0001104659-09-049820.txt : 20110621
0001104659-09-049820.hdr.sgml : 20110621
20090814134139
ACCESSION NUMBER: 0001104659-09-049820
CONFORMED SUBMISSION TYPE: 485APOS
PUBLIC DOCUMENT COUNT: 7
FILED AS OF DATE: 20090814
DATE AS OF CHANGE: 20090814
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HARTFORD LIFE INSURANCE CO SEPARATE ACCOUNT SEVEN
CENTRAL INDEX KEY: 0000809013
IRS NUMBER: 060974148
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-148564
FILM NUMBER: 091014253
BUSINESS ADDRESS:
STREET 1: HARTFORD LIFE INSURANCE
STREET 2: 200 HOPMEADOW STREET
CITY: SIMSBURY
STATE: CT
ZIP: 06089
BUSINESS PHONE: 860-843-5910
MAIL ADDRESS:
STREET 1: 200 HOPMEADOW STREET
CITY: SIMSBURY
STATE: CT
ZIP: 06089
FORMER COMPANY:
FORMER CONFORMED NAME: HARTFORD LIFE INSURANCE CO THOMSON MCKINNON SEPARATE ACCT
DATE OF NAME CHANGE: 19920703
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HARTFORD LIFE INSURANCE CO SEPARATE ACCOUNT SEVEN
CENTRAL INDEX KEY: 0000809013
IRS NUMBER: 060974148
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-04972
FILM NUMBER: 091014254
BUSINESS ADDRESS:
STREET 1: HARTFORD LIFE INSURANCE
STREET 2: 200 HOPMEADOW STREET
CITY: SIMSBURY
STATE: CT
ZIP: 06089
BUSINESS PHONE: 860-843-5910
MAIL ADDRESS:
STREET 1: 200 HOPMEADOW STREET
CITY: SIMSBURY
STATE: CT
ZIP: 06089
FORMER COMPANY:
FORMER CONFORMED NAME: HARTFORD LIFE INSURANCE CO THOMSON MCKINNON SEPARATE ACCT
DATE OF NAME CHANGE: 19920703
0000809013
S000002251
HARTFORD LIFE INSURANCE CO SEPARATE ACCOUNT SEVEN
C000080961
Hartford Leaders Select III
C000080962
Huntington Hartford Leaders III
0000809013
S000002251
HARTFORD LIFE INSURANCE CO SEPARATE ACCOUNT SEVEN
C000061190
Hartford Leaders Series V-A
485APOS
1
a09-12980_1485apos.txt
485APOS
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 2009
FILE NO. 333-148564
811-04972
--------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 8 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 352 /X/
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN
(Exact Name of Registrant)
HARTFORD LIFE INSURANCE COMPANY
(Name of Depositor)
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Address of Depositor's Principal Offices)
(860) 843-1941
(Depositor's Telephone Number, Including Area Code)
RICHARD J. WIRTH
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CT 06104-2999
(Name and Address of Agent for Service)
------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
------------
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on , 2009 pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / , pursuant to paragraph (a)(1) of Rule 485
/X/ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PART A
HARTFORD LEADERS
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 4/1/99)
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 12/8/86)
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102 - 5085
[TELEPHONE ICON] 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES)
[COMPUTER ICON] WWW.HARTFORDINVESTOR.COM
[THE HARTFORD LOGO]
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This prospectus describes information you should know before you purchase Series
V of the Hartford Leaders variable annuity. The prospectus describes a contract
between each Owner and joint Owner ("you") and Hartford Life and Annuity
Insurance Company or Hartford Life Insurance Company ("us," "we" or "our"). This
is an individual, deferred, flexible-premium variable annuity. This variable
annuity allows you to allocate your Deposit among the following portfolio
companies:
X AIM Variable Insurance Funds
X AllianceBernstein Variable Products Series Fund, Inc.
X Fidelity Variable Insurance Products Funds
X Franklin Templeton Variable Insurance Products Trust
X Hartford HLS Series Fund II
X Hartford Series Fund, Inc.
X MFS(R) Variable Insurance Trust
X Putnam Variable Trust
You may also allocate your Deposit to the Personal Pension Account and/or the
Fixed Accumulation Feature. The Fixed Accumulation Feature is not available for
every Contract class.
This prospectus refers to the following Contract classes:
X B Share (Core)
X C Share (Access)
X I Share (Advisory)
The Contract class will be selected on your application and identified in your
Contract. Not every Contract class or optional rider may be available from your
Financial Intermediary. The I share class is offered through registered
investment/financial advisors. Other available Contract classes offered through
select Financial Intermediaries are not described in this Prospectus and may be
subject to different charges.
Please read this prospectus carefully before investing and keep it for your
records and for future reference. You can also contact us to get a Statement of
Additional Information free of charge. The Statement of Additional Information
contains more information about this Contract and, like this prospectus, is
filed with the Securities and Exchange Commission ("SEC" or "Commission").
Although we file this prospectus and the Statement of Additional Information
with the SEC, the SEC doesn't approve or disapprove these securities or
determine if the information in this prospectus is truthful or complete. Anyone
who represents that the SEC does these things may be guilty of a criminal
offense. This prospectus and the Statement of Additional Information can also be
obtained from us or the SEC's website (www.sec.gov).
This variable annuity may not be suitable for everyone. This variable annuity
may not be appropriate for people who do not have a long investment time horizon
and is not appropriate for people who intend to engage in market timing. You
will get NO ADDITIONAL TAX ADVANTAGE from this variable annuity if you are
investing in a variable annuity through a tax-advantaged retirement plan (such
as a 401(k) plan or Individual Retirement Account ("IRA")). This prospectus is
not intended to provide tax, accounting or legal advice.
We are not an investment adviser nor are we registered as such with the SEC or
any state securities regulatory authority. We are not acting in any fiduciary
capacity with respect to your investment. This information does not constitute
personalized investment advice or financial planning advice.
NOT INSURED BY FDIC OR ANY MAY LOSE NOT A DEPOSIT OF OR GUARANTEED BY [NOT] FDIC
FEDERAL GOVERNMENT AGENCY VALUE ANY BANK OR ANY BANK AFFILIATE [NOT] BANK
--------------------------------------------------------------------------------
PROSPECTUS DATED: AUGUST 14, 2009
STATEMENT OF ADDITIONAL INFORMATION DATED: AUGUST 14, 2009
2
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CONTENTS
PAGE
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1. INTRODUCTION 3
2. FEE SUMMARY 4
3. MANAGEMENT OF THE CONTRACT 10
The Company 10
The General Account 10
The Separate Account 10
The Funds 10
Fixed Accumulation Feature 12
Personal Pension Account 13
4. INFORMATION ON YOUR ACCOUNT 17
a. Opening an Account 17
b. Charges and Fees 24
c. Surrenders 27
d. Annuity Payouts 29
e. Standard Death Benefit 33
5. RETURN OF PREMIUM DEATH BENEFIT 34
6. FURTHER INFORMATION 38
a. Glossary 38
b. State Variations 40
c. Miscellaneous 41
d. Legal Proceedings 42
e. How Contracts Are Sold 42
7. FEDERAL TAX CONSIDERATIONS/ TAX-QUALIFIED RETIREMENT PLANS 44
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 59
APPENDIX A - EXAMPLES APP A-1
APPENDIX B - ACCUMULATION UNIT VALUES APP B-1
APPENDIX C - FUND DATA APP C-1
3
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1. INTRODUCTION
HOW TO BUY THIS VARIABLE ANNUITY
[Thumbs up] CHOOSE A CONTRACT CLASS
MORTALITY &
MINIMUM INITIAL EXPENSE RISK
DEPOSIT NON- AND MAXIMUM
QUALIFIED QUALIFIED ADMINISTRATIVE UP-FRONT
CONTRACT CONTRACT SALES & OTHER CHARGES CHARGES COMMISSION
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B SHARE $2,000 $5,000 8 year Contingent Deferred Sales Charge and 0.50% 5%
Distribution Charge
C SHARE $2,000 $10,000 1 year Contingent Deferred Sales Charge 1.35% 1%
I SHARE $5,000 $10,000 None 0.30% 0%
This table does not show Fund expenses, Premium taxes, Distribution Charges, and
optional rider fees.
[Thumbs up] CHOOSE INVESTMENT OPTIONS
X Sub-Accounts - Funds with different investment strategies, objectives and
risk/reward profiles.
X Fixed Accumulation Feature (B share class only) - A fixed interest account.
X Personal Pension Account - A fixed interest account designed to provide
lifetime payouts.
Subject to limitations, you may move your investment among each of these
options.
[Thumbs up] CHOOSE AN OPTIONAL FEATURE (IF DESIRED)
OPTIONAL FEATURE GENERAL PURPOSE
------------------------------------------------------------------------
Return of Premium Death Benefit* Guaranteed Minimum Death Benefit
* Investment restrictions apply.
Optional features may not be available through your Financial Intermediary.
[In writing] COMPLETE OUR APPLICATION OR ORDER REQUEST AND SUBMIT IT TO YOUR
FINANCIAL INTERMEDIARY FOR APPROVAL.
$ PAY THE APPLICABLE MINIMUM INITIAL DEPOSIT.
4
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2. FEE SUMMARY
THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
BUYING, OWNING AND SURRENDERING YOUR VARIABLE ANNUITY. THE FIRST TABLE DESCRIBES
THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY OR SURRENDER
THIS VARIABLE ANNUITY. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
CONTRACT OWNER TRANSACTION EXPENSES
B SHARE C SHARE I SHARE
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CONTINGENT DEFERRED SALES CHARGE (CDSC) (1) None
1 7% 2%
2 7%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9+ 0%
SURRENDER FEE None None None
TRANSFER FEE None None None
(1) Each Deposit has its own CDSC schedule.
CONTRACT OWNER PERIODIC EXPENSES
THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
AND ON A DAILY BASIS (EXCEPT AS NOTED) DURING THE TIME THAT YOU OWN THE VARIABLE
ANNUITY, NOT INCLUDING ANNUAL FUND FEES AND EXPENSES.
B SHARE C SHARE I SHARE
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ANNUAL MAINTENANCE FEE (2) $30 $30 $30
DISTRIBUTION CHARGE (3) 0.75% None None
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily
Contract Value excluding Fixed Accumulation Feature
investments)
Mortality and Expense Risk Charge 0.30% 1.15% 0.10%
Administrative Charge 0.20% 0.20% 0.20%
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 0.50% 1.35% 0.30%
MAXIMUM OPTIONAL CHARGES
Return of Premium Death Benefit (4) 0.75% 0.75% 0.75%
(2) Fee waived if Account Balance is $50,000 or more on your Contract
Anniversary.
(3) The Distribution Charge is based on a percentage of Remaining Gross
Premium. Each Premium Payment has its own Distribution Charge schedule. The
Distribution Charge is reduced to 0% after the completion of eight years
after each respective Premium Payment.
(4) Charge based on a percentage of Premium Payments adjusted for Surrenders on
each Contract Anniversary. Current rider charge is 0.30%.
THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING
EXPENSES CHARGED BY THE FUNDS THAT YOU MAY PAY ON A DAILY BASIS DURING THE TIME
THAT YOU OWN THIS VARIABLE ANNUITY. MORE DETAIL CONCERNING EACH FUND'S FEES AND
EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND.
MINIMUM MAXIMUM
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.44% 2.37%
(expenses that are deducted from Underlying Fund assets,
including management fees, distribution
and/or service fees (12b-1) fees, and other expenses.
5
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THE LAST TABLE SHOWS THE TOTAL ANNUAL FUND OPERATING EXPENSES FOR EACH
UNDERLYING FUND. ACTUAL FEES AND EXPENSES FOR THE UNDERLYING FUNDS VARY DAILY.
AS A RESULT, THE FEES AND EXPENSES FOR ANY GIVEN DAY MAY BE GREATER OR LESS THAN
THE TOTAL ANNUAL FUND OPERATING EXPENSES LISTED BELOW. MORE DETAIL CONCERNING
EACH UNDERLYING FUND'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH
FUND. THESE EXPENSES MAY VARY FROM YEAR TO YEAR.
