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The
United States Securities and
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Exchange
Commission
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100
F Street, N.E.
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Washington,
D.C. 20549-8629
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·
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Contract
Value must be allocated between one permitted investment option and the
Market Preservation Investment ("MPI") (unless the Dollar Cost Averaging
for Living Benefits program is elected; see item
2).
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Each
of the available investment options has been assigned a risk tolerance by
Nationwide based on Nationwide's profit and risk
objectives. Nationwide will not change the risk tolerance of an
investment option.
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Risk
tolerance determines MPI allocation requirements. In general,
riskier options have higher MPI allocation requirements. At any
given time, each investment option with the same risk tolerance will have
the same MPI allocation
requirement.
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·
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Nationwide
may adjust the MPI allocation requirement for a given risk
tolerance. Any such change to the MPI allocation requirement
will not affect existing Contract Values; only future allocations to the
investment options in that risk
tolerance.
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The
MPI allocation requirement percentage represents the percentage of a particular
allocation that must be allocated to the MPI. It does
not mean that the entire Contract Value will, on an ongoing basis, be
allocated according to those percentages (e.g., 20% to the MPI,
80% to the investment option). Due to the fact that the
Contract Value allocated to the investment option will fluctuate with
market performance, those percentages will necessarily
change. This could result in the MPI being a relatively large
(if the market declines) or relatively small (if the market increases)
portion of the entire Contract
Value.
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·
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Once
Contract Value is allocated to the MPI, it may not be transferred out of
the MPI (except in anticipation of
annuitization).
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2.
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Dollar
Cost Averaging for Living Benefits:
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Dollar
Cost Averaging ("DCA") for Living Benefits involves the automatic transfer
of a specific amount from the Fixed Account into the permitted investment
option selected by the Contract Owner. If a Custom Portfolio
model is the elected investment option, the specified amount will be
allocated according to the Custom Portfolio allocation percentages
indicated by the Contract Owner.
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·
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Only
new purchase payments to the contract are eligible for DCA for Living
Benefits.
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Once
a DCA for Living Benefits program has begun, no transfers among or between
investment options is permitted until the program is completed (the Fixed
Account is depleted) or terminated.
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·
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To
terminate the DCA for Living Benefits program, a Contract Owner must
instruct Nationwide in writing.
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o
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Upon
termination, Nationwide will transfer the remaining balance in the Fixed
Account to the elected investment option. If a Custom Portfolio
model is the elected investment option, the transferred amount will be
based on the allocation percentages indicated by the Contract
Owner.
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o
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Upon
termination, no MPI allocation evaluation will occur and no additional MPI
allocation will be required (unless the Contract Owner also requests a
transfer to an investment option in a different risk tolerance – see item
3).
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3.
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Transfer
Requests:
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a.
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Generally
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A
Contract Owner may transfer the portion of the Contract Value that is
not
allocated to the MPI to another permitted investment option, either within
or outside the current investment option’s risk
tolerance.
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o
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A
transfer to an investment option within the same risk tolerance will not
trigger an MPI allocation evaluation and no additional MPI allocation will
be required.
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o
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A
transfer to an investment option with a different risk tolerance will
trigger an MPI allocation evaluation, which may require an additional MPI
allocation. Nationwide uses the following formula for the MPI
allocation evaluation – it will determine the amount of any additional MPI
allocation requirement:
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Current
Income Benefit Base
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X
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Current
MPI allocation requirement for the investment option
elected
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--
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Current
MPI balance
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=
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Dollar
amount of additional MPI allocation
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·
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If,
based on the above calculation, an additional MPI allocation is required,
Nationwide will allocate part of the transferred Contract Value to the MPI
in an amount equal to the shortfall. This “catch-up” MPI
allocation will create a new MPI Band (see the MPI prospectus for more
information on MPI Bands).
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·
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If
based on the above calculation, no additional MPI allocation is required,
the entire amount in the current investment option will be transferred to
the new investment option. Since assets allocated to the MPI
cannot be transferred out of the MPI, any excess MPI allocation will not
be transferred to the selected investment
option.
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·
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All
transfer requests must be submitted to Nationwide’s home office in writing
on Nationwide’s administrative form. The administrative form
will provide the current MPI allocation requirements for each risk
tolerance. Contract Owners can obtain the L.Inc MX Option
transfer form by contacting Nationwide at the address listed on page 1 of
the prospectus.
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b.
