Patent Grant
8359257
1. Field of the Invention
The present invention relates to a method and system for providing a deferred variable annuity contract 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 a guarantee of lifetime benefit payments, wherein the lifetime benefit payment available for each period is equal to: (a Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base).
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, the 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 base amount is typically set at the time of the first lifetime benefit payment and is fixed for the remainder of the term of the annuity product. Further, the withdrawal percent is typically fixed after the first lifetime benefit payment is requested, or alternatively the withdrawal percent varies slightly for the remainder of the term of the annuity product. 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.
Many financial products and systems have been disclosed. These include: information relevant to financial products having a future benefit conditioned on life expectancies of both an insured and a beneficiary; a post employment qualified health care benefit plan funded during a covered person's working years to covered persons under the plan, a retirement plan funded with a variable life insurance policy and/or a variable annuity policy; a benefit plan providing systematic withdrawal payments during a liquidity period and annuity payments when the systematic withdrawal payments cease, and financial instruments providing a guaranteed growth rate and a guarantee of lifetime payments.
Each one of these prior art references suffers from at least the following disadvantage(s): the relevant life does not have the flexibility to be able to choose to defer payments upon eligibility in order to receive a deferral bonus added onto the original payment for each subsequent year.
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 contains lifetime benefit payments, wherein the relevant life has the flexibility to be able to choose to defer payments in order to receive bonuses in addition to the payments received for each subsequent year. Furthermore, the lifetime benefit payment for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
The present invention provides a data processing method for administering a deferred variable annuity contract during the accumulation phase wherein the annuity contract has lifetime benefit payments and the lifetime benefit payment for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base),
Generally stated, the method of the invention calculates a withdrawal base for the annuity contract that is preferably related to 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 predetermines a withdrawal percent for the annuity contract, wherein the withdrawal percent is preferably related to the attained age of the relevant life. Preferably, the method of the present invention determines a withdrawal percent chart that provides a particular withdrawal percent for each respective attained age of the relevant life's life. If requested by the relevant life, the present method periodically accepts premium payments from the relevant life, which increase the payment base and the contract value. If requested by the relevant life, or if other defined criteria are reached, the present method periodically calculates a lifetime benefit payment for the relevant life, which decreases the contract value, wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
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 decrease. In other aspects of the invention, the annuity product 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-I and fund level charges. These charges may or may not be assessed against the contract value.
In a preferred embodiment, 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, wherein the withdrawal base is the greater of (the payment base) and (the contract value). 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+deferral bonus percent) of the payment base.
The relevant life is eligible to take advantage of the withdrawal percent provided by the predetermined withdrawal percent chart and is preferably based on the respective attained age of the relevant life's life. The deferral bonus is added to the withdrawal percent, wherein the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment. 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 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) determining a withdrawal base; (ii) determining a withdrawal percent; and (iii) calculating a lifetime benefit payment, wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
The invention can comprise a deferred variable annuity contract having: (i) means for calculating a withdrawal base; (ii) means for determining a withdrawal percent; (iii) means for calculating a lifetime benefit payment; wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
In another aspect of the invention, there is provided a data processing system for administering a deferred variable annuity contract having a payment base, 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: (a) an instruction for calculating a withdrawal base; (b) an instruction for determining a withdrawal percent; (c) 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 Deferral Bonus Percent)×(the Withdrawal Base),
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. The lifetime benefit payment available for each period is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
wherein the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment.
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. 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, and further provides a deferral bonus percent to be added to the withdrawal percent if the relevant life defers the first lifetime benefit payment by a number of years, 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. Preferably, the lifetime benefit payment is based on a withdrawal percent that is provided by a predetermined withdrawal percent chart. The present invention further provides a deferral bonus percent that is related to the number of years deferred by the relevant life until taking a first lifetime benefit payment, regardless of the actual age of the relevant life. The deferral bonus percent is added to the withdrawal percent when calculating the lifetime benefit payment. The relevant life is eligible to take advantage of the deferral bonus percent 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 then prior art annuity products. This advantage is especially beneficial to a person who purchases the annuity contract at a relatively early age and waits many years prior to requesting a first withdrawal payment. Significantly, the relevant life takes advantage of a potentially higher withdrawal percent value at an earlier age because of the deferral bonus percent, as compared to prior art annuity products which provide a predetermined withdrawal percent chart that is strictly age-based and which do not provide any incentives to defer the first withdrawal payment.
