments, comprising: a storage device; a processor coupled to the storage device, the storage device storing instructions that are utilized by the processor, the instructions comprising: (i) receiving information from said relevant life in order to establish the deferred variable annuity contract; (ii) receiving lifetime benefit payment withdrawal requests from the relevant life; (iii) determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iv) calculating a lifetime benefit payment; wherein the lifetime benefit payment withdrawal is determined according to the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table.
The present invention solves several of the problems associated with conventional administration of annuity contracts. Determination of the lifetime benefit payment is accomplished via an improved formula that provides the potential to afford a greater monetary value for the lifetime benefit payment at an earlier point in time and at an earlier age than prior art annuity products. The relevant life is afforded increased security by the availability of a potentially enhanced lifetime benefit payment at an earlier age, wherein the withdrawal percent is based on the number of completed years since the purchase date of the annuity contract and is not based on the age of the relevant life.
Other objects, features, and characteristics of the present invention, as well as the methods of operation and functions of the related elements of the structure, and the combination of parts and economies of manufacture, will become more apparent upon consideration of the following detailed description with reference to the accompanying drawings, all of which form a part of this specification.
A further understanding of the present invention can be obtained by reference to a preferred embodiment set forth in the illustrations of the accompanying drawings. Although the illustrated embodiment is merely exemplary of systems for carrying out the present invention, both the organization and method of operation of the invention, in general, together with further objectives and advantages thereof, may be more easily understood by reference to the drawings and the following description. The drawings are not intended to limit the scope of this invention, which is set forth with particularity in the claims as appended or as subsequently amended, but merely to clarify and exemplify the invention.
For a more complete understanding of the present invention, reference is now made to the following drawings in which:
As required, a detailed illustrative embodiment of the present invention is disclosed herein. However, techniques, systems and operating structures in accordance with the present invention may be embodied in a wide variety of forms and modes, some of which may be quite different from those in the disclosed embodiment. Consequently, the specific structural and functional details disclosed herein are merely representative, yet in that regard, they are deemed to afford the best embodiment for purposes of disclosure and to provide a basis for the claims herein, which define the scope of the present invention. They are deemed to afford the best embodiment for purposes of disclosure; but should not be construed as limiting the scope of the invention. The following presents a detailed description of the preferred embodiment of the present invention.
The present invention comprises a data processing method for administering a deferred variable annuity contract having a payment base, a contract value, and lifetime benefit payments. As used herein, the term “annuity contract” means a set of rules and other data that are reflected in a computer processing system for operations of the annuity product.
In the present invention, the lifetime benefit available for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract. The present data processing method is preferably in the form of a rider to a variable annuity contract. In another aspect of the invention, the present data processing method is not in the form of a rider, but is a part of the base contract. In exchange for paying higher fees, the relevant life receives several advantages by selecting the method and system of the present invention, which provides a lifetime benefit payment available for each period that is related to a withdrawal percent that is related to the number of completed years since the purchase date of the contract, regardless of the actual age of the relevant life. These advantages include the following: The relevant life will have the opportunity to request a lifetime benefit payment during each period that is based on a withdrawal percent that is provided by a predetermined withdrawal percent table and is related to the number of completed years since the purchase date of the contract, regardless of the actual age of the relevant life. The relevant life is eligible to take advantage of the withdrawal percent provided by the predetermined withdrawal percent table regardless of his actual age. Accordingly, depending on the age of the relevant life at the time he purchases the annuity contract, the relevant life has the opportunity to request a lifetime benefit payment that has the potential to afford a greater monetary value at an earlier point in time than prior art annuity products. Significantly, the relevant life takes advantage of a potentially higher withdrawal percent value at an earlier age, as compared to prior art annuity products, which provide a predetermined withdrawal percent table that is strictly age-based. Therefore, the present invention provides a higher guaranteed lifetime benefit if more time passes before living benefit payments commence. The present invention provides a simple design that makes future income easier to understand in advance by the relevant life.
The present invention comprises a data processing method for administering a deferred variable annuity contract for a relevant life, the annuity contract having a payment base, a contract value and lifetime benefit payments, comprising the steps of: (i) calculating a payment base; (ii) calculating a contract value; (iii) determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iv) calculating a lifetime benefit payment wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is determined by said withdrawal percent table.
In an alternative embodiment, the present invention comprises a system for administering a deferred variable annuity contract during the accumulation phase for a relevant life, the annuity contract having a payment base value, a contract value, and lifetime benefit payments, comprising: a storage device; a processor coupled to the storage device, the storage device storing instructions that are utilized by the processor, the instructions comprising: (i) receiving information from said relevant life in order to establish the deferred variable annuity contract; (ii) receiving lifetime benefit payment withdrawal requests from the relevant life; (iii) determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iv) calculating a lifetime benefit payment; wherein the lifetime benefit payment withdrawal is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the Withdrawal Percent is predetermined according to the withdrawal percent table.
It should be understood that as used herein the term “periodically” includes method steps that in certain aspects may only be performed once. In other aspects, such “periodically” performed method steps may be performed more than once as described herein.
The following definitions are given hereunder to better understand terms used in the specification.
“Relevant Life” or “Covered Life”: The term relevant life or covered life is the governing life for determination of the living benefits provided under this illustrative embodiment. Covered life (or relevant life) may refer to any one or more of the following: an owner, joint owner, annuitant, joint annuitant, co-owner, co-annuitant or beneficiary.
“Withdrawal Base”: The withdrawal base is the amount used in one embodiment of the present invention to determine the lifetime benefit payment. Preferably, the withdrawal base may be equal to the amount of the original premium, the payment base value, the contract value, or the greater of the payment base value and the contract value.
“Payment Base”: The payment base (PB) (or more accurately the payment base value) is the amount used in one embodiment of the present invention to determine the lifetime benefit payment and the rider charge. In one embodiment of the present invention, the initial payment base value equals the initial premium.
“Premium”: 100% of the dollar amount of the initial or subsequent premium payments deposited into the contract before application of any sales charges or payment enhancements.
