0001193125-09-210285.txt : 20110808
0001193125-09-210285.hdr.sgml : 20110808
20091020152412
ACCESSION NUMBER: 0001193125-09-210285
CONFORMED SUBMISSION TYPE: CORRESP
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20091020
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: METLIFE INVESTORS USA SEPARATE ACCOUNT A
CENTRAL INDEX KEY: 0000356475
IRS NUMBER: 540696644
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: CORRESP
BUSINESS ADDRESS:
STREET 1: 5 PARK PLAZA, SUITE 1900
CITY: IRVINE
STATE: CA
ZIP: 92614
BUSINESS PHONE: 9492235680
MAIL ADDRESS:
STREET 1: 5 PARK PLAZA, SUITE 1900
CITY: IRVINE
STATE: CA
ZIP: 92614
FORMER COMPANY:
FORMER CONFORMED NAME: METLIFE INVESTORS SEPARATE ACCOUNT A
DATE OF NAME CHANGE: 20010314
FORMER COMPANY:
FORMER CONFORMED NAME: SECURITY FIRST LIFE SEPARATE ACCOUNT A
DATE OF NAME CHANGE: 19920703
CORRESP
1
filename1.txt
W. THOMAS CONNER
DIRECT LINE: 202.383.0590
E-mail: thomas.conner@sutherland.com
October 20, 2009
VIA E-MAIL AND EDGAR CORRESPONDENCE SUBMISSION
----------------------------------------------
Alison White, Esq.
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-8629
Re: MetLife Investors USA Insurance Company
Initial Registration Statement on Form N-4
File Nos. 333-161443 and 811-3365
Dear Ms. White:
On behalf of MetLife Investors USA Insurance Company (the "Company") and its
separate account, MetLife Investors USA Separate Account A (the "Separate
Account") we are providing the Company's responses to your comments of
September 29, 2009 in connection with the above-referenced initial registration
statement filed on August 19, 2009 for certain individual single premium
deferred variable annuity contracts issued by the Company through the Separate
Account (the "Contract"). Each of the Staff's comments is set forth below,
followed by the Company's response. To the extent that a response indicates
that the Company proposes revised disclosure, the revised prospectus pages are
attached.
1. General
-------
a. COMMENT: Please confirm that the Contract name on the front cover page
of the prospectus will continue to be the same as the EDGAR class
identifier associated with the contract.
RESPONSE: The Company confirms that the Contract name on the front cover
page of the prospectus will continue to be the same as the EDGAR class
identifier associated with the contract.
b. COMMENT: Please clarify supplementally whether there are any types of
guarantees or support agreements with third parties to support any of
the company's guarantees under the policy (other than reinsurance
agreements) or whether the company will be primarily responsible for
paying out on any guarantees associated with the policy.
Alison White, Esq.
October 20, 2009
Page 2
RESPONSE: The Company does not have any type of guarantee or support
agreement with a third party to support any of the guarantees under the
contract. The Company will be primarily responsible for paying out any
guarantees associated with the contract.
c. COMMENT: Please note that if you qualify for and intend to rely upon the
exemption provided by Rule 12h-7 under the Securities Exchange Act of
1934, you must include a statement to that effect in the prospectus. See
Release No. 33-8996 (January 8, 2009).
RESPONSE: The Company does not currently intend to rely upon the
exemption provided by Rule 12h-7 under the Securities Exchange Act of
1934.
2. Cover Page
----------
COMMENT: We note that the Contract's name is MetLife Growth and
Guaranteed Income. In light of the bolded disclosure on pages 24 and 28,
please explain how the use of the term "guaranteed" in the title
complies with Rule 35d-l under the Investment Company Act of 1940, as
amended, and is not otherwise misleading.
RESPONSE: The Company does not believe that Rule 35d-1 under the
Investment Company Act of 1940 is applicable because Rule 35d-1 relates
to names that suggest that the securities are guaranteed, sponsored,
recommended, or approved by the United States government or any United
States government agency or instrumentality. The Company believes that
it is clear from the Contract's name that the guarantee is provided by
the Company and not by the United States government. The Contract's name
does not use the word "guaranteed" in conjunction with the words "United
States" or "U.S. government" and it does not otherwise suggest that the
United States government is providing any guarantee. Furthermore, the
Company believes that the Contract's name is not misleading because the
Company provides for guaranteed withdrawals so long as specified
conditions are met. The bolded disclosure on pages 24 and 28 relate to
situations where the Contract owner does not comply with the specified
conditions of the guarantee.
However, the Company has added clarifying disclosure to the cover page
of the prospectus that states: "The Contract includes a Guaranteed
Withdrawal Benefit for Life feature that allows for guaranteed
withdrawals that begin when the youngest annuitant reaches age 59 1/2
and lasts for the life or lives of the annuitiant(s) provided that
specified conditions are met. This feature does not guarantee the net
asset value of the underlying investment option."
Alison White, Esq.
October 20, 2009
Page 3
3. Highlights, pages 5-6
----------
COMMENT: Please add a statement that in certain circumstances the
contract may be terminated and payments under the Guaranteed Withdrawal
Benefit for Life lost with a cross-reference to page 24 of the
prospectus.
RESPONSE: The Company has added a statement that excess withdrawals that
reduce the contract value to zero will terminate the Contract. The
Company has also added a cross-reference to the appropriate section of
the prospectus.
4. Owner Transaction Expense Table, page 7
-------------------------------
a. COMMENT: Please delete everything but $25 across from Exchange Fee, as
the information is disclosed in Note 2.
RESPONSE: The Company believes that the current format of the Exchange
Fee in the Fee Table is effective because the Fee Table provides a
succinct range of the Exchange Fee and the footnote provides additional
information. Furthermore, the Company believes that this approach is
permitted by Instruction 11 of Item 3 of Form N-4, which states that the
Registrant may include a tabular presentation of the range of exchange
fees unless such a presentation would be so lengthy as to encumber the
larger table. Moreover, consistent with an approach that the Company has
taken in the past that the Staff has found satisfactory, the Company has
revised the "Exchange Fee" line so that the maximum fee of $25 is placed
before the current fee of $0 so that the maximum fee is more prominent.
b. COMMENT: Please move all footnotes to the bottom of the page so that
they do not compete with the required fee table disclosures.
RESPONSE: The Company has moved all footnotes to the bottom of the page
so that they do not compete with the required Fee Table disclosures.
c. COMMENT: Please reduce the font size of the surrender charge table in
Note 1 to the same size as the rest of the note.
RESPONSE: The Company has reduced the font size of the surrender charge
table in Note 1 to the same size as the rest of the note.
d. COMMENT: Please note that the withdrawal charge schedule may be included
in the fee table. See Instruction 9 to Item 3 of Form N-4.
Alison White, Esq.
October 20, 2009
Page 4
RESPONSE: The Company appreciates the Staff drawing Instruction 9 to
Item 3 of Form N-4 to its attention. However, the Company prefers its
current approach of including the withdrawal charge schedule in a
footnote. The Company believes its approach is consistent with
Instruction 5 to Item 3 of Form N-4, which permits a withdrawal charge
schedule to be presented in a footnote to the information provided in
the Fee Table.
5. Total Annual Portfolio Expenses Table, page 8
-------------------------------------
COMMENT: Please remove the .32% fee for the Fidelity VIP Money Market
Portfolio from the portfolio expenses table, since the investment option
is available only during the free look period.
RESPONSE: The Company has removed the .32% fee for the Fidelity VIP
Money Market Portfolio from the portfolio expenses table.
6. Examples, page 9
--------
COMMENT: Please confirm that the examples will reflect the highest
Mortality and Expense Charge of 2.05% for joint annuitants.
RESPONSE: The Company confirms that the examples will reflect the
highest Mortality and Expense Charge of 2.05% for joint annuitants.
7. Investment Options, page 14
------------------
COMMENT: Please bold or in some other way highlight the statement about
where copies of the prospectuses for the investment options may be
found. See Item 5(D) of Form N-4.
