7702 – Product changes and transition rules

7702 changes

Background

With the passage of the Consolidated Appropriations Act of 2021 on December 27, 2020, a change was made to Section 7702 of the Internal Revenue Code. This change outlined several requirements permanent life insurance policies must meet in order to qualify as a life insurance contract for tax purposes

The change affects the life insurance industry by replacing the statutory interest rate assumptions (from 1984) from a previously hard-coded 4% rate to a floating rate. These changes will impact the limits associated with definitions of life insurance in the Guideline Premium Test, Cash Value Accumulation Test and Modified Endowment Contract calculations.

What you need to know

The 7702 changes apply to new business starting January 1, 2021. Our illustration system will be updated May 3, 2021, to reflect these standards.

New 7702 premium limits will apply to applications received after April 30, 2021, on the following products:

Eclipse Accumulator Indexed Universal Life (IUL)
Eclipse Protector II IUL
Eclipse Survivor II IUL
Premier Variable Universal Life (VUL)
Eclipse NY
VUL Defender®

Please note (if applicable): Products currently sold but not listed above will be updated to comply with 7702 at a later date. Additional communication and details to follow.

Only policies dated January 1, 2021, and later are eligible for the new 7702 premium limits. Changes to contracts dated January 1-April 30, 2021, may be made beginning in July 2021. More information will follow as that date approaches. Pending policies will have the option to move to the new 7702 premium limits or remain as currently illustrated. Contact your sales team with questions or see transition rules below.

The Guaranteed Income Agreement will be discontinued May 1, 2021, as a result of the 7702 changes. To add this agreement to a new or existing contract, please follow the transition rules below.

Pricing changes
Effective May 1, 2021, pricing changes for the following products will be made in combination with the 7702 updates:

Eclipse Accumulator IUL
Eclipse Survivor II IUL
Premier VUL

Transition Rules
Key dates

7702 changes

Friday, April 30, 3 p.m., CST — Applications received after this time will be issued with the new 7702 premium limits.
Monday, May 3 — Updated illustrations will be available.
Friday, July 2, 3 p.m., CST — Pending cases that were received prior to May 1 that are requesting the old 7702 premium limits must be underwritten, approved, paid and delivered (delivery receipt signed) by this date with a signed illustration run no later than July 2.
- Cases that have not completed the above requirements by this time will be issued under the new 7702 premium limits and will require a new, signed 7702 compliant illustration. This is a regulatory requirement, and NO EXCEPTIONS will be made.

Guaranteed Income Agreement (GIA)
This agreement will be discontinued May 1, as it is not available for contracts using the new 7702 premium limits.

Friday, October 1, 3 p.m., CST — Deadline to add this agreement to an existing contract sold under the old 7702 premium limits. All requirements must be completed by this date.

Pricing changes

Friday, April 30, 3 p.m., CST — Applications received after this time will be issued with the new pricing.
Monday, May 3 — Updated illustrations will be available.
Friday, July 2, 3 p.m., CST — Pending cases that were received prior to May 1 that want to receive the old pricing must be underwritten, approved, paid and delivered (delivery receipt signed) by this date with a signed illustration run no later than July 2.
- Cases that have not completed the above requirements by this time will be issued under the new pricing and will require a new, signed illustration.

NOTE:
There may be situations in which you receive an illustration upon policy delivery containing different 7702 premium limits or pricing than intended. If this occurs, you will be asked to supply a new, signed compliant illustration.

For more information on 7702, click here.

Contact Us
Questions?
Please call Securian’s Sales Support Team at 1-888-413-7860, option 1.

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