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Transfers
when DCA for Living Benefits is
elected
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·
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If
a Contract Owner with DCA for Living Benefits wants to transfer to another
investment option (either within the same risk tolerance or in a different
risk tolerance), the Contract Owner must first terminate participation in
the DCA for Living Benefits
program.
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·
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As
described above:
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o
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If
the new investment option is in the same risk tolerance, no MPI allocation
evaluation will occur.
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o
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If
the new investment option is in a different risk tolerance, an MPI
allocation evaluation will occur.
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·
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If
a Contract Owner with DCA for Living Benefits who is invested in a Custom
Portfolio model wants reallocate within that model, the Contract Owner may
do so without terminating their DCA for Living Benefits, and no MPI
allocation evaluation will occur.
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·
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Contract
Owners can transfer to or from a permitted Custom Portfolio model as
described in sub-section (a) above.
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A
Contract Owner can change the underlying mutual fund allocations within
their elected model without triggering a MPI allocation evaluation and
without terminating DCA for Living Benefits (if
elected).
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·
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Transfer
requests to an investment option other than a permitted investment option
will not be honored and will be treated as though no transfer request was
submitted.
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Allocations
to more than one investment option will not be honored and will be treated
as though no transfer request was
submitted.
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4.
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Subsequent
Purchase Payments:
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a.
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Generally
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Where
permitted by state law, subsequent purchase payments are permitted under
the L.Inc MX Option as long as the Contract Value is greater than
zero.
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Nationwide
will allocate subsequent purchase payments to the investment option
elected as of the date of the subsequent purchase
payment.
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If
the elected investment option has an MPI allocation requirement, the
required portion of the subsequent purchase payment will be allocated to
the MPI, creating a new MPI Band. The amount of the subsequent
purchase payment that will be allocated to the MPI is determined as
follows:
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Amount
of purchase payment
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X
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Current
MPI allocation requirement for the investment option
elected
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=
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MPI
allocation requirement
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·
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If
the Contract Owner would like for the subsequent purchase payment to be
part of a DCA for Living Benefits program, the Contract Owner must provide
instructions to Nationwide along with the subsequent purchase
payment. In other words, the subsequent purchase payment will
not be defaulted into the DCA for Living Benefits
program.
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·
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If
the elected investment option is a Custom Portfolio model, the Contract
Value not
required to be allocated to the MPI will be allocated according to the
allocation percentages indicated by the Contract
Owner.
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5.
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Partial
surrenders (excess withdrawals or lifetime income
withdrawals):
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·
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For
each excess or lifetime income withdrawal, Nationwide will first surrender
Accumulation Units proportionally from the Sub-Account(s) until depleted,
then from any amount allocated to the Fixed Account as part of a DCA for
Living Benefits program, and finally from the MPI, starting with the
oldest MPI Band first.
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·
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As
long as there is Contract Value available in the Sub-Account(s) and/or the
Fixed Account, the Contract Owner is not permitted to take surrenders from
the MPI.
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6.
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Death
of Contract Owner:
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a.
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No
Spousal Continuation Benefit
elected
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Upon
death of the Contract Owner (the determining life), the benefits and
requirements associated with the L.Inc MX Option
terminate.
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·
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The
Contract Value will continue to remain invested in the current investment
option until the death benefit is paid (if the Contract Owner who is also
the Annuitant dies) or Contract Value is paid (if the Contract Owner who
is not the Annuitant dies).
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b.
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Spousal
Continuation Benefit elected
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·
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Upon
death of the Contract Owner before the first
lifetime income withdrawal is taken, the benefits and requirements
associated with the L.Inc. MX Option continue for the lifetime of the
surviving spouse.
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·
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Upon
death of the Contract Owner after the first
lifetime income withdrawal is taken, the surviving spouse can continue to
take lifetime income withdrawals for the duration of their
lifetime. All of the terms, rights and conditions associated
with the L.Inc MX Option, including the L.Inc MX Option investment
requirements, will apply until
annuitization.
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·
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If
the Contract Owner's spouse dies before the Contract Owner, the Contract
Owner will not receive the benefits associated with the Spousal
Continuation Benefit and he/she must continue to pay for the option and
comply with all of the terms and conditions associated with the L.Inc MX
Option, including the L.Inc MX Option investment requirements, until
annuitization.
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7.
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Annuitization:
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·
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If
the Contract Owner requests to annuitize the contract, the L.Inc MX Option
will terminate along with the L.Inc MX Option investment
requirements.
