funds supporting the contracts that fall under the scope of these requirements shall be included in the definition of Revenue Sharing. Working Reserve - For doing the necessary projections, the concept of a Working Reserve is introduced in order to simplify the calculations. At any point in the projections, including at the start of the projection, the Working Reserve shall equal the projected Cash Surrender Value. For a variable payout annuity without a Cash Surrender Value, the Working Reserve shall equal the present value, at the valuation interest rate and the valuation mortality table specified for such a product by the Standard Valuation Law of future income payments projected using a return based on the valuation interest rate less appropriate asset based charges. For annuitizations that occur during the projection, the valuation interest rate as of the current valuation date may be used in determining the Working Reserve. Alternatively, if an integrated model of equity returns and interest rates is used, a future estimate of valuation interest rates may be incorporated into the Working Reserve. For contracts not covered above including variable payout annuities with liquidity options or variable payout annuities that provide alternative benefit designs, e.g., joint and last survivor, life with period certain, etc., the actuary shall determine the Working Reserve in a manner that is consistent with the above requirements. For example, for many reinsurance contracts and group insurance contracts the working reserve is zero.
Scope Covered products consist of: --all variable annuities except for Modified Guaranteed Annuities; --group annuities containing guarantees similar in nature to VAGLBs or GMDBs; and --all other products that contain guarantees similar in nature1 to GMDBs or VAGLBs, even if the company does not offer the funds to which these guarantees relate, where there is no explicit reserve requirement (other than AG VACARVM) for such guarantees. If such a benefit is offered as a part of a contract that has an explicit reserve
1
The term "similar in nature", as used above is intended to capture both current products and benefits as well as product and benefit designs that may emerge in the future. Examples of the currently known designs are listed in footnote #2 below. Any product or benefit design that does not clearly fit the Scope should be evaluated on a case-by-case basis taking into consideration factors that include, but are not limited to, the nature of the guarantees, the definitions of GMDB and VAGLB and whether the contractual amounts paid in the absence of the guarantee are based on the investment performance of a market-value fund or marketvalue index (whether or not part of the company's separate account).
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