“Withdrawal Request”: A request made by the relevant life to withdraw funds during the “accumulation phase” of the contract. One type of withdrawal is a lifetime benefit payment. Any withdrawal that is in excess of the lifetime benefit payment may: (i) decrease the contract value below the minimum contract value; (ii) decrease the payment base value; and (iii) decrease the guaranteed death benefit.
“Lifetime Benefit Payment”: A benefit payment that is available until the death of the relevant life. The lifetime benefit payment may be paid yearly in one embodiment. The total lifetime benefit payment for the year may also be distributed monthly, quarterly or any other defined period. Preferably, the lifetime benefit payment is only available if the covered life age is 60 (or other predetermined age) or older. Preferably, if the relevant life is age 59 (or other predetermined age) or younger, the LBP is equal to zero. Other age restrictions can also be utilized for the lifetime benefit payment. Preferably, the lifetime benefit payment is determined by the following formula:
LBP=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract.
It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the lifetime benefit payment.
“Contract Value”: The contract value (CV) is a numerical measure of the relative worth of a variable annuity product during the accumulation phase. The contract value is determined by adding the amount of purchase payments made during the accumulation phase, deducting management fees, deducting contract fees, deducting optional rider fees and surrenders made by the owner, and adjusting for the relative increase (or decrease) of the investment option(s) chosen by the owner. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the contract value.
“Sub-account”: Variable account investments within the variable annuity contract, such as mutual funds, stocks and bonds.
“Withdrawal”: Also known as a “surrender”, a relevant life may withdraw up to the contract value at any time.
“Death Benefit”: The death benefit provision guarantees that upon the death of the relevant life a death benefit (DB) is paid to a beneficiary named in the contract that is equal to the greater of the guaranteed death benefit or the contract value as of the date the annuity company receives due proof of death. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the guaranteed death benefit.
“Benefit Amount”: In one embodiment of the present invention, the benefit amount is used to calculate that amount of the death benefit. Preferably, the benefit amount is equal to the premium payments minus any lifetime benefit payments or withdrawals.
“Annuity Commencement Date”: The annuity commencement date (ACD) is the date upon which the contract enters the “annuitization phase”.
“Withdrawal Percent”: In one embodiment of the present invention, the withdrawal percent (WP) is used to determine the amount of the lifetime benefit payment. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the lifetime benefit payment.
“PB increase”: Payment Base increase.
“Step-Up”: An increase to the payment base value that is available if the contract value increases because of favorable performance of the underlying investments. Preferably, the step-up is guaranteed at a predetermined percentage.
“Partial Surrender”: Partial surrender means the gross amount of the partial surrender and will include any applicable contingent deferred sales charges.
“Covered Life Change”: Any contractual change before ACD, which causes a change in the covered life, will result in a reset in the benefits provided under the rider and allows the issuing company to impose the fund allocation restrictions.
“Annuity Contract”: The term annuity contract means a set of rules and other data that are reflected in a computer processing system for operations of the annuity product.
“Issue Rules”: The issuance of a contract may be subject to established requirements known as issue rules.
The following detailed illustrative embodiment(s) is presented to provide a more complete understanding of the invention. The specific techniques, systems, and operating structures set forth to illustrate the principles and practice of the invention may be embodied in a wide variety of sizes, shapes, forms and modes, some of which may be quite different from those in the disclosed embodiment. Consequently, the specific structural and functional details disclosed herein are exemplary. They are deemed to afford the best embodiment for purposes of disclosure; but should not be construed as limiting the scope of the invention.
The covered life, or relevant life, may have a single life election or joint/spousal continuation election as described more fully herein.
If a natural owner, the covered life is the owner and the joint owner (if any) on the rider effective date. If a non-natural owner, the covered life is the annuitant on the rider effective date. All age-contingent benefit provisions are based on the attained age of the oldest covered life.
If a natural owner, the covered life is both spouses (as defined by Federal Law). All age-contingent benefit provisions are based on the attained age of the youngest covered life.
The following issue rules are set forth to provide a more complete understanding of this illustrative embodiment of the present invention. It should be understood by those skilled in the art that these issue rules are set forth for illustrative purposes only and that other rules may be utilized. Accordingly, the issue rules set forth below should not be construed as limiting the scope of the invention.
The issue rules may include a maximum issue age. In one embodiment, the riders are not available if any covered life or annuitant is age 81 (or other predetermined age) or greater on the rider effective date. In another embodiment, the riders are not available if any covered life or annuitant is age 76 (or other predetermined age) or greater on the Rider effective date. The rider may be elected on contract issue or post-issue.
Single Life Election. No additional requirements
Joint/Spousal Continuation Election: (This may also include co-annuitants)
One of the following must apply:
The Withdrawal Percent (WP) is used to determine the amount of the lifetime benefit payment. In a preferred embodiment, a predetermined withdrawal percent table (below) provides a particular Withdrawal Percent for each respective completed since the purchase date of the contract and wherein at least a portion of the respective completed years provide a Withdrawal Percent that is equal to the number of completed years since the purchase date of the contract. In this embodiment, the age of the relevant life does not determine the withdrawal percent; rather, the number of completed years since the purchase date of the contract determines the respective withdrawal percent as provided by a predetermined withdrawal percent table. As shown below, the withdrawal percent table may group certain year ranges into the same withdrawal percent. Alternatively, each year of the relevant life may be provided with a different Withdrawal Percent. Preferably there is a minimum and maximum withdrawal percent for any given completed year in the withdrawal percent table.
In another embodiment, the WP is determined at the later of, (i) the attained age of the covered life on the most recent contract anniversary prior to the first withdrawal, or (ii) the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age).
(Note: The table represents a function of the values contained therein. Accordingly, the following percentages and ages, if ages are in fact used, can vary)
The Payment Base (PB) (or more accurately payment base value) is the amount used to determine the lifetime benefit payment (LBP) and the rider charge.
A total partial surrender amount in a contract year that exceeds the LBP by not more than $0.12 (the tolerance amount) will be deemed not more than the LBP. This provision recognizes that owners may take the LBP in installments over the year, and the amount of installment may round the proportional distribution amount to the higher cent. Therefore, owners intended to stay within the LBP may exceed it by only a few cents. The maximum PB is $5,000,000.