---
RESPONSE: The Company has bolded the requested statement.
8. Substitution of Investment Options, page 15
----------------------------------
COMMENT: Please disclose, if true, that there will always be at least
one variable option for investing under the contract.
RESPONSE: The Company has added disclosure that there will always be at
least one variable option for investing under the contract.
9. Surrender Charge, page 17
----------------
COMMENT: Please bold or in some other way highlight the statement that
"no surrender charge will apply to withdrawals under the GWB feature
that are less than or equal to the GWB Amount."
Alison White, Esq.
October 20, 2009
Page 5
RESPONSE: The Company has bolded the requested statement.
10. Annuity Income Options--Annuity Income Option (1), pages 18-19
-------------------------------------------------
a. COMMENT: Please clarify that the following statement applies only when
the youngest annuitant is 59 1/2 or above: "[i]f total withdrawals in
any contract year do not exceed the GWB Amount for that same contract
year, the adjusted purchase payment is reduced by the dollar amount of
the withdrawal(s)."
RESPONSE: The Company has clarified that this statement applies only
when the youngest annuitant is 59 1/2 or above.
b. COMMENT: Please add an Appendix with numeric examples of how the
adjusted purchase payment is calculated.
RESPONSE: The Company has added numeric examples of how the adjusted
purchase payment is calculated directly in the "Annuity Payments (The
Income Phase)" section.
c. COMMENT: You state that "Annuity income option (1) is only available on
the latest possible annuity date unless the contract is converted to an
annuity income option. . ." Please define "latest possible annuity date."
RESPONSE: The Company has added disclosure to define the latest possible
annuity date.
11. Systematic Withdrawal Program, page 22
-----------------------------
COMMENT: Please bold or in some other way highlight the statement that
"[i]n order to receive the greater of your eligible GWB Amount or RMD,
you must agree to the following conditions:"
RESPONSE: The Company has bolded the requested statement.
12. Guaranteed Withdrawal Benefit for Life, pages 24-29
--------------------------------------
a. COMMENT: Please bold or in some other way highlight the statement on
page 24 that "The GWB Value does not establish or guarantee any contract
value or minimum return for any investment option and cannot be taken as
a lump sum."
RESPONSE: The Company has bolded the requested statement.
b. COMMENT: Please disclose that the examples on pages 26-27 do not reflect
the deduction of fees and charges, surrender charges or income taxes and
tax penalties.
Alison White, Esq.
October 20, 2009
Page 6
RESPONSE: The Company notes that the examples reflect the surrender
charge. Accordingly, the Company has revised the prospectus to disclose
that the examples reflect the deduction of surrender changes, but not
other fees and charges or income taxes or tax penalties.
c. COMMENT: Please consider revising the examples to reflect surrender
charges.
RESPONSE: As noted above, the examples already reflect the surrender
charges.
d. COMMENT: Please disclose whether an owner will be notified if a
withdrawal will: (1) be deemed an excess withdrawal; (2) cause the
contract to be terminated; or (3) cause the GWB Amount to be converted
to annuity payments. Disclose whether the owner will be given any chance
to prevent these things from happening.
RESPONSE: The Company has revised the prospectus to include in the
Highlights section a warning that withdrawals must be managed carefully,
with a brief description of the negative effects of excess withdrawals
and a cross-reference to the more detailed disclosure on the negative
effects of excess withdrawals in the GWB section. In addition, the
Company added the following disclosure in the GWB section: "It is your
responsibility to manage withdrawals, and you will not be notified if
you submit a withdrawal request that causes an excess withdrawal,
including an excess withdrawal that reduces the contract value to zero
and terminates the contract."
13. Death Benefit--Return of Purchase Payment Death Benefit, page 31
-------------------------------------------------------
COMMENT: Please clarify that the following statement applies only when
the youngest annuitant is 59 1/2 or above: "[i]f total withdrawals in
any contract year do not exceed the GWB Amount for that same contract
year, the Return of Purchase Payment death benefit is reduced by the
dollar amount of the withdrawal(s)."
RESPONSE: The Company has added disclosure to the prospectus clarifying
that the statement applies only when the youngest annuitant is 59 1/2 or
above.
14. Appendix C--Withdrawals in Excess of Annual GWB Amount, page 49
------------------------------------------------------
COMMENT: As some of the examples in this section reflect surrender
charges, please revise the statement at the top of the page that "[t]he
examples do not reflect the deduction of fees and charges, surrender
charges or income taxes and tax penalties."
RESPONSE: The Company has revised the prospectus to specify that some of
the examples reflect surrender charges.
Alison White, Esq.
October 20, 2009
Page 7
15. Appendix C--Required Minimum Distributions under the GWB, page 50
--------------------------------------------------------
COMMENT: It appears that the RMD requirements are listed on page 22 and
not page 14 of the prospectus. Please revise the cross-references
accordingly.
RESPONSE: The Company has revised the cross-references.
16. Part C--Exhibit 3(iii)
-----------------------
COMMENT: Please file the actual, rather than "form of" Retail Sales
Agreement.
RESPONSE: The Company believes that the approach of filing a "form of"
retail sales agreement is specifically permitted by Item 24(a)(3) of
Form N-4, which expressly permits the filing of sales agreements as
specimens. The "form of" retail sales agreement that the Company has
filed constitutes the specimen master contract.
17. Powers of Attorney
------------------
COMMENT: Please provide powers of attorney that relate specifically to
this new registration statement as required by Rule 483(b) of the 1933
Act. This means that each power of attorney must either (a) specifically
list the '33 Act registration number of the initial filing, or
(b) specifically name the contract or fund whose prospectus and/or SAT
is being registered.
RESPONSE: The Company confirms that the powers of attorney will relate
specifically to this new registration statement.
18. Financial Statements, Exhibits, and Other Information
-----------------------------------------------------
COMMENT: Financial statements, exhibits, and other required disclosure
not included in this registration statement must be filed in a
pre-effective amendment to the registration statement.
RESPONSE: The Company confirms that the financial statements, exhibits,
and other required disclosure not included in the initial registration
statement will be filed in a pre-effective amendment to the registration
statement.
Alison White, Esq.
October 20, 2009
Page 8
19. Tandy Comment
-------------
COMMENT: Notwithstanding our comments, in the event the fund requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such request,
acknowledging that:
. should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose
the Commission from taking any action with respect to the filing;
. the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the fund from its full responsibility for the adequacy
and accuracy of the disclosure in the filing;
. and the fund may not assert this action as defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
RESPONSE: The Company will provide these representations under separate
cover.
* * *
We hope you will find these responses satisfactory. If you have any questions
or comments, please contact the undersigned at (202) 383-0590 or Lisa Flanagan
at (202) 383-0873.
Sincerely,
/s/ W. Thomas Conner
W. Thomas Conner
cc: Michele Abate, Esq.
John Towers, Esq.
Lisa Flanagan, Esq.
CORRESP
2
filename2.txt
THE VARIABLE ANNUITY CONTRACT
ISSUED BY
METLIFE INVESTORS USA INSURANCE COMPANY
AND
METLIFE INVESTORS USA SEPARATE ACCOUNT A
METLIFE GROWTH AND GUARANTEED INCOME/SM/
NOVEMBER 16, 2009
This prospectus describes the single premium deferred variable annuity contract
offered by MetLife Investors USA Insurance Company (MetLife Investors USA or we
or us). The contract is offered for individuals and some tax qualified and
non-tax qualified retirement plans. The contract includes a Guaranteed
Withdrawal Benefit for Life ("GWB") feature that allows for guaranteed
withdrawals that begin when the youngest annuitant reaches age 59 1/2 and last
for the life or lives of the annuitiant(s) provided that specified conditions
are met. This feature does not guarantee the net asset value of the underlying
investment option.
