Tax-Deferred Cash Value Accumulation

§ 7702. Life insurance contract defined(a) General ruleFor purposes of this title, the term “life insurance contract” means any contract which is a life insurance contract under the applicable law, but only if such contract—(1) meets the cash value accumulation test of subsection (b), or (2)(A) meets the guideline premium requirements of subsection (c), and (B) falls within the cash value corridor of subsection (d). (b) Cash value accumulation test for subsection (a)(1)(1) In generalA contract meets the cash value accumulation test of this subsection if, by the terms of the contract, the cash surrender value of such contract may not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract. (2) Rules for applying paragraph (1)Determinations under paragraph (1) shall be made—(A) on the basis of interest at the greater of the applicable accumulation test minimum rate or the rate or rates guaranteed on issuance of the contract, (B) on the basis of the rules of subparagraph (B)(i) (and, in the case of qualified additional benefits, subparagraph (B)(ii)) of subsection (c)(3), and (C) by taking into account under subparagraphs (A) and (D) of subsection (e)(1) only current and future death benefits and qualified additional benefits. (3) Applicable accumulation test minimum rateFor purposes of paragraph (2)(A), the term “applicable accumulation test minimum rate” means the lesser of—(A) an annual effective rate of 4 percent, or (B) the insurance interest rate (as defined in subsection (f)(11)) in effect at the time the contract is issued. (c) Guideline premium requirementsFor purposes of this section—(1) In generalA contract meets the guideline premium requirements of this subsection if the sum of the premiums paid under such contract does not at any time exceed the guideline premium limitation as of such time. (2) Guideline premium limitationThe term “guideline premium limitation” means, as of any date, the greater of—(A) the guideline single premium, or (B) the sum of the guideline level premiums to such date. (3) Guideline single premium(A) In generalThe term “guideline single premium” means the premium at issue with respect to future benefits under the contract. (B) Basis on which determination is madeThe determination under subparagraph (A) shall be based on—(i) reasonable mortality charges which meet the requirements prescribed in regulations to be promulgated by the Secretary or that do not exceed the mortality charges specified in the prevailing commissioners’ standard tables as defined in subsection (f)(10), (ii) any reasonable charges (other than mortality charges) which (on the basis of the company’s experience, if any, with respect to similar contracts) are reasonably expected to be actually paid, and (iii) interest at the greater of the applicable guideline premium minimum rate or the rate or rates guaranteed on issuance of the contract.