If this rider is effective on the contract issue date, then the PB equals the X % of the initial premium. If this rider is effective after the contract issue date, then the PB equals 100% of the dollar amount of the contract value on the rider effective date, less any payment enhancements received in the last twelve months.
When subsequent premium payments are received, the PB will be increased by 100% of the dollar amount of the subsequent premium payment. Whenever a partial surrender is made prior to the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the payment base is reduced for an adjustment defined below.
“Threshold” definition: 5% single/4.5% joint/spousal multiplied by the greater of the payment base or the contract value at the beginning of the contract year plus subsequent premiums prior to a partial surrender.
For cumulative partial surrenders during each contract year that are equal to or less than the threshold, the adjustment is equal to the dollar amount of the partial surrender.
For any partial surrender that first causes cumulative partial surrenders during the contract year to exceed the threshold, the adjustment is the dollar amount of the partial surrender that does not exceed the threshold. For the portion of the withdrawal that exceeds the threshold, the adjustment is a factor. The factor is as follows:
1−(A/(B−C)) where
For partial surrenders during each contract year, where the sum of prior partial surrenders are in excess of the threshold, the adjustment is a factor. The factor is applied to the payment base immediately before the surrender. The factor is as follows:
1−(A/B) where
Whenever a partial surrender is made on or after the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the PB will be equal to the amount determined as follows:
For any partial surrender that first causes cumulative partial surrenders during the contract year to exceed the current LBP and the RMD exception above does not apply the adjustment is a factor. The factor is as follows:
1−(A/(B−C)) where
For additional partial surrender(s) in a contract year, where the sum of all prior partial surrenders exceed the current LBP, the PB will be reduced by applying a factor. The factor is as follows:
1−(A/B) where
In one embodiment, the withdrawal percent will be set at the attained age of the first withdrawal and will not increase thereafter. In another embodiment, the benefit increase is facilitated through an increase in the payment base as follows.
On every contract anniversary up to and including the contract anniversary immediately following the covered life's 80th birthday (or other predetermined age), it will be determined if an increase in the PB is applicable. If an increase is applicable, the PB will increase by the factor below, subject to a minimum of zero and a maximum of 10% (note: the percentage could change or it could be a full step up (no limit)):
The LBP is available until the death of any covered life or until the withdrawal benefit is revoked.
A total partial surrender amount in a contract year that exceeds the LBP by not more than $0.12 (the tolerance amount) will be deemed not more than the LBP. This provision recognizes that owners may take the LBP in installments over the year, and the amount of installment may round the proportional distribution amount to the higher cent. Therefore, owners intended to stay within the LBP may exceed it by only a few cents.
On the Rider effective date, the following applies to the calculation of the LBP.
On any contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the following describes in more detail the calculation of the LBP.
The LBP is equal to the WP multiplied by the withdrawal base. The withdrawal base may be equal to the original premium, the payment base, the contract value or the greater of the payment base or the contract value on the anniversary for the Time-Based, the Age-Based and the Market-Based Riders, single and spousal. The LBP can fluctuate year to year due to market performance, but will never be lower than the WP multiplied by the PB as long as the covered life has reached the age of 60 (or other predetermined age). In addition, if the account value on the anniversary exceeds the PB, the LBP may decrease in future years but will never be less than the PB multiplied by the WP.
When a subsequent premium payment is made after the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the LBP is equal to the greater of: (i) the WP, on the most recent contract anniversary, multiplied by the greater of the PB or contract value immediately after the subsequent premium is received, or (ii) the prior LBP.
Whenever a partial surrender is made on or after the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age):
The LBP will be equal to the amount determined in either one as follows:
The contract owner may request an amount less than, equal to, or greater than the lifetime benefit payment. Total partial surrenders taken during a contract year on or after the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age) which exceed the LBP may reduce future LBP values and may reduce the PB. If the total amount requested by the contract owner during a contract year is less than the lifetime benefit payment, the excess cannot be carried over to increase future years' lifetime benefit payments.
If the LBP exceeds the actual withdrawal amount (AWA) on the most recent contract anniversary, any contingent deferred sales charge (CDSC) will be waived up to the LBP amount.
For both single and joint/spousal election, a death benefit may be available on the death of any owner or annuitant. For joint/spousal election only, no death benefit will be available when a covered life is the beneficiary, and the beneficiary dies. The death benefit provision guarantees that upon death a death benefit (DB) will be paid equal to the greater of the death benefit or the contract value as of the date proof of death is received. The rider charge is not assessed on death.
When proof of death is processed, the contract will go into suspense mode. No charges will apply during that period. The amount available to be paid as a death benefit under the terms of the rider is a return of premium adjusted for subsequent premium payments and partial surrenders.
At the rider effective date:
When a subsequent premium payment is received, the DB will be increased by 100% of the dollar amount of the subsequent premium payment. If the withdrawal feature is revoked, all future withdrawals from the death benefit will be fully proportional as of the date it is revoked.
Whenever a partial surrender is made prior to the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the death benefit is reduced for an adjustment defined below.
For the “threshold” definition, see the definition described in the section entitled “Calculation of the Payment Base” supra.
For cumulative partial surrenders during each contract year that are equal to or less than the threshold, the adjustment is the dollar amount of the partial surrender. For any partial surrender that first causes cumulative partial surrenders during the contract year to exceed the threshold, the adjustment is the dollar amount of the partial surrender that does not exceed the threshold and the adjustment for the remaining portion of the partial surrender is a factor. The factor is applied to the portion of the death benefit that exceeds the threshold. The factor is defined as follows:
1−(A/(B−C)) where
For partial surrenders during each contract year, where the sum of the prior partial surrenders in the year that are in excess of the threshold, the adjustment is a factor. The factor is applied to the adjusted death benefit immediately before the surrender. The factor is defined as follows:
1−(A/B) where
Whenever a partial surrender is made on or after the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age), the DB will be equal to the amount determined as follows:
1−(A/(B−C)) where
For partial surrenders during each contract year, where the sum of the prior partial surrenders in the year that are in excess of the current LBP, the adjustment is a factor. The factor for adjustments for partial surrenders for the DB is applied to the adjusted DB immediately before the surrender. The factor is as follows:
1−(A/B) where
The minimum contract value rules are an optional feature of the present invention and do not apply to the preferred embodiments. If the minimum contract value rules are selected to be applied, then the following rules are used. The minimum contract value (MCV) is defined as 20% or other predetermined percentage of the payment base on the date of a withdrawal request. Lifetime benefit payments cannot reduce the contract value below this minimum threshold. Only sub-account performance and withdrawals in excess of the LBP can decrease the contract value below the MCV.