The annuity contract has a single investment choice. Your contract value also
may be allocated to the Fidelity VIP Money Market Portfolio (the "Money Market
Portfolio") under certain circumstances, as described in "Purchase--Free Look".
Please see page 12 for more information.
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
(INVESTOR CLASS):
FIDELITY(R) VIP FUNDSMANAGER(R) 60% PORTFOLIO
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the MetLife Investors USA
Variable Annuity contract.
To learn more about the MetLife Investors USA Variable Annuity contract, you
can obtain a copy of the Statement of Additional Information (SAI) dated
November 16, 2009. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of the prospectus. The SEC maintains a
Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding companies that file electronically
with the SEC. The Table of Contents of the SAI is on Page 42 of this
prospectus. For a free copy of the SAI, or for further information, call us at
(800) 544-2442, or write the Annuity Service Center: P.O. Box 770001,
Cincinnati, OH 45277-0050.
THE CONTRACTS:
ARE NOT BANK DEPOSITS
ARE NOT FDIC INSURED
ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
ARE NOT GUARANTEED BY ANY BANK OR CREDIT UNION
MAY BE SUBJECT TO LOSS OF PRINCIPAL
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOVEMBER 16, 2009
HIGHLIGHTS
The variable annuity contract that we are offering is a contract between you,
the owner, and us, the insurance company, where you agree to make one purchase
payment to us and we agree to make a series of annuity payments at a later
date. Your contract value will be invested on a tax-deferred basis in the
Fidelity VIP FundsManager 60% Portfolio. The contract is intended for
retirement savings or other long-term investment purposes. The contract
includes a Guaranteed Withdrawal Benefit for Life (GWB) feature that allows for
guaranteed withdrawals that begin when the youngest annuitant reaches age
59 1/2 and last for the life or lives of the annuitant(s). YOU SHOULD PURCHASE
THIS CONTRACT ONLY IF YOU ARE BUYING IT FOR THE GWB FEATURE. It is important
that you carefully manage withdrawals under the GWB feature. Excess withdrawals
(which include all withdrawals prior to the youngest annuitant reaching age
59 1/2 ) may significantly reduce the income you receive from the GWB feature,
and an excess withdrawal that reduces the contract value to zero will terminate
the contract (see "Guaranteed Withdrawal Benefit for Life--Managing Your
Withdrawals" for more information).
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. If you make a withdrawal during the first five contract
years, we may assess a 2% surrender charge. The income phase occurs when you
begin receiving regular annuity payments from your contract. You and the
annuitant (the person on whose life we base annuity payments) do not have to be
the same, unless you purchase a tax qualified contract.
If you choose to annuitize the contract, your annuity payments will be made on
a fixed basis. The amount of each payment generally will not change during the
income phase.
TAX DEFERRAL AND QUALIFIED PLANS. The contracts are offered for individuals on
a tax qualified and non-tax qualified basis. For any tax-qualified account
(e.g., an IRA), the tax deferred accrual feature is provided by the tax
qualified retirement plan. Therefore, there should be reasons other than tax
deferral for acquiring the contract within a qualified plan. (See "Federal
Income Tax Status.")
STATE VARIATIONS. Contracts issued in your state may provide different features
and benefits from, and impose different costs than, those described in this
prospectus because of state law variations. These differences include, among
other things, free look rights, age issuance limitations, exchange rights and
limitations, the right to reject purchase payments, the right to assess
exchange fees, requirements for unisex annuity rates, and the availability of
certain features of the GWB. This prospectus describes all the material
features of the contract. If you would like to review a copy of the contract
and any endorsements, contact our Annuity Service Center.
FREE LOOK. You have the right to cancel the purchase of your contract for at
least ten days after you receive it. We assume it will take five days from the
day we mail the contract until you receive it. This is called the "Free Look
Period". The time you have to return your contract may be longer, depending on
the state where you purchase the contract and other factors. Some states allow
us to refund your contract value plus any deductions made for premium taxes.
Other states and federal tax laws require that we return at least your purchase
payment for at least a portion of the Free Look Period.
If your contract is a qualified contract or if state law requires that we
return at least the amount of your purchase payment, then your contract will be
invested entirely in the Money Market Portfolio for either 15 days or the
length of time we are required to return at least the amount of your purchase
payment, whichever is longer. This is called the Money Market Period. Then at
the close of the business day in which the Money Market Period expires, we will
transfer your contract value to the Fidelity VIP FundsManager 60% Portfolio.
Together with your contract, we will provide notice to you of the date on which
your Free Look Period ends. If you cancel the contract during the Money Market
Period, we will return the greater of your purchase payment or your contract
value. For other cancellations, we will pay you your contract value. If your
contract is a non-qualified contract and state law requires that we return an
amount based on your contract value, then your purchase payment will be
invested in the Fidelity VIP FundsManager 60% Portfolio beginning on the
contract date.
TAX PENALTY. The earnings in your contract are not taxed until you take money
out of your contract. If you take money out of a non-qualified contract during
the accumulation phase, for tax purposes any earnings are deemed to come
out first. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on
5
FEE TABLES AND EXAMPLES
The following tables describe the fees and expenses that you will pay when
buying, owning, and surrendering the contract. The first table describes the
fees and expenses that you will pay at the time that you buy the contract,
surrender the contract, or exchange contract value between investment options.
State premium taxes of 0% to 3.5% may also be deducted.
Owner Transaction Expenses Table
Surrender Charge (Note 1)
(as a percentage of amount withdrawn) 2%
Exchange Fee (Note 2) $25
$ 0 (First 12 per year)
Note 1. If any amount is withdrawn during the first five contract years, a
surrender charge may be assessed. Surrender charges are calculated in
accordance with the following. (See "Expenses--Surrender Charge.")
Number of Complete Years from Surrender Charge
Contract Date (% of Amount Withdrawn)
------------- -----------------------
0 2
1 2
2 2
3 2
4 2
5 and thereafter 0
Note 2. Currently, the contract offers only one investment option. In the
future, we may make additional investment options available. There is no charge
for the first 12 exchanges in a contract year; thereafter the fee is $25 per
exchange. MetLife Investors USA is currently waiving the exchange fee, but
reserves the right to charge the fee in the future.
7
The next tables describe the fees and expenses that you will pay periodically
during the time that you own the contract, not including investment option fees
and expenses.
Variable Account Annual Expenses
(referred to as Variable Account Product Charge)
(as a percentage of average contract value in the variable account)
Mortality and Expense Charge
Single annuitant 1.90%
Joint annuitants 2.05%
The next table shows the minimum and maximum total operating expenses charged
by the investment options that you may pay periodically during the time that
you own the contract. An investment option may impose a redemption fee in the
future. More detail concerning each investment option's fees and expenses is
contained in the prospectus for that investment option and in the following
tables.
Minimum (1) Maximum (1)
----------- -----------
Total Annual Portfolio Expenses 0.89% 0.89%
(expenses that are deducted from investment option assets,
including management fees, 12b-1/service fees, and other
expenses)
Note 1. The total annual portfolio expenses of the Fidelity VIP FundsManager
60% Portfolio include the fees and expenses of the underlying portfolios
(Acquired Fund Fees and Expenses).
For information concerning compensation paid for the sale of the contracts, see
"Other Information--Distributor."
8
INVESTMENT OPTION EXPENSES
(as a percentage of the average daily net assets of an investment option)
The following table is a summary. For more complete information on investment
option fees and expenses, please refer to the prospectus for each investment
option.
Acquired Total
12b-1/ Fund Fees Annual
Management Service Other and Portfolio
Fees Fees Expenses Expenses Expenses
FIDELITY VARIABLE INSURANCE PRODUCTS
Fidelity VIP FundsManager
60% Portfolio (1) 0.25% 0.00% 0.00% 0.64% 0.89%
Total Annual Portfolio Expenses have not been restated to reflect contractual
arrangements under which investment advisers or managers of investment options
have agreed to waive and/or pay expenses of the portfolios. Total Annual
Portfolio Expenses have not been restated to reflect expense reductions that
certain investment options achieved as a result of directed brokerage
arrangements. The investment options provided the information on their
expenses, and we have not independently verified the information. Unless
otherwise indicated the information provided is for the year ended December 31,
2008.
