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SF 3115

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to consumer protection; protecting senior citizens from financial
exploitation; regulating annuity transactions; appropriating money; proposing
coding for new law in Minnesota Statutes, chapters 45; 47; 61A; 513.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

PROTECTION OF SENIOR CITIZENS

Section 1.

new text begin [45.25] DEPARTMENT OF COMMERCE; ASSISTANCE TO
FINANCIALLY EXPLOITED SENIOR CITIZENS.
new text end

new text begin Subdivision 1. new text end

new text begin Hotline. new text end

new text begin The commissioner of commerce shall establish a toll-free
telephone hotline for senior citizens to report financial exploitation to the Department of
Commerce. Senior citizens must be offered the option of making the report confidentially.
For purposes of this section, "senior citizen" means an individual who is at least 60 years
of age.
new text end

new text begin Subd. 2. new text end

new text begin Publicizing the hotline. new text end

new text begin The commissioner of commerce shall publicize
the hotline by using cost-effective advertising in publications read by senior citizens and
through organizations that communicate with senior citizens.
new text end

new text begin Subd. 3. new text end

new text begin Use of reports. new text end

new text begin The commissioner shall attempt to resolve the complaints
appropriately, including referral to federal, state, or local law enforcement authorities, or
to other entities that may be helpful in resolving the complaints.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2006.
new text end

Sec. 2.

new text begin [47.195] FINANCIAL INSTITUTIONS; COOPERATION WITH STATE
AND LOCAL AGENCIES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the terms defined in
this subdivision have the meanings given.
new text end

new text begin (b) "Financial exploitation" means the use of a position of trust or undue influence to
acquire possession, ownership, or control of the assets of another person to the benefit of
the person using the position of trust and to the detriment of the other person, without the
other person??a??a??s informed consent.
new text end

new text begin (c) "Financial records" means any original paper or electronic document, any copy
of it, or any information contained in it, held by or in the custody of a financial institution,
when the document, copy, or information is identifiable as pertaining to one or more
customers of a financial institution.
new text end

new text begin (d) "Financial institution" means a bank, savings bank, savings association, trust
company, credit union, or industrial loan and thrift, whether federally chartered or
state-chartered.
new text end

new text begin (e) "Law enforcement agency" has the meaning given in section 626.84, subdivision
1.
new text end

new text begin (f) "Senior citizen customer" means any individual who is at least 60 years old, who
is transacting or has transacted business with a financial institution, or who is using or has
used the services of a financial institution, or for whom or which a financial institution has
acted or is acting as a fiduciary.
new text end

new text begin Subd. 2. new text end

new text begin Disclosure permitted. new text end

new text begin A financial institution may, in its discretion,
initiate contact with, communicate with, and disclose customer records to appropriate law
enforcement agencies concerning any suspected theft or financial exploitation in which a
senior citizen customer is a victim.
new text end

new text begin Subd. 3. new text end

new text begin Liability. new text end

new text begin A financial institution is not liable to any person for any loss,
damage, or injury arising out of or in any way pertaining to a release of information
under this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2006.
new text end

Sec. 3.

new text begin [513.65] IMPROVIDENT TRANSFERS OF TITLE.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) As used in this section, unless the context otherwise
indicates, the terms defined in this subdivision have the meanings given.
new text end

new text begin (b) "Dependent," with respect to an elderly person, means wholly or partially
dependent upon one or more other persons for care or support, either emotional or
physical, because the elderly person:
new text end

new text begin (1) suffers from a significant limitation in mobility, vision, hearing, emotional or
mental functioning, or the ability to read or write; or
new text end

new text begin (2) is suffering or recovering from a major illness or is facing or recovering from
major surgery.
new text end

new text begin (c) "Elderly person" means a person who is 60 years of age or older.
new text end

new text begin (d) "Independent counsel" means an attorney retained by the elderly dependent
person to represent only that person's interests in the transfer.
new text end

new text begin (e) "Less than full consideration," with respect to a transfer of property, means the
transferee pays less than fair market value for the property or the transfer is supported by
past consideration.
new text end

new text begin (f) "Major transfer of personal property or money" means a transfer of money or
items of personal property which represent ten percent or more of the elderly dependent
person's estate.
new text end

new text begin (g) "Transfer" does not include testamentary transfers, which are outside the scope
of this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Undue influence. new text end

