CHAPTER 462

FORMERLY

HOUSE BILL NO. 615

AS AMENDED BY HOUSE AMENDMENT NOS. 1 AND 2

AN ACT TO AMEND TITLE 18 RELATING TO EMPLOYER OWNED LIFE INSURANCE POLICIES AND TRUST OWNED LIFE INSURANCE POLICIES ISSUED IN THIS STATE.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Section 2704(c)(3), Chapter 27, Title 18 of the Delaware Code by deleting said paragraph in its entirety and by substituting in lieu thereof the following:

"(3) Exclusive of paragraph (2) of this subsection, an employer

providing life, health, disability, retirement or similar benefits to its employees or the employees of its affiliates, and acting in a fiduciary capacity with respect to such employees or retired employees or their dependents or beneficiaries, has an insurable interest in the lives of its employees. As used in this Section and in Sections 702(c) and 2708(4) of this Title, the term 'employee' shall include any and all directors, officers, partners, employees, and retired employees. The term 'employer' shall include corporations,

partnerships, other business entities, including associations of employers, and their affiliates. The trustee of a trust established by an employer for the benefit of the employer has the same insurable interest in the life of any person and employee as does the employer;"

Section 2. Amend Section 2704(c), Chapter 27, Title 18 of the Delaware Code by deleting the period "." as it appears at the end of paragraph "(4)" thereof and by substituting in lieu thereof the phrase "; and" and by adding a new paragraph thereto to read as follows:

"(5) The trustee of a trust established by an individual has an

insurable interest in the life of that individual and the same insurable interest in the life of any other person as does the individual. A 'Trust Owned Life Insurance Policy', for the purposes of this Title, means an insurance contract permitted under this paragraph, issued for delivery in this State to a trust established under the laws of this State and having a trustee with its principal place of business in this State."

Section 3. Amend Section 2704(e), Chapter 27, Title 18 of the Delaware Code, by deleting said subsection in its entirety and by substituting in lieu thereof the following:

"(e) An 'Employer Owned Life Insurance Policy', for the purposes of this Title, means an insurance contract permitted under paragraph (c)<3) of this Section and Section 2708(4) of this Title, Issued for delivery in this State and procured or effected by any employer, or a trust established by an employer, which employer has at least 50 employees and is incorporated, registered or qualified to do business in this State. The existence of an insurable interest with respect to an Employer Owned Life Insurance Policy shall be governed by paragraph (c)(3) of this Section without regard to an employee's state of residency or location. An Employer Owned Life Insurance Policy, if delivered to the employer's principal place of business in this State or to Its registered agent in this State, or, in the case of a policy issued to a trust established by an employer, if delivered to the place of business in Delaware of the trustee of said trust, shall be deemed to have been delivered in this State. The parties to an Employer Owned Life Insurance Policy may arrange for delivery in this State by means other than the method described in the preceding sentence. An Employer Owned Life Insurance Policy may be issued on an individual or group basis, and any group policy shall be exempt from Chapter 31 of this Title. A group insurance policy issued to an employer for the benefit of persons other than the employer, as permitted by Section 3102 of this Title, shall not constitute an Employer Owned Life Insurance Policy."

Section 4. Amend Section 2708(4), Chapter 27, Title 18 of the Delaware Code by deleting said subsection in its entirety and by substituting in lieu thereof the following:

"(4) An employer or the trustee of a trust established by the

employer may effectuate insurance under an Employer Owned Life Insurance Policy, as defined in Section 2704(e) of this Title, upon any employee in whom it has an insurable interest, and the employer shall not be required to notify employees of the effectuation of such insurance or obtain their consent. An employer or trustee that receives funds as the beneficiary of an Employer Owned Life Insurance Policy shall establish depository arrangements with a Delaware banking institution as may be appropriate for the employee benefit plan, and the insurer and any investment subadvisors shall (1) use best efforts to direct securities transactions relating to such Employer Owned Life Insurance Policies and underlying assets, subject to best execution, through a securities agent licensed and located in this State and (2) direct all insurance and annuity transactions relating to such Employer Owned Life Insurance Policies through an insurance agent or broker licensed and located in this State."

Section 5. Amend Section 4403(b)(2), Chapter 44, Title 18 of the Delaware Code by deleting the period "." as it appears at the end of subparagraph "h" thereof and by substituting in lieu thereof the phrase "; or and by adding a new subparagraph at the end thereof to read as follows:

"i. Any Employer Owned Life Insurance Policy, as defined in Section 2704(e) of this Title."

Section 6. Amend Section 702(a), Chapter 7, Title 18 of the Delaware Code by adding a new sentence at the end thereof to read as follows:

Any premiums received for Employer Owned Life Insurance Policies, as defined in Section 2704(e) of this Title, and Trust Owned Life Insurance Policies, as defined in Section 2704(c)(5) of this Title, shall be itemized separately in the report, except that separate itemization for a Trust Owned Life Insurance Policy shall not be required if the insurer elects to pay tax on premiums received for such policy under paragraph (c)(1) of this Section."

Section 7. Amend section 702(c), Chapter 7, Title 18 of the Delaware Code by redesignating it as section 702(c)(1) and by adding a new section 702(c)(2) to read as follows:

"(2) In lieu of paragraph (1) above, there shall be paid a tax on a graduated basis at the rates set forth in the following table on net premiums per case for Employer Owned Life Insurance Policies, as defined In Section 2704(e) of this Title, and Trust Owned Life Insurance Policies, as defined in Section 2704(c)(5) of this Title. For purposes of this section, a 'case' is all contracts issued to a single employer or trust established by a single employer or individual (or group of employers or individuals that participate in a single private placement under federal securities laws). Said tax shall be paid on net premiums and all other considerations received on account of insurance contracts issued for delivery in this State, except that no premium tax shall be paid with respect to persons resident or located outside of this State upon whom premium tax is paid to the State of residency or location.

Net Premiums Per Case Premium Tax Rate

First $10,000,000

$10,000,001 to $24,999,999

$25,000,000 to $99,999,999 $100,000,000 and over

The premium tax rate shall be calculated on the basis of net premiums (upon which taxes are payable to this State) received per case in each calendar year, except that in subsequent calendar years the premium tax rate shall not be higher than the rate established for the preceding year. A reduction in the premium tax rate for a subsequent calendar year shall not apply retrospectively to any previous calendar year. The following example illustrates calculation of the tax rates under this Section:

Calendar Year

Premiums Per Case Tax Rate

     

1995 $9,000,000 2%

1996 $20,000,000 2% x $10,000,000

+ 1.5% x $10,000,000

1997 $30,000,000 1.5% x $25,000,000

+ 1.25% x $5,000,000 1998 $9,000,000 1.25%

The tax imposed by this subsection shall by the only tax imposed by this Chapter on Employer Owned Life Insurance Policies and Trust Owned Life Insurance Policies."

Section 8 This Act shall apply to insurance contracts issued for delivery on or after its date of enactment.

Section 9. If any provision of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared to be severable.

Approved July 22, 1994.