Page:United States Statutes at Large Volume 102 Part 4.djvu/693

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3663

"(2) REDUCTION IN BENEFITS DURING 1ST 7 YEARS.—

"(A) IN GENERAL.—If there is a reduction in benefits under the contract within the 1st 7 contract years, this section shall be applied as if the contract had originally been issued at the reduced benefit level. "(B) REDUCTIONS ATTRIBUTABLE TO NONPAYMENT OF PRE-

MIUMS.—Any reduction in benefits attributable to the nonpayment of premiums due under the contract shall not be taken into account under subparagraph (A) if the benefits are reinstated within 90 days after the reduction in such benefits. "(3) TREATMENT OF MATERIAL CHANGES.—

"(A) IN GENERAL.—If there is a material change in the benefits under (or in other terms of) the contract which was not reflected in any previous determination under this section, for purposes of this section— "(i) such contract shall be treated as a new contract entered into on the day on which such material change takes effect, and "(ii) appropriate adjustments shall be made in determining whether such contract meets the 7-pay test of subsection (b) to take into account the cash surrender value under the contract. "(B) TREATMENT OF CERTAIN INCREASES IN FUTURE BENE-

FITS.—For purposes of subparagraph (A), the term 'material change' includes any increase in future benefits under the contract. Such term shall not include— "(i) any increase which is attributable to the payment of premiums necessary to fund the lowest level of future benefits payable in the 1st 7 contract years (determined after taking into account death benefit increases described in subparagraph (A) or (B) of section 7702(e)(2)) or to crediting of interest or other earnings (including policyholder dividends) in respect of such premiums, and "(ii) to the extent provided in regulations, any cost-ofliving increase based on an established broad-based index if such increase is funded ratably over the remaining life of the the contract. "(4) SPECIAL RULE FOR CONTRACTS WITH DEATH BENEFITS UNDER

$10,000.—In the case of a contract— "(A) which provides an initial death benefit of $10,000 or less, and "(B) which requires at least 7 nondecreasing annual premium payments, each of the 7 level annual premiums determined under subsection (b) (without regard to this paragraph) shall be increased by $75. For purposes of this paragraph, the contract involved and all contracts previously issued to the same insurer by the same company shall be treated as one contract. "(5)

REGULATORY AUTHORITY FOR CERTAIN COLLECTION EX-

PENSES.—The Secretary may by regulations prescribe rules for taking into account expenses solely attributable to the collection of premiums paid more frequently than annually.

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