new text begin (a) In any transfer of real estate or major transfer of
personal property or money for less than full consideration or execution of a guaranty
by an elderly person who is dependent on others to a person with whom the elderly
dependent person has a confidential or fiduciary relationship, it is presumed that the
transfer or execution was the result of undue influence, unless the elderly dependent
person was represented in the transfer or execution by independent counsel. When the
elderly dependent person successfully raises the presumption of undue influence by a
preponderance of the evidence and when the transferee or person who benefits from the
execution of a guaranty fails to rebut the presumption, the elderly dependent person is
entitled to avoid the transfer or execution and entitled to the relief set forth in subdivision 4.
new text end

new text begin (b) For the purpose of this subdivision, the transfer of property or execution of
a guaranty is deemed to have been made in the context of a confidential or fiduciary
relationship if the transferee or person who benefits from the execution of a guaranty had
a close relationship with the elderly dependent person prior to the transfer or execution.
Confidential or fiduciary relationships include the following:
new text end

new text begin (1) a family relationship between the elderly dependent person and the transferee
or person who benefits from the execution of a guaranty, including relationships by
marriage and adoption;
new text end

new text begin (2) a fiduciary relationship between the elderly dependent person and the transferee
or person who benefits from the execution of a guaranty, such as with a guardian,
conservator, trustee, accountant, broker, or financial advisor;
new text end

new text begin (3) a relationship between an elderly dependent person and a physician, nurse,
or other medical or health care provider;
new text end

new text begin (4) a relationship between the elderly dependent person and a psychologist, social
worker, or counselor;
new text end

new text begin (5) a relationship between the elderly dependent person and an attorney;
new text end

new text begin (6) a relationship between the elderly dependent person and a priest, minister, rabbi,
or spiritual advisor;
new text end

new text begin (7) a relationship between the elderly dependent person and a person who provides
care or services to that person whether or not care or services are paid for by the elderly
person;
new text end

new text begin (8) a relationship between an elderly dependent person and a friend or neighbor; or
new text end

new text begin (9) a relationship between an elderly dependent person and a person sharing the
same living quarters.
new text end

new text begin When any of these relationships exist and when a transfer or execution is made
to a corporation or organization primarily on account of the membership, ownership
or employment interest, or for the benefit of the fiduciary or confidante, a fiduciary or
confidential relationship with the corporation or organization is deemed to exist.
new text end

new text begin Subd. 3. new text end

new text begin Civil action; relief available. new text end

new text begin (a) A civil action may be brought to obtain
relief under this chapter by an elderly dependent person, that person's legal representative,
or the personal representative of the estate of an elderly dependent person.
new text end

new text begin (b) When a court finds that a transfer of property or execution of a guaranty was the
result of undue influence, it shall grant appropriate relief enabling the elderly dependent
person to avoid the transfer or execution, including the rescission or reformation of a deed
or other instrument, the imposition of a constructive trust on property or an order enjoining
use of or entry on property or commanding the return of property. When the court finds
that undue influence is a good and valid defense to a transferee's suit on a contract to
transfer the property or a suit of a person who benefits from the execution of a guaranty on
that guaranty, the court shall refuse to enforce the transfer or guaranty.
new text end

new text begin No relief obtained or granted under this subdivision may in any way affect or limit
the right, title, and interest of good faith purchasers, mortgagees, holders of security
interests, or other third parties who obtain an interest in the transferred property for value
after its transfer from the elderly dependent person. No relief obtained or granted under
this subdivision may affect any mortgage to the extent of value given by the mortgagee.
new text end

new text begin (c) An elderly person who has been the subject of undue influence is entitled to
damages from the transferee or beneficiary of the guaranty equal to twice the value of the
transferred property or guaranty if the property is returned to the elderly person or the
guaranty is terminated, or three times the value of the transferred property if it is not
returned or if the guaranty is not terminated.
new text end

new text begin Subd. 4. new text end

new text begin Other common law and statutory causes of action and relief still
available.
new text end

new text begin Nothing in this section may be construed to abrogate any other causes of action
or relief at law or equity to which elderly dependent persons are entitled under other
laws or at common law.
new text end

new text begin Subd. 5. new text end

new text begin Title practices. new text end

new text begin This section does not require that language showing
compliance with this section be included in a deed or other conveyance and does not
require that evidence of compliance with this section be recorded. Any attempt to record
such evidence is void and has no effect on title.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2006.
new text end

Sec. 4. new text begin APPROPRIATION.
new text end

new text begin $....... is appropriated from the general fund to the commissioner of commerce for
fiscal year 2007 for purposes of section 1.
new text end

ARTICLE 2

CONSUMER PROTECTION IN ANNUITY TRANSACTIONS

Section 1.