ANNUAL FUND OPERATING EXPENSES
AS OF THE FUND'S YEAR END
(As a percentage of net assets)
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
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AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 0.61% 0.25% 0.29% 0.01%
AIM V.I. International
Growth Fund - Series II 0.71% 0.25% 0.35% 0.02%
AIM V.I. Mid Cap Core Equity
Fund - Series II 0.72% 0.25% 0.32% 0.03%
AIM V.I. PowerShares ETF
Allocation Fund - Series II 0.67% 0.25% 0.89% 0.56%
AIM V.I. Small Cap Equity
Fund - Series II 0.75% 0.25% 0.34% 0.01%
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 0.55% 0.25% 0.22% N/A
AllianceBernstein VPS
International Value
Portfolio - Class B 0.74% 0.25% 0.07% N/A
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 0.75% 0.25% 0.11% N/A
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.56% 0.25% 0.10% N/A
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.56% 0.25% 0.12% N/A
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.57% 0.25% 0.16% N/A
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 0.68% 0.35% 0.31% 0.04%
Franklin Income Securities
Fund - Class 4 0.45% 0.35% 0.02% N/A
Franklin Rising Dividends
Securities Fund - Class 4 0.60% 0.35% 0.02% 0.01%
Franklin Small Cap Value
Securities Fund - Class 4 0.52% 0.35% 0.16% 0.01%
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 0.50% 0.35% 0.28% 0.02%
Franklin Strategic Income
Securities Fund - Class 4 0.37% 0.35% 0.25% 0.01%
Mutual Global Discovery
Securities Fund - Class 4 0.80% 0.35% 0.18% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 1.16% 0.01% N/A 1.15% (1)(2)(3)(4)
AIM V.I. International
Growth Fund - Series II 1.33% 0.01% N/A 1.32% (1)(2)(3)(4)
AIM V.I. Mid Cap Core Equity
Fund - Series II 1.32% 0.03% N/A 1.29% (1)(2)(3)(4)
AIM V.I. PowerShares ETF
Allocation Fund - Series II 2.37% 1.38% N/A 0.99% (1)(2)(4)(5)
AIM V.I. Small Cap Equity
Fund - Series II 1.35% N/A N/A 1.35% (1)(4)(6)
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 1.02% 0.02% N/A 1.00% (7)
AllianceBernstein VPS
International Value
Portfolio - Class B 1.06% N/A N/A 1.06%
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 1.11% N/A N/A 1.11%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.91% N/A N/A 0.91% (8)
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.93% N/A N/A 0.93% (8)
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.98% N/A N/A 0.98%
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 1.38% 0.31% N/A 1.07% (9)(12)
Franklin Income Securities
Fund - Class 4 0.82% N/A N/A 0.82% (10)
Franklin Rising Dividends
Securities Fund - Class 4 0.98% N/A N/A 0.98%
Franklin Small Cap Value
Securities Fund - Class 4 1.04% N/A N/A 1.04% (12)
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 1.15% N/A N/A 1.15% (12)
Franklin Strategic Income
Securities Fund - Class 4 0.98% N/A N/A 0.98% (12)
Mutual Global Discovery
Securities Fund - Class 4 1.33% N/A N/A 1.33% (11)
6
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DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 0.60% 0.35% 0.13% N/A
Templeton Foreign Securities
Fund - Class 4 0.64% 0.35% 0.15% 0.02%
Templeton Global Bond
Securities Fund - Class 4 0.47% 0.35% 0.11% N/A
Templeton Growth Securities
Fund - Class 4 0.74% 0.35% 0.04% N/A
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.61% N/A 0.03% N/A
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.45% N/A 0.01% N/A
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.65% 0.25% 0.09% N/A
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 0.75% 0.25% 0.17% N/A
American Funds Bond HLS Fund
- Class IB 0.50% 0.25% 0.05% N/A
American Funds Global Bond
HLS Fund - Class IB 0.75% 0.25% 0.10% N/A
American Funds Global Growth
and Income HLS Fund - Class
IB 0.80% 0.25% 0.06% N/A
American Funds Global Growth
HLS Fund - Class IB 1.00% 0.25% 0.12% N/A
American Funds Global Small
Capitalization HLS Fund -
Class IB 0.80% 0.25% 0.11% N/A
American Funds Growth HLS
Fund - Class IB 0.75% 0.25% 0.03% N/A
American Funds Growth-
Income HLS Fund - Class IB 0.70% 0.25% 0.04% N/A
American Funds International
HLS Fund - Class IB 0.85% 0.25% 0.04% N/A
American Funds New World HLS
Fund -
Class IB 1.10% 0.25% 0.09% N/A
Hartford Capital
Appreciation HLS Fund -
Class IA 0.63% N/A 0.04% N/A
Hartford Disciplined Equity
HLS Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Dividend and Growth
HLS Fund -
Class IA 0.64% N/A 0.03% N/A
Hartford Global Equity HLS
Fund - Class IA 0.95% N/A 0.07% N/A
Hartford Global Growth HLS
Fund - Class IA 0.71% N/A 0.04% N/A
Hartford Growth HLS Fund -
Class IA 0.80% N/A 0.04% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 1.08% N/A N/A 1.08%
Templeton Foreign Securities
Fund - Class 4 1.16% N/A N/A 1.16% (12)
Templeton Global Bond
Securities Fund - Class 4 0.93% N/A N/A 0.93% (13)
Templeton Growth Securities
Fund - Class 4 1.13% N/A N/A 1.13% (10)
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.64% N/A N/A 0.64%
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.46% N/A N/A 0.46%
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.99% 0.40% 0.32% 0.91% (14)
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 1.17% 0.50% 0.43% 1.10% (14)
American Funds Bond HLS Fund
- Class IB 0.80% 0.25% 0.40% 0.95% (14)
American Funds Global Bond
HLS Fund - Class IB 1.10% 0.50% 0.59% 1.19% (14)
American Funds Global Growth
and Income HLS Fund - Class
IB 1.11% 0.55% 0.62% 1.18% (14)
American Funds Global Growth
HLS Fund - Class IB 1.37% 0.75% 0.55% 1.17% (14)
American Funds Global Small
Capitalization HLS Fund -
Class IB 1.16% 0.55% 0.74% 1.35% (14)
American Funds Growth HLS
Fund - Class IB 1.03% 0.50% 0.33% 0.86% (14)
American Funds Growth-
Income HLS Fund - Class IB 0.99% 0.45% 0.28% 0.82% (14)
American Funds International
HLS Fund - Class IB 1.14% 0.60% 0.52% 1.06% (14)
American Funds New World HLS
Fund -
Class IB 1.44% 0.85% 0.81% 1.40% (14)
Hartford Capital
Appreciation HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Disciplined Equity
HLS Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Dividend and Growth
HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Global Equity HLS
Fund - Class IA 1.02% 0.10% N/A 0.92% (15)
Hartford Global Growth HLS
Fund - Class IA 0.75% N/A N/A 0.75%
Hartford Growth HLS Fund -
Class IA 0.84% N/A N/A 0.84%
7
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DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.70% N/A 0.04% N/A
Hartford Index HLS Fund -
Class IB 0.30% 0.25% 0.02% N/A
Hartford International
Opportunities HLS Fund -
Class IA 0.67% N/A 0.04% N/A
Hartford Money Market HLS
Fund - Class IA 0.40% N/A 0.04% N/A
Hartford Small Company HLS
Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Total Return Bond
HLS Fund - Class IA 0.46% N/A 0.03% N/A
Hartford Value HLS Fund -
Class IA 0.81% N/A 0.03% N/A
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 0.75% 0.25% 0.08% N/A
MFS(R) Investors Trust
Series - Service Class 0.75% 0.25% 0.09% N/A
MFS(R) Research Bond Series
- Service Class 0.50% 0.25% 0.14% N/A
MFS(R) Total Return Series -
Service Class 0.74% 0.25% 0.07% N/A
MFS(R) Value Series -
Service Class 0.75% 0.25% 0.09% N/A
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 0.65% 0.25% 0.13% 0.02%
Putnam VT Investors Fund -
Class IB 0.65% 0.25% 0.12% N/A
Putnam VT Voyager Fund -
Class IB 0.64% 0.25% 0.08% 0.01%
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.74% N/A N/A 0.74%
Hartford Index HLS Fund -
Class IB 0.57% N/A N/A 0.57%
Hartford International
Opportunities HLS Fund -
Class IA 0.71% N/A N/A 0.71%
Hartford Money Market HLS
Fund - Class IA 0.44% N/A N/A 0.44%
Hartford Small Company HLS
Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Total Return Bond
HLS Fund - Class IA 0.49% N/A N/A 0.49%
Hartford Value HLS Fund -
Class IA 0.84% N/A N/A 0.84%
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 1.08% N/A N/A 1.08% (16)
MFS(R) Investors Trust
Series - Service Class 1.09% N/A N/A 1.09% (16)
MFS(R) Research Bond Series
- Service Class 0.89% N/A N/A 0.89% (16)
MFS(R) Total Return Series -
Service Class 1.06% N/A N/A 1.06% (16)
MFS(R) Value Series -
Service Class 1.09% N/A N/A 1.09% (16)
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 1.05% N/A N/A 1.05% (17)
Putnam VT Investors Fund -
Class IB 1.02% N/A N/A 1.02% (18)
Putnam VT Voyager Fund -
Class IB 0.98% N/A N/A 0.98% (17)
* The 12b-1 fees deducted from these classes cover certain distribution,
shareholder support and administrative services provided by intermediaries
(the insurance company, broker dealer or other service provider).
NOTES
(1) Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Net Annual Fund Operating Expenses listed above may exceed the
expense limit numbers. The impact of the acquired fund fees and expense are
included in the total returns of the Fund.
(2) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to
100% of the net advisory fees Invesco Aim receives from the affiliated
money market funds on investments by the Fund of uninvested cash (excluding
investments of cash collateral from securities lending) in such affiliated
money market funds. Fee Waiver reflects this agreement.
(3) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.45% of average daily net assets.
(4) Except as otherwise noted, figures shown in the table are for the year
ended December 31, 2008 and are expressed as a percentage of the Fund's
average daily net assets. There is no guarantee that actual expenses will
be the same as those shown in the table.
(5) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 0.43% of average daily net assets.
(6) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.40% of average daily net assets.
(7) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Portfolio's operating expenses.
This waiver extends through April 30, 2010 and may be extended by the
Adviser for additional one-year terms.
(8) A portion of the brokerage commissions that the fund pays may be reimbursed
and used to reduce the fund's expenses. In addition, through arrangements
with the fund's custodian, credits realized as a result of un-invested cash
balances are used to reduce the fund's custodian expenses. Including these
reductions, the total class operating expenses would have been: Fidelity
VIP Contrafund Portfolio Initial Class - 0.65%; Fidelity VIP Contrafund
Portfolio Service Class 2 - 0.90%;
8
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Fidelity VIP Growth Portfolio Initial Class - 0.67%; Fidelity VIP Growth
Portfolio Service Class 2 - 0.92%; Fidelity VIP Mid Cap Portfolio Service
Class 2 - 0.92%; Fidelity Overseas Portfolio Initial Class - 0.84%. These
offsets may be discontinued at any time.
(9) The investment manager and administrator have contractually agreed to waive
or limit their respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that common annual Fund operating
expenses (i.e., a combination of investment management fees, fund
administration fees, and other expenses, but excluding Rule 12b-1 fees and
acquired fund fees and expenses) do not exceed 0.72% (other than certain
non-routine expenses or costs, including those relating to litigation,
indemnification, reorganizations, and liquidations) until April 30, 2010.
This waiver is separate from the waiver related to the Sweep Money Fund.
(10) The Fund administration fee is paid indirectly through the management fee.
(11) The Fund's name changed from Mutual Discovery Securities Fund effective as
of May 1, 2009.
(12) The manager has agreed in advance to reduce its fee from assets invested by
the Fund in a Franklin Templeton money market fund (the Sweep Money Fund
which is "the acquired fund" in this case) to the extent of the Fund's fees
and expenses of the acquired fund. This reduction is required by the
Trust's board of trustees and an exemptive order by the Securities and
Exchange Commission; this arrangement will continue as long as the
exemptive order is relied upon.
(13) The Fund's name changed from Templeton Global Income Securities Fund
effective as of May 1, 2009.
(14) Because the Feeder Fund invests all of its assets in the Master Fund, the
Feeder Fund will bear its own fees and expenses and its proportionate share
of the fees and expenses of the Master Fund. The amounts shown under
"Master Fund Expenses" include the advisory fee (before non-contractual fee
waiver). The Annual Fund Operating Expense table and the Examples reflect
the estimated expenses of both the Feeder Fund and the Master Fund.
The Class I shares of the Master Funds do not have a sales charge (load) or
a distribution and service (12b-1) fee.
HL Advisors has entered into a contractual agreement with Hartford Series
Fund, Inc (the Company") under which it will waive a portion of its
advisory fee for such time as the fund is operated as a feeder fund,
because during the that time it will not be providing the portfolio
management portion of the advisory and management services to be provided
under its investment management with the Company. The fee waiver will
continue as long as the fund is part of a master-feeder structure unless
the Board of Directors approves a change in or elimination of the waiver.
Currently, the fund waivers are as follows: American Funds Asset Allocation
HLS Fund - 0.40%; American Funds Blue Chip and Growth HLS Fund - 0.50%;
American Fund Bond HLS Fund - 0.25%; American Funds Global Bond HLS Fund -
0.50%; American Funds Global Growth and Income HLS Fund - 0.55%; American
Funds Global Growth HLS Fund - 0.75%; American Fund Global Small
Capitalization HLS Fund - 0.55%; American Funds Growth HLS Fund - 0.50%;
American Funds Growth-Income HLS Fund - 0.45%; American Funds International
HLS Fund - 0.60%; American Funds New World HLS Fund - 0.85%.
(15) Effective August 25, 2008 HL Advisors contractually agreed to waive a
portion of its management fees until May 1, 2010. While such waiver is in
effect, using the most recent fiscal year average net assets, the
management fee is 0.85% and the total annual operating expenses are 0.92%.
(16) The fund's Rule 12b-1 plan permits it to pay distribution and/or service
fees to support the sale and distribution of the fund's Service Class
shares and the services provided by financial intermediaries. The maximum
rates that may be charged under the plan, together with details of any fee
reduction arrangements, are set forth under "Distribution and Service
Fees."
(17) "Total Annual Fund Operating Expenses" includes the amount from "Acquired
Fund Fees and Expenses" column, which is an estimate of expenses
attributable to the fund's investments in other investment companies, based
on the total annual fund operating expenses of such companies as reported
in their most recent shareholder reports (net of any applicable expense
limitations). These indirect expenses will vary from time to time depending
on the fund's investments in other investment companies and their operating
expenses
(18) Includes estimated expenses attributable to the fund's investments in other
investment companies that the fund bears indirectly.
