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The 192nd General Court of the Commonwealth of Massachusetts

Section 132F: Pension contracts; funding agreements; separate accounts

Section 132F. Any life company may, by written agreements, hereinafter called ''funding agreements'', with the holders of ''pension contracts'', as hereinafter defined, assign, wholly or in part, such contracts and the funds received thereunder, to one or more separate investment accounts, independent of its general investment account, for the purposes of allocating investment returns and asset gains and losses. Within each separate investment account, hereinafter called ''separate account'', such classes of investments may be established as the life company may determine.

''Pension contracts'' for the purpose of this section shall mean life policies and annuity contracts or any other policies or contracts, whether on the group or individual basis, and any supplementary agreements relating thereto, issued in connection with a pension, profit-sharing, or retirement plan; and shall include such contracts assigned wholly or in part to any separate account after their dates of issue, and agreements reinsuring pension contracts issued by other insurers or reinsuring retirement systems established by law.

Pension contracts shall provide for the payment of a periodic retirement benefit payable in fixed or variable amounts, or both. In the case of any pension contract providing for retirement benefits payable in variable amounts, such benefits may vary in amount in direct proportion to the investment results of any or all investments in any separate account to which such pension contract has been assigned in whole or in part or, with the approval of the commissioner, such benefits may vary on some other basis fixed by the contract. Any pension contract delivered in this commonwealth providing for the payment of a retirement benefit in variable amounts shall contain a statement of the essential features of the procedure to be followed by a life company in determining the amount of such variable benefits. Any such pension contract, including a group contract and any certificate issued thereunder, shall state that the amount of such variable benefits may decrease or increase and shall contain on its first page, in a prominent position, a statement that the benefits thereunder are on a variable basis. If and to the extent so provided under the applicable contracts, that portion of the assets of a separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the life company may conduct.

Amounts payable to the life company under a funding agreement with the holder of a pension contract may, with the consent of the life company, be paid by transferring to the life company investments then held under a pension, profit-sharing, or retirement plan which meets the requirements for the tax treatment specified in the second paragraph of this section.

The life company's reserve liability under a pension contract with respect to benefits payable in fixed and guaranteed amounts and with respect to funds guaranteed as to principal amount or stated rate of interest may be maintained in a separate account (i) if the portion of the assets of such separate account which is allocated to the funding agreement with respect to such pension contract shall be invested in accordance with the requirements applicable to the life company's general investment account; provided, however, that such guaranteed separate account need not comply with the requirement of paragraph 14A of section sixty-three, to the effect that not more than one-half of the reserve of any domestic stock or mutual life company shall be invested in corporate obligations authorized under said paragraph 14A, and shall be valued and computed as provided in section twenty-five, or (ii) if the insurer shall annually prepare, an actuarial opinion that, after taking into account any risk charge payable from the assets of such separate account with respect to such guarantee, the assets in such separate account make good and sufficient provision for the fixed and guaranteed obligations of the insurer under such pension contract, and such opinion shall be accompanied by a memorandum of the actuary providing the opinion describing the calculations made in support of such opinion and the assumptions used in the calculations. Such actuarial opinion and accompanying memorandum shall be maintained in the insurer's home office and be available for examination. To the extent that a pension contract provides for the payment of benefits in variable amounts, the life company's reserve liability for such benefits shall be in accordance with actuarial procedures which recognize the variable nature of the benefits to be provided.

Except as required by clause (i) of the preceding paragraph, the life company's assets relating to separate accounts shall be valued at their market value at the date as of which valued in accordance with the terms of the applicable agreements, or if there is no readily available market, then in accordance with the terms of such agreements.

The life company's assets and liabilities relating to separate accounts shall be included in its other assets and liabilities in the annual statement required by section twenty-five.

No domestic life company, and no other life company admitted to transact business in this commonwealth, shall be authorized to issue or deliver within this commonwealth any pension contract providing benefits in variable amounts until such company has satisfied the commissioner that its condition and methods of operation in connection with the issuance of such contracts will not be such as would render its operation hazardous to the public or its policyholders in this commonwealth. In determining the qualification of a company requesting authority to issue or deliver such contracts within this commonwealth, the commissioner shall consider, among other things, (1) the history and financial condition of the company; (2) the character, responsibility and general fitness of the officers and directors of the company; and (3) in the case of a company other than a domestic company, whether the regulation provided by its domiciliary jurisdiction provides a degree of protection to policyholders and the public which is substantially equal to that provided by this section and by the rules and regulations issued thereunder.

The commissioner may issue such rules and regulations as may be necessary to carry out the provisions of this section. The provisions of chapter thirty A shall not be applicable to such rules and regulations.