(1) The Portfolio is a "fund of funds" that invests substantially all of its
assets in other investment companies. Because the Portfolio invests in
other investment companies, the Portfolio will bear its pro rata portion
of the operating expenses of the underlying investment companies in which
it invests, including the management fee.
9
3. INVESTMENT OPTIONS
The contract offers two INVESTMENT OPTIONS, which are listed below. However,
you may not choose to allocate the purchase payment or exchange contract value
to the Money Market Portfolio (see "Money Market Portfolio" below for more
information). Additional investment options may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY. COPIES OF THESE
PROSPECTUSES WILL ACCOMPANY OR PRECEDE THE DELIVERY OF YOUR CONTRACT. YOU CAN
OBTAIN COPIES OF THE FUND PROSPECTUSES BY CALLING US AT: (800) 544-2442. YOU
CAN ALSO OBTAIN INFORMATION ABOUT THE FUNDS (INCLUDING A COPY OF THE STATEMENT
OF ADDITIONAL INFORMATION) BY ACCESSING THE SECURITIES AND EXCHANGE
COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. Certain investment options
described in the fund prospectuses may not be available with your contract. A
summary of advisers, subadvisers, and investment objectives for each investment
option is listed below.
The investment objectives and policies of certain of the investment options may
be similar to the investment objectives and policies of other mutual funds that
certain of the portfolios' investment advisers manage. Although the objectives
and policies may be similar, the investment results of the investment options
may be higher or lower than the results of such other mutual funds. The
investment advisers cannot guarantee, and make no representation, that the
investment results of similar funds will be comparable even though the funds
may have the same investment advisers.
Shares of the investment options may be offered to insurance company variable
accounts of both variable annuity and variable life insurance contracts and to
qualified plans. Due to differences in tax treatment and other considerations,
the interests of various owners participating in, and the interests of
qualified plans investing in the investment options may conflict. The
investment options will monitor events in order to identify the existence of
any material irreconcilable conflicts and determine what action, if any, should
be taken in response to any such conflict.
We select the investment options offered through this contract based on a
number of criteria, including asset class coverage, the strength of the
adviser's or subadviser's reputation and tenure, brand recognition,
performance, and the capability and qualification of each investment firm.
We review the investment options periodically and may remove an investment
option or limit its availability to new purchase payments and/or exchanges of
contract value if we determine that the investment option no longer meets one
or more of the selection criteria, and/or if the investment option has not
attracted significant allocations from contract owners. In some cases, we have
included investment options based on recommendations made by selling firms.
These selling firms may receive payments from the investment options they
recommend and may benefit accordingly from the allocation of contract value to
such investment options.
We do not provide any investment advice and do not recommend or endorse any
particular investment option. You bear the risk of any decline in the contract
value of your contract resulting from the performance of the investment options
you have chosen.
FIDELITY VARIABLE INSURANCE PRODUCTS
(Investor Class)
Fidelity Variable Insurance Products is a variable insurance product fund with
multiple portfolios. Investor Class shares of the following portfolios are
offered under the contract:
. Fidelity VIP FundsManager 60% Portfolio
Strategic Advisers, Inc. is the investment manager of the Fidelity VIP
FundsManager 60% Portfolio. The Fidelity VIP FundsManager 60% Portfolio
seeks high total return.
MONEY MARKET PORTFOLIO
We may allocate contract value under certain circumstances (see "Purchase--Free
Look") to the Money Market Portfolio. You may not choose to allocate or
exchange contract value to the Money Market Portfolio.
15
VOTING RIGHTS
We are the legal owner of the investment option shares. However, we believe
that when an investment option solicits proxies in conjunction with a vote of
shareholders, we are required to obtain from you and other affected owners
instructions as to how to vote those shares. When we receive those
instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that we own on our own behalf.
The effect of this proportional voting is that a small number of contract
owners may control the outcome of a vote. Should we determine that we are no
longer required to comply with the above, we will vote the shares in our own
right.
SUBSTITUTION OF INVESTMENT OPTIONS
If investment in the investment options or a particular investment option is no
longer possible, in our judgment becomes inappropriate for purposes of the
contract, or for any other reason in our sole discretion, we may substitute
another investment option or investment options without your consent. The
substituted investment option may have different fees and expenses.
Substitution may be made with respect to existing investments or the investment
of future purchase payments, or both. However, we will not make such
substitution without any necessary approval of the Securities and Exchange
Commission and applicable state insurance departments. Furthermore, we may
close investment options to allocation of purchase payments or contract value,
or both, at any time in our sole discretion. There will always be at least one
investment option offered under the contract.
16
4. EXPENSES
There are charges and other expenses associated with the contract that reduce
the return on your investment in the contract. These charges and expenses are:
PRODUCT CHARGES
VARIABLE ACCOUNT PRODUCT CHARGES. Each day, we make a deduction for our
variable account product charges (the mortality and expense charge). We do this
as part of our calculation of the value of the accumulation units.
We assess a daily mortality and expense charge that is equal, on an annual
basis, to 1.90% (for a single annuitant) or 2.05% (for joint annuitants) of the
average daily net asset value of each investment option.
This charge compensates us for mortality risks we assume for the lifetime
withdrawal, annuity payment and death benefit guarantees made under the
contract. These guarantees include allowing lifetime withdrawals and making
annuity payments that will not change based on our actual mortality experience,
and providing a guaranteed minimum death benefit under the contract.
The charge also compensates us for expense risks we assume to cover contract
maintenance expenses. These expenses may include issuing contracts, maintaining
records, making and maintaining subaccounts available under the contract and
performing accounting, regulatory compliance, and reporting functions. This
charge also compensates us for costs associated with the establishment and
administration of the contract. If the mortality and expense charge is
inadequate to cover the actual expenses of mortality, maintenance, and
administration, we will bear the loss. If the charge exceeds the actual
expenses, we will add the excess to our profit and it may be used to finance
distribution expenses or for any other purpose.
SURRENDER CHARGE
We impose a surrender charge to reimburse us for contract sales expenses,
including commissions and other distribution, promotion, and acquisition
expenses. During the accumulation phase, you can make a withdrawal from your
contract (either a partial or a complete withdrawal). A surrender charge is
assessed against any amount withdrawn during the first five contract years
(including amounts withdrawn pursuant to a request to divide the assets of a
contract due to divorce), except as described below.
The surrender charge is calculated at the time of each withdrawal in accordance
with the following:
Number of Complete Years from Surrender Charge
Contract Date (% of Amount Withdrawn)
------------- -----------------------
0 2
1 2
2 2
3 2
4 2
5 and thereafter 0
For a partial withdrawal, you may elect to have the surrender charge deducted
either from the remaining contract value, if sufficient, or from the amount
withdrawn. If the remaining contract value is not sufficient, the surrender
charge is deducted from the amount withdrawn.
WE DO NOT ASSESS THE SURRENDER CHARGE ON ANY AMOUNTS PAID OUT AS ANNUITY
PAYMENTS OR AS DEATH BENEFITS. ALSO, NO SURRENDER CHARGE WILL APPLY TO
WITHDRAWALS UNDER THE GWB FEATURE THAT ARE LESS THAN OR EQUAL TO THE GWB
AMOUNT. However, a surrender charge will be assessed on withdrawals prior to
the youngest annuitant reaching age 59 1/2 or, thereafter, on any withdrawals
in excess of the GWB Amount (see "Guaranteed Withdrawal Benefit for Life" for
more information). In addition, we will not assess the surrender charge on
required minimum distributions from qualified contracts made through the
Systematic Withdrawal Program but only as to amounts required to be distributed
from this contract. (See "Access To Your Money--Systematic Withdrawal Program"
for more information.)