9
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EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THIS
VARIABLE ANNUITY WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITIES. LET'S
SAY, HYPOTHETICALLY, THAT YOUR ANNUAL INVESTMENT RETURN IS FIVE (5%) PERCENT AND
THAT YOUR FEES AND EXPENSES TODAY WERE AS HIGH AS POSSIBLE INCLUDING THE
ELECTION OF THE HIGHEST POSSIBLE OPTIONAL CHARGES (I.E., THE HARTFORD'S RETURN
OF PREMIUM DEATH BENEFIT). THE EXAMPLE ILLUSTRATES THE EFFECT OF FEES AND
EXPENSES THAT YOU COULD INCUR (OTHER THAN TAXES). YOUR ACTUAL FEES AND EXPENSES
MAY VARY. FOR EVERY $10,000 INVESTED (EXCLUDING PERSONAL PENSION ACCOUNT
CONTRIBUTIONS AND AMOUNTS ALLOCATED TO THE FIXED ACCUMULATION FEATURE), HERE'S
HOW MUCH YOU WOULD PAY UNDER EACH OF THE THREE SCENARIOS POSED:
(1) If you Surrender your variable annuity at the end of the applicable time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $1137 $2092 $2858 $4630
C Share $676 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
(2) If you annuitize at the end of the applicable time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $294 $1245 $2199 $4525
C Share $381 $1355 $2332 $4782
I Share $274 $1041 $1822 $3841
(3) If you do not Surrender your variable annuity:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $474 $1425 $2379 $4630
C Share $486 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
When Premium Payments are credited to your Funds, they are converted into
Accumulation Units by dividing the amount of your Premium Payments minus any
Premium taxes, by the Accumulation Unit Value for that Valuation Day. All
classes of Accumulation Unit Values may be obtained, free of charge, by
contacting us. See Appendix B - Accumulation Unit Values for additional
information. You can find financial statements for us and the Separate Account
in the Statement of Additional Information.
10
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3. MANAGEMENT OF THE CONTRACT
THE COMPANY
We are a stock life insurance company engaged in the business of writing life
insurance and individual and group annuities. Hartford Life Insurance Company is
authorized to do business in all states of the United States and the District of
Columbia. Hartford Life and Annuity Insurance Company is authorized to do
business in Puerto Rico, the District of Columbia, and all states of the United
States except New York. Hartford Life Insurance Company was originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Hartford Life and Annuity Insurance Company was
originally incorporated under the laws of Wisconsin on January 9, 1956, and
subsequently redomiciled to Connecticut. Hartford Life and Annuity Insurance
Company is a subsidiary of Hartford Life Insurance Company. Our corporate
offices are located in Simsbury, Connecticut. Neither company cross guarantees
the obligations of the other. We are ultimately controlled by The Hartford
Financial Services Group, Inc.
All guarantees under the Contract are subject to each issuing company's
financial strength and claims-paying capabilities. We provide information about
our financial strength in reports filed with the SEC (Hartford Life Insurance
Company only) and/or state insurance departments. For example, Hartford Life
Insurance Company files annual reports (Form 10-K), quarterly reports (Form
10-Q) and periodic reports (Form 8-K) with the SEC. Forms 10-K and 10-Q include
information such as our financial statements, management discussion and analysis
of the previous year of operations, risk factors, and other information. Form
8-K reports are used to communicate important developments that are not
otherwise disclosed in the other forms described above. You may read or copy
these reports at the SEC's Public Reference Room at 100 F. Street N.E., Room
1580, Washington, D.C. 20549-2001. You may also obtain reports and other
information about us by contacting us using the information stated on the cover
page of this prospectus, visiting our website at www.hartfordinvestor.com or
visiting the SEC's website at www.sec.gov. You may also obtain reports and other
financial information about us by contacting your state insurance department.
THE GENERAL ACCOUNT
The Fixed Accumulation Feature and the Personal Pension Account are part of our
General Account. Any amounts that we are obligated to pay under the Fixed
Accumulation Feature and the Personal Pension Account and any other payment
obligation we undertake under the Contract are subject to our financial strength
and claims-paying ability and our long-term ability to make such payments. We
invest the assets of the General Account according to the laws governing the
investments of insurance company general accounts. The General Account is not a
bank account and is not insured by the FDIC or any other government agency. We
receive a benefit from all amounts held in our General Account. Amounts in our
General Account are available to our general creditors. We issue other types of
insurance policies and financial products and pay our obligations under these
products from our assets in the General Account.
THE SEPARATE ACCOUNT
We set aside and invest the assets of some of our annuity contracts, including
these Contracts, in a Separate Account. These Separate Accounts are registered
as unit investment trusts under the 1940 Act. This registration does not involve
supervision by the SEC of the management or the investment practices of a
Separate Account or us. Separate Accounts meet the definition of "Separate
Account" under federal securities law. The Separate Accounts referenced in this
prospectus hold only assets for variable annuity contracts. These Separate
Accounts:
- hold assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract;
- are not subject to the liabilities arising out of any other business we may
conduct;
- are not affected by the rate of return of our General Account or by the
investment performance of any of our other Separate Accounts;
- may be subject to liabilities of other variable annuity contracts offered by
this Separate Account which are not described in this prospectus; and
- are credited with income and gains, and takes losses, whether or not
realized, from the assets they hold without regard to our other income,
gains or loss.
We do not guarantee the investment results of the Separate Account.
THE FUNDS
The Funds available for investment are not the same mutual funds that you can
buy through your Registered Representative even though they may have similar
investment strategies and the same portfolio managers. Each Fund has varying
degrees of investment risk. Funds are also subject to separate fees and expenses
such as management fees, distribution and operating expenses. "Master-feeder" or
"fund of funds" ("feeder funds") invest substantially all of their assets in
other funds and will therefore bear a pro-rata share of fees and expenses
incurred by both funds. This will reduce your investment return. Please contact
us to obtain a copy of the prospectuses for each Fund (or for any feeder funds).
Read these prospectuses carefully before investing. We do not guarantee the
investment results of any Fund. Certain Funds may not be available in all states
and in all Contract classes.
11
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MIXED AND SHARED FUNDING - Fund shares may be sold to our other separate
accounts, our insurance company affiliates or other unaffiliated insurance
companies to serve as an underlying investment for variable annuity contracts
and variable life insurance policies, pursuant to a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Owners, and other contract owners investing
these Funds. If a material conflict arose, we will consider what action may be
appropriate, including removing the Fund from the Separate Account or replacing
the Fund with another underlying fund.
VOTING RIGHTS - We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Funds' shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted;
- send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract;
- arrange for the handling and tallying of proxies received from Owners;
- vote all Fund shares attributable to your Contract according to instructions
received from you, and
- vote all Fund shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any shareholder meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease. As a result of proportional voting, a small number of Owners
could determine the outcome of a proposition subject to shareholder vote.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS - Subject to any applicable law,
we may make certain changes to the Funds offered under your Contract. We may, in
our sole discretion, establish new Funds. New Funds may be made available to
existing Owners as we deem appropriate. We may also close one or more Funds to
additional Premium Payments or transfers from existing Funds. We may liquidate
one or more Sub-Accounts if the board of directors of any Fund determines that
such actions are prudent. Unless otherwise directed, investment instructions
will be automatically updated to reflect the Fund surviving after any merger,
substitution or liquidation.
We may eliminate the shares of any of the Funds from the Contract for any reason
and we may substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Fund will not be made until we have
the approval of the SEC and we have notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of the
Owners, the Separate Account may be operated as a management company under the
1940 Act or any other form permitted by law, may be de-registered under the 1940
Act in the event such registration is no longer required, or may be combined
with one or more other Separate Accounts.
FEES WE RECEIVE FROM FUNDS AND RELATED PARTIES - We receive substantial and
varying administrative service payments (referred to as "revenue sharing
payments") and Rule 12b-1 fees from certain Funds or related parties. We
consider revenue sharing payments and Rule 12b-1 fees among a number of factors
when deciding to add or keep a Fund that we offer through the Contract. We
collect these payments and fees under agreements between us and a Fund's
principal underwriter, transfer agent, investment adviser and/or other entities
related to the Fund. We expect to make a profit on these fees.
The availability of these types of arrangements creates an incentive for us to
seek and offer Funds (and classes of shares of such Funds) that pay us revenue
sharing. Other funds (or available classes of shares) may have lower fees and
better overall investment performance. As of December 31, 2008, we have entered
into arrangements to receive administrative service payments and/or Rule 12b-1
fees from each of the following Fund complexes (or affiliated entities): AIM
Advisors, Inc., AllianceBernstein Variable Products Series Funds & Alliance
Bernstein Investments, American Variable Insurance Series & Capital Research and
Management Company, Branch Banking & Trust Company, Evergreen Investment
Services Inc., Fidelity Distributors Corporation, Fidelity Investments
Institutional Operations Company, Franklin Templeton Services, LLC, The
Huntington Funds, Lord Abbett Series Fund & Lord Abbett Distributor, LLC, MFS
Fund Distributors, Inc. & Massachusetts Financial Services Company, Merrill
Lynch Asset Management & Princeton Funds Distributor, Morgan Stanley
Distribution, Inc. & Morgan Stanley Investment Management & The Universal
Institutional Funds, MTB Investment Advisors, Inc., Banc of America Advisors,
LLC, JPMorgan Investment Advisors, Inc., Oppenheimer Variable Account Funds &
Oppenheimer Funds Distributor, Inc., Pioneer Variable Contracts Trust & Pioneer
Investment Management, Inc. & Pioneer Funds Distributor, Inc., Prudential
Investment Management Services, LLC, Putnam Retail Management Limited
Partnership, SunTrust Securities, Inc. & Trusco Capital Management, Inc., UBS
Financial Services, Inc., Van Kampen Life Investment Trust & Van Kampen Asset
Management, Van Kampen Funds, The Victory Variable Insurance Funds &
12
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Victory Capital Management, Inc. & Victory Capital Advisers, Inc. and Wells
Fargo Variable Trust & Wells Fargo Fund Management, LLC.
We are affiliated with Hartford Series Fund, Inc. and Hartford HLS Series Fund
II, Inc. (collectively, the "HLS Funds") based on our affiliation with their
investment advisers HL Investment Advisors, LLC and Hartford Investment
Management Company. In addition to investment advisory fees, we, or our other
insurance company affiliates, receive fees to provide, among other things,
administrative, processing, accounting and shareholder services for the HLS
Funds.
Not all Fund complexes pay the same amounts of revenue sharing payments and/or
Rule 12b-1 fees. Therefore, the amount of fees we collect may be greater or
smaller based on the Funds you select. Revenue sharing payments and Rule 12b-1
fees did not exceed 0.50% and 0.35%, respectively, in 2008, and are not expected
to exceed 0.50% and 0.35%, respectively, in 2009, of the annual percentage of
the average daily net assets (for instance, in 2008, assuming that you invested
in a Fund that paid us the maximum fees and you maintained a hypothetical
average balance of $10,000, we would collect a total of $85 from that Fund). For
the fiscal year ended December 31, 2008, revenue sharing payments and Rule 12b-1
fees did not collectively exceed approximately $145.6 million. These fees do not
take into consideration indirect benefits received by offering HLS Funds as
investment options.
FIXED ACCUMULATION FEATURE
INTERESTS IN THE FIXED ACCUMULATION FEATURE ARE NOT REGISTERED UNDER THE 1933
ACT AND THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED AS AN INVESTMENT
COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE FIXED ACCUMULATION FEATURE
NOR ANY OF ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE
1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE
DISCLOSURE REGARDING THE FIXED ACCUMULATION FEATURE. THE FOLLOWING DISCLOSURE
ABOUT THE FIXED ACCUMULATION FEATURE IS SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND
COMPLETENESS OF DISCLOSURES. THE FIXED ACCUMULATION FEATURE IS NOT OFFERED IN
ALL CONTRACT CLASSES AND IS NOT AVAILABLE IN ALL STATES.
We guarantee that we will credit interest to amounts you allocate to the Fixed
Accumulation Feature at a minimum rate that meets your State's minimum
non-forfeiture requirements. Non-forfeiture rates vary from state-to-state. We
may credit a rate higher than the minimum rate. We reserve the right to declare
different rates of interest depending on when amounts are allocated or
transferred to the Fixed Accumulation Feature. This means that amounts at any
designated time may be credited with a different rate of interest than the rate
previously credited to such amounts and to amounts allocated or transferred at
any other designated time. We will periodically publish the Fixed Accumulation
Feature interest rates currently in effect. There is no specific formula for
determining interest rates and, except as specifically stated above, no
assurances are offered as to future rates in excess of non-forfeiture rates.
Some of the factors that we may consider in determining whether to credit
interest are: general economic trends, rates of return currently available for
the types of investments and durations that match our liabilities and
anticipated yields on our investments; regulatory and tax requirements; and
competitive factors. Fixed Accumulation Feature interest rates may vary by
State.
We will account for any deductions, Surrenders or transfers from the Fixed
Accumulation Feature on a "first-in, first-out" basis (i.e., oldest investments
will be liquidated first).
ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED ACCUMULATION FEATURE
IN EXCESS OF THE MINIMUM GUARANTEED INTEREST RATE WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCUMULATION
FEATURE MAY NOT EXCEED THE MINIMUM GUARANTEED INTEREST RATE FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates in our sole
discretion.
We may restrict your ability to allocate Contract Value, Benefit Balance or
Premium Payments to the Fixed Accumulation Feature (and vice versa) at any time
in our sole discretion. We may close the Fixed Accumulation Feature to new
Premium Payments or transfers of existing Contract Value and/or Benefit Balance.
