LIMITATION ON UNREASONABLE MORTALITY AND OTHER EXPENSE CHARGES UNDER SECTION 7702.

SEC. 5011. LIMITATION ON UNREASONABLE MORTALITY AND OTHER EXPENSE CHARGES UNDER SECTION 7702. (a) General Rule.— Subparagraph (B) of section 7702(c)(3) of the 1986 Code (relating to guideline premium requirements) is amended by striking out clauses (i) and (ii) and inserting in lieu thereof the following: “(i) reasonable mortality charges which meet the requirements (if any) prescribed in regulations and which (except as provided in regulations) do not exceed the mortality charges specified in the prevailing commissioners’ standard tables (as defined in section 807(d)(5)) as of the time the contract is issued, “(ii) any reasonable charges (other than mortality charges) which (on the basis of the company’s experi-102 STAT. 3661ence, if any, with respect to similar contracts) are reasonably expected to be actually paid, and”. (b) Special Rules.— Paragraph (3) of section 7702(c) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(D) Special rules for subparagraph (B)(ii).— “(i) Charges not specified in the contract.— If any charge is not specified in the contract, the amount taken into account under subparagraph (B)(ii) for such charge shall be zero. “(ii) New companies, etc.— If any company does not have adequate experience for purposes of the determination under subparagraph (B)(ii), to the extent provided in regulations, such determination shall be made on the basis of the industry-wide experience.” (c) Interim Rules.— (1) Regulations.— Not later than January 1, 1990, the Secretary of the Treasury (or his delegate) shall issue regulations under section 77O2(c)(3)(B)(i) of the 1986 Code (as amended by subsection (a)). (2) Standards before regulations take effect.— In the case of any contract to which the amendments made by this section • apply and which is issued before the effective date of the regulations required under paragraph (1), mortality charges which do not differ materially from the charges actually expected to be imposed by the company (taking into account any relevant characteristic of the insured of which the company is aware) shall be treated as meeting the requirements of clause (i) of section 7702(c)(3)(B) of the 1986 Code (as amended by subsection (a)). (d) Effective Date.— The amendments made by this section shall apply to contracts entered into on or after October 21, 1988.