Any contractual change before the annuity commencement date (ACD) which causes a change in the covered life will result in a reset in the benefits provided under the rider, and allows fund allocation restrictions to be imposed.
Covered life changes in the first 6 months of the contract issue date (or during another time period) will not cause a change in the DB or PB. However, the WP and LBP may change based on the attained age of the covered life after the covered life change.
Covered life changes after the first 6 months of contract issue date will cause a reset in the benefits. If the oldest covered life after the change is equal to or less than the age limitation of the rider at the time of the change, then either below will automatically apply.
If the oldest covered life after the change is greater than the age limitation of the rider at the time of the change, the rider will terminate, and the DB will be equal to the contract value. If the rider is no longer available for sale and the issue age of the rider has changed (to be determined on a non-discriminatory basis), and a covered life change occurs, and it exceeds that newly determined age limitation, then rider will terminate, and the death benefit will be equal to contract value.
Where covered life changes after the first 6 months of the contract issue date, and if the owner and owner's spouse are no longer married, for reasons other than death, then covered life changes may occur as follows:
If surrenders have not been taken from the contract, then the PB, the DB and the MCV remain the same; the covered life will be reset and the WP scale will be based on the youngest covered life as of the date of the change. Additionally, the following covered life changes may occur.
If surrenders have been taken from the contract, then the following covered life changes may occur.
If the oldest covered life after the change is greater (older) than the age limitation of the rider at the time of the change, then the rider will terminate. The death benefit will be equal to contract value.
If any other contractual change causes a change in the covered life, then either will automatically apply:
In the event the contract owner dies and spousal continuation is elected, the contract value will increase to the DB value (the greater of the contract value and the DB). The covered life will be re-determined on the date of the continuation. If the covered life is less than age 81 (or other predetermined age) at the time of the continuation, then either of the following will automatically apply:
If the covered life is greater than or equal to 81 (or other predetermined age) at the time of the continuation, the rider will terminate. The death benefit will be equal to the contract value.
In the event that the contract owner dies and spousal continuation is elected, the contract value will be increased to the DB value (the greater of the contract value and the DB). The spouse may do the following.
Continue the Contract and the Rider.
The existing rider will continue with respect to all benefits, at the current contract rider charge. The payment base will be equal to the greater of contract value or payment base on the continuation date. The LBP will be recalculated to equal the withdrawal percent multiplied by the greater of the contract value or the payment base on the continuation date. The maximum contract value will be the greater of the payment base or the contract value on the continuation date. The DB will be equal to the bumped up contract value on the continuation date.
The WP recalculation rule:
Continue the Contract and Revoke the Withdrawal Feature of the Rider.
The charge is assessed on revocation date, and then no longer assessed. The covered life will be re-determined on the date of the continuation date for death benefit purposes. If the covered life is greater than the age limitation at the time of continuation, the rider will terminate. The death benefit will be equal to contract value.
The following tables describe the effect of the death of the owner or annuitant before the annuity commencement date.
If the annuitant dies where there is a contingent annuitant (who is different from the owner/annuitant), then the rider continues and all provisions of the rider remain the same, there are no resets nor DBs paid. Upon the death of the last surviving covered life, a DB is paid to the beneficiary, and the rider terminates.
The following table describes the effect of death after the annuity commencement date.
The right to restrict investment is reserved in any investment option in the case of a change of covered life after six months. If the investment option restriction is imposed, the contract owner has the following options:
For purposes of determining the PB under the rider, one or more deferred variable annuity contracts issued with the rider attached in the same calendar year can be treated as one contract. If the contracts are aggregated, the period will change over which withdrawals are measured against the benefit payment.
The issuing company will treat the effective date of the election until the end of the calendar year as a contract year for the purposes of the LBP limit. A pro rata rider charge will be taken at the end of that calendar year. As long as total withdrawals in that period do not exceed the LBP, the withdrawals will not necessitate a reset.
In future calendar years, the LBP limits will be aggregated and will be on a calendar year basis. In other words, withdrawals under all aggregated contracts in a calendar year will be compared against the combined LBP limits for the aggregated contracts. If withdrawals exceed those combined limits, the aggregate PB will be set to the combined contract values of the aggregated contracts. The LBP will then equal withdrawal percent multiplied by the new PB.
If withdrawals do not exceed those combined limits, each withdrawal will reduce the PB dollar for dollar. The withdrawal benefits relating to the contract value reaching zero will not apply until the contract value of all aggregated contracts reaches zero.
The rider charge will be taken at the end of each calendar year. It will be deducted pro rata from all of the sub-accounts and fixed accounts of the aggregated contracts. If the contract values of all aggregated contracts are reduced below our minimum account rules in effect, the annuity options will be offered as defined earlier in this specification. The options will pay the combined LBP.
If the annuity reaches the maximum ACD, which is the later of the 10th contract anniversary and the date the annuitant reaches age 90, the contract must be annuitized unless it is agreed upon to extend the ACD. In this circumstance, the contract may be annuitized under standard annuitization rules, but under no circumstances will the amount payable be less than your LBP, provided that the certain period does not exceed the Death Benefit remaining at the ACD divided by the LBP.
A fixed lifetime and Period Certain Payout will be issued. The lifetime portion will be based on the Covered Life determined at ACD. The Covered Life is the Annuitant for this payout option. If there is more than one Covered Life, then the lifetime portion will be based on both Covered Lives. The Covered Lives will be the Annuitant and Joint Annuitant for this payout option. The lifetime portion will terminate on the first death of the two. The minimum amount paid to owner under this Annuity Option will at least equal the remaining DB under this rider.