17
5. ANNUITY PAYMENTS (THE INCOME PHASE)
ANNUITY DATE
Under the contract you can receive regular income payments (referred to as
ANNUITY PAYMENTS). You can choose the month and year in which those payments
begin. We call that date the ANNUITY DATE. Your annuity date must be at least
30 days after we issue the contract. Annuity payments must begin by the first
day of the calendar month on or after the contract anniversary on or after the
oldest owner's (or, for contracts owned by certain trusts, the oldest
annuitant's) 95th birthday (this requirement may be changed by us).
When you purchase the contract, the annuity date will be the first day of the
calendar month on or after the contract anniversary on or after the oldest
owner's (or, for contracts owned by certain trusts, the oldest annuitant's)
95th birthday. You can change the annuity date at any time before the annuity
date with 30 days prior notice to us, subject to restrictions that may apply in
your state.
ANNUITY INCOME OPTIONS
You can choose among income plans. We call those ANNUITY INCOME OPTIONS. We ask
you to choose an annuity income option when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us.
You will receive the annuity payments during the income phase. The annuitant is
the natural person(s) whose life we look to in the determination of annuity
payments. The dollar amount of each annuity payment generally will not change.
The contract offers two annuity income options. Unless you elect another
annuity income option prior to the annuity date or you elect an earlier annuity
date, the contract will default to annuity income option (1).
ANNUITY INCOME OPTION (1). Under annuity income option (1), on the annuity
date, we compare the contract value to the adjusted purchase payment. At
contract issue, the adjusted purchase payment is equal to the purchase
payment. The adjusted purchase payment is reduced by withdrawals as follows:
If total withdrawals in any contract year after the youngest annuitant
reaches age 59 1/2 do not exceed the GWB Amount for that same contract year,
the adjusted purchase payment is reduced by the dollar amount of the
withdrawal(s).
If you make withdrawals before the youngest annuitant reaches age 59 1/2,
the adjusted purchase payment will be reduced for each such withdrawal as
follows:
1) At the end of the valuation period in which you make the withdrawal,
we divide the withdrawal by what the contract value would have been at
the end of the valuation period had you not taken the withdrawal. The
result is the percentage factor used to calculate the reduction to the
adjusted purchase payment.
2) Multiply the percentage determined in (1) by the adjusted purchase
payment immediately before the withdrawal. The result is the amount by
which the adjusted purchase payment is reduced.
If you make withdrawals on or after the date the youngest annuitant reaches
age 59 1/2 and the total withdrawals in a contract year are greater than the
GWB Amount for that contract year, then the adjusted purchase payment will
be reduced by the amount of the GWB Amount for that contract year, then
further reduced for each such withdrawal as follows:
1) Determine the portion of the most recent withdrawal, in combination
with the sum of all other withdrawals taken in the current contract
year, that exceeds the GWB Amount for that contract year.
2) Determine what the contract value would have been at the end of the
valuation period had you NOT taken the withdrawal, less any portion of
the most recent withdrawal that is eligible to be applied to the GWB
Amount in that contract year.
3) Determine the percentage reduction in the adjusted purchase payment by
dividing the amount determined in (1) by the amount determined in (2).
4) Multiply the percentage determined in (3) by the adjusted purchase
payment prior to the excess withdrawal.
19
Take the adjusted purchase payment prior to the excess withdrawal and reduce
it by the amount determined in (4).
For example, assume your contract has one annuitant who is age 55 and you
made a $25,000 purchase payment (the example does not reflect the deduction
of income taxes or tax penalties, or fees and charges):
. At issue, the adjusted purchase payment is equal to the purchase
payment, $25,000.
. Assume that your contract value is $30,000 later in that contract
year, and you make one $5,000 withdrawal. Because the withdrawal
is made prior to the youngest annuitant reaching age 59 1/2, the
adjusted purchase payment would be reduced by $5,000 divided by
$30,000, or 16.67%. The result is a new adjusted purchase payment
of $20,833 ($25,000 minus [$25,000 multiplied by 16.67%]).
. Assume that six years later, your contract value is $40,000, you
have begun taking withdrawals under the GWB feature, your GWB
Amount is $1,600, and you make total withdrawals of $5,000 in that
contract year. The GWB Amount reduces the adjusted purchase
payment by the dollar amount of the GWB Amount, however because
you make an excess withdrawal of $3,400 ($5,000 minus $1,600), the
adjusted purchase payment would be further reduced by [$3,400
divided by ($40,000 minus $1,600)], or 8.85%. The result is a new
adjusted purchase payment of $17,531 ($20,833 minus $1,600 minus
[($20,833 minus $1,600) multiplied by 8.85%]).
If the adjusted purchase payment is greater than or equal to the contract
value: you will receive annuity income payments equal to your eligible GWB
Amount (see "Guaranteed Withdrawal Benefit for Life" for more information)
that will be paid to you as annuity payments until there is no longer any
living annuitant.
If on the death of the last surviving annuitant the total of all annuity
payments on or after the annuity date is less than the adjusted purchase
payment, we will pay to the beneficiary the GWB Amount as annuity income
payments until the total payments made to the annuitant(s) and beneficiary
(or if there is no living beneficiary to the last surviving beneficiary's
estate) are equal to the adjusted purchase payment.
If the contract value on the annuity date is greater than the adjusted
purchase payment: you will receive annuity income payments equal to the
greater of (a) or (b), where (a) is your eligible GWB Amount and (b) is the
amount of annuity payments that will be paid to you by applying your
contract value determined as of the annuity date (less premium and other
taxes) to annuity income purchase rates that will pay you monthly annuity
payments terminating with the last payment due prior to the death of the
last living annuitant.
If on the death of the last surviving annuitant the total of all annuity
income payments on or after the annuity date is less than the contract value
on the annuity date, we will refund the difference to your beneficiary (or
if there is no living beneficiary to the last surviving beneficiary's
estate).
Annuity income option (1) is only available on the latest possible annuity
date unless the contract is converted to an annuity income option as
described in "Guaranteed Withdrawal Benefit for Life--Conversion of GWB
Amount To Annuity Payments." The latest possible annuity date is the first
day of the calendar month on or after the contract anniversary on or after
the oldest owner's (or, for contracts owned by certain trusts, the oldest
annuitant's) 95th birthday (or earlier if required by state law).
ANNUITY INCOME OPTION (2). You may have the contract value determined as of
the annuity date (less premium and other taxes) applied to annuity income
purchase rates that will pay you monthly annuity payments until there is no
longer any living annuitant or for 120 monthly payments, whichever is longer.
If the surviving annuitant dies before we have made all annuity payments due
under the contract, any remaining annuity payments will be paid to the
beneficiary or if there is no living beneficiary to the last surviving
beneficiary's estate. The beneficiary or estate may choose instead to
receive the present value of the remaining annuity payments in a lump sum.
The present value is determined by commuting the future guaranteed annuity
income using the annuity income purchase rates in effect at that time.
This annuity income option is available on any annuity date. If elected,
benefits under the GWB feature will terminate.
20
IN ORDER TO RECEIVE THE GREATER OF YOUR ELIGIBLE GWB AMOUNT OR RMD, YOU MUST
AGREE TO THE FOLLOWING CONDITIONS:
(1) You must elect to receive the greater of the GWB Amount and the RMD and
authorize us to calculate the RMD for you;
(2) The RMD for a calendar year will be determined by us exclusively from the
contract value of this contract;
(3) No RMD withdrawal may occur until after December 31st of the calendar
year in which your contract was issued;
(4) If the contract was purchased prior to your reaching age 70 1/2, your
first RMD must be withdrawn in the calendar year in which you reach age
70 1/2 (even though the Code allows you to delay your first RMD until
April 1st of the following calendar year). We require this because only
one calendar year's RMD will qualify for the exception to withdrawals in
excess of the GWB Amount; and
(5) If you make a withdrawal other than through this Systematic Withdrawal
Program, you will no longer be eligible to receive the greater of the RMD
or GWB Amount during that contract year, and any amounts withdrawn in
excess of the GWB Amount will be considered excess withdrawals (see
"Guaranteed Withdrawal Benefit for Life--Withdrawals in Excess of Annual
GWB Amount"). The Systematic Withdrawal Program will terminate and you
must re-enroll in the Systematic Withdrawal Program for the next contract
year.
