Guarantees of Principal and interest. While guarantee of principal alone is insufficient to qualify as an assumption of investment risk, when combined with a permanent minimum interest rate, an unallocated component may constitute a guaranteed benefit policy. See Associates in Adolescent Psychiatry v. Home Life Ins. Co., 941 R2d 561 (7`" Cir. 1991); Xxxxxxxx x Xxxx, 1996 U.S. Dist. LEXIS 5653; Peoria Union Stock Yards Co. Retirement Plan x. Xxxx Mutual Life Ins. Co., 698 R2d 320, 324-25 (7`" Cir. 1983); Xxxx x. Variable Annuity Life Ins. Co., 814 F.2d 1127, 1132 (7`" Cir. 1986); Xxxxxx-Xxxxx Co. v Connecticut General Life Ins. Co., 1991 U.S. Dist. LEXIS 18080 (N.D. Ill. 1991); See also Rule 151 (a minimum interest rate generally equal to state nonforfeiture law). The provision of guaranteed interest rates above a guaranteed minimum rate ("additional amount” or “excess interest rates") is further evidence of assumption of investment risk with respect to unallocated funds. In this regard, one-year guaranteed rates set and declared in advance provide strong support for guaranteed benefit policy status. There is little authority considering an arrangement in which excess interest rates are guaranteed for periods of less than one year. The SEC has provided some analysis relating to excess interest rates in its discussion of the safe harbor provided under Rule 151. While Rule 151 requires excess interest to be guaranteed for one-year, insurers may increase excess interest rates during the year, provided that the new rate is protected against reduction for a further one year period. Insurers may provide separate twelve-month guarantees with respect to each payment received and consolidate the guarantees using a calendar or contract year system.
Guarantees of Principal and interest. While guarantee of principal alone is insufficient to qualify as an assumption of investment risk, when combined with a permanent minimum interest rate, an unallocated component may constitute a guaranteed benefit policy. See Associates in Adolescent Psychiatry v. Home Life Ins. Co., 941 R2d 561 (7`" Cir. 1991); Xxxxxxxx x Xxxx, 1996 U.S. Dist. LEXIS 5653; Peoria Union Stock Yards Co. Retirement Plan x. Xxxx Mutual Life Ins. Co., 698 R2d 320, 324-25 (7`" Cir. 1983); Xxxx x. Variable Annuity Life Ins. Co., 814 F.2d 1127, 1132 (7`" Cir. 1986); Xxxxxx-Xxxxx Co. v Connecticut General Life Ins. Co., 1991 U.S. Dist. LEXIS 18080 (N.D. Ill. 1991); See also Rule 151 (a minimum interest rate generally equal to state nonforfeiture law).
