Non-forfeiture Interest Rate
In 2003, the National Association of Insurance Commissioners (NAIC) adopted a new annuity Standard Non-forfeiture Law (SNFL) that ties the minimum interest rate that must be paid by fixed annuities to current yields. Prior to this, the state-mandated minimum interest rate was 3% in most states. During times of extremely low interest rates, this made profitably crediting an interest rate above 3% difficult and sometimes impossible. As a result, many companies had no choice but to pull specific products or interest rate guarantee periods from the market.
With the new law, the rate floats between 1% and 3%. The standard does not become effective until adopted by individual states, but almost all states now have enacted one of two types of relief—either in the form of a 1.5% minimum guaranteed interest rate, or a rate that moves with prevailing interest rates.