PRUDENTIAL NEW YORK PRODUCT UPDATE – GUARANTEED UNIVERSAL LIFE PREMIUM CHANGES AND BENEFITACCESS RIDER UPDATE
Effective January 17, 2017, new sales of UL Protector policies issued in New York will see increased rates. Also effective January 17, 2017, the new version of our BenefitAccess Rider, which offers a choice of monthly benefit payout options (either 2% or 4%), will be available on all permanent products sold that currently offer the BenefitAccess Rider in New York. Finally, there is an important note regarding a New York state requirement for the BenefitAccess Rider, which applies to new and existing policy owners with BenefitAccess Rider.
For further details and explanations, please continue reading below.
PruLife Universal Protector (“UL Protector”) Update In order to maintain the sustainability of our guaranteed universal life (“GUL”) products in current market conditions, Prudential recently increased rates for new sales of UL Protector. The following increases took effect in most states on September 26, 2016:
- Level pay planned premiums increased between approximately 1% and 2%.*
- Short pay planned premiums increased between 1% and 5%.*
- Single pay through 5-pay planned premiums increased approximately 5%.*
Effective January 17, 2017, these rate changes will apply to UL Protector policies issued in New York.
BenefitAccess Rider (“BAR”) Update Effective January 17, 2017, the new version of our BAR, which offers a choice of monthly benefit payout options (either 2% or 4%), will be available on the below permanent products sold in New York:
- UL Protector
- PruLife Founders Plus UL
- PruLife Index Advantage UL
- PruLife Custom Premier II
- VUL Protector
Key Dates /Transition Rules in New York: UL Protector:
- January 17, 2017: Changes will be reflected in our sales illustration system.
- January 17, 2017 (“Ready to Sell” Date): New rates for UL Protector and the new version of BAR are in effect. All applications signed and dated on or after January 17 will receive the new rates and the new version of BAR (unless old rates are requested and permitted).
- February 13, 2017 (Transition Period End Date): Last day that an application can be signed with a request for old UL Protector rates. If old rates are desired for an application dated during the 28-day transition period, a written request, along with the appropriate illustration version, should be submitted on or after January 17, 2017.
Note: during this 28-day transition period, if requesting old GUL rates, only the old version of BAR is available–the new BAR, with 4% monthly benefit option, is not available on the old GUL rates.
- February 14, 2017: All UL Protector applications dated on or after February 14, 2017 will receive the new UL Protector rates and new version of BAR (if requested) only.
PruLife Founders Plus UL, PruLife Index Advantage UL, PruLife Custom Premier UL, VUL Protector:
- January 16, 2017 (Old version of BAR discontinued): The old version of BAR is only available on applications signed and dated on or before January 16.
- January 17, 2017: Changes will be reflected in our sales illustration system for all products listed above.
- January 17, 2017 (“Ready to Sell” Date): The enhanced BAR will be in effect for these products. All applications signed and dated on or after January 17 will receive the enhanced version of BAR and will reflect a January 2017 rate basis version on the illustration.
New York’s Tax Favorability Requirement for Chronic Illness Benefits Under BAR Applies to all New York products with which BAR is available. Under current New York law, chronic illness benefit payments under accelerated benefit riders may only be made if the payments are expected to qualify for favorable tax treatment under 101(g) of the federal tax code. As such, when determining whether the benefit payments will receive favorable tax treatment, we must consider the payment of benefits from all insurance policies that provide chronic illness or long term care benefits. BAR payments may be reduced or unavailable to the extent the payments would result in unfavorable tax treatment.
Chronic illness benefits are only tax qualified to the extent they do not exceed the greater of a daily benefit limit set by the IRS (“Daily Limit” – $360 in 2017) or actual out of pocket costs for qualified expenses under the federal tax code. Any amount of chronic illness payments exceeding an individual’s unreimbursed qualified expenses or the Daily Limits would be subject to federal income tax. Benefits under our BAR may be less than, but cannot exceed the Daily Limit. If an individual only has one BAR and does not have other riders or policies that provide chronic illness or long term care benefits, then New York’s tax favorability requirement would not affect them. If, however, an individual has multiple riders or policies that provide chronic illness or long term care benefits, then benefits under their BAR may be reduced or unavailable to the extent payments would cause the insured to exceed I.R.S. limits for favorable tax treatment.
New York’s tax favorability requirement applies to new and existing policy owners with BAR. Previous versions of BAR clearly disclosed that benefits are intended to meet tax favorability requirements. With the new version of the rider, we are taking the extra step of highlighting the tax favorability requirement in the important notice section of the rider and in the conditions of eligibility for chronic illness benefits. As noted above, the new version of BAR will be available on January 17, 2017 for New York sales of all permanent products that offer BAR. We are also taking steps to help ensure customers that have or have applied for previous New York versions of BAR are aware of this New York specific requirement. For pending applications (for all Prudential products that offer BAR), we have prepared an important notice to highlight the NY tax favorability requirement, which we began including in policy packages on January 5, 2017.
We will also be taking steps to help ensure existing policy holders who already purchased our New York version of BAR are fully aware of this requirement. Look for additional information in the coming weeks.
*Your clients may choose various planned premium patterns to meet the requirements of the policy’s conditional no-lapse guarantees. The amount and timing of premium payments are just some of the factors that will determine how long the conditional guarantees last.