Page:United States Statutes at Large Volume 98 Part 1.djvu/799

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 751

"(A) in the case of an annuity contract, the amounts paid in, or the amount paid out, reflect the investment return and the market value of the segregated asset account, or "(B) in the case of a life insurance contract, the amount of the death benefit (or the period of coverage) is adjusted on the basis of the investment return and the market value of the segregated asset account. If a contract ceases to reflect current investment return and current market value, such contract shall not be considered as meeting the requirements of paragraph (3) after such cessation. "(e) PENSION PLAN CONTRACTS TREATED AS PAYING ANNUITY.—A

pension plan contract which is not a life, accident, or health, property, casualty, or liability insurance contract shall be treated as a contract which provides for the payments of annuities for purposes of subsection (d).

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"(f) OTHER SPECIAL RULES.— "(1) LIFE INSURANCE RESERVES.—For

purposes of subsection (b)(1)(A) of section 816, the reflection of the investment return and the market value of the segregated asset account shall be considered an assumed rate of interest. "(2) ADDITIONAL SEPARATE COMPUTATIONS.—Under regulations prescribed by the Secretary, such additional separate computations shall be made, with respect to the items separately accounted for in accordance with subsection (c), as may be necessary to carry out the purposes of this section and this part.

"(g)

Ante, p. 748.

KS.-

VARIABLE ANNUITY CONTRACTS TREATED AS ANNUITY CON-

TRACTS.—For purposes of this part, the term 'annuity contract' includes a contract which provides for the payment of a variable annuity computed on the basis of^ "(1) recognized mortality tables, and "(2)(A) the investment experience of a segregated asset account, or "(B) the company-wide investment experience of the company. Paragraph (2)(B) shall not apply to any company which issues contracts which are not variable contracts. "(h) TREATMENT OF CERTAIN NONDIVERSIFIED CONTRACTS.—

"(1) IN GENERAL.—For purposes of subchapter L, section 72 (relating to annuities), and section 7702(a) (relating to definition of life insurance contract), a variable contract (other than a pension plan contract) which is otherwise described in this section and which is based on a segregated asset account shall not be treated as an annuity, endowment, or life insurance contract for any period (and any subsequent period) for which the investments made by such account are not, in accordance with regulations prescribed by the Secretary, adequately diversified. For purposes of this paragraph and paragraph (2), beneficial interests in a regulated investment company or in a trust shall not be treated as 1 investment if all of the beneficial interests in such company or trust are held by 1 or more segregated asset accounts of 1 or more insurance companies. "(2) SAFE HARBOR FOR DIVERSIFICATION.—A segregated asset account shall be treated as meeting the requirements of paragraph (1) for any quarter of a taxable year if as of the close of such quarter— "(A) it meets the requirements of section 851(b)(4), and

Post, p. 767

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