If the oldest Annuitant is age 59 (or other predetermined age) or younger, the date the payments begin will be deferred until the oldest Annuitant attains age 60 (or other predetermined age) and is eligible to receive payments in a fixed dollar amount until the later of the death of any Annuitant or a minimum number of years.
If the Annuitant(s) are alive and age 60 (or other predetermined age) or older, payments will be received in a fixed dollar amount until the later of the death of any Annuitant or a minimum number of years. The minimum number of years that payments will be made is equal to the remaining DB under this rider divided by the product of the payment base on the ACD multiplied by the greater of the WP and 5% Single (4½% Spousal).
Single Election:
Joint/Spousal Election:
This annualized amount will be paid over the greater of the minimum number of years, or until the death of any Annuitant, in the frequency that is elected. The frequencies will be among those offered at that time but will be no less frequent than annually. If, at the death of any Annuitant, payments have been made for less than the minimum number of years, the remaining scheduled period certain payments will be made to the Beneficiary. A lump sum option is not available.
The minimum amount paid to owner under this Annuity Option will at least equal the DB under this rider. If the younger Annuitant is alive and age 59 (or other predetermined age) or younger, the date that payments begin will be automatically deferred until the younger Annuitant attains age 60 (or other predetermined age) and is eligible to receive payments in a fixed dollar amount until the death of the last surviving Annuitant or a minimum number of years.
If the Annuitants are alive and the younger Annuitant is age 60 or older (or other predetermined age), payments will be received in a fixed dollar amount until the death of the last surviving Annuitant or a minimum number of years. The minimum number of years that payments will be made is equal to the remaining DB under this rider divided by the LBP at annuitization. This annualized amount will be paid over the greater of the minimum number of years, or until the death of the last surviving Annuitant, in the frequency that is elected. The frequencies will be among those offered at that time but will be no less frequent than annually. If, at the death of the last surviving Annuitant, payments have been made for less than the minimum number of years, the remaining scheduled period certain payments will be made to the Beneficiary. A lump sum option is not available.
If both spouses are alive, the owner will be issued a Fixed Joint & Survivor Lifetime and Period Certain Payout. The Covered Life and Covered Life's spouse will be the Annuitant and Joint Annuitant for this payout option. The lifetime benefit will terminate on the last death of the two. If one spouse is alive, a Fixed Lifetime and Period Certain Payout will issue. The lifetime portion will be based on the Covered Life. The Covered Life is the Annuitant for this payout option. The lifetime benefit will terminate on the last death of the Covered Life.
Prior company approval is required on all subsequent premium payments received after the first 12 months. The approval rules are as follows.
In one embodiment, at any time following the earlier of Spousal Continuation or the fifth anniversary of the Rider effective date, the Contract Owner may elect to revoke the Withdrawal Feature of the Rider. The Payment Base will go to zero and the Withdrawal Percent will go to Zero, and LBP will go to Zero.
On the date the withdrawal feature is revoked, a pro rata share of the Rider charge is equal to the Rider charge percentage multiplied by the PB, multiplied by the number of days since the last charge was assessed, divided by 365. The Rider Charge will be assessed on the revocation date, and then will no longer be assessed. The Death Benefit continues as is upon the date of the revocation. No other living benefit may be elected upon the revocation of the Withdrawal Feature.
In another embodiment, the Contract Owner can not elect to revoke the withdrawal Feature. The Withdrawal Feature can be revoked in certain circumstances by the issuing company.
Additional terms of the contract(s) or rider(s) include the following. The benefits under the contract cannot be assigned. If the free look provision under the contract is exercised, the rider will terminate.
Subject to state approval, a rider will be made available on all currently available products issued on or after the date the rider is launched for sale in the state of issue. This does not imply post-issue election. Post-issue election will be determined oil an as needed basis.
If the rider effective date is after the contract issue date, then the period between the rider effective date and the next contract anniversary will constitute a contract year.
If the rider effective date is after the contract issue date, then the period between the rider effective date and the next contract anniversary will constitute a contract year.
The following describes the optional benefits that may be available.
The employee gross-up is not considered premium for purposes of the payment base and death benefit. Payment enhancements are not considered premium for purposes of the payment base and death benefit. Front-end loads are not taken from the premium for purposes of the payment base and death benefit.
Turning now to the figures,
The annuity contract processing routine starts (block 600), and the method sometime later enters the calculation of the payment base phase (block 602), followed by the calculation of the contract value phase (block 604). The present method determines a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract (block 606). If requested by the relevant life, the present method periodically accepts premium payments from the relevant life (block 608) which increase the payment base and the contract value. If requested by the relevant life and the covered life is older than a predetermined age (i.e. 60 years old), the present method periodically calculates a lifetime benefit payment for the relevant life (block 610) which decreases the contract value. If requested by the relevant life, the present method periodically calculates a withdrawal payment (block 612) that is in excess of the lifetime benefit payment for the relevant life, which decreases each of: the contract value and the payment base. Preferably, the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to said withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract. The annuity contract processing routine ends (block 614) according to the contract rules.
Referring next to
The network server may also be configured in a distributed architecture, wherein the server components or modules are housed in separate units or locations. Each of the modules described may be implemented as single servers or one or more or all of the modules may be incorporated into a single server. These servers will perform primary processing functions and contain at a minimum, a RAM, a ROM, and a general controller or processor. In such an embodiment, each server is connected to a communications hub or port that serves as a primary communication link with other servers, clients or user computers and other related devices. The communications hub or port may have minimal processing capability itself, serving primarily as a communications router. A variety of communications protocols may be part of the system, including but not limited to: Ethernet, SAP, SAS™, ATP, Bluetooth, GSM and TCP/IP.
In the preferred embodiment, all of the modules described herein are operably inter-connected via a central communications bus 738. The communications bus 738 is able to receive information from each of the modules, as well as to transmit information from one module to another. The insurance contract generating system 714 further includes a display module 704, and a generating module 706. The generating module is used for generating an insurance contract, wherein the insurance contract provides coverage to an individual or group for at least one event defined in the insurance contract.