Except as otherwise provided, during each Contract Year, you may make transfers
out of the Fixed Accumulation Feature to Sub-Accounts or the Personal Pension
Account, subject to the transfer restrictions discussed below. All transfer
allocations must be in whole numbers (e.g., 1%). Each Contract Year you may
transfer the greater of:
- thirty (30%) percent of the Contract Value in the Fixed Accumulation Feature
as of the last Contract Anniversary. When we calculate the 30%, we add
Premium Payments allocated to the Fixed Accumulation Feature, transfers from
Sub-Accounts and transfers from the Personal Pension Account made after that
date but before the next Contract Anniversary. These restrictions also apply
to systematic transfers. The 30% does not include Contract Value in any DCA
Plus Program; or
- an amount equal to your largest previous transfer from the Fixed
Accumulation Feature in any one Contract Year.
We apply these restrictions to all transfers from the Fixed Accumulation
Feature, including all systematic transfers and Dollar Cost Averaging Programs,
except for transfers under our DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer any amount up to 100% of the amount to be
invested at the renewal rate. You must make this transfer request within 60 days
of being notified of the renewal rate.
We may defer transfers and partial Surrenders from the Fixed Accumulation
Feature for up to six months from the date of your request.
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You must wait six months after your most recent transfer from the Fixed
Accumulation Feature before moving Sub-Account Values or Benefit Balance back to
the Fixed Accumulation Feature. If you make systematic transfers from the Fixed
Accumulation Feature under a Dollar Cost Averaging Program or DCA Plus Program,
you must wait six months after your last systematic transfer before moving
Contract Value or Benefit Balance back to the Fixed Accumulation Feature.
As a result of these limitations, it may take a significant amount of time
(i.e., several years) to move Contract Value in the Fixed Accumulation Feature
to Sub-Accounts and/or Personal Pension Account and therefore this may not
provide an effective short term defensive strategy.
PERSONAL PENSION ACCOUNT
INTERESTS IN THE PERSONAL PENSION ACCOUNT ARE NOT REGISTERED UNDER THE 1933 ACT
AND THE PERSONAL PENSION ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE PERSONAL PENSION ACCOUNT NOR ANY OF
ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR
THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE DISCLOSURES
REGARDING THE PERSONAL PENSION ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE
PERSONAL PENSION ACCOUNT IS SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURES. THE PERSONAL PENSION ACCOUNT MAY NOT BE AVAILABLE TO ALL TYPES OF
QUALIFIED PLANS, OWNERSHIP ARRANGEMENTS, OR IN ALL STATES.
WHAT IS THE PERSONAL PENSION ACCOUNT?
THE FOLLOWING IS A BRIEF SUMMARY OF THE PERSONAL PENSION ACCOUNT. YOU SHOULD
READ THIS ENTIRE SECTION OF THE PROSPECTUS TO MAKE SURE THAT YOU UNDERSTAND THE
IMPORTANT LIMITATIONS AND RESTRICTIONS APPLICABLE TO THE PERSONAL PENSION
ACCOUNT.
The Personal Pension Account is like the Fixed Accumulation Feature because you
receive a fixed interest rate investment return. So, like the Fixed Accumulation
Feature, you can invest in the Personal Pension Account if you want a steadier
return than you would receive from the Sub-Accounts, where your return depends
on the investment performance of the Funds you select.
While the Personal Pension Account and Fixed Accumulation Feature both offer a
fixed interest rate return, the Personal Pension Account is designed to serve a
different purpose than the Fixed Accumulation Feature. The Fixed Accumulation
Feature is designed to serve as a conventional accumulation-oriented investment
-you put money in to build up your investment, and you can then withdraw money
to meet financial needs as they arise. You can also transfer some or all of your
investment to the Sub-Accounts or the Personal Pension Account, and your
beneficiaries receive a death benefit if you die. The Personal Pension Account
is designed to serve a different purpose - it has features and guarantees you
can use to design your own personal pension plan to provide you with life-long
income payments without having to use the Sub-Accounts or Fixed Accumulation
Feature for that purpose. These guarantees let you know in advance how much your
income payments will be in the future. While you can take income payments from
the Fixed Accumulation Feature too, the amount of those income payments is not
guaranteed in advance.
Why would you invest in the Fixed Accumulation Feature if the Personal Pension
Account gives you income guarantees and more flexibility structuring income
payments? The reason is that to give you the guarantees and income payment
flexibility, we had to place significant restrictions on how much you can
transfer out of the Personal Pension Account in any year as well as on your
ability to receive lump sum payments - instead of SURRENDERING part or all of
the amounts you have built up in the Personal Pension Account, you can get a
lump sum payment only by specifying some or all of the payments you are
receiving, and then COMMUTING them into one lump sum. When you invest in the
Personal Pension Account, you may end up getting less than you would have if you
invested in the Fixed Accumulation Feature. This is the tradeoff you have to
accept in return for getting the additional flexibility and guarantees that let
you design your own personal pension plan.
THERE ARE CERTAIN CONDITIONS THAT MUST BE SATISFIED FOR YOU TO RECEIVE
GUARANTEED INCOME PAYMENTS FROM YOUR PERSONAL PENSION ACCOUNT INVESTMENT,
INCLUDING STARTING TO TAKE PAYMENTS BEFORE THE END OF A SPECIFIED PERIOD. YOU
SHOULD READ THE REST OF THIS PROSPECTUS AND YOUR CONTRACT CAREFULLY TO MAKE SURE
YOU UNDERSTAND ALL OF THESE CONDITIONS.
AS YOU READ THE REMAINDER OF THIS SECTION OF THE PROSPECTUS, WHICH PROVIDES YOU
WITH MORE DETAILED INFORMATION ABOUT HOW THE PERSONAL PENSION ACCOUNT WORKS, YOU
SHOULD KEEP IN MIND THESE IMPORTANT POINTS:
- YOUR ABILITY TO MAKE TRANSFERS FROM THE PERSONAL PENSION ACCOUNT IS
SIGNIFICANTLY LIMITED BECAUSE THE PERSONAL PENSION ACCOUNT RESTRICTS
LIQUIDITY DUE TO TRANSFER LIMITATIONS AND THE POTENTIAL LOSS OF VALUE AS A
RESULT OF COMMUTATION. ACCORDINGLY, YOU SHOULD ENSURE THAT YOUR INVESTMENTS
IN THE FIXED ACCUMULATION FEATURE AND THE SUB-ACCOUNTS WILL BE ADEQUATE TO
MEET YOUR LIQUIDITY NEEDS.
- BECAUSE THE PERSONAL PENSION ACCOUNT IS DESIGNED AS A LONG-TERM RETIREMENT
FUNDING VEHICLE, IT HAS GUARANTEED PAYOUT RATES APPLICABLE ONLY FOR PERSONAL
PENSION ACCOUNT PAYMENTS COMMENCED BEFORE THE EXPIRATION OF YOUR SPECIFIED
"GUARANTEE WINDOW" (AS DESCRIBED BELOW).
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- THE PERSONAL PENSION ACCOUNT PROVIDES CERTAIN ADDITIONAL FLEXIBILITY WITH
RESPECT TO STRUCTURING INCOME PAYMENTS - YOU CAN CONVERT PART OF YOUR
INVESTMENT IN THE PERSONAL PENSION ACCOUNT INTO INCOME PAYMENTS AT A
PARTICULAR TIME RATHER THAN YOUR ENTIRE INVESTMENT, AND YOU MAY ESTABLISH
DIFFERENT INCOME STREAMS.
- AT ANY GIVEN TIME, CREDITED RATES AVAILABLE UNDER THE PERSONAL PENSION
ACCOUNT MAY BE HIGHER OR LOWER THAN INTEREST RATES OFFERED UNDER THE FIXED
ACCUMULATION FEATURE.
- YOU MAY USE THE PERSONAL PENSION ACCOUNT TO ESTABLISH STREAMS OF INCOME
PAYMENTS THAT WILL CONTINUE FOR AS LONG AS YOU, THE ANNUITANT OR A JOINT
OWNER ARE ALIVE.
- IF YOU REQUEST A LUMP SUM PAYMENT, WE COMMUTE THE AMOUNT OF THE PAYMENTS
THAT WOULD HAVE BEEN MADE DURING THE "GUARANTEED PAYOUT DURATION" (AS
DESCRIBED BELOW) PAYMENTS WILL COMMENCE AGAIN IF YOU THE ANNUITANT OR A
JOINT OWNER LIVE PAST THE GUARANTEED PAYOUT DURATION.
- IF YOU TERMINATE THIS CONTRACT, YOU GIVE UP YOUR RIGHT TO FUTURE "PERSONAL
PENSION ACCOUNT PAYOUTS" (AS DESCRIBED BELOW).
HOW DOES THE PERSONAL PENSION ACCOUNT WORK?
CONTRIBUTIONS - You invest in the Personal Pension Account through Personal
Pension Account Contributions. The first Personal Pension Account Contribution
becomes your initial investment called your "Benefit Balance." The Benefit
Balance will be increased by the amount of each subsequent Personal Pension
Account Contribution, transfers into the Personal Pension Account from the Fixed
Accumulation Feature and Sub-Accounts and accrued interest. Unlike the Fixed
Accumulation Feature, the Benefit Balance is not indicative of what you would
receive as a lump sum.
Once you start taking Personal Pension Account Payouts, as described below, your
Benefit Balance is divided into an "Accumulation Balance" and "Annuity Payout
Value." Annuity Payout Value refers to the sums used to fund your Personal
Pension Account Payouts and anything remaining is referred to as your
Accumulation Balance. Because you may convert all or any portion of your
Accumulation Balance into Personal Pension Account Payouts at different times,
you may have more than one Annuity Payout Value.
The minimum initial Personal Pension Account Contribution is $10,000. Our prior
approval may be required for any single or cumulative Personal Pension Account
Contribution of $1 million or more. Each subsequent Personal Pension Account
Contribution must be at least $1,000. If made through an approved investment
Program, subsequent Personal Pension Account Contributions minimums must be met
over the course of the Contract Year or the duration of the investment Program,
if less. FAILURE TO MAINTAIN A MINIMUM ACCUMULATION BALANCE OF $5,000 WILL
RESULT IN PREMATURE COMMENCEMENT OF PENSION ACCOUNT PAYOUTS. You may not make
any Personal Pension Account Contributions after the Annuity Commencement Date.
INTEREST CREDITING - We guarantee that we will credit interest to amounts that
you allocate to the Personal Pension Account at a minimum rate of 1.5% (called a
"credited rate(s)"). We may credit a rate higher than the minimum credited rate.
We expect to make a profit in setting credited rates. Different credited rates
may apply during the course of your investment in the Personal Pension Account.
Credited rates will continue to apply to your Accumulation Balance until the
earliest of when you commence taking Personal Pension Account Payouts, the
Annuity Commencement Date or when we pay the Death Benefit. Credited rates will
not apply to your Annuity Payout Values.
We reserve the right to periodically establish new credited rates that will be
applied to new Personal Pension Account Contributions. This means that all or
portions of your Accumulation Balance may earn interest at different credited
rates. See Examples 1, 2 and 4 under the Personal Pension Account Examples in
Appendix A for an illustration of how different credited rates may apply during
the term of your Contract. There is no specific formula for determining credited
rates and no assurances are offered as to future credited rates and their
applicability. Some of the factors that we may consider in determining credited
rates include, but are not limited to, general economic trends, rates of return
currently available for the types of investments and durations that match these
or our general liabilities and anticipated yields on our investments; regulatory
and tax requirements; and competitive factors.
PERSONAL PENSION ACCOUNT PAYOUTS - You may tell us to start paying you income
payments called "Personal Pension Account Payouts" at any time or at different
times until your Annuity Commencement Date. Subsequent Premium Payments can be
made into Sub-Accounts and/or the Fixed Accumulation Feature after Personal
Pension Account Payouts have begun (if received before your Annuity Commencement
Date).
As noted above, your ability to receive lump sum payments from the Personal
Pension Account is limited. You do not withdraw any part of your Benefit Balance
in the same way that you can surrender your Contract Value from Sub-Accounts or
the Fixed Accumulation Feature. Rather, you must convert Accumulation Balance
into an Annuity Payout Value that is then used to set your Personal Pension
Account Payouts. You may surrender any or all of your Contract Value without
affecting your Annuity Payout Value, or you may commute any or all of your
Annuity Payout Value without affecting your Contract Value. However, you may
terminate your Contract by (a) fully surrendering all of your Contract Value in
the Sub-Accounts and Fixed Accumulation Feature; (b) commuting your Annuity
Payout Value in your Personal Pension Account (as discussed in more detail
below); and (c) giving up your right to Personal Pension Account Payouts.
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You will automatically start receiving Personal Pension Account Payouts on your
Annuity Commencement Date. Personal Pension Account Payouts will be paid in the
manner described in Annuity Payout Option Two or Eight under the heading "When
do your Annuity Payouts begin?" under the Annuity Payouts section below. We
reserve the right to require that you own your Contract for at least six months
before you start receiving Personal Pension Account Payouts. For Qualified
Contracts, we reserve the right to require that you start taking Personal
Pension Account Payouts no later than when the Annuitant turns age 70 1/2. An
annual benefit increase option may also be elected to adjust Personal Pension
Account Payouts, subject to availability.
