Variable annuity contracts must conform to the requirements of this section in order to obtain the commissioner's approval.
  (1) Filing of variable annuity contracts. All variable annuity contracts, all riders, endorsements, applications, and other documents that are attached to and made a part of the contract and that relate to the variable nature of the contract, must be filed with the commissioner and approved, as applicable, by the commissioner before delivery or issuance for delivery in this state.
    (A) Each variable annuity contract and related forms must be filed according to Chapter 3, Subchapter A of this title (relating to Submission Requirements for Filings and Departmental Actions Related to Such Filings).
    (B) The commissioner may approve variable annuity contracts and related forms with provisions the commissioner deems to be not less favorable to the contract holder, certificate holder, and the beneficiary than those required by these sections.
  (2) Mandatory contract provisions. Every variable annuity contract must contain at least the following.
    (A) The cover page or page corresponding to the cover page of each contract must contain:
      (i) a prominent statement that the benefits under the contract are on a variable basis; and
      (ii) a prominent statement that the dollar amounts will vary to reflect the investment experience of a separate account or separate accounts.
    (B) A full description of the investment increment factors to be used in computing dollar amounts of variable benefits or variable contractual payments of values, and may guarantee that expense and/or mortality results will not adversely affect such dollar amounts. In the case of an individual variable annuity contract under which the expense and mortality results may adversely affect the dollar amount of benefits, the expense and mortality factors must be stipulated in the contract. In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:
      (i) the annual net investment increment assumption may not exceed 5.0% except with the approval of the commissioner;
      (ii) to the extent that the level of benefits may be affected by future mortality results, the mortality factor must be determined from the Annuity Mortality Table for 1949, Ultimate, or any modification of that table not having a higher mortality rate at any age, or, if approved by the commissioner, from another table.
    (C) A provision designating the separate account to be used and stating that the portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account may not be chargeable with liabilities arising out of any other business the company may conduct.
    (D) As appropriate, a provision for a grace period.
      (i) For individual variable annuities that provide for the payment of periodic stipulated payments, a grace period of 31 days within which any stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract must continue in force. The contract may include a statement of the basis for determining the date that any such payment received during the period of grace will be applied to produce the values under the contract arising therefrom.
      (ii) For group variable annuities, a provision that the contract holder or premium payor is entitled to a grace period of 31 days for the payment of any premium due except the first, during which grace period the contract must continue in force, unless the contract holder or premium payor has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the contract. The contract may provide that the contract holder or premium payor will be liable to the insurer for the payment of pro rata premium for the time the contract was in force during such grace period.
    (E) A provision that, at any time within two years from the date of default in making periodic stipulated payments to the insurer during the life of the annuitant and unless the cash surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by contract, and of all indebtedness to the insurer on the contract, including interest. The contract may include a statement of the basis for determining the date that the amount to cover such overdue payments and any indebtedness will be applied to produce the values under the contract arising therefrom.
    (F) A unique definition of any cash surrender values available under the contract.
    (G) A provision for nonforfeiture benefits as defined in paragraph (3) of this section.
    (H) A provision defining the documents that make up the entire contract.
    (I) An identification of the owner of the contract.
    (J) A provision stating that the company must mail to the individual contract holder or group contract holder at least once each year after the first at the contract holder's last address known to the company a statement reporting the investments held in the separate account.
    (K) For individual variable annuities, a provision that the company must mail to the contract holder at least once in each contract year, after the first at the contract holder's last address known to the company, a statement reporting the status of the policy as of a date not more than four months before the date of mailing. In the case of an annuity contract under which payments have not yet commenced, the statement must contain:
      (i) the number of accumulation units credited to such contract and the dollar value of a unit; or
      (ii) the value of the contract holder's account.
  (3) Reserves and nonforfeiture benefits.
    (A) The reserve liability for variable annuities must be established under Insurance Code Chapter 425, Subchapter B, concerning Standard Valuation Law, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.
    (B) The provisions of this paragraph relating to nonforfeiture benefits do not apply to any:
      (i) reinsurance;
      (ii) group annuity contract purchases in connection with one or more retirement plan or plans of deferred compensation established or maintained by or for one or more employers (including partnerships or sole proprietorships), employee organizations, or any combination thereof, or other plans providing individual retirement accounts or individual retirement annuities under Internal Revenue Code §408, as now or hereafter amended;
      (iii) premium deposit fund;
      (iv) investment annuity;
      (v) immediate annuity;
      (vi) deferred annuity contract after annuity payments have commenced;
      (vii) reversionary annuity; or
      (viii) to any contract that is to be delivered outside this state through an agent or other representative of the company issuing the contract.
    (C) To the extent that any variable annuity contract provides benefits that do not vary in accordance with the investment performance of a separate account before the annuity commencement date, such contract must contain provisions that satisfy the requirements of Insurance Code Chapter 1107, concerning Standard Nonforfeiture Law for Certain Annuities, and may not otherwise be subject to this section.
    (D) No variable annuity contract, except as stated in subparagraphs (B) and (C) of this paragraph, may be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions that in the opinion of the commissioner are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract.
      (i) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan described in the contract that complies with subparagraph (H) of this paragraph. Such description must include a statement of the mortality table, if any, and guaranteed or assumed interest rates used in calculating annuity payments.
      (ii) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or before the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit as described in the contract that complies with subparagraph (I) of this paragraph. The contract may provide that the company reserves the right, at its option, to defer the determination and payment of any cash surrender benefit for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists that may make such determination and payment impractical.
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