The insurance contract generating system 714 additionally includes a payment module 708 for making payments to an insured individual or group for a predetermined period of time as defined by the deferred annuity insurance contract.
The system further comprises a beneficiary module 710 for choosing a beneficiary to receive payments from the insurance provider in the instance of an insured individual's death. Furthermore, the system comprises a dependent module 712 for offering an insurance contract structured according to the methods of the present invention to dependents of an individual eligible for the insurance contract described herein.
Additionally, the insurance contract generating system 714 includes: a storage drive 716 for receiving data stored on a storage disc, a processing module 718 for processing digital data received by and contained in the insurance contract generating system 714, a communication module 720 for bi-directional communication with external and telecommunications systems, a data storage module 722 for storing and managing digital information, a text data input module 724 for inputting data in the form of text, and a data input module 726 for converting to digital format documents and images and inputting them into the insurance contract generating system 714.
Finally, the insurance contract generating system 714 includes: an audio data input module 728 for receiving and inputting audio information, an audio data output module 730 for outputting data in audio format (i.e. recorded speech, synthetically generated speech from digital text, etc), a memory module 732 for temporarily storing information as it is being processed by the processing module 718, a universal serial bus interface module 734 for receiving and transmitting data to and from devices capable of establishing a universal serial bus connection, and a digital data input interface module 736 for receiving data contained in digital storage devices.
Data storage device may include a hard magnetic disk drive, tape, optical storage units, CD-ROM drives, or flash memory. Such data storage devices generally contain databases used in processing transactions and/or calculations in accordance with the present invention. In one embodiment, the database software creates and manages these databases. Insurance-related calculations and/or algorithms of the present invention are stored in storage device and executed by the CPU.
The data storage device may also store, for example, (i) a program (e.g., computer program code and/or a computer program product) adapted to direct the processor in accordance with the present invention, and particularly in accordance with the processes described in detail hereinafter with regard to the controller; (ii) a database adapted to store information that may be utilized to store information required by the program. The database includes multiple records, and each record includes fields that are specific to the present invention such as interest rates, contract value, payment base value, step-ups, premiums, subscribers, payouts, claims, etc.
The program may be stored, for example, in a compressed, an uncompiled and/or an encrypted format, and may include computer program code. The instructions of the program may be read into a main memory of the processor from a computer-readable medium other than the data storage device, such as from a ROM or from a RAM. While execution of sequences of instructions in the program causes the processor to perform the process steps described herein, hard-wired circuitry may be used in place of, or in combination with, software instructions for implementation of the processes of the present invention. Thus, embodiments of the present invention are not limited to any specific combination of hardware and software.
Suitable computer program code may be provided for performing numerous functions such as providing a deferred annuity insurance contract to an individual, generating a deferred annuity insurance contract, and making payments to the individual as defined in the deferred annuity insurance contract. The functions described above are merely exemplary and should not be considered exhaustive of the type of function, which may be performed by the computer program code of the present inventions.
The computer program code required to implement the above functions (and the other functions described herein) can be developed by a person of ordinary skill in the art, and is not described in detail herein.
The term “computer-readable medium” as used herein refers to any medium that provides or participates in providing instructions to the processor of the computing device (or any other processor of a device described herein) for execution. Such a medium may take many forms, including but not limited to, non-volatile media, volatile media, and transmission media. Non-volatile media include, for example, optical or magnetic disks, such as memory. Volatile media include dynamic random access memory (DRAM), which typically constitutes the main memory. Common forms of computer-readable media include, for example, a floppy disk, a flexible disk, hard disk, magnetic tape, any other magnetic medium, a CD-ROM, DVD, any other optical medium, punch cards, paper tape, any other physical medium with patterns of holes, a RAM, a PROM, an EPROM or EEPROM (electronically erasable programmable read-only memory), a FLASH-EEPROM, any other memory chip or cartridge, a carrier wave as described hereinafter, or any other medium from which a computer can read.
Various forms of computer readable media may be involved in carrying one or more sequences of one or more instructions to the processor (or any other processor of a device described herein) for execution. For example, the instructions may initially be borne oil a magnetic disk of a remote computer. The remote computer can load the instructions into its dynamic memory and send the instructions over an Ethernet connection, cable line, or even telephone line using a modem. A communications device local to a computing device (or, e.g., a server) can receive the data on the respective communications line and place the data on a system bus for the processor. The system bus carries the data to main memory, from which the processor retrieves and executes the instructions. The instructions received by main memory may optionally be stored in memory either before or after execution by the processor. In addition, instructions may be received via a communication port as electrical, electromagnetic or optical signals, which are exemplary forms of wireless communications or data streams that carry various types of information.
Servers of the present invention may also interact and/or control one or more user devices or terminals. The user device or terminal may include any one or a combination of a personal computer, a mouse, a keyboard, a computer display, a touch screen, LCD, voice recognition software, or other generally represented by input/output devices required to implement the above functionality. The program also may include program elements such as an operating system, a database management system and “device drivers” that allow the processor to interface with computer peripheral devices (e.g., a video display, a keyboard, a computer mouse, etc).
For example, a user provides instructions for the amount of the living benefit payment that is requested. It should be understood that the user may communicate with the computing system directly or indirectly through another party, such as the insurance provider 702. In the event the user communicates with an insurance provider 702, the insurance provider 702 than receives and transfers information, to and from the insurance contract generating system 714 via the text data input module 724, audio data input module 728, audio data output module 730 and the display module 704. For example, the relevant life may provide instructions to the insurance provider 702 indicating the amount of living benefit payments the relevant life would like to receive. Furthermore, as used herein the data storage module 722 is also referred to as a storage device. The processing module 718 is contained within the insurance contract generating system 714, which is coupled to the storage device, the storage device stores instructions that are utilized by the processor. The instructions comprise: (i) an instruction for calculating a payment base; (ii) an instruction for calculating a contract value; (iii) an instruction for determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; (iv) and an instruction for calculating a lifetime benefit payment; wherein the lifetime benefit payment withdrawal is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to the withdrawal percent table.