We reserve the right to limit or modify this Systematic Withdrawal Program if
we determine that the program will cause us to distribute during any contract
year an amount more than the greater of the GWB Amount or the RMD for any
calendar year.
Each Systematic Withdrawal may be subject to federal income taxes, including
any penalty tax that may apply. We reserve the right to modify or discontinue
the Systematic Withdrawal Program except as necessary to meet RMD withdrawals
as described above. (For a discussion of the surrender charge, see "Expenses"
above.)
SUSPENSION OF PAYMENTS OR EXCHANGES
We may be required to suspend or postpone payments for withdrawals or exchanges
for any period when:
. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
. trading on the New York Stock Exchange is restricted;
. an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of shares of the investment
options is not reasonably practicable or we cannot reasonably value the
shares of the investment options;
. or during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require us to block an owner's ability to make
certain transactions and thereby refuse to accept any requests for exchanges,
withdrawals, surrenders, or death benefits until instructions are received from
the appropriate regulator. We may also be required to provide additional
information about you and your contract to government regulators.
23
7. GUARANTEED WITHDRAWAL BENEFIT FOR LIFE
Your contract is issued with a living benefit feature that offers protection
against market risk (the risk that your investments may decline in value or
underperform your expectations). This feature is called the Guaranteed
Withdrawal Benefit for Life (GWB).
The GWB guarantees that when the youngest annuitant reaches age 59 1/2, you are
eligible to withdraw a specific amount each contract year called the Guaranteed
Withdrawal Benefit Amount ("GWB Amount"). The GWB Amount, described below, is
available for withdrawal each contract year during the annuitant(s)' lifetime
regardless of your contract value. You may make partial withdrawals up to the
GWB Amount during the contract year. You are not required to make any
withdrawals. However, unused portions of the GWB Amount are not cumulative and
do not carry over into future contract years.
The GWB Amount is determined each contract year by multiplying the Guaranteed
Withdrawal Benefit Value ("GWB Value"), described below, by the Withdrawal
Percentage, also described below. THE GWB VALUE DOES NOT ESTABLISH OR GUARANTEE
ANY CONTRACT VALUE OR MINIMUM RETURN FOR ANY INVESTMENT OPTION AND CANNOT BE
TAKEN AS A LUMP SUM. Income taxes and penalties may apply to your withdrawals.
No benefit is payable until the youngest annuitant reaches age 59 1/2.
Withdrawals prior to the youngest annuitant reaching 59 1/2 will decrease the
GWB Value as described below in "Withdrawals Before Youngest Annuitant Reaches
Age 59 1/2". The annuitant(s) will be listed on the contract and may not be
changed after the contract date (except by court order).
You should carefully consider when to begin taking withdrawals. If you begin
taking withdrawals too soon, you may limit the value of the GWB feature. For
example, taking your first withdrawal at a younger age may result in a lower
Withdrawal Percentage. However, if you delay taking withdrawals for too long,
you may limit the number of years available for you to take withdrawals in the
future (due to life expectancy).
At any time during the accumulation phase, you can elect to annuitize under
current annuity rates. This may provide higher income amounts if the current
annuity option rates applied to the contract value on the annuity date exceed
the GWB Amount payments. Also, after-tax annuity income payment amounts
provided by annuitizing under current annuity rates may be higher due to
different tax treatment of this income compared to the tax treatment of the
payments received under the GWB feature. (See "Federal Income Tax Status")
TAX TREATMENT. The tax treatment of withdrawals under the GWB feature is
uncertain. It is conceivable that the amount of potential gain could be
determined based on the GWB Value at the time of the withdrawal, if the GWB
Value is greater than the contract value (prior to surrender charges, if
applicable). This could result in a greater amount of taxable income reported
under a withdrawal and conceivably a limited ability to recover any remaining
basis if there is a loss on surrender of the contract. Consult your tax advisor
prior to purchase.
MANAGING YOUR WITHDRAWALS. It is important that you carefully manage your
annual withdrawals. To retain the full guarantees of this feature, your annual
withdrawals cannot exceed the GWB Amount each contract year. In other words,
you should not take excess withdrawals. If you do take an excess withdrawal, we
will reduce the GWB Value proportionately (as described below) and reduce the
GWB Amount to the new GWB Value multiplied by the applicable Withdrawal
Percentage. These reductions in the GWB Value and GWB Amount may be
significant. You are still eligible to receive lifetime payments so long as the
withdrawal that exceeded the GWB Amount did not cause your contract value to
decline to zero. IF THE CONTRACT VALUE IS REDUCED TO ZERO BECAUSE YOU MAKE A
FULL WITHDRAWAL AND TOTAL WITHDRAWALS IN THAT CONTRACT YEAR (INCLUDING THE
WITHDRAWAL THAT REDUCES THE CONTRACT VALUE TO ZERO) EXCEED THE GWB AMOUNT, YOUR
CONTRACT WILL BE TERMINATED AND YOU WILL NOT RECEIVE LIFETIME PAYMENTS. IT IS
YOUR RESPONSIBILITY TO MANAGE WITHDRAWALS, AND YOU WILL NOT BE NOTIFIED IF YOU
SUBMIT A WITHDRAWAL REQUEST THAT CAUSES AN EXCESS WITHDRAWAL, INCLUDING AN
EXCESS WITHDRAWAL THAT REDUCES THE CONTRACT VALUE TO ZERO AND TERMINATES THE
CONTRACT.
You are not required to withdraw the full GWB Amount each year. However, if you
choose to receive only a part of your GWB Amount in any given contract year,
your GWB Amount is not cumulative and your GWB Value and GWB Amount will not
increase as a result of taking a smaller withdrawal. For example, if your
Withdrawal Percentage is 5%, you cannot withdraw 3% of the GWB Value in one
year and then withdraw 7% of the GWB Value the next year without making an
excess withdrawal in the second year.
24
On each contract anniversary prior to the oldest annuitant turning age 85, the
GWB Value is compared to the contract value to determine whether the GWB Value
should be increased. If the contract has joint annuitants and the oldest
annuitant dies before the contract anniversary that falls on or after his or
her 85th birthday, the surviving annuitant's age will be used. However, if the
oldest annuitant dies on or after the contract anniversary that falls on or
after his or her 85th birthday, the GWB Value will not increase.
If the contract value is lower than the GWB Value, the GWB Value will not
change.
If the contract value is greater than the GWB Value, the GWB Value will be
automatically increased to equal the contract value. If you make a withdrawal
on the contract anniversary, the withdrawal will be deducted from the contract
value after it is compared to the GWB Value.
Any new GWB Value will be used to determine the GWB Amount for the rest of that
contract year, provided the youngest annuitant has reached age 59 1/2 and a
Withdrawal Percentage has been established by your first withdrawal of a GWB
Amount.
WITHDRAWALS BEFORE YOUNGEST ANNUITANT REACHES AGE 59 1/2
You are not eligible to withdraw any part of the GWB Amount until the youngest
annuitant reaches age 59 1/2. If you make a withdrawal before the youngest
annuitant reaches age 59 1/2, the GWB Value is reduced by a percentage
determined by dividing the withdrawal amount by the contract value at time of
the withdrawal. We calculate the new GWB Value as follows.
(1) At the end of the valuation period (a "valuation period" is the period of
time between one determination of the value of accumulation units to the
next determination on the following business day) in which you make the
withdrawal, we divide the withdrawal by what the contract value would
have been at the end of the valuation period had you not taken the
withdrawal. The result is the percentage factor used to calculate the
reduction in the GWB Value.