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·
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The
MPI is not an available investment option during annuitization, therefore,
the Contract Owner must transfer any Contract Value allocated to the MPI
to another investment option. Upon transfer, the Contract Owner will
forfeit any MPI Performance Credit that would be payable for that MPI
Period.
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1.
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L.Inc MX Option investment
requirements. The revised disclosure still requires significant
clarification. The revised version does not give allocation
percentages and does not provide a formula showing how those allocation
percentages are determined.
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a.
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Disclose
how the allocation percentages are
determined.
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Contract Value on date L.Inc MX Option is
elected
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X
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Current MPI allocation requirement for the
investment option elected
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=
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MPI allocation
requirement
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b.
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Clarify
contradicting disclosure. In one section it states all
investment options within a risk tolerance will have the same MPI
allocation requirement at a given time, and if a change to the allocation
percentage occurred, it would be applicable to all the investment options
in that risk tolerance simultaneously. However, there is
another statement within the disclosure that sounds like this is not the
case.
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c.
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The
disclosure does not make it clear whether or not Nationwide can change the
risk tolerance associated with a given investment option. If it
can, disclose this and what would
happen.
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a.
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The
disclosure does not explain what happens if a customer has a high risk
option, then transfers to a less risky option – what happens to the
allocation requirement for
sub-pays?
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b.
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What
if, after above, the customer wants to move to an investment option in
between? Does the additional MPI allocation requirement come
out of the float or is the MPI allocation requirement based on the amount
being transferred (i.e., the variable portion)? In other words,
if a contract owner has more than the required amount allocated to the
MPI, and then makes a transfer or new purchase payment that requires
a
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c.
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Dollar
Cost Averaging for Living Benefits. How do you treat
investments in Dollar Cost Averaging for Living Benefits if the allocation
requirements change after enrolling – are the allocation percentages
continuously those that were in effect at the time of enrollment, or are
they those that are in effect at the time the transaction actually
occurs? How does the customer know what the allocation
percentage requirement is? Where does the money
go?
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d.
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Termination
of Dollar Cost Averaging for Living
Benefits.
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i.
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It
is still not clear whether a Contract Owner can terminate the
program.
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ii.
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For
other riders, upon termination of the program, the remaining amount in the
Fixed Account gets automatically allocated to the money
market. Is that the case
here?
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iii.
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If
the customer terminates to change investment options, how is the new MPI
allocation determined?
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iv.
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Can
the Contract Owner accidentally terminate the
program?
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v.
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If
Dollar Cost Averaging for Living Benefits cannot be terminated and the
Contract Owner is not old enough to take withdrawals without penalty, is
there any way they can get their money out of Dollar Cost Averaging for
Living Benefits without taking a
surrender?
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3.
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Changing risk tolerances.
When a customer changes risk tolerances, what is the impact to the
allocation requirement in relation to the contract value in light of
market ups and downs?
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4.
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Custom Portfolio.
Confirm and clarify: if a customer has elected a Custom Portfolio model
and wants to reallocate within that model, is there a change to their MPI
allocation? What if they want to move to a Custom Portfolio
model with a different risk tolerance, can the customer direct which funds
move?