Turning now to
Referring now to table 800, illustrated are exemplary lifetime benefit payments made to the relevant life under various conditions. More specifically, the “Immediate W/D” column 806 represents the lifetime benefit payments 816 made to the relevant life when a withdrawal is made without deferring the first lifetime benefit payment 816. Thus, in this example, the relevant life collected the first lifetime benefit payment 816 on the first year of eligibility, wherein the first year of eligibility occurred within the year the relevant life turned 60, as indicated by “Age” column 802. Since the relevant life withdrew the first lifetime benefit payment 816 on the first year of eligibility and hence did not defer the first lifetime benefit payment 816, the relevant life is entitled to a 5.0% withdrawal percent 832, as illustrated by supplemental table 828. Thus, the relevant life is entitled 5.0% of payment base 826 (i.e. $100,000) as illustrated by supplemental table 824. Therefore, in this example, the relevant life receives $5,000 a year for 26 years. “Wait 6” column 808 illustrates lifetime benefit payments 818, whereby the first lifetime benefit payment 818 is withdrawn by the relevant life on the sixth year of eligibility. Thus, the relevant life deferred the first five lifetime benefit payments. The withdrawal percent 832 is derived by simply considering the amount of years that the relevant life defers the first lifetime benefit payment 818. Consequently, by implementing the information from supplemental tables 824 and 828, the relevant life is entitled to a 6.0% withdrawal percent 832 of payment base 826 (i.e. $100,000). Therefore, in this example, the relevant life receives $6,000 a year for 21 years. “Wait 7” column 810 operates based on the same principles as thoroughly described above. However, in this example, the relevant life defers the first six eligible lifetime benefit payments, and therefore received the first lifetime benefit payment 820 on the seventh year of eligibility. Hence, by implementing the information from supplemental tables 824, and 828, the relevant life is entitled to a 7.0% withdrawal percent 832 of payment base 826 (i.e. $100,000). Therefore, the relevant life receives lifetime benefit payments 820 in the amount of $7,000 a year for a total of 20 years. The same principles are applied to “Wait 8” column 812. Accordingly, the relevant life collects lifetime benefit payments 822 in the same manner as extensively described above with regards to “Wait 7” column 810. However, in this example, the relevant life defers the first seven eligible lifetime benefit payments, and therefore received the first lifetime benefit payment 822 on the eighth year of eligibility. Hence, by implementing the information from supplemental tables 824, and 828, the relevant life is entitled to a 8.0% withdrawal percent 832 of payment base 826 (i.e. $100,000). Therefore, the relevant life receives lifetime benefit payments 822 in the amount of $8,000 a year for a total of 19 years. Additionally, “Duration” column 804 represents the length of time in which the relevant life is eligible to receive lifetime benefit payments 816, 818, 820, and 822. For this example, “Duration” column 804 of table 800 illustrates 26 years in total, however the invention should not be limited to this range. Additionally, although the length of time is represented in years, various other periods of time may be used (i.e. days, weeks, months, decades, etc.). “Age” column 802 simply tracks the age of the relevant life.
It should be understood that several of the method steps of the present invention (for example blocks 602-604) require the input of a contract owner in order to be able to determine the respective values. However, a computer is required to use the method of the present invention; the calculations and appropriate data records are performed by a computer.
For example, in one embodiment of the present invention, the payment base is related to premium payments by the relevant life wherein some of the premium payments may be discretionary. In one embodiment, the lifetime benefit payment is dependent on a predetermined withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract, and is predetermined by the company issuing the annuity and/or the relevant life. Preferably, the withdrawal percent is based on the number of years since the purchase date of the contract at the time of the first requested lifetime benefit payment and is provided according to the predetermined withdrawal percent table that is predetermined by the company issuing the annuity. In another embodiment, the withdrawal percent is based on the number of the current contract year. The annuity commencement date is discretionary and is selected by the company issuing the annuity and/or the relevant life, with certain restrictions. The initial guaranteed death benefit amount is discretionary and is determined by the company issuing the annuity and/or the relevant life. Preferably, the company issuing the annuity sets the initial guaranteed death benefit amount for calculation purposes. In a preferred embodiment, the initial guaranteed death benefit amount is equal to the payment base.
The lifetime benefit payment is paid periodically, such as yearly, quarterly, monthly, weekly, etc. The lifetime benefit payment that is requested by the relevant life for a given period may be any amount greater than Zero and equal to or less than the (the Withdrawal Percent)×(a Withdrawal Base), wherein the Withdrawal Percent is predetermined according to said withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract. The available lifetime benefit payment is determined at each period by the aforementioned formula.
In another embodiment, the withdrawal percent corresponds to the current year of the contract, rather than the completed year. For example, a 6% Withdrawal Percent in year 6, a 7% Withdrawal Percent in year 7, etc.
In one embodiment, the relevant life does not have to wait for the contract anniversary date in order to request the withdrawal percent that corresponds to the number of completed years since the purchase date of the contract as provided by a predetermined withdrawal percent table.
The withdrawal base may be equal to the original premium, the Payment Base, the Contract Value, or the greater of the Payment Base and the Contract Value. In most cases, the value of (the Payment Base)×(the Withdrawal Percent) will not be equal to (the present Contract Value)×(the Withdrawal Percent). Therefore, in some embodiments the higher of these two values is the highest available lifetime benefit payment available for that period. However, the relevant life does not have to elect the highest possible available lifetime benefit payment. The value that is requested, if any, for the lifetime benefit payment for that period will be subtracted from the contract value, but not from the payment base. Therefore, the higher the lifetime benefit payment requested for a period, the greater the possible impact on the value of (the present Contract Value)×(the Withdrawal Percent) for the subsequent period.
Preferably, the withdrawal percent is a function of the number of completed years since the purchase date of the contract; in other words, the withdrawal percent increases as the time since the purchase date increases and is provided by the predetermined withdrawal percent table. Significantly, the age of the relevant life is irrelevant for determining the withdrawal percent from the withdrawal percent table. In one embodiment, however, the relevant life must be a minimum age to begin taking lifetime benefit payments.
In one embodiment, the withdrawal percent table has a minimum withdrawal percent of 5% for any given completed year. Other minimum withdrawal percents may be used. Preferably, the first few number of years since the purchase date of the contract that are listed in the withdrawal percent table are set to the minimum withdrawal percent value. Preferably, each of the first five completed years of the withdrawal percent table has a 5% withdrawal percent.
