Method and apparatus for providing retirement income benefits

• US 8,204,767 B2
• Filed: 09/13/2006
• Issued: 06/19/2012
• Est. Priority Date: 09/25/1998
• Status: Expired due to Term

• Current Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Original Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Inventors: Dellinger, Jeffrey K., Lewis, Stephen H., Schwartz, Denis G., Rickard, Jason H.
• Primary Examiner(s): Wong, Eric T
• Application Number:
  US11/520,411
• Publication Number:
  US 20070011086A1
• Time in Patent Office: 2,106 Days
• Field of Search: 705/35, 705/36, 705/4
• US Class Current: 705/4
• CPC Class Codes: G06Q 20/102 Bill distribution or payments
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A computerized method of administering a benefit plan providing systematic withdrawal payments during a liquidity period and annuity payments when the systematic withdrawal payments cease. The method includes steps of storing data relating to the plan, and performing a sequence of steps during the liquidity period to determine an account value, and initial and current benefit payments. The method further includes the steps of determining the account value to be annuitized at the end of the liquidity period, and determining and paying initial and current annuity payments during the annuity period. The method may be used when the benefit plan is a straight life annuity benefit plan, or a life annuity benefit plan having either a death benefit, a surrender benefit, or both.

Claims

1. A computerized method for administering a benefit plan using a computer having a storage element, said plan having a feature that provides a stream of systematic withdrawal payments during a liquidity period and annuity payments under an annuity payout option to be paid to an owner under the plan if the owner is living when the systematic withdrawal payments cease, and having an account value during the liquidity period which includes a first portion for funding payments during the liquidity period and a second portion for funding payments during an annuity period, comprising the steps of:

a) storing data relating to the benefit plan in the storage element, including data relating to at least one of the account value, an AIR, where AIR is one of an assumed investment rate and an interest rate, systematic withdrawal and annuity payments, the liquidity period, the annuity period, and the annuity payout option;

b) during the liquidity period, using the computer to periodically perform the steps of;

1. determining a single special annuity factor based on the AIR for the liquidity period and the AIR and mortality rate for the annuity period;

2. determining an amount of a payment using the special annuity factor and said first and second portions of the account value, and paying said amount to the owner;

3. determining the account value; and

4. monitoring the account value for unscheduled payments made under the benefit plan and making corresponding adjustments to future payments;

c) at the end of the liquidity period, determining the account value to be used to determine the initial annuity payment in the annuity period; and

d) during the annuity period, using the computer to periodically perform the steps of;

1. determining an amount of an annuity payment; and

2. periodically paying the annuity payment to the owner.

2. The method of claim 1, wherein the special annuity factor is calculated using the following formula:

3. The method of claim 1, wherein an initial payment in the liquidity period is calculated at issue using the following formula:

Payment_o=Net Account Value_o/Special Annuity Factor_o

Where;

Payment_o=initial payment

Net Account Value_o=initial account value, net of any initial charge for benefit guarantees

Special Annuity Factor_o=special annuity factor calculated at issue.

4. The method of claim 3, wherein payments made subsequent to the initial payment are determined by the following formula:

Payment_t+1=Payment_t×

[(1+i)/(1+AIR)]

Where;

Payment_t+1=payment made at time t+1

Payment_t=payment made at time t

i=net fund performance (or interest credited) during period t to t+1, net of any contract charges

AIR=assumed investment rate for variable annuities or guaranteed interest rate for fixed annuities.

5. The method of claim 1, wherein the account value during the liquidity period is determined by the following formula:

Account Value_t+1=(Account Value_t−

Payment_t)×

(1+i)

Where;

Payment_t=payment made at time t

Account Value_t+1=account value at time t+1

Account Value_t=account value at time t

i=net fund performance (or interest credited) during period t to t+1, net of any contract charges.

6. The method of claim 1, wherein the step of making adjustments to future payments due to an unscheduled payment comprises the steps of re-determining the account value as of the time the next systematic payment is due, and determining the next systematic payment as if it was an initial payment based on the re-determined account value and the time remaining in the liquidity period.

7. The method of claim 1, wherein an initial annuity payment is calculated using the following formula:

Annuity Payment_n=Account Value_n/AF_n

Where;

Annuity Payment_n=initial annuity payment made at time n

Account Value_n=account value at time n

AF_n=attained age annuity factor at time n.

8. The method of claim 1, wherein an initial annuity payment is calculated using the following formula:

Annuity Payment_n=Payment<sub>n−

1</sub>×

[(1+i)/(1+AIR)]

Where;

Annuity Payment_n=initial annuity payment made at time n

Payment<sub>n−

1</sub>=final payment made during the liquidity period

i=net fund performance (or interest credited) during period n−

1 to n, net of any contract charges

AIR=assumed investment rate for variable annuities or guaranteed interest rate for fixed annuities.

9. The method of claim 8, wherein annuity payments subsequent to the initial annuity payment are determined by the following formula:

Annuity Payment_t+1=Annuity Payment_t×

[(1+i)/(1+AIR)]

Where;

Annuity Payment_t+1=annuity payment paid at time t+1

Annuity Payment_t=annuity payment paid at time t

i=net fund performance (or interest credited) during period t to t+1, net of any contract charges

AIR=assumed investment rate for variable annuities or guaranteed interest rate for fixed annuities.

10. The method of claim 1, wherein the benefit plan is a straight life annuity benefit plan.

11. The method of claim 1, wherein the benefit plan is a life annuity benefit plan having at least one of a death benefit and a surrender benefit.

12. The method of claim 11, wherein said surrender benefit or death benefit is dependent upon the present value of specified future benefits.

13. The method of claim 1, further comprising the step of determining, at the end of the liquidity period, a charge for providing the annuity.

14. The method of claim 13, further comprising the step of deducting the charge from the account value at the end of the liquidity period.

15. The method of claim 13, further comprising the step of reducing the annuity payments in an amount which is related to the charge.

16. The method of claim 13, further comprising the step of making a deduction from the systematic payments during the liquidity period to offset the charge.

17. The method of claim 3, wherein payments during the liquidity period made subsequent to the initial payment are determined by the following formula:

Payment_t=Net Account Value_t/Special Annuity Factor_t

Where;

Payment_t=subsequent payment

Net Account Value_t=Account Value, net of any charges, at time t

Special Annuity Factor_t=Special Annuity Factor calculated at time t.