State RegulationsNC specificDifficulty 3/5
An insurer fails and two holders of unallocated annuity contracts file claims with the North Carolina Life and Health Insurance Guaranty Association: a participant in a governmental retirement plan and a contract holder of a private, non-governmental pension trust. How will the Association's limits apply?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under G.S. 58-62-21(d)(3), a participant in a governmental retirement plan (such as a 401(k), 403(b), or 457 plan) is protected up to $300,000 in present value of unallocated annuity benefits, including net cash surrender and withdrawal values. Under G.S. 58-62-21(d)(4), any OTHER unallocated annuity contract holder is protected up to $5,000,000, regardless of the number of contracts. The two caps never cross between plan types.
Why the other options are wrong
- B) Applying $5,000,000 to the governmental plan participant ignores the separate $300,000 cap for governmental retirement plans in G.S. 58-62-21(d)(3).
- C) Applying $300,000 to the private contract holder ignores the $5,000,000 cap for non-governmental unallocated annuity contract holders in G.S. 58-62-21(d)(4).
- D) $1,000,000 is the structured settlement limit per payee under G.S. 58-62-21(d)(5); it does not apply to unallocated annuities, and the two limits here are $300,000 and $5,000,000.
Memory hook
Government gets 300 grand; everyone else unallocated gets 5 million.