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 withdrawal base; (ii) determining a withdrawal percent; and (iii) calculating a lifetime benefit payment wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(the Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base),
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, in one embodiment, the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base);
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.
“Deferral Bonus Percent”: The bonus a relevant life receives in addition to receiving the lifetime benefit payments. The relevant life is entitled to the deferral bonus percent if lifetime benefit payment(s) are deferred once the relevant life becomes eligible to receive lifetime benefit payments. It is important to note, the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment.
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.
Covered Life in Single and Joint/Spousal Election(s)
The covered life, or relevant life, may have a single life election or joint/spousal continuation election as described more fully herein.
Single Life Election:
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.
Joint/Spousal Continuation Election:
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.
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. 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. There are two types of withdrawal percents: (i) the predetermined withdrawal percent (shown below); and (ii) the withdrawal percent elected by the relevant life during each given year.
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).
Single Life Election:
(Note: the Following Percentages and Ages, if Ages are in Fact Used, can Vary)
5.0% for attained ages 60 to 64;
5.5% for attained ages 65 to 69;
6.0% for attained ages 70 to 74;
6.5% for attained ages 75 to 79; and
7.0% for attained ages 80 and above.
Joint/Spousal Continuation Election:
4.5% for attained ages 60 to 64;
5.0% for attained ages 65 to 69;
5.5% for attained ages 70 to 74;
6.0% for attained ages 75 to 79; and
6.5% for attained ages 80 and above.
Calculation of the Payment Base (PB)
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 (tile 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 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:
If the total partial surrenders since the most recent contract anniversary are equal to or less than the current lifetime benefit payment (LBP), the PB is not reduced by the amount of the partial surrender.
If the total partial surrenders since most recent contract anniversary are more than the current LBP, but all partial surrenders were paid under the Automatic Income Required Minimum Distribution (AI RMD), the PB is not reduced by the amount of partial surrender.
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.
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 automatically determined as to whether an increase in the PB is applicable. If an increase is applicable, the PB will automatically 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)):
(contract value prior to rider charge taken on current anniversary/maximum contract value)−1
where maximum contract value equals the greater of (A) or (B) below:
The WP is locked in on the date of the first withdrawal.
Calculation of the Lifetime Benefit Payment
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 applies to the calculation of the LBP:
The LBP is equal to the (WP+the deferral bonus percent) 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+the deferral bonus percent) multiplied by the PB as long as the covered life has reached the age of 60 (or other predetermined age). Also, 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+the deferral bonus percent).
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+the deferral percent bonus percent), 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.
If the PB is 0 (zero) due to withdrawals, the LBP is equal to 0 (zero). During the deferral stage, subsequent premiums may be made to re-establish the PB and the LBP.
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.
Contingent Deferred Sales Charge (CDSC)—Free Up to the Amount of the LBP
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.
Death Benefit Before Annuity Commencement Date
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 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.
“Threshold” definition: see 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 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 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:
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 fund allocation restrictions may be imposed.
Covered life changes in the first 6 months of the contract issue date (or other 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 oldest 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 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 (to be determined on a non-discriminatory basis) has been changed, and a covered life change occurs, and they exceed that newly determined age limitation, then rider will terminate, and the death benefit will be equal to contract value.
Covered Life Change(s)—Joint Life Elections
Covered life changes after the first 6 months of contract issue date, if 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; covered life will be reset and the WP scale will be based on the youngest covered life as of the date of the change.
If surrenders have not been taken from the contract, the following covered life changes may occur.
If surrenders have been taken from the contract:
If surrenders have been taken from the contract, then the following covered life changes occur.
If the oldest covered life after the change is greater than (older) to 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.
Joint/Spousal Continuation Election
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 be continued 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 either the contract value or the payment base on the continuation date. The maximum contract value will be the greater of either 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.
Effect of Death of the Owner or the Annuitant Before the Annuity Commencement Date
The following tables describe the effect of the death of the owner or annuitant before the annuity commencement date.
Contingent Annuitant Becomes Annuitant
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.
Effect of Death after the Annuity Commencement Date.
The following table describes the effect of death after the annuity commencement date.