(2) Multiply the percentage determined in (1) by the GWB Value immediately
before the withdrawal. The result is the amount by which the old GWB
Value is reduced.
For example, assume your contract has one annuitant who is age 55 and you made
a $25,000 purchase payment (the example does not reflect the deduction of
income taxes or tax penalties, or fees and charges other than the surrender
charge):
. If you make no withdrawals during the first contract year your GWB Value
would be $25,000 for the whole contract year.
. Assume that your contract value is $30,000 later in that contract year
and you make one $5,000 withdrawal ($4,900 of which would be paid to you
after deduction of a $100 surrender charge).
. Your GWB Value would be reduced by 16.67% ($5,000 withdrawal amount
divided by $30,000 contract value).
. The result is a new GWB Value of $20,833 ($25,000 GWB Value minus
[$25,000 multiplied by 16.67%]).
WITHDRAWALS IN EXCESS OF ANNUAL GWB AMOUNT
If you withdraw more than the GWB Amount in any contract year on or after the
youngest annuitant reaches age 59 1/2, the GWB Value is reduced by an amount
equal to the percentage determined by dividing the portion of a withdrawal that
is in excess of the GWB Amount for that contract year ("excess withdrawal") by
the contract value at time of the excess withdrawal, as described below. The
new GWB Value following an excess withdrawal is calculated as follows:
1) Determine the portion of the most recent withdrawal, in combination with
the sum of all other withdrawals taken in the current contract year, that
exceeds the GWB Amount for that contract year.
2) Determine what the contract value would have been at the end of the
valuation period had you NOT taken the withdrawal, less any portion of
the most recent withdrawal that is eligible to be applied to the GWB
Amount in that contract year.
3) Determine the percentage reduction in GWB Value by dividing the amount
determined in (1) by the amount determined in (2).
4) Multiply the percentage determined in (3) by the GWB Value prior to the
withdrawal.
26
5) Take the GWB Value prior to the withdrawal and reduce it by the amount
determined in (4). This will result in a new GWB Value.
For example, assume your contract is in its sixth contract year, has one
annuitant who is age 60, a contract value of $30,000 and a GWB Value of $25,000
(the example does not reflect the deduction of income taxes or tax penalties or
fees and charges; surrender charges do not apply after the fifth contract year):
. If you make a first withdrawal of $5,000 in the sixth contract
year, you will establish a Withdrawal Percentage of 4% and be
eligible to withdraw up to the GWB Amount of $1,000 ($25,000
multiplied by 4%) without causing a reduction in GWB Value.
. Because your first withdrawal is $5,000, $1,000 of the withdrawal
is eligible to be applied to the GWB Amount for that contract year
and $4,000 of the withdrawal is an excess withdrawal.
. For purposes of determining the impact on the GWB Value, the
contract value is first reduced by the GWB Amount ($30,000 minus
$1,000) resulting in a contract value of $29,000.
. The $4,000 excess withdrawal proportionally reduces the contract
value by 13.79% ($4,000 divided by $29,000) which results in a new
GWB Value of $21,552.50 ($25,000 less [25,000 multiplied by
13.79%]).
. If there are no further withdrawals in that contract year and the
GWB Value is not increased on the next contract Anniversary, the
GWB Amount for the next contract year will be $862.10 ($21,552.50
multiplied by 4%).
If the contract is a qualified contract and you elect to receive your minimum
required distributions under the Code through our Systematic Withdrawal
Program, the references to GWB Amount in (1) and (2) above shall mean "the
greater of the GWB Amount or any minimum required distribution under the Code
determined exclusively by us from the contract value." If you take a withdrawal
to satisfy your minimum required distribution in a way other than through our
Systematic Withdrawal Program and your RMD is in excess of your GWB Amount, the
withdrawal may result in surrender charges (if applicable) and a reduction in
your GWB Value.
Any Premium Tax amount that we deduct from your contract value will not be
treated as an excess withdrawal.
See Appendix C for additional examples of GWB Value increases and decreases.
CONVERSION OF GWB AMOUNT TO ANNUITY PAYMENTS
If the contract value is reduced to zero because you make a full withdrawal and
total withdrawals in that contract year (including the withdrawal that reduces
the contract value to zero) do not exceed the GWB Amount, we will convert the
contract to an annuity income option. If that happens, we will pay you the
difference between your GWB Amount for that contract year (less prior
withdrawals in that contract year) and the contract value prior to that
withdrawal, and then, on the first day of the calendar month on or after your
next contract anniversary, the contract will convert to an annuity option that
will pay you an annual amount equal to your GWB Amount for so long as any
annuitant is still alive. The first payment will be equal to any remaining
portion of the GWB Amount for the contract year at the time of conversion. Once
a conversion occurs under this provision, the contract will no longer have a
contract value.
IF THE CONTRACT VALUE IS REDUCED TO ZERO BECAUSE YOU MAKE A FULL WITHDRAWAL AND
TOTAL WITHDRAWALS IN THAT CONTRACT YEAR (INCLUDING THE WITHDRAWAL THAT REDUCES
THE CONTRACT VALUE TO ZERO) EXCEED THE GWB AMOUNT, YOUR CONTRACT WILL BE
TERMINATED AND YOU WILL NOT RECEIVE ANY ANNUITY INCOME PAYMENTS.
If you are receiving GWB Amount payments through our Systematic Withdrawal
Program and a withdrawal under the Systematic Withdrawal Program causes this
provision to apply, we will continue to pay your GWB Amount as an annuity
income payment on the same day of the month for the period you selected under
the Systematic Withdrawal Program.
The resulting GWB Amount for future contract years will be paid in monthly
annuity income payments as long as each monthly annuity income payment is at
least $20. We reserve the right to pay the GWB Amount as an annual annuity
income payment or in any other payment method that is mutually agreeable to you
and us.
DEATH BENEFIT AFTER CONVERSION OF GWB AMOUNT TO ANNUITY PAYMENTS. On the death
of the last surviving annuitant, payments will continue to your beneficiary
until the beneficiary has received the Return of Purchase Payment death
27
9. DEATH BENEFIT DURING THE ACCUMULATION PHASE
UPON YOUR DEATH
If you die during the accumulation phase, we will pay a death benefit to your
beneficiary (or beneficiaries).
Where there are multiple beneficiaries, the death benefit for each beneficiary
will be determined as of the time that beneficiary submits the necessary
documentation in good order.
If you have a joint annuitant, the death benefit will not be paid when the
first annuitant dies (except for certain qualified contracts with a joint
annuitant who is age 95 or older at the death of the first annuitant--see
"Spousal Continuation" below). Upon the death of either annuitant, the
surviving joint annuitant will be the primary beneficiary. Any other
beneficiary designation will be treated as a contingent beneficiary, unless
instructed otherwise.
If a non-natural person owns the contract, the annuitant will be deemed to be
the owner in determining the death benefit.
DEATH BENEFIT
The death benefit will be payable to your beneficiaries upon the last surviving
annuitant's death. The beneficiaries must elect the death benefit to be paid
under one of the two options below. Subject to our administrative procedures,
we will pay a death benefit equal to the contract value death benefit if the
contract value death benefit is greater than the sum of payments to be received
under the Return of Purchase Payment death benefit. Until you direct us to pay
those proceeds to you in a lump sum or under any other option we make
available, the death benefit amount will remain in the variable account for up
to five years from the date of death.
1) Contract Value
The first option is a death benefit equal to the contract value as determined
as of the end of the business day on which we receive due proof of death and an
election for the payment method. This death benefit amount remains in the
investment options until each of the beneficiaries submits the necessary
documentation in good order to claim his/her death benefit. (See "General Death
Benefit Provisions" below.) Any death benefit amounts held in the variable
account on behalf of the remaining beneficiaries are subject to investment risk.