In one embodiment, the withdrawal percent table has a maximum withdrawal percent of 10% for any given completed year. Other maximum withdrawal percents may be used. Preferably, the withdrawal percents increase for each subsequent year that passes since the purchase date of the contract until the maximum withdrawal percent is reached. Preferably, each of the completed years equal to or greater than ten completed years of the withdrawal percent table has a 10% withdrawal percent.
In a preferred embodiment, the withdrawal percent table is as follows:
In one embodiment, once the first lifetime benefit payment withdrawal is taken, then the withdrawal percent is fixed for the remainder of the contract. In another embodiment, the withdrawal percent continues to rise with the relevant life's age (i.e. number of years since the purchase date of the contract), no matter if the relevant life has already begun to take lifetime benefit payments. In another embodiment, the withdrawal percent may either increase or decrease over the term of the annuity. Alternatively, the withdrawal percent may fluctuate over the term of the annuity.
In a further embodiment, the present method further comprises the step of collecting a rider fee or collecting an account maintenance fee. In another embodiment, the present method further comprises the step of: calculating a death benefit for a beneficiary upon the death of the relevant life, wherein the death benefit is the greater of: (a) a predetermined guaranteed death benefit amount; and (b) the present contract value. Alternatively, the guaranteed death benefit is paid to the beneficiary only if the relevant life dies during the accumulation phase. Preferably, the value of the annuity payments, if any, equals the value of the last guaranteed lifetime benefit payment.
In another embodiment, the present invention comprises a deferred variable annuity contract comprising: (i) means for calculating a payment base; (ii) means for calculating a contract value; (iii) means for determining a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract; and (iv) means for calculating a lifetime benefit payment; wherein the lifetime benefit payment withdrawal is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to the withdrawal percent table.
In another embodiment, the present invention comprises a system for administering a deferred variable annuity contract during the accumulation phase, the improvement comprising: administration means operative to calculate a lifetime benefit payment, wherein the lifetime benefit payment withdrawal is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent)×(a Withdrawal Base),
wherein the withdrawal percent is predetermined according to a withdrawal percent table that provides a particular withdrawal percent for each respective completed year since the purchase date of the contract and wherein at least a portion of the respective completed years provide a withdrawal percent that is equal to the number of completed years since the purchase date of the contract.
In another embodiment, the annuity product includes a step-up provision wherein the payment base is increased in response to positive performance of the underlying investments of the contract for a given period.
Other formulas may be utilized to determine the yearly lifetime benefit payment amount, wherein the withdrawal base is related to other values besides the payment base and/or the contract value.
Each time a lifetime benefit payment withdrawal request is received, the withdrawal percent is provided by utilizing the withdrawal percent table and looking up the corresponding number of completed years since the purchase date of the annuity contract. In one embodiment, the relevant life does not have to wait for the contract anniversary date in order to request the corresponding withdrawal percent for the completed year as provided by a predetermined withdrawal percent table. The lifetime benefit payment withdrawal amount is then determined by the following formula:
LBP withdrawal=(the Withdrawal Percent)×(a Withdrawal Base),
wherein the Withdrawal Percent is determined by said withdrawal percent table. The Withdrawal Base may be equal to the original premium, the Payment Base, the Contract Value, or the greater of the Payment Base and the Contract Value. In the embodiment where the Withdrawal Base is equal to the greater of the Payment Base and the Contract Value, a test will be performed to determine the greater of: (i) (the Payment Base)×(the Withdrawal Percent); and (ii) (the Contract Value)×(the Withdrawal Percent). The “guaranteed lifetime benefit payment” is equal to (the Payment Base)×(the Withdrawal Percent); and the “maximum lifetime benefit payment” is equal to (the Contract Value)×(the Withdrawal Percent). The relevant life may request a lifetime benefit payment amount during each period that is up to the LBP withdrawal amount, which in one embodiment is the greater of the “guaranteed lifetime benefit payment” and the “maximum lifetime benefit payment”.
The following example illustrates one embodiment of the present method and system. The Withdrawal Percent Table is provided for purposes of the following example. Such predetermined values for the percents and the year ranges for the Withdrawal Percent Table are strictly for the purposes of illustration. The withdrawal percent table represents a function of the values contained therein. For example, the predetermined withdrawal percentages may be in the range of 0% to 100%, and more preferably in the range of 0% to 50%.
Note: For purposes of illustration, the relevant life cannot take lifetime benefit payments until reaching age 60.
In the following example, no lifetime benefit payments are requested by the relevant life. The values listed for the “guaranteed lifetime benefit payment” and the “maximum lifetime benefit payment” are simply the maximum available lifetime benefit payments for each period listed.
“Guaranteed lifetime benefit payment”=(the Payment Base)×(the Withdrawal Percent)
“Maximum lifetime benefit payment”=(the Contract Value)×(the Withdrawal Percent)
For the purposes of illustration, the relevant life is 60 years old on Mar. 31, 1983 and his birthday is on Mar. 31, 1983. That is, his birthday and the contract anniversary date are the same.
Having thus described the invention in rather full detail, it will be understood that such detail need not be strictly adhered to, but that additional changes and modifications may suggest themselves to one skilled in the art, all falling within the scope of the invention as defined by the subjoined claims.
While the present invention has been described with reference to the preferred embodiment and several alternative embodiments, which embodiments have been set forth in considerable detail for the purposes of making a complete disclosure of the invention, such embodiments are merely exemplary and are not intended to be limiting or represent an exhaustive enumeration of all aspects of the invention. The scope of the invention, therefore, shall be defined solely by the following claims. Further, it will be apparent to those of skill in the art that numerous changes may be made in such details without departing from the spirit and the principles of the invention. It should be appreciated that the present invention is capable of being embodied in other forms without departing from its essential characteristics.
This application claims the benefit of Application No. 60/961,792, filed Jul. 24, 2007.
| Number | Date | Country | |
|---|---|---|---|
| 60961792 | Jul 2007 | US |