new text begin [61A.61] CONSUMER PROTECTION IN ANNUITY
TRANSACTIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability and scope. new text end

new text begin This section applies to all group and
individual annuity contracts and certificates except:
new text end

new text begin (1) registered or nonregistered variable annuities or other registered products;
new text end

new text begin (2) immediate and deferred annuities that contain no nonguaranteed elements;
new text end

new text begin (3) (A) annuities used to fund:
new text end

new text begin (i) an employee pension plan which is covered by the federal Employee Retirement
Income Security Act (ERISA);
new text end

new text begin (ii) a plan described by section 401(a), 401(k), or 403(b) of the Internal Revenue
Code, where the plan, for purposes of ERISA, is established or maintained by an employer;
new text end

new text begin (iii) a governmental or church plan defined in section 414 or a deferred compensation
plan of a state or local government or a tax-exempt organization under section 457 of the
Internal Revenue Code; or
new text end

new text begin (iv) a nonqualified deferred compensation arrangement established or maintained by
an employer or plan sponsor; and
new text end

new text begin (B) notwithstanding paragraph (A), the regulation shall apply to annuities used to
fund a plan or arrangement that is funded solely by contributions an employee elects
to make whether on a pretax or after-tax basis, and where the insurance company has
been notified that plan participants may choose from among two or more fixed annuity
providers and there is a direct solicitation of an individual employee by a producer for the
purchase of an annuity contract. As used in this subsection, direct solicitation shall not
include any meeting held by a producer solely for the purpose of educating or enrolling
employees in the plan or arrangement;
new text end

new text begin (4) structured settlement annuities;
new text end

new text begin (5) charitable gift annuities; and
new text end

new text begin (6) funding agreements.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms defined in
this subdivision have the meanings given.
new text end

new text begin (b) "Buyer's guide" means the Buyer's Guide to Fixed Annuities provided as an
appendix to the Annuity Disclosure Model Regulation of the National Association of
Insurance Commissioners, including any future amendments and including the appendix
to the buyer's guide.
new text end

new text begin (c) "Charitable gift annuity" means a transfer of cash or other property by a donor
to a charitable organization in return for an annuity payable over one or two lives, under
which the actuarial value of the annuity is less than the value of the cash or other property
transferred and the differences in value constitutes a charitable deduction for federal tax
purposes, but does not include a charitable remainder trust or a charitable lead trust or
other similar arrangement where the charitable organization does not issue an annuity and
incur a financial obligation to guarantee annuity payments.
new text end

new text begin (d) "Contract owner" means the owner named in the annuity contract or certificate
holder in the case of a group annuity contract.
new text end

new text begin (e) "Determinable elements" means elements that are derived from processes or
methods that are guaranteed at issue and not subject to company discretion, but where
the values or amounts cannot be determined until some point after issue. These elements
include the premiums; credited interest rates, including any bonus; benefits; values;
noninterest based credits; and charges or elements of formulas used to determine any of
these. These elements may be described as guaranteed but not determined at issue. An
element is considered determinable if it was calculated from underlying determinable
elements only, or from both determinable and guaranteed elements.
new text end

new text begin (f) "Funding agreement" means an agreement for an insurer to accept and accumulate
funds and to make one or more payments at future dates in amounts that are not based
on mortality or morbidity contingencies.
new text end

new text begin (g) "Generic name" means a short title descriptive of the annuity contract being
applied for or illustrated such as "single premium deferred annuity."
new text end

new text begin (h) "Guaranteed elements" means the premiums; credited interest rates, including
any bonus; benefits; values; noninterest based credits; and charges or elements of formulas
used to determine any of these, that are guaranteed and determined at issue. An element
is considered guaranteed if all of the underlying elements that go into its calculation
are guaranteed.
new text end

new text begin (i) "Nonguaranteed elements" means the premiums; credited interest rates, including
any bonus; benefits; values; noninterest based credits; and charges or elements of
formulas used to determine any of these, that are subject to company discretion and are
not guaranteed at issue. An element is considered nonguaranteed if any of the underlying
nonguaranteed elements are used in its calculation.
new text end

new text begin (j) "Structured settlement annuity" means a "qualified funding asset" as defined
in section 130(d) of the Internal Revenue Code or an annuity that would be a qualified
funding asset under section 130(d) but for the fact that it is not owned by an assignee
under a qualified assignment.
new text end

new text begin Subd. 3. new text end

new text begin Standards for disclosure document and buyer's guide. new text end

new text begin (a) Where the
application for an annuity contract is taken in a face-to-face meeting, the applicant shall
at or before the time of application be given both the disclosure document described in
paragraph (d) and the buyer's guide.
new text end