Fund Allocation Restrictions
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, the right is reserved to treat one or more deferred variable annuity contracts issued with the rider attached in the same calendar year as one contract. If the contracts are aggregated, the period will changed over which withdrawals are measured against the benefit payment.
The effective date of the election will be treated 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 the minimum account rules in effect, the annuity options will be offered as defined earlier in this specification. The options will pay the combined LBP.
Annuity Commencement Date
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.
Single Life Election:
The provider will issue the insured a fixed lifetime and period certain payout. 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 automatically 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 at the age of 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 (41/2% Spousal).
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 frequently 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.
Joint/Spousal Continuation Election:
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 at the age of 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 at the age of 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 frequently 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, 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, owner will be issued a Fixed Lifetime and Period Certain Payout. 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.
Premium Restrictions
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 days since the last charge was assessed, divided by 365. The rider charge will be assessed on 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.
Additional Annuity Contract(s) Rules
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 on an as needed basis. See product requirements for a complete list.
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 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,
LBP withdrawal=(a Withdrawal Percent+a Deferral Bonus Percent)×(a Withdrawal Base),
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 up percent, 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 on 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 withdrawal base; (ii) an instruction for determining a withdrawal percent; (iii) 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 deferral bonus percent)×(the withdrawal base), wherein the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime payment.
Turning now to
Referring now to table 806, illustrated are exemplary lifetime benefit payments made to the relevant life under various conditions. More specifically, the “Immediate W/D” column 824 represents the lifetime benefit payments 834 made to the relevant life when a withdrawal is made without deferring the first payment. Thus, in this example, the relevant life collected the first lifetime benefit payment 834 on the first year of eligibility, wherein the first year of eligibility occurred when the relevant life turned 60, as indicated by “Age” column 820. Hence, by applying the information from supplemental tables 800, 802 and 804, the relevant life is entitled to a 5.0% withdrawal rate of payment base 808 (i.e. $100,000). Therefore, the relevant life receives $5,000 a year for 26 years. “Wait 1” column 826 illustrates the lifetime benefit payments 836 made to the relevant life when the withdrawal is made after deferring only the first eligible payment. Thus, the relevant life collected the lifetime benefit payment 836 on the second year of eligibility. Hence, by implementing the information from supplemental tables 800, 802, and 804, the relevant life is now entitled to a 5.1% withdrawal rate. This withdrawal rate is derived by simply adding increase rate 810, which is 0.1% to the 5.0% withdrawal rate entitled to the relevant life, who happens to be 61 years of age. Therefore, the relevant life receives $5,100 a year for 25 years. “Wait 2” column 828 operates based on the same principles as thoroughly described above. However, in this example, the relevant life defers the first two eligible payments. Hence, by implementing the information from supplemental tables 800, 802, and 804, the relevant life is entitled to a 5.2% withdrawal rate. Therefore, the relevant life collects lifetime benefit payments 838 in the amount of $5,200 a year for a total of 24 years. The same principles are applied to “Wait 3” column 830 and “Wait 4” column 832. Accordingly, the relevant life collects lifetime benefit payments 840 and 842, respectively. “Duration” column 822 represents the length of time in which the relevant life is eligible to receive lifetime benefit payments. For this example, table 806 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 820 simply tracks the age of the relevant life.
It should be understood that several of the method steps of the present invention require a computer in order to be able to determine the respective values. In other words, a computer is required to use the method of the present invention; that is to say the calculations and appropriate data records must be accomplished by 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 chart that provides a particular withdrawal percent for each respective attained age of the relevant life, and is predetermined by the company issuing the annuity and/or the relevant life. Preferably, the withdrawal percent is based on the attained age of the relevant life and is provided according to the withdrawal percent chart that is predetermined by the company issuing the annuity.
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, and the like. 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 Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base), wherein the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment. Preferably, the withdrawal percent chart provides a particular withdrawal percent for each respective attained age of the relevant life's life. The available lifetime benefit payment is determined at each period by the aforementioned formula.
In another embodiment, the deferral bonus percent corresponds to the number of the current year of the contract until taking a first lifetime benefit payment, rather than the number of completed years that have been deferred.
In one embodiment, the deferral bonus percent is a predetermined percent for every 5 years of deferral before the relevant life takes a first lifetime benefit payment.