2) Return of Purchase Payment Death Benefit
The second option is a Return of Purchase Payment death benefit, equal to the
Purchase Payment reduced by withdrawals as described below.
If total withdrawals in any contract year after the youngest annuitant reaches
age 59 1/2 do not exceed the GWB Amount for that same contract year, the Return
of Purchase Payment death benefit is reduced by the dollar amount of the
withdrawal(s).
If you make withdrawals before the youngest annuitant reaches age 59 1/2, the
Return of Purchase Payment death benefit will be reduced as follows:
1) At the end of the valuation period in which you make the withdrawal, we
divide the withdrawal by what the contract value would have been at the
end of the valuation period had you not taken the withdrawal. The result
is the percentage factor used to calculate the reduction in the Return of
Purchase Payment death benefit.
2) Multiply the percentage determined in (1) by the Return of Purchase
Payment death benefit immediately before the withdrawal. The result is
the amount by which the old Return of Purchase Payment death benefit is
reduced.
If you make withdrawals after the youngest annuitant reaches age 59 1/2 and the
total withdrawals in a contract year are greater than the GWB Amount for that
contract year, then the Return of Return of Purchase Payment death benefit will
be equal to the Return of Purchase Payment death benefit, reduced by the amount
of the GWB Amount for that contract year, then further reduced as follows:
1) Determine the portion of the most recent withdrawal, in combination with
the sum of all other withdrawals taken in the current contract year, that
exceeds the GWB Amount for that contract year.
30
APPENDIX C
GUARANTEED WITHDRAWAL BENEFIT FOR LIFE EXAMPLES
The purpose of these examples is to illustrate the operation of the GWB
feature. The investment results shown are hypothetical and are not
representative of past or future performance. Actual investment results may be
more or less than those shown and will depend upon a number of factors,
including investment allocations and the investment experience of the
investment options chosen. The examples do not reflect the deduction of fees
and charges (other than applicable surrender charges) or income taxes and tax
penalties. The GWB does not establish or guarantee a contract value or minimum
return for any investment option. The GWB Value cannot be taken as a lump sum.
GWB VALUE AND GWB AMOUNT
Assume your contract has one annuitant who is age 64 and you made a $25,000
purchase payment on the contract date. Assume you make one withdrawal in the
first contract year equal to your eligible GWB Amount ($1,000 = 4% Withdrawal
Percentage multiplied by the $25,000 GWB Value). Your GWB Value would be
$25,000 for the entire first contract year. If your contract value is $30,000
at time of the first contract anniversary, your GWB Value will be increased to
$30,000 and your GWB Amount for the second contract year would be increased to
$1,200 to reflect the increased GWB Value.
In the same example, if the contract value was $20,000 at time of the first
contract anniversary, the GWB Value would be unchanged on the contract
anniversary and would remain at $25,000. Similarly, the GWB Amount would also
be unchanged and remain $1,000.
WITHDRAWALS IN EXCESS OF ANNUAL GWB AMOUNT
Assume your contract has one annuitant who is age 64 and you made a $100,000
purchase payment on the contract date. If you make no withdrawals during the
first contract year your GWB Value would be $100,000 for the whole contract
year. Further assume that you make a $3,000 withdrawal during the first
contract year. This withdrawal will establish the Withdrawal Percentage as 4%
and the GWB Amount as $4,000. Because the withdrawal does not exceed your
eligible GWB Amount, there are no surrender charges applicable to this
withdrawal and there is no reduction to the GWB Value. Your contract value will
be reduced by $3,000, the amount of the withdrawal.
Further assume that later in that first contract year, you make a second
withdrawal, this time for $10,000. At the time of this $10,000 withdrawal, the
GWB Amount is $4,000 and the sum of all prior withdrawals in this contract year
is $3,000. Therefore, $1,000 of the withdrawal is treated as a withdrawal of
your GWB Amount and the remainder of the withdrawal ($9,000) is treated as an
excess withdrawal. Assume your contract value would have been $104,000 at the
end of the valuation period had you not taken the withdrawal. Your GWB Value
will be reduced by 8.74%. The 8.74% reduction is determined by dividing the
$9,000 excess withdrawal by $103,000 ($104,000 - $1,000 determined above)
resulting in a new GWB Value of $91,260 ($100,000 GWB Value minus [100,000
multiplied by .0874]). Additionally, a $180 surrender charge is due on the
$10,000 withdrawal (2% of the $9,000 excess withdrawal).
Further assume that you make a third withdrawal in the first contract year,
this time for $5,000. At the time of this $5,000 withdrawal, the GWB Amount is
$4,000 and the sum of all prior withdrawals in this contract year is $13,000.
Therefore, all $5,000 of the withdrawal is treated as an excess withdrawal. If
your contract value would have been $90,000 at the end of the valuation period
had you not taken the withdrawal, your GWB Value will reduce by 5.56% ($5,000
excess withdrawal divided by $90,000) resulting in a new GWB Value of
$86,185.94 ($91,260 GWB Value minus [91,260 multiplied by .0556]). A $100
surrender charge is due on the $5,000 withdrawal (2% of the $5,000 excess
withdrawal).
REQUIRED MINIMUM DISTRIBUTIONS UNDER THE GWB
Assume your contract date is five years in the past and your contract has one
annuitant who is age 75. Also assume that your GWB Value is $100,000, your GWB
Amount is $5,000 and your minimum required distribution, as computed
exclusively by us, is $5,300 for the current calendar year. Assume further that
you have not yet made any withdrawals from your contract in the current
contract year, nor have you made any withdrawals in the current calendar year.
Also, assume that your next contract anniversary will occur in the following
calendar year and that your GWB Value did not increase on your contract
anniversary in the current calendar year.
45
Example 1
To satisfy your RMD, you request a $5,300 withdrawal outside of our Systematic
Withdrawal Program. At the time of this $5,300 withdrawal, the GWB Amount is
$5,000 and the sum of all prior withdrawals in this contract year is $0.
Therefore, $5,000 of the withdrawal is treated as a withdrawal of your GWB
Amount and the remainder of the withdrawal ($300) is treated as an excess
withdrawal. A reduction in your GWB Value will occur because you did not
participate in the Systematic Withdrawal Program to receive this withdrawal and
you did not meet all of the other criteria as stated on page 23 of this
prospectus to receive the greater of your GWB Amount and your RMD. To
demonstrate the reduction, assume your contract value would have been $103,000
at the end of the valuation period had you not taken the withdrawal. After your
withdrawal is processed, your contract value will be $97,700 and your GWB Value
will be reduced by 0.31%. The 0.31% reduction is determined by dividing the
$300 excess withdrawal by $98,000 ($103,000 - $5,000 determined above)
resulting in a new GWB Value of $99,690 ($100,000 GWB Value minus [100,000
multiplied by .0031]).
Example 2
Alternatively, assume that at the beginning of the year, you had been signed up
for a monthly systematic withdrawal of your GWB Amount. Each month we will pay
an amount so that we will have paid the greater of your GWB Amount or RMD, in
this case $5,300, by the end of the calendar year. Since the withdrawal to
cover your RMD was taken through our SWP program, your GWB Value will still be
$100,000. We have assumed that all of the conditions for receiving the greater
of your GWB Amount and your RMD as shown on page 14 of this prospectus have
been met.
Example 3
Assume instead that you sign up for a systematic withdrawal of your GWB Amount
in September. In order to meet your RMD requirements, you would need to elect
an annual payment frequency from the Systematic Withdrawal Program so that we
are able to pay a full year's worth of payments on a systematic basis prior to
the end of the calendar year. Note that any frequency of payment other than
annual in this case will not allow you to meet your RMD. After the withdrawal
of $5,300, your GWB Value will still be $100,000 since the withdrawal to cover
your RMD was taken through our Systematic Withdrawal Program. We have assumed
that all of the conditions for receiving an RMD exception as shown on page 14
of the prospectus have been met.
46