new text begin (b) Where the application for an annuity contract is taken by means other than in
a face-to-face meeting, the applicant shall be sent both the disclosure document and the
buyer's guide no later than five business days after the completed application is received
by the insurer, provided that:
new text end

new text begin (1) with respect to an application received as a result of a direct solicitation through
the mail:
new text end

new text begin (i) providing a buyer's guide in a mailing inviting prospective applicants to apply for
an annuity contract shall be deemed to satisfy the requirement that the buyer's guide be
provided no later than five business days after receipt of the application; and
new text end

new text begin (ii) providing a disclosure document in a mailing inviting a prospective applicant to
apply for an annuity contract shall be deemed to satisfy the requirement that the disclosure
document be provided no later than five business days after receipt of the application;
new text end

new text begin (2) with respect to an application received via the Internet:
new text end

new text begin (i) taking reasonable steps to make the buyer's guide available for viewing and
printing on the insurer's Web site shall be deemed to satisfy the requirement that the
buyer's guide be provided no later than five business days after receipt of the application;
and
new text end

new text begin (ii) taking reasonable steps to make the disclosure document available for viewing
and printing on the insurer's Web site shall be deemed to satisfy the requirement that
the disclosure document be provided no later than five business days after receipt of
the application; and
new text end

new text begin (3) a solicitation for an annuity contract provided in other than a face-to-face
meeting shall include a statement that the proposed applicant may contact the insurance
department of the state for a free annuity buyer's guide. In lieu of the foregoing statement,
an insurer may include a statement that the prospective applicant may contact the insurer
for a free annuity buyer's guide.
new text end

new text begin (c) Where the buyer's guide and disclosure statement are not provided at or before
the time of application, a free look period of no less than 15 days shall be provided for
the applicant to return the annuity contract without penalty. This free look shall run
concurrently with any other free look provided under state law or regulation.
new text end

new text begin (d) At a minimum, the following information shall be included in the disclosure
document required to be provided under this section:
new text end

new text begin (1) the generic name of the contract, the company product name, if different, and
form number, and the fact that it is an annuity;
new text end

new text begin (2) the insurer's name and address;
new text end

new text begin (3) a description of the contract and its benefits, emphasizing its long-term nature,
including examples where appropriate:
new text end

new text begin (i) the guaranteed, nonguaranteed, and determinable elements of the contract, and
their limitations, if any, and an explanation of how they operate;
new text end

new text begin (ii) an explanation of the initial crediting rate, specifying any bonus or introductory
portion, the duration of the rate, and the fact that rates may change from time to time
and are not guaranteed;
new text end

new text begin (iii) periodic income options both on a guaranteed and nonguaranteed basis;
new text end

new text begin (iv) any value reductions caused by withdrawals from or surrender of the contract;
new text end

new text begin (v) how values in the contract can be accessed;
new text end

new text begin (vi) the death benefit, if available, and how it will be calculated;
new text end

new text begin (vii) a summary of the federal tax status of the contract and any penalties applicable
on withdrawal of values from the contract; and
new text end

new text begin (viii) impact of any rider, such as a long-term care rider;
new text end

new text begin (4) specific dollar amount or percentage charges and fees shall be listed with an
explanation of how they apply; and
new text end

new text begin (5) information about the current guaranteed rate for new contracts that contains a
clear notice that the rate is subject to change.
new text end

new text begin (e) Insurers shall define terms used in the disclosure statement in language that
facilitates the understanding by a typical person within the segment of the public to which
the disclosure statement is directed.
new text end

new text begin Subd. 4. new text end

new text begin Report to contract owners. new text end

new text begin For annuities in the payout period with
changes in nonguaranteed elements and for the accumulation period of a deferred annuity,
the insurer shall provide each contract owner with a report, at least annually, on the status
of the contract that contains at least the following information:
new text end

new text begin (1) the beginning and end date of the current report period;
new text end

new text begin (2) the accumulation and cash surrender value, if any, at the end of the previous
report period and at the end of the current report period;
new text end

new text begin (3) the total amounts, if any, that have been credited, charged to the contract value,
or paid during the current report period; and
new text end

new text begin (4) the amount of outstanding loans, if any, as of the end of the current report period.
new text end

new text begin Subd. 5. new text end

new text begin Penalties. new text end

new text begin In addition to any other penalties provided by the laws of this
state, an insurer or producer that violates a requirement of this section shall be guilty of a
violation of sections 72A.17 to 72A.32.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2007, and applies to
contracts sold on or after that date.
new text end