We calculate the amount of your Personal Pension Account Payouts by applying the
applicable payout rate to your Accumulation Balance. We will provide you with a
guaranteed payout rate each time that you make a new Personal Pension Amount
Contribution. Payout rates are set at our sole discretion. There is no specific
formula for determining payout rates and, except as specifically provided below,
there is no assurance as to future payout rates. Payout rates may vary based on
Contract class and distribution channel. Some of the factors that we may
consider in determining payout rates include, but are not limited to, general
economic trends, rates of return currently available for the types of
investments and durations that match our liabilities and anticipated yields on
our investments; regulatory and tax requirements; competitive factors and
mortality tables (including age and gender factors). When you first make a
Personal Pension Account Contribution, you will be required to choose a Target
Income Age at which you are likely to begin taking Personal Pension Account
Payouts. The Target Income Age cannot exceed twenty (20) years from the oldest
Annuitant's age at the time of investment or age 80. Except as provided below,
the Target Income Age cannot be changed.
We will use the guaranteed payout rate(s) to calculate Personal Pension Account
Payouts if you commence taking Personal Pension Account Payouts during the
timeframe that begins three (3) years prior to the Target Income Age and ends
three (3) years after the Target Income Age (this seven year period is referred
to as the "guarantee window"). If you commence taking Personal Pension Account
Payouts at any time outside of the guarantee window, then we will calculate your
Personal Pension Account Payouts using payout rate(s) that we then determine at
our sole discretion. This payout rate will not exceed the guaranteed payout rate
nor will the corresponding Personal Pension Account Payout be less than any
guaranteed minimum provided in your Contract. The existence of guaranteed payout
rates, among other things, distinguishes the Personal Pension Account from the
way we treat annuitization of your Contract Value and investments in the Fixed
Accumulation Feature at the end of the accumulation phase of your Contract. See
Examples 1 and 4 under the Personal Pension Account Examples in Appendix A for
an illustration of Personal Pension Account Payouts during the guarantee window.
LUMP SUM PAYMENTS - You may commute any or all of your Annuity Payout Value to
get a lump sum payment from the Personal Pension Account. The way we do this is
to calculate the number of Personal Pension Account Payouts (corresponding to
the Annuity Payout Value that you seek to commute) that when added together will
equal the amount of your commutation request, and then the time period over
which these Personal Pension Account Payouts would have otherwise been made is
called the "Guaranteed Payout Duration." Personal Pension Account Payouts will
resume after the Guaranteed Payout Duration for so long as you, the Annuitant or
a joint Owner are alive.
You should understand that if you commute you will receive less than your
Annuity Payout Value. The amount you receive over time depends on a number of
factors, including the difference between interest rates currently being
credited and the discount rate used upon commutation, how long you have invested
in the Personal Pension Account and whether you (or the Annuitant) live long
enough so that Personal Pension Account Payouts start up again after the
Guaranteed Payout Duration. Please refer to "What kinds of Surrenders are
available" and "What is the Commuted Value" in the Surrenders section as well as
Example 4 under the Personal Pension Account Examples in Appendix A for more
information about how commutation works.
TRANSFERS - Each Contract Year, you may transfer a portion of your Accumulation
Balance to the Fixed Accumulation Feature or Sub-Accounts without having to
comply with the annuitization and commutation requirements discussed above. All
transfer allocations must be in whole numbers (e.g., 1%). The maximum amount of
Accumulation Balance that may be transferred is the highest of:
- four (4%) percent of your Accumulation Balance as of your prior
Contract Anniversary;
- the amount of interest credited to your Accumulation Balance over the
most recent full Contract Year; or
- the amount of Accumulation Balance transferred to Contract Value
during the most recent full Contract Year.
We reserve the right to: (a) limit the number of transfers from the Personal
Pension Account; (b) make you wait six months after your most recent transfer
from the Personal Pension Account before moving Contract Value back into the
Personal Pension Account; or (c) revoke this transfer privilege at any time.
Amounts transferred out of the Personal Pension Account will reduce the
Accumulation Balance by the amount transferred. Amounts transferred from the
Personal Pension Account to the Fixed Accumulation Feature or the Sub-Accounts
will be treated as a subsequent Premium Payment and become part of your Contract
Value. You may also transfer Contract Value from your Sub-Accounts or Fixed
Accumulation Feature, to the Accumulation Balance (such transfers will reduce
the amount of your optional Death Benefit, Annual Withdrawal Amount (AWA) and
Remaining Gross Premiums). If applicable, no CDSC will be applied to
Accumulation Balance transferred to Sub-Accounts or the Fixed Accumulation
Feature, or vice versa. No transfers
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may be made to or from the Personal Pension Account after the Annuity
Commencement Date. See Example 3 under the Personal Pension Account Examples in
Appendix A for an illustration of transfers into your Personal Pension Account.
AS A RESULT OF THESE OUT-BOUND TRANSFER RESTRICTIONS, IT MAY TAKE A SIGNIFICANT
AMOUNT OF TIME (I.E., SEVERAL YEARS) TO MOVE ACCUMULATION BALANCE TO
SUB-ACCOUNTS OR THE FIXED ACCUMULATION FEATURE AND THEREFORE THIS MAY NOT
PROVIDE AN EFFECTIVE SHORT TERM DEFENSIVE STRATEGY. PLEASE REFER TO EXAMPLE 3
UNDER THE PERSONAL PENSION ACCOUNT EXAMPLES IN APPENDIX A FOR AN ILLUSTRATION OF
TRANSFER RESTRICTIONS.
DEATH BENEFIT - The Personal Pension Account includes a Death Benefit equal to
your Benefit Balance. This Death Benefit is considered to be part of the
standard Death Benefit or any optional Death Benefit that you elect. Your
Personal Pension Account Death Benefit increases as a result of additional
Personal Pension Account Contributions and transfers into the Personal Pension
Account. YOUR PERSONAL PENSION ACCOUNT DEATH BENEFIT DECREASES AS YOU TAKE
PERSONAL PENSION ACCOUNT PAYOUTS AND MAY BE ELIMINATED OVER TIME. Benefit
Balance transfers to Sub-Accounts and/or the Fixed Accumulation Feature also
decrease your Personal Pension Account Death Benefit but because these amounts
are converted into Contract Value, they become part of the standard Death
Benefit and/or optional Death Benefit. YOUR BENEFIT BALANCE IS NOT GUARANTEED AS
PART OF ANY OPTIONAL DEATH BENEFIT RIDER.
Personal Pension Account Payouts will generally terminate upon notification to
us of the death of the Owner, joint Owner or Annuitant, if prior to the Annuity
Commencement Date; or upon notification to us of the Annuitant's death, if after
the Annuity Commencement Date. The method of payment of the Death Benefit will
be subject to the restrictions contained in the "Standard Death Benefit" section
of this Prospectus.
Your Benefit Balance will be converted into Contract Value and transferred to
the Money Market Sub-Account without annuitization and commutation. Unless
otherwise stated below, Contract Value may not be reallocated back into the
Personal Pension Account. The Contingent Annuitant may reinvest Contract Value
back into the Personal Pension Account and establish a new guarantee window,
target income age and receive then applicable credited rates. If Spousal
Contract continuation is elected, your Spouse can either continue to maintain
the Personal Pension Account and resume Personal Pension Account Payouts, if
applicable, or instruct us to transfer Benefit Balance to the Money Market
Sub-Account. Your Spouse may then reinvest Contract Value back into the Personal
Pension Account by establishing a new guarantee window and target income age.
New crediting rates will apply.
OTHER INFORMATION - We will account for any Personal Pension Account
Contributions, Personal Pension Account Payouts, interest, and deductions
separately and on a first-in, first-out basis for the purposes of determining
which credited rates are associated with each Personal Pension Account
Contribution. Personal Pension Account Payouts are not cumulative and may not be
advanced, commuted or accelerated, except as explicitly stated in this
prospectus. Subject to applicable state insurance law, the Personal Pension
Account does not establish a cash surrender benefit. We may close the Personal
Pension Account to new Personal Pension Account Contributions at any time
without notice. We may also make the Personal Pension Account available only
through enrollment in one or more investment Programs that we establish.
Special consideration should be given by Personal Pension Account investors who
are under age 40 to the twenty-year limitation on setting your Target Income Age
and the absence of guaranteed payout rates applied if Personal Pension Account
Payouts commence outside of your guarantee window.
The Personal Pension Account should not be confused with a pension plan under
The Employee Retirement Income Security Act of 1974, as amended (ERISA). Neither
we nor any of our affiliates assume any fiduciary duties with regard to this
Contract, as such terms are defined under ERISA laws and regulations. The
Personal Pension Account is not a defined benefit plan guaranteed by the Pension
Benefit Guaranty Corporation (PBGC) or any federal or state government agency.
This feature is not a corporate pension plan issued by us or our affiliates.
In summary, the Personal Pension Account is designed for the long-term investor
who is willing to forego some degree of liquidity in exchange for, among other
things, deferred lifetime income in the form of Personal Pension Account
Payouts. This feature restricts liquidity through transfer and commutation
restrictions. The amount ultimately received as a consequence of your investment
in the Personal Pension Account is not predictable because of the uncertainty of
factors such as how long you have invested in the Personal Pension Account,
interest rates in effect at the time of investment and commutation, and how long
you receive lifetime Personal Pension Account Payouts. If you partially commute
your Personal Pension Account Payouts, you will retain the right to collect life
contingent Personal Pension Account Payouts that resume after the applicable
Guaranteed Payout Duration. HOWEVER, IF YOU ELECT TO TERMINATE YOUR CONTRACT,
YOU WILL GIVE UP YOUR RIGHT TO THESE FUTURE LIFE CONTINGENT PERSONAL PENSION
ACCOUNT PAYOUTS. YOU SHOULD THEREFORE CONSULT WITH YOUR REGISTERED
REPRESENTATIVE OR A TRUSTED ADVISER BEFORE TERMINATING YOUR CONTRACT TO BE SURE
THAT YOU UNDERSTAND THESE IMPORTANT IMPLICATIONS. Please refer to "What kinds of
Surrenders are available" and "What is the Commuted Value" in the Surrenders
section as well as Example 4 under the Personal Pension Account Examples in
Appendix A for more information.
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4. INFORMATION ON YOUR ACCOUNT
A. OPENING AN ACCOUNT
WHO CAN BUY THIS CONTRACT?
The Contract is an individual or group tax-deferred variable annuity Contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- any trustee or custodian for a retirement plan qualified under Section
401(a) of the Code;
- individual Retirement Annuities adopted according to Section 408 of the
Code;
- employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state; and
- certain eligible deferred compensation plans as defined in Section 457 of
the Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other Qualified
Plan receives tax-deferred treatment under the Code.
We no longer accept any incoming 403(b) exchanges, transfers or applications for
403(b) individual annuity contracts or additional investments into any
individual annuity contract funded through a 403(b) plan.
The Personal Pension Account may not be available to all types of Qualified
Plans.
HOW DO YOU PURCHASE A CONTRACT?
You may only purchase a Contract through a Financial Intermediary. A Registered
Representative will work with you to complete and submit an application or an
order request form. Part of this process will include an assessment as to
whether this variable annuity may be suitable for you. Prior to recommending the
purchase or exchange of a deferred variable annuity, your Registered
Representative shall make reasonable efforts to obtain certain information about
you and your investment needs. This recommendation will be independently
reviewed by a principal within your Financial Intermediary. Your initial Deposit
will not be invested in any Account and/or the Personal Pension Account during
this period.
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account. When
you open an account, your Financial Intermediary will ask for your name,
address, date of birth and other information that will allow us to identify you.
They may also ask to see your driver's license or other identifying documents.
Non-Resident Alien (NRA) application submissions require our prior approval.
The minimum initial Deposit required to buy this Contract varies based on the
type of investment, Contract class and whether you enroll in a systematic
investment Program such as the InvestEase(R) Program. Financial Intermediaries
may impose requirements regarding the form of payment they will accept. Deposits
not actually received by us within the time period provided below will result in
the rejection of your application or order request.
Deposits sent to us must be made in U.S. dollars and checks must be drawn on
U.S. banks. We do not accept cash, third party checks or double endorsed checks.
We reserve the right to limit the number of checks processed at one time. If
your check does not clear, your purchase will be cancelled and you could be
liable for any losses or fees incurred. A check must clear our account through
our Administrative Office to be considered to be in good order.
We reserve the right to impose special conditions on anyone who seeks our prior
approval to purchase a Contract with Deposits of $1 million or more. In order to
request prior approval, you must submit a completed enhanced due diligence form
prior to the submission of your application:
- if you are seeking to purchase a Contract with an initial Deposit of $1
million or more;
- if total Deposits, aggregated by social security number or taxpayer
identification number, equal $1 million or more; and
- for all applications where the Owner or joint Owner are non-resident aliens.
You and your Annuitant must not be older than age 80 on the date that your
Contract is issued. You must be of minimum legal age in the state where the
Contract is being purchased or a guardian must act on your behalf. Optional
riders are subject to additional maximum issue age restrictions.
We urge you to discuss with your Registered Representative which share class is
suitable for your needs. Share class availability and/or mortality and expense
risk charge arrangements may vary based on the Financial Intermediary selling
this variable annuity to you.
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Charges affect your overall rate of return on your Contract Value. In
determining whether to invest in a share class that imposes a contingent
deferred sales charge, you might consider whether higher mortality and expense
risk and distribution charges out weigh the benefits of contingent deferred
sales charges that reduce, or are eliminated, over time. For instance, those
investing over $100,000 may find a front-end sales charge class share to be more
economically advantageous than a contingent deferred sales charge share class.
Finally, in determining whether to invest in a share class offered through a
financial advisor, you might consider how the fee charged by your advisor bears
in relation to the costs associated with investing in other share classes that
impose higher fees.
