Except as otherwise provided in Section 10489.6, reserves according to the commissioners’ reserve valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform rates shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such certificates, over the then present value of any future modified net rates therefor. The modified net rates for any such certificate shall be such uniform percentage of the respective contract payment for such benefits that the present value, at the date of issue of the certificate, of all such modified net rates shall be equal to the sum of the then present value of such benefits provided for by the certificate and the excess of (a) over (b), as follows:

(a) A net level annual payment equal to the present value at the date of issue, of such benefits provided for after the first certificate year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such certificate on which a payment falls due; provided, however, that such net level annual payment shall not exceed the net level annual payment on the 19-year payment whole life plan for insurance of the same amount at an age one year higher than the age at issue of such certificate.

(b) A net one-year term payment for such benefits provided for in the first certificate year.

Provided that for any certificate issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph and the reserve as of such policy anniversary calculated as described in that paragraph, but with (i) the value defined in subdivision (a) of that paragraph being reduced by 15 percent of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in Sections 11136 and 11136.1 shall be used.

Reserves according to the commissioners’ reserve valuation method for (1) life insurance certificates providing for a varying amount of insurance or requiring the payment of varying rates, (2) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (3) disability and accidental death benefits in all certificates and contracts, and (4) all other benefits, except life insurance and endowment benefits in life insurance certificates, shall be calculated by a method consistent with the principles of the first paragraph of this section, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.

(Amended by Stats. 1982, Ch. 940, Sec. 7. Effective September 13, 1982.)