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Contract Value on date L.Inc MX Option is
elected
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X
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Current MPI allocation requirement for the investment
option elected
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=
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MPI allocation
requirement
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L.Inc
MX Option Investment Options
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Investment
Option
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Risk
Tolerance
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MPI
Allocation
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NVIT
– NVIT Cardinal Moderately Aggressive Fund: Class II
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Moderately
Aggressive
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Higher
MPI Allocation Requirement
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NVIT
– NVIT Investor Destinations Moderately Aggressive Fund: Class
II
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Custom
Portfolio: Moderately Aggressive Model
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NVIT
– American Funds NVIT Asset Allocation Fund: Class II
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Capital
Appreciation
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NVIT
– NVIT Cardinal Capital Appreciation Fund:
Class
II
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NVIT
– NVIT Investor Destinations Capital Appreciation Fund: Class
II
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Custom
Portfolio: Capital Appreciation Model
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NVIT
– NVIT Cardinal Moderate Fund: Class II
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Moderate
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NVIT
– NVIT Investor Destinations Moderate Fund:
Class
II
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Custom
Portfolio: Moderate Model
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NVIT
– NVIT Cardinal Balanced Fund: Class II
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Balanced
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NVIT
– NVIT Investor Destinations Balanced Fund:
Class
II
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Custom
Portfolio: Balanced Model
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American Funds: Static Model
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NVIT
– NVIT Cardinal Moderately Conservative Fund: Class II
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Moderately
Conservative
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NVIT
Investor Destinations Moderately Conservative Fund: Class
II
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Custom
Portfolio: Moderately Conservative Model
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NVIT
– NVIT Cardinal Conservative Fund: Class II
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Conservative
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Lower
MPI Allocation Requirement
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NVIT
– NVIT Investor Destinations Conservative Fund: Class
II
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Custom
Portfolio: Conservative Model
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Current Income Benefit Base
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X
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Current MPI allocation requirement for the investment
option elected
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--
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Current MPI balance
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=
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Dollar amount of additional MPI
allocation
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Amount of purchase payment
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X
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Current MPI allocation requirement for the investment
option elected
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=
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MPI allocation
requirement
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Contract
Owner’s Age
(at
time of the first
lifetime
income withdrawal)
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Lifetime
Withdrawal
Percentage
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55
through 64
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4%
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65
through 74
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5%
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75
through 84
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6%
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85+
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7%
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(1)
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the
dollar amount of the excess withdrawal;
or
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(2)
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a
figure representing the proportional amount of the
withdrawal. This amount is determined by the following
formula:
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dollar
amount
of
the
excess
withdrawal
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X
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Current
Income
Benefit
Base
prior
to the withdrawal
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Contract
Value (reduced by the amount of the allowable benefit amount
withdrawn)
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(1)
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be
at least 70½ years old as of the date of the surrender request, and if the
L.Inc MX Spousal Continuation Benefit is elected the younger spouse must
be at least age 55;
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(2)
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own
the contract as an IRA, SEP IRA, Simple IRA, or Qualified Investment-Only
Contract; and
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(3)
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submit
a completed administrative form in advance of the withdrawal to
Nationwide’s home office. The form can be obtained by
contacting Nationwide’s home office at the telephone number listed on page
1 of this prospectus.
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(1)
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The
Current Income Benefit Base immediately before the L.Inc MX
Anniversary;
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(2)
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The
Contract Value on the L.Inc MX Anniversary;
or
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(3)
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The
L.Inc MX Roll-Up Amount (if applicable, as discussed
below).
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(1)
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The
Current Income Benefit Base immediately before the L.Inc MX Anniversary;
or
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(2)
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The
L.Inc MX Roll-Up Amount (if applicable, as discussed
below).
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(1)
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the
dollar amount of the excess withdrawal; or a figure representing the proportional amount
of the withdrawal. This amount is determined by the following
formula:
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dollar
amount
of
the
excess
withdrawal
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X
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Current
L.Inc MX
Roll-Up
Base
prior
to the withdrawal
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Contract
Value (reduced by the amount of the allowable benefit amount
withdrawn)
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(1)
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The
Contract Owner can continue to take annual surrenders of no more than the
annual Lifetime Income Benefit Amount until the death of the Contract
Owner;
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(2)
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The
Contract Owner can elect the Age Based Lump Sum Settlement Option, as
described below; or
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(3)
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If
the Contract Owner qualifies after a medical examination, the Contract
Owner can elect the Underwritten Lump Sum Settlement Option, as described
below.
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Contract
Owner’s Age
(as
of the date the Age Based Lump Sum Option is elected)
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Annual
Benefit
Multiplier
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Up
to Age 70
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5.5
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71-75
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4.5
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76-80
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3.5
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81-85
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2.5
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86-90
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2.0
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91-95
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1.5
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96+
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1.0
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Conservative:
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Designed
for Contract Owners that are willing to accept very little risk but still
want to see a small amount of growth.
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Moderately
Conservative:
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Designed
for Contract Owners that are willing to accept some market volatility in
exchange for greater potential income and growth.
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Balanced:
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Designed
for Contract Owners that are willing to accept some market volatility in
exchange for potential long-term returns.
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Moderate:
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Designed
for Contract Owners that are willing to accept some short-term price
fluctuations in exchange for potential long-term
returns.
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Capital
Appreciation:
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Designed
for Contract Owners that are willing to accept more short-term price
fluctuations in exchange for potential long-term
returns.
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Moderately
Aggressive1:
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Designed
for Contract Owners willing to accept sharp, short-term price fluctuations
in exchange for potential long-term
returns.
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