CAN YOU CANCEL YOUR CONTRACT AFTER YOU PURCHASE IT?
Yes. If for any reason you are not satisfied with your Contract, simply return
it within ten days after you receive it with a written request for cancellation
that indicates your tax-withholding instructions. In some states, you may be
allowed more time to cancel your Contract. We may require additional
information, including a signature guarantee, before we can cancel your
Contract.
Unless otherwise required by state law, we will pay you your Account Balance
(minus applicable expenses) as of the Valuation Day we receive your properly
completed request to cancel and will refund any sales or Contract charges
incurred during the period you owned the Contract. The Account Balance may be
more or less than your Deposits depending upon the investment performance of
your Contract. This means that you bear the risk of any decline in your Account
Balance until we receive your notice of cancellation. In certain states,
however, we are required to return your Deposit without deduction for any fees
or charges.
HOW ARE DEPOSITS APPLIED TO YOUR CONTRACT?
Your initial Deposit will usually be invested within two Valuation Days of our
actual receipt in-hand at our Administrative Office of both a properly completed
application or order request and the Deposit; both being in good order. If we
receive a subsequent Deposit before the end of a Valuation Day, it will be
invested on the same Valuation Day. If we receive your subsequent Deposit after
the end of a Valuation Day, it will be invested on the next Valuation Day. If we
receive a subsequent Deposit on a non-Valuation Day, the amount will be invested
on the next Valuation Day. Unless we receive new instructions, we will invest
all Deposits based on your last instructions on record. We will send you a
confirmation when we invest your Deposit.
If the request or other information accompanying the initial Deposit is
incomplete or not in good order when received, we will hold the money in a
non-interest bearing account for up to five Valuation Days (from the Valuation
Day that we actually receive your initial Deposit at our Administrative Office)
while we try to obtain complete information. If we cannot obtain the information
within five Valuation Days, we will either return the Deposit and explain why it
could not be processed or keep the Deposit if you authorize us to keep it until
you provide the necessary information.
Generally, we will receive your application or order request (whether for an
initial purchase or a subsequent investment) after your Financial Intermediary
has completed a suitability review. We will then consider if your investment is
in good order. While the suitability and good order process is underway,
Deposits will not be applied to your Contract. You will not earn any interest on
Deposits even if they have been sent to us or deposited into our bank account.
We are not responsible for gains or lost investment opportunities incurred
during this review period or if your Financial Intermediary asks us to unwind a
transaction based on their review of your Registered Representative's
recommendations. Your Financial Institution, and we, may directly or indirectly
earn income on your Deposits. For more information, contact your Registered
Representative.
HOW IS CONTRACT VALUE CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of the value of the Fixed Accumulation Feature, if
applicable, and all Funds, and does not include Benefit Balance. There are two
things that affect the value of your Sub-Accounts: (1) the number of
Accumulation Units, and (2) the Accumulation Unit Value. Contract Value is
determined by multiplying the number of Accumulation Units by the Accumulation
Unit Value. On any Valuation Day the investment performance of the Sub-Accounts
will fluctuate with the performance of the Funds.
When Premium Payments are credited to Sub-Accounts within your Account, they are
converted into Accumulation Units by dividing the amount of your Premium
Payments, minus any Premium taxes, by the Accumulation Unit Value for that day.
The more Premium Payments you make to your Account, the more Accumulation Units
you will own. You decrease the number of Accumulation Units you have by
requesting partial or full Surrenders, settling a Death Benefit claim or by
annuitizing your Contract or as a result of the application of certain Contract
charges.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- the net asset value per share plus applicable distributions per share of
each Fund at the end of the current Valuation Day; reduced by
- the net asset value per share of each Fund at the end of the prior Valuation
Day; reduced by
- contract charges including the deductions for the mortality and expense risk
charge and any other periodic expenses and administrative charges, divided
by the number of days in the year multiplied by the number of days in the
valuation period.
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We will send you a statement at least annually.
WHAT OTHER WAYS CAN YOU INVEST?
You may enroll in the following features (sometimes called a "Program") for no
additional fee. Not all Programs are available with all Contract variations.
- INVESTEASE
This electronic funds transfer feature allows you to have money automatically
transferred from your checking or savings account and deposited into your
Contract on a monthly or quarterly basis. It can be changed or discontinued at
any time. The minimum amount for each transfer is $50. You can elect to have
transfers made into any available Fund, the Fixed Accumulation Feature, or the
Personal Pension Account. You cannot use this Program to invest in the DCA Plus
Programs.
- STATIC ASSET ALLOCATION MODELS
This feature allows you to select an asset allocation model based on several
potential factors including your risk tolerance, time horizon, investment
objectives, or your preference to invest in certain Funds or Fund families.
Based on these factors, you can select one of several asset allocation models,
with each specifying percentage allocations among various Funds available under
your Contract. Some asset allocation models are based on generally accepted
investment theories that take into account the historic returns of different
asset classes (e.g., equities, bonds or cash) over different time periods. Other
asset allocation models focus on certain potential investment strategies that
could possibly be achieved by investing in particular Funds or Fund families and
are not based on such investment theories. Static asset allocation models
offered from time to time are reflected in your application and marketing
materials. You may obtain a copy of the current models by contacting your
Financial Intermediary.
You may invest in an asset allocation model through the Dollar Cost Averaging
Program where the Fixed Accumulation Feature, Personal Pension Account, or a DCA
Plus Program is the source of the assets to be invested in the asset allocation
model you have chosen. You can also participate in these asset allocation models
while enrolled in the InvestEase or Automatic Income Program.
You can switch asset allocation models up to twelve times per year. Your ability
to elect or switch into and between asset allocation models may be restricted
based on Fund abusive trading restrictions.
Your investments in an asset allocation model will be rebalanced quarterly to
reflect the model's original percentages and you may cancel your model at any
time subject to investment restrictions for maintaining certain optional riders.
We have no discretionary authority or control over your investment decisions.
These asset allocation models are based on then available Funds and do not
include the Fixed Accumulation Feature or the Personal Pension Account. We make
available educational information and materials (e.g., risk tolerance
questionnaire, pie charts, graphs, or case studies) that can help you select an
asset allocation model, but we do not recommend asset allocation models or
otherwise provide advice as to what asset allocation model may be appropriate
for you.
While we will not alter allocation percentages used in any asset allocation
model, allocation weightings could be affected by mergers, liquidations, fund
substitutions or closures. Availability of these models is subject to Fund
company restrictions. Please refer to "What Restrictions Are There on your
Ability to Make a Sub-Account Transfer?" for more information.
You will not be provided with information regarding periodic updates to the
Funds and allocation percentages in the asset allocation models, and we will not
reallocate your Contract Value based on those updates. Information on updated
asset allocation models may be obtained by contacting your Registered
Representative. If you wish to update your asset allocation model, you may do so
by terminating your existing model and re-enrolling into a new one. Investment
alternatives other than these asset allocation models are available that may
enable you to invest your Contract Value with similar risk and return
characteristics. When considering an asset allocation model for your individual
situation, you should consider your other assets, income and investments in
addition to this annuity.
Asset allocation does not guarantee that your Contract Value will increase nor
will it protect against a decline if market prices fall. If you choose to
participate in an asset allocation program, you are responsible for determining
which asset allocation model is best for you. Tools used to assess your risk
tolerance may not be accurate and could be useless if your circumstances change
over time. Although each asset allocation model is intended to maximize returns
given various levels of risk tolerance, an asset allocation model may not
perform as intended. Market, asset class or allocation option class performance
may differ in the future from historical performance and from the assumptions
upon which the asset allocation model is based, which could cause an asset
allocation model to be ineffective or less effective in reducing volatility. An
asset allocation model may perform better or worse than any single Fund,
allocation option or any other combination of Funds or allocation options. In
addition, the timing of your investment and automatic rebalancing may affect
performance. Quarterly rebalancing and periodic updating of asset allocation
models can cause their component Funds to incur transactional expenses to raise
cash for money flowing out of Funds or to buy securities with money flowing into
the Funds. Moreover, large outflows of money from the Funds may increase the
expenses attributable to the assets remaining in the Funds. These expenses can
adversely affect the performance of the relevant Funds and of the asset
allocation models. In addition, these inflows and outflows may cause a Fund to
hold a large portion of its assets in cash, which could detract
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from the achievement of the Fund's investment objective, particularly in periods
of rising market prices. For additional information regarding the risks of
investing in a particular Fund, see that Fund's prospectus.
Additional considerations apply for qualified Contracts with respect to Static
Asset Allocation Model Programs. Neither we, nor any third party service
provider, nor any of their respective affiliates, is acting as a fiduciary under
The Employee Retirement Income Security Act of 1974, as amended (ERISA) or the
Code, in providing any information or other communication contemplated by any
Program, including, without limitation, any asset allocation models. That
information and communications are not intended, and may not serve as a primary
basis for your investment decisions with respect to your participation in a
Program. Before choosing to participate in a Program, you must determine that
you are capable of exercising control and management of the assets of the plan
and of making an independent and informed decision concerning your participation
in the Program. Also, you are solely responsible for determining whether and to
what extent the Program is appropriate for you and the assets contained in the
qualified Contract. Qualified Contracts are subject to additional rules
regarding participation in these Programs. It is your responsibility to ensure
compliance of any recommendation in connection with any asset allocation model
with governing plan documents.
- ASSET REBALANCING
In asset rebalancing, you select a portfolio of Funds, and we will rebalance
your assets at the specified frequency to reflect the original allocation
percentages you selected (choice of frequency may be limited when certain
optional riders are elected). You can also combine this Program with others such
as the Automatic Income Program, InvestEase and DCA Programs (subject to
restrictions). You may designate only one set of asset allocation instructions
at a time.
- DOLLAR COST AVERAGING PROGRAMS
We offer three Dollar Cost Averaging Programs:
- DCA Plus
- Fixed Amount DCA
- Earnings/Interest DCA
DCA Plus - These programs allow you to earn a fixed rate of interest on
investments. These Programs are different from the Fixed Accumulation Feature or
the Personal Pension Account. We determine, in our sole discretion, the interest
rates to be credited. These interest rates may vary depending on the Contract
class you purchased and the date the request for the Program is received. Please
consult your Registered Representative to determine the interest rate for your
Program.
You may elect either the "12-Month Transfer Program" or the "6-Month Transfer
Program".
- Under the 12-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 12 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 12 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 7 but no more than 12 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Under the 6-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 6 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 6 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 3 but no more than 6 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Each time you make a subsequent Premium Payment, you can invest in a
different rate lock program. Any subsequent investments made considered a
separate rate lock Program investment. You can invest in up to 5 different
rate lock Programs at one time.
- You must invest at least $5,000 in each rate lock program ($2,000 for
qualified plan transfers or rollovers, including IRAs). We will
pre-authorize transfers from our Fixed Accumulation Feature subject to
restrictions.
- Pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions in good order.
- If a DCA Plus payment is received without enrollment instructions and a DCA
Plus Program is active on the Contract, we will set up the new Program to
mirror the existing one. If a DCA Plus payment is received without
enrollment instructions and a DCA Plus Program is not active on the
Contract, but is the future investment allocation and a static asset
allocation model is active on the Contract, we will set up the new Program
to move Funds to the Static Asset Allocation Model. Otherwise, we will
contact your investment professional to obtain complete instructions. If we
do not receive in good order enrollment instructions within the 15 day
timeframe noted above, we will refund the Program payment for further
instruction.
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- If your Program payment is less than the required minimum amount, we will
invest into the destination Funds or the Personal Pension Account indicated
on the Program instructions accompanying the payment. If Program
instructions were not provided and a DCA Plus Program is active on the
Contract, we will apply the payment to the destination Funds or the Personal
Pension Account of the current DCA Plus Program. Otherwise, we will contact
your investment professional to obtain further investment instructions.
- The credited interest rate used under the DCA Plus Programs is not earned on
the full amount of your Premium Payment for the entire length of the Program
because Program transfers to Sub-Accounts or the Personal Pension Account
decrease the amount of your Premium Payment remaining in the Program.
- You may elect to terminate your involvement in this Program at any time.
Upon cancellation, all the amounts remaining in the Program will be
immediately transferred to the Funds or the Personal Pension Account you
designated.
Fixed Amount DCA - This feature allows you to regularly transfer (monthly or
quarterly) a fixed amount from the Fixed Accumulation Feature (if available
based on the form of Contract selected) or any Fund(s) into different Fund(s) or
the Personal Pension Account. This program begins in 15 days unless you instruct
us otherwise. You must make at least three transfers in order to remain in this
Program.
Earnings/Interest DCA - This feature allows you to regularly transfer (monthly
or quarterly) the earnings (i.e., any gains over the previous month's or
quarter's value) from your investment in the Fixed Accumulation Feature (if
available based on the form of Contract selected) or any Fund(s) into other
Fund(s) or the Personal Pension Account. This program begins two business days
plus the frequency selected unless you instruct us otherwise. You must make at
least three transfers in order to remain in this Program.
- AUTOMATIC INCOME PROGRAM
This systematic withdrawal feature allows you to make partial Surrenders up to
5% of your total Premium Payments each Contract Year. You can designate the
Funds to be surrendered from and also choose the frequency of partial Surrenders
(monthly, quarterly, semiannual, or annually). The Personal Pension Account is
not an eligible source Fund for partial Surrenders facilitated through the
Automatic Income Program. The minimum amount of each Surrender is $100. Amounts
taken under this program will count towards the AWA and may be subject to a
CDSC. If received prior to age 59 1/2, may have adverse tax consequences,
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment. You may satisfy Code Section 72(t)/(q) requirements by
enrolling in this program. Please see the "Federal Tax Considerations" section
and consult your tax adviser for information about the tax consequences
associated with your Contract. Your level of participation in this program may
result in your exceeding permissible withdrawal limits under certain optional
riders.
