Otis Passes Bill to Provide Greater Financial Flexibility for Insurance Annuity Policyholders
Assemblyman Steve Otis (D-Rye) announced the recent passage of his bill to amend state insurance law to permit holders of individual or group annuity contracts to reinvest dividends back into the annuity in order to increase future guaranteed income payments. The legislation, A7152A (Otis)/ S2525B (Seward), passed the Assembly on June 7, 2017 and the Senate on June 8th.
Income annuity contracts are a type of insurance policy in which a policy holder pays a set premium in return for a guaranteed income benefit at a future date, plus dividends. These policies can help individuals plan for their future retirement needs and achieve a degree of stability and security in their financial planning.
Under current law, participating life insurance policies allow policyholders the option of reinvesting dividends in order to increase the future payout under those policies. Similarly, annuity holders in other states may elect to reinvest their dividend distributions in their annuity contracts by purchasing “paid up additions.” These paid up additions add value to the annuity contract by increasing the amount of the annuity’s future guaranteed income.
In New York, however, holders of annuity contracts have only had the option to accept annuity dividends from the insurance company in the form of a cash payment. “This bill achieves parity for annuity policy holders in the State, giving them the flexibility to automatically reinvest dividend distributions so as to increase their future income under the annuity contract,” said Otis. “Consumers will now have greater options when planning for the future and saving for retirement.”
Senate Insurance Committee Chairman Senator James L. Seward (R/C/I/Ref-Oneonta) said, “This is consumer friendly legislation that will bring New York up to speed with the rest of the nation. Allowing investors the flexibility to opt-in and utilize this reinvestment strategy adds value to their annuity contracts and helps provide for their future. I was pleased to work with Assemblyman Otis on this bi-partisan legislation and look forward to it being signed into law.”
Life Insurance Council President and CEO Mary A. Griffin said, “Life insurance companies provide a variety of products that help people plan and save for retirement and once this bill is signed, New Yorkers will be able to reinvest their annuity dividends and thereby increase the amount of retirement income their annuities provide. We want to thank Assemblyman Otis for his leadership and for championing this proposal in the Assembly.”
The legislation will now be sent to the Governor for his review and consideration.