The predetermined percent may be in the range of 0% to 5.0%, more preferably in the range of 0.1% to 2.0%, and most preferably in the range of 0.2% to 1.0%. The length of time established for tracking the deferral bonus may be in the range of 2 to 10 years, more preferably 3 to 8 years, and most preferably 5 years.
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 attained age of the relevant life's life as provided by a predetermined withdrawal percent chart.
The withdrawal base may be equal to the amount of 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, then 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 attained age of the relevant life's life. Further, the deferral bonus percent is a function of the number of years deferred by the relevant life until taking a first lifetime benefit payment. Significantly, the age of the relevant life is irrelevant for determining the deferral bonus percent. In one embodiment, however, the relevant life must be a minimum age to begin taking lifetime benefit payments. Further, in one embodiment, the relevant life must wait a minimum number of years to begin taking lifetime benefit payments. In one embodiment, the minimum number of years is set at 3 years.
In one embodiment, the withdrawal percent chart has a minimum withdrawal percent of 5.0% for any given attained age. Other minimum withdrawal percents may be used. Preferably, the first few attained ages that are listed in the withdrawal percent chart are set to the minimum withdrawal percent value. Preferably, each of the attained ages of 60-64 of the withdrawal percent chart has a 5.0% withdrawal percent.
In one embodiment, the withdrawal percent chart has a maximum withdrawal percent of 7.0% for any given attained age. Other maximum withdrawal percents may be used. Preferably, the withdrawal percents are grouped into several attained age ranges until the maximum withdrawal percent is reached. Preferably, each of the attained ages 80 and over of the withdrawal percent chart has a 7.0% withdrawal percent.
In a preferred embodiment, the withdrawal percent chart is as follows:
In one embodiment, once the first lifetime benefit payment 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, 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 most recent guaranteed lifetime benefit payment.
In another embodiment, the present invention comprises a deferred variable annuity contract comprising: (a) means for calculating a withdrawal base; (b) means for determining a withdrawal percent; (c) means for calculating a lifetime benefit payment; wherein the lifetime benefit payment is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base),
In another embodiment, the present invention comprises in 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 is determined by the following formula:
LBP withdrawal=(a Withdrawal Percent+a deferral bonus percent)×(Withdrawal Base),
In another embodiment, the annuity contract 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 available lifetime benefit payment, wherein the withdrawal base is related to other values besides the payment base and/or the contract value.
The following description and examples further illustrate the preferred features of the present invention.
Each time a lifetime benefit payment request is received, the withdrawal percent is provided by preferably utilizing the withdrawal percent chart. Preferably, the withdrawal percent chart provides a particular withdrawal percent for each respective attained age of the relevant life's life. In this embodiment, the withdrawal percent is determined by looking up the corresponding attained age of the relevant life on the withdrawal percent chart. 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 predetermined withdrawal percent chart. The Lifetime Benefit Payment withdrawal amount is then determined by the following formula:
LBP withdrawal=(the Withdrawal Percent+a deferral bonus percent)×(a Withdrawal Base),
The following examples illustrate one embodiment of the present method and system. The following withdrawal percent chart is set for the following example. Such predetermined values for the percents and the attained age ranges for the withdrawal percent chart are exemplary and are used strictly for the purposes of illustration. 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%. Preferably, there is a minimum age at which the relevant life may purchase the annuity contract of the present invention. In one embodiment, said minimum age is 40 years old.
Withdrawal Percent Chart:
Note: For purposes of illustration, the relevant life cannot take lifetime benefit payments until reaching age 60.
Deferral Bonus Percent: For the purposes of illustration, the deferral bonus percent is 0.25% percent for every 5 years of deferral before the relevant life takes a first lifetime benefit payment.
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 is a continuation application of co-pending U.S. patent application Ser. No. 11/985,467 entitled METHOD AND SYSTEM FOR PROVIDING A DEFERRED VARIABLE ANNUITY WITH LIFETIME BENEFIT PAYMENTS RELATED TO A WITHDRAWAL PERCENT AND A DEFERRAL BONUS PERCENT, filed Nov. 15, 2007, the entire contents of which are herein incorporated by reference for all purposes.
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| Number | Date | Country | |
|---|---|---|---|
| 20110218936 A1 | Sep 2011 | US |
| Number | Date | Country | |
|---|---|---|---|
| Parent | 11985467 | Nov 2007 | US |
| Child | 13112350 | US |