- OTHER PROGRAM CONSIDERATIONS
- You may terminate your enrollment in any Program at any time.
- We may discontinue, modify or amend any of these Programs at any time. We
will automatically and unilaterally amend your enrollment instructions if:
- any Fund is merged or substituted into another Fund - then your
allocations will be directed to the surviving Fund; or
- any Fund is liquidated - then your allocations to that Fund will be
directed to any available money market Fund following prior
notifications prior to reallocation.
You may always provide us with updated instructions following any of these
events.
- Continuous or periodic investment neither insures a profit nor protects
against a loss in declining markets. Because these Programs involve
continuous investing regardless of fluctuating price levels, you should
carefully consider your ability to continue investing through periods of
fluctuating prices.
- These Programs may be modified, terminated or adversely impacted by the
imposition of Fund trading policies.
CAN YOU TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
Yes. During those phases of your Contract when transfers are permissible, you
may make transfers between Funds and/or Benefit Balance according to the
following policies and procedures, as they may be amended from time to time.
- WHAT IS A SUB-ACCOUNT TRANSFER?
A Sub-Account transfer is a transaction requested by you that involves
reallocating part or all of your Contract Value among the Funds available in
your Contract. Your transfer request will be processed as of the end of the
Valuation Day that it is received in good order. Otherwise, your request will be
processed on the following Valuation Day. We will send you a confirmation when
we process your
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transfer. You are responsible for verifying transfer confirmations and promptly
advising us of any errors within 30 days of receiving the confirmation.
- WHAT HAPPENS WHEN YOU REQUEST A SUB-ACCOUNT TRANSFER?
Many Owners request Sub-Account transfers. Some request transfers into
(purchases) a particular Sub-Account, and others request transfers out of
(redemptions) a particular Sub-Account. In addition, some Owners allocate new
Premium Payments to Sub-Accounts, and others request Surrenders. We combine all
the daily requests to transfer out of a Sub-Account along with all Surrenders
from that Sub-Account and determine how many shares of that Fund we would need
to sell to satisfy all Owners' "transfer-out" requests. At the same time, we
also combine all the daily requests to transfer into a particular Sub-Account or
new Premium Payments allocated to that Sub-Account and determine how many shares
of that Fund we would need to buy to satisfy all contract owners' "transfer-in"
requests.
In addition, many of the Funds that are available as investment options in our
variable annuity products are also available as investment options in variable
life insurance policies, retirement plans, funding agreements and other products
offered by us or our affiliates. Each day, investors and participants in these
other products engage in similar transfer transactions.
We take advantage of our size and available technology to combine sales of a
particular Fund for many of the variable annuities, variable life insurance
policies, retirement plans, funding agreements or other products offered by us
or our affiliates. We also combine transfer-out requests and transfer-in
requests. We then "net" these trades by offsetting purchases against
redemptions. Netting trades has no impact on the net asset value of the Fund
shares that you purchase or sell. This means that we sometimes reallocate shares
of a Fund rather than buy new shares or sell shares of the Fund.
For example, if we combine all transfer-out requests of a stock Fund with all
other transfer-out requests of that Fund from all our other products, we may
have to sell $1 million dollars of that Fund on any particular day. However, if
other Owners and the owners of other products offered by us, want to transfer-in
an amount equal to $300,000 of that same Fund, then we would send a sell order
to the Fund for $700,000 (a $1 million sell order minus the purchase order of
$300,000) rather than making two or more transactions.
- WHAT RESTRICTIONS ARE THERE ON YOUR ABILITY TO MAKE A SUB-ACCOUNT TRANSFER?
FIRST, YOU MAY MAKE ONLY ONE SUB-ACCOUNT TRANSFER REQUEST EACH DAY. We count all
Sub-Account transfer activity that occurs on any one Valuation Day as one
"Sub-Account transfer", however, you cannot transfer the same Contract Value
more than once a Valuation Day.
EXAMPLES
TRANSFER REQUEST PER VALUATION DAY PERMISSIBLE?
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Transfer $10,000 from a money market Sub-Account to a growth Sub-Account Yes
Transfer $10,000 from a money market Sub-Account to any number of other Sub-Accounts Yes
(dividing the $10,000 among the other Sub-Accounts however you chose)
Transfer $10,000 from any number of different Sub-Accounts to any number of other Yes
Sub-Accounts
Transfer $10,000 from a money market Sub-Account to a growth Sub-Account and then, before No
the end of that same Valuation Day, transfer the same $10,000 from the growth Sub-Account
to an international Sub-Account
SECOND, YOU ARE ALLOWED TO SUBMIT A TOTAL OF 20 SUB-ACCOUNT TRANSFERS EACH
CONTRACT YEAR (the "Transfer Rule") by U.S. Mail, Voice Response Unit, Internet
or telephone. Once you have reached the maximum number of Sub-Account transfers,
you may only submit any additional Sub-Account transfer requests and any trade
cancellation requests in writing through U.S. Mail or overnight delivery
service. In other words, Voice Response Unit, Internet or telephone transfer
requests will not be honored. We may, but are not obligated to, notify you when
you are in jeopardy of approaching these limits. For example, we will send you a
letter after your 10th Sub-Account transfer to remind you about the Transfer
Rule. After your 20th transfer request, our computer system will not allow you
to do another Sub-Account transfer by telephone, Voice Response Unit or via the
Internet. You will then be instructed to send your Sub-Account transfer request
by U.S. Mail or overnight delivery service.
We reserve the right to aggregate your Contracts (whether currently existing or
those recently surrendered) for the purposes of enforcing these restrictions.
The Transfer Rule does not apply to Sub-Account transfers that occur
automatically as part of a Company sponsored asset allocation or Dollar Cost
Averaging Program. Reallocations made based on a Fund merger or liquidation also
do not count toward this transfer limit. Restrictions may vary based on state
law.
We make no assurances that the Transfer Rule is or will be effective in
detecting or preventing market timing.
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THIRD, POLICIES HAVE BEEN DESIGNED TO RESTRICT EXCESSIVE SUB-ACCOUNT
TRANSFERS. You should not purchase this Contract if you want to make frequent
Sub-Account transfers for any reason. In particular, don't purchase this
Contract if you plan to engage in "market timing," which includes frequent
transfer activity into and out of the same Fund, or frequent Sub-Account
transfers in order to exploit any inefficiencies in the pricing of a Fund. Even
if you do not engage in market timing, certain restrictions may be imposed.
Generally, you are subject to Fund trading policies, if any. We are obligated to
provide, at the Fund's request, tax identification numbers and other shareholder
identifying information contained in our records to assist Funds in identifying
any pattern or frequency of Sub-Account transfers that may violate their trading
policy. In certain instances, we have agreed to serve as a Fund's agent to help
monitor compliance with that Fund's trading policy.
We are obligated to follow each Fund's instructions regarding enforcement of
their trading policy. Penalties for violating these policies may include, among
other things, temporarily or permanently limiting or banning you from making
Sub-Account transfers into a Fund or other funds within that fund complex. We
are not authorized to grant an exception to a Fund's trading policy. Please
refer to each Fund's prospectus for more information. Transactions that cannot
be processed because of Fund trading policies will be considered not in good
order.
In certain circumstances, Fund trading policies do not apply or may be limited.
For instance:
- Certain types of Financial Intermediaries may not be required to provide us
with shareholder information.
- "Excepted funds" such money market funds and any Fund that affirmatively
permits short-term trading of its securities may opt not to adopt this type
of policy. This type of policy may not apply to any Financial Intermediary
that a Fund treats as a single investor.
- A Fund can decide to exempt categories of Contract holders whose Contracts
are subject to inconsistent trading restrictions or none at all.
- Non-shareholder initiated purchases or redemptions may not always be
monitored. These include Sub-Account transfers that are executed: (i)
automatically pursuant to a company-sponsored contractual or systematic
program such as transfers of assets as a result of "dollar cost averaging"
programs, asset allocation programs, automatic rebalancing programs, annuity
payouts, or systematic withdrawal programs; (ii) as a result of the payment
of a Death Benefit; (iii) as a result of any deduction of charges or fees
under a Contract; or (iv) as a result of payments such as scheduled
contributions, scheduled withdrawals or Surrenders, retirement plan salary
reduction contributions, or planned Premium Payments.
POSSIBILITY OF UNDETECTED ABUSIVE TRADING OR MARKET TIMING. We may not be able
to detect or prevent all abusive trading or market timing activities. For
instance:
- Since we net all the purchases and redemptions for a particular Fund for
this and many of our other products, transfers by any specific market timer
could be inadvertently overlooked.
- Certain forms of variable annuities and types of Funds may be attractive to
market timers. We cannot provide assurances that we will be capable of
addressing possible abuses in a timely manner.
- These policies apply only to individuals and entities that own this Contract
or have the right to make transfers (regardless of whether requests are made
by you or anyone else acting on your behalf). However, the Funds that make
up the Sub-Accounts of this Contract are also available for use with many
different variable life insurance policies, variable annuity products and
funding agreements, and are offered directly to certain qualified retirement
plans. Some of these products and plans may have less restrictive transfer
rules or no transfer restrictions at all.
- In some cases, we are unable to count the number of Sub-Account transfers
requested by group annuity participants co-investing in the same Funds
("Participants") or enforce the Transfer Rule because we do not keep
Participants' account records for a Contract. In those cases, the
Participant account records and Participant Sub-Account transfer information
are kept by such owners or its third party service provider. These owners
and third party service providers may provide us with limited information or
no information at all regarding Participant Sub-Account transfers.
HOW ARE YOU AFFECTED BY FREQUENT SUB-ACCOUNT TRANSFERS?
We are not responsible for losses or lost investment opportunities associated
with the effectuation of these policies. Frequent Sub-Account transfers may
result in the dilution of the value of the outstanding securities issued by a
Fund as a result of increased transaction costs and lost investment
opportunities typically associated with maintaining greater cash positions. This
can adversely impact Fund performance and, as a result, the performance of your
Contract Value. This may also lower the Death Benefit paid to your Beneficiary
or lower Annuity Payouts for your Payee as well as reduce the value of other
optional benefits available under your Contract.
Separate Account investors could be prevented from purchasing Fund shares if we
reach an impasse on the execution of a Fund's trading instructions. In other
words, a Fund complex could refuse to allow new purchases of shares by all our
variable product
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investors if the Fund and we cannot reach a mutually acceptable agreement on how
to treat an investor who, in a Fund's opinion, has violated the Fund's trading
policy.
In some cases, we do not have the tax identification number or other identifying
information requested by a Fund in our records. In those cases, we rely on the
Contract Owner to provide the information. If the Contract Owner does not
provide the information, we may be directed by the Fund to restrict the Owner
from further purchases of Fund shares. In those cases, all participants under a
plan funded by the Contract will also be precluded from further purchases of
Fund shares.
MAIL, TELEPHONE AND INTERNET TRANSFERS
You may make transfers through the mail or your Financial Intermediary. You may
also make transfers by calling us or through our website. Transfer instructions
received by telephone before the end of any Valuation Day will be carried out at
the end of that day. Otherwise, the instructions will be carried out at the end
of the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
us at the time and date stated on the electronic acknowledgement we return to
you. If the time and date indicated on the acknowledgement is before the end of
any Valuation Day, the instructions will be carried out at the end of that
Valuation Day. Otherwise, the instructions will be carried out at the end of the
next Valuation Day. If you do not receive an electronic acknowledgement, you
should contact us as soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly reporting any
inaccuracy or discrepancy to us and your Registered Representative. Any verbal
communication should be re-confirmed in writing.
Telephone or Internet transfer requests may currently only be cancelled by
calling us before the end of the Valuation Day you made the transfer request.
We, our agents or our affiliates are NOT responsible for losses resulting from
telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that Contract Owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We may suspend, modify,
or terminate telephone or electronic transfer privileges at any time.
POWER OF ATTORNEY
You may authorize another person to conduct financial and other transactions on
your behalf by submitting a completed power of attorney form that meets the
power of attorney requirements of your resident state law. Once we have the
completed form on file, we will accept transaction requests, including transfer
instructions, subject to our transfer restrictions, from your designated third
party until we receive new instructions in writing from you.
B. CHARGES AND FEES
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for assuming mortality and expense risks under the
Contract. This charge is deducted from your Sub-Account Value.
The mortality and expense risk charge is broken into charges for mortality risks
and for an expense risk:
- Mortality Risk - There are two types of mortality risks that we assume,
those made while your Premium Payments are accumulating and those made once
Annuity Payouts have begun.
During the accumulation phase of your Contract, we are required to cover any
difference between the Death Benefit paid and the Surrender Value. These
differences may occur in periods of declining value or in periods where any
CDSCs would have been applicable. The risk that we bear during this period is
that actual mortality rates, in aggregate, may exceed expected mortality rates.
Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. The
risk that we bear during this period is that the actual mortality rates, in
aggregate, may be lower than the expected mortality rates.
- Expense Risk - We also bear an expense risk that the sales charges (if
applicable), Distribution Charge (if applicable) and the Annual Maintenance
Fee collected before the Annuity Commencement Date may not be enough to
cover the actual cost of selling, distributing and administering the
Contract.
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Although variable Annuity Payouts will fluctuate with the performance of the
Fund selected, your Annuity Payouts will NOT be affected by (a) the actual
mortality experience of our annuitants, or (b) our actual expenses if they are
greater than the deductions stated in the Contract. Because we cannot be certain
how long our Annuitants will live, we charge this percentage fee based on the
mortality tables currently in use. The mortality and expense risk charge enables
us to keep our commitments and to pay you as planned. If the mortality and
expense risk charge under a Contract is insufficient to cover our actual costs,
we will bear the loss. If the mortality and expense risk charge exceeds these
costs, we keep the excess as profit. We may use these profits, as well as
revenue sharing and Rule 12b-1 fees received from certain Funds, for any proper
corporate purpose including, among other things, payment of sales expenses,
including the fees paid to distributors. We expect to make a profit from the
mortality and expense risk charge.
ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and your Account. The annual charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Account Balance at
either of those times is less than $50,000. The charge is deducted
proportionately from each Sub-Account in which you are invested.
We will waive the Annual Maintenance Fee if your Account Balance is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Owners who own more than
one Contract with a combined Account Balance between $50,000 and $100,000. If
you have multiple Contracts with a combined Account Balance of $100,000 or
greater, we will waive the Annual Maintenance Fee on all Contracts. However, we
may limit the number of waivers to a total of six Contracts. We also may waive
the Annual Maintenance Fee under certain other conditions. We do not include
Contracts from our Putnam Hartford line of variable annuity Contracts with the
Contracts when we combine Account Balance for purposes of this waiver.
ADMINISTRATIVE CHARGE
We apply a daily administration charge against all Contract Values held in the
Separate Account during both the accumulation and annuity phases of the
Contract. This charge compensates us for administrative expenses that exceed
revenues from the Annual Maintenance Fee described above. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
DISTRIBUTION CHARGE
We apply an annual distribution charge against all Remaining Gross Premiums
invested in B share class Contracts (the "Distribution Charge"). The
Distribution Charge will apply to each Premium Payment that has been invested
for eight years or less and will be deducted on each Contract Anniversary. Each
Premium Payment has its own Distribution Charge schedule. The Distribution
Charge will also apply to any partial Surrender in excess of the AWA. The
Distribution Charge is intended to compensate us for a portion of our
acquisition expenses, including promotion and distribution of the Contract. A
proportional Distribution Charge will be deducted upon:
- partial Surrenders in excess of the AWA (partial Surrenders are taken on a
first-in, first-out basis);
- full Surrender;
- full or partial Annuitization, and/or
- the date we receive due proof of death of the Owner, joint Owner, or the
Annuitant and upon a corresponding full Surrender and/or annuitization. Upon
such death, a proportional Distribution Charge will be applied on receipt of
due proof of death and upon a Death Benefit distribution if elected at a
later date.
If a Beneficiary elects to continue under any of the available options described
under the "Standard Death Benefits" section below, we will continue to deduct
the Distribution Charge based on the portion of Remaining Gross Premium
applicable for that Beneficiary. The Distribution Charge is taken proportionally
out of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by
your state (in which event we will deduct the Distribution Charge from other
Sub-Accounts).
PREMIUM TAXES
We deduct Premium taxes, if required, by a state or other government agency.
Some states collect these taxes when Deposits are made; others collect at
annuitization. Since we pay Premium taxes when they are required by applicable
law, we may deduct them from your Contract when we pay the taxes, upon
Surrender, or on the Annuity Commencement Date. The premium tax rate varies by
state or municipality and currently ranges from 0 - 3.5%.
SALES CHARGES
CONTINGENT DEFERRED SALES CHARGES (CDSC) - B AND C SHARE CONTRACTS ONLY
We may deduct a CDSC when you make Surrenders from your Contract. We may also
deduct a CDSC in connection with certain Annuity Payout Options. This charge is
designed to recover the expense of distributing the Contracts that are
surrendered before
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distribution expenses have been recouped from revenue generated by these
Contracts. Each Deposit has its own CDSC schedule. Only amounts invested for
less than the requisite holding period are subject to a CDSC.
In computing the CDSC, Surrenders will be taken:
1st - from the AWA;
2nd - from Contract Value subject to a CDSC on a first-in, first-out basis; and
3rd - from remaining Contract Value.
CDSC is charged based on the type of transaction:
- Partial Surrenders: To calculate the CDSC when you make a partial Surrender,
we apply the applicable CDSC percentage to the amount of the Surrender in
excess of the AWA that is eligible for CDSC.
- Full Surrenders: If you fully Surrender your Contract, we apply the
applicable CDSC percentage to the greater of Contract Value or Remaining
Gross Premiums minus the AWA.
- Annuity Payouts: To calculate the CDSC when you take an Annuity Payout
pursuant to certain Annuity Payout Options, we apply the applicable CDSC to
Commuted Value.
Please refer to Examples 1 through 5 under the Remaining Gross Premium Examples
in Appendix A for an illustration of these computations.
The following are NOT subject to a CDSC:
- Annual Withdrawal Amount (AWA) - During each Contract Year when a CDSC
applies, you may take partial Surrenders up to the greater of:
1. 5% of the total Premium Payments that are otherwise subject to CDSC, or
2. Contract Value minus Remaining Gross Premiums.
We compute the AWA as of the end of the Valuation Day when a partial
Surrender request is received by us in good order. The AWA is calculated
by comparing two values. First, total Premium Payments subject to a CDSC
is multiplied by 5%. Next, the total Remaining Gross Premiums is
subtracted from the Contract Value. The greater of the two calculations
is the applicable AWA at the end of that particular Valuation Day. This
method for calculating CDSCs is used for the current and all future
partial Surrenders. All reductions from your Premium Payments will be
made on a first-in, first-out basis. The financial impact of the CDSC
will be greater during declining market conditions. These amounts are
different for Contracts issued to a Charitable Remainder Trust.
The AWA may vary on a daily basis because of fluctuations in Contract
Value. If you do not take maximum AWA one Contract Year, you may not take
more than the maximum AWA in a subsequent Contract Year. The AWA does not
apply to Personal Pension Account Payouts.
- Transfers from Sub-Accounts or the Fixed Accumulation Feature to the
Personal Pension Account.
- If you are a patient in a certified long-term care facility or other
eligible facility - CDSC will be waived for a partial or full Surrender if
you, the joint Owner or the Annuitant, are confined for at least 180
calendar days to a:
- facility recognized as a general hospital by the proper authority of
the state in which it is located or the Joint Commission on the
Accreditation of Hospitals;
- facility certified as a hospital or long-term care facility; or
- nursing home licensed by the state in which it is located and offers
the services of a registered nurse 24 hours a day.
For this waiver to apply, you must:
- have owned the Contract continuously since it was issued,
- provide written proof of your eligibility satisfactory to us, and
- request the Surrender within 91 calendar days after the last day that
you are an eligible patient in a recognized facility or nursing home.
This waiver is not available if the Owner, the joint Owner or the Annuitant
is in a facility or nursing home when you purchase the Contract. We will
not waive any CDSC applicable to any Premium Payments made while you are in
an eligible facility or nursing home. This waiver can be used any time
after the first 180 days in a certified long-term care facility or other
eligible facility up until ninety days after exiting such a facility. This
waiver may not be available in all states.
- Upon death of the Annuitant or any Contract Owner(s) - CDSC will be waived
if the Annuitant or any Contract Owner(s) dies.
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- Upon Annuitization - CDSC will be waived when you annuitize the Contract.
However, we will charge a CDSC if the Contract is Surrendered during the
CDSC period under an Annuity Payout Option which allows commutation.
- For Required Minimum Distributions - CDSC will be waived for any Annuitant
age 70 1/2 or older with a Contract held under an IRA who Surrenders an
amount equal to the Required Minimum Distribution for one year's required
minimum distribution for that Contract Year. All requests for Required
Minimum Distributions must be in writing.
- For substantially equal periodic payments - CDSC will be waived if you take
partial Surrenders under the Automatic Income Program where you receive a
scheduled series of substantially equal periodic payments for the greater of
five years or to age 59 1/2.
- Upon cancellation during the Right to Cancel Period - CDSC will be waived if
you cancel your Contract during the Right to Cancel Period.
- Exchanges - As an accommodation, we may, in our sole discretion, time-credit
CDSC for the time that you held an annuity previously issued by us.
- Settlements - We may, in our sole discretion, waive or time-credit CDSCs in
connection with the settlement of disputes or if required by regulatory
authorities.
CHARGES AGAINST THE FUNDS
Annual Fund Operating Expenses - The Separate Account purchases shares of the
Funds at net asset value. The net asset value of the Fund reflects investment
advisory fees, distribution fees, operating expenses and administrative expenses
already deducted from the assets of the Funds. These charges are described in
the Funds' prospectuses and the Fee Summary.
REDUCED FEES AND CHARGES
We may offer, in our discretion, reduced fees and charges for certain Contracts
(including employer sponsored savings plans) which may result in decreased costs
and expenses.
C. SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
BEFORE THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - When you Surrender or terminate your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium taxes, CDSCs, a pro-rated portion of optional
benefit charges, if applicable, distribution charges and the Annual Maintenance
Fee. The Surrender Value may be more or less than the amount of the Premium
Payments made to a Contract.
For information on how termination of the Contract impacts the Personal Pension
Account, see "Personal Pension Account" section above.
Partial Surrenders - You may request a partial Surrender of Contract Value at
any time before the Annuity Commencement Date. We will deduct any applicable
CDSC and Distribution Charge. You can ask us to deduct the CDSC and Distribution
Charge from the amount you are Surrendering or from your remaining Contract
Value. If we deduct the CDSC from your remaining Contract Value, that amount
will also be subject to CDSC. This is our default option.
Both full and partial Surrenders of Contract Value are taken proportionally out
of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by your
state.
There are several restrictions on partial Surrenders of Contract Value before
the Annuity Commencement Date:
- the partial Surrender of Contract Value must be at least equal to
$500, and
- your Account Balance must be equal to or greater than our then
current Minimum Amount Rule that we establish according to our then
current policies and procedures. The "Minimum Amount Rule" refers to
the minimum Contract Value that you must maintain within this
Contract. If you fail to comply with the Minimum Amount Rule, we
reserve the right to fully terminate your Contract. The Minimum
Amount Rule varies by share class. Currently the Minimum Amount Rule
for class I share Contracts is $500 and is $2,000 for Class B and C
Shares. We may increase the Minimum Amount Rule from time to time but
in no event shall the Minimum Amount Rule exceed $2,000 (Class I
Shares) or $10,000 (Class B and C Shares).
You may only commute all or a portion of Personal Pension Account Payouts by
following the procedures described below in the "After the Annuity Commencement
Date" section below.
Withdrawals will reduce your standard Death Benefit on a dollar-for-dollar
basis. Please consult with your Registered Representative to be sure that you
fully understand the ways such a decision will affect your Contract.
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AFTER THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - You may Surrender and thus terminate your
Contract on or after the Annuity Commencement Date only if you selected Annuity
Payout Options Two, Three, Five, Six and Eight. IN THE EVENT YOU TAKE A FULL
SURRENDER AND THEREBY TERMINATE YOUR CONTRACT AFTER ELECTING ANNUITY PAYOUT
OPTIONS TWO, THREE, FIVE, OR EIGHT, YOU WILL FORFEIT THE LIFE CONTINGENT
PAYMENTS PAYABLE UNDER THESE OPTIONS. Upon Contract termination, we pay you the
Commuted Value, minus any applicable CDSCs and Premium tax.
Partial Surrenders/Commutation - Partial Surrenders and/or commutation are
permitted after the Annuity Commencement Date if you select the Annuity Payout
Option Two, Three, Five, or Six, or Eight. You may withdraw amounts equal to the
Commuted Value of the payments that we would have made during the Guaranteed
Payout Duration. See Example 4 and footnote 3 under the Personal Pension Account
Examples in Appendix A for an illustration of Personal Pension Account Commuted
Value and the computation of Guaranteed Payout Duration. If you select the
Annuity Payout Options Two or Eight, the Guaranteed Payout Duration will be
equivilant to the Annuity Payout Value divided by the Annuity Payout amount,
rounded down. To qualify under these Annuity Payout Options you must make the
request before the Guaranteed Payout Duration expires. Both full and partial
Surrenders of Contract Value are taken proportionally out of the Sub-Accounts
and the Fixed Accumulation Feature unless prohibited by your state. We will
deduct any applicable CDSCs.
If you elect to withdraw the entire Commuted Value of the Annuity Payouts we
would have made during the Guaranteed Payout Duration, we will not make any
Annuity Payouts during the remaining Guaranteed Payout Duration. If you elect to
withdraw only some of the Commuted Value of the Annuity Payouts we would have
made during the Guaranteed Payout Duration, we will reduce the remaining Annuity
Payouts during the remaining Guaranteed Payout Duration on a first-in, first-out
basis. ONCE THE GUARANTEED PAYOUT DURATION HAS EXPIRED, YOU MAY RESUME RECEIVING
ANNUITY PAYOUTS PROVIDED THAT YOU, A JOINT OWNER OR THE ANNUITANT IS ALIVE AND
YOU HAVE NOT TERMINATED YOUR CONTRACT.
Annuity Payout Options may not be available if the Contract is issued to qualify
under Code Sections 401, 408, or 457.
WHAT IS THE COMMUTED VALUE?
You may choose to accelerate Annuity Payouts under certain Annuity Payout
Options to be received in one lump sum. This is referred to as "commuting" your
Annuity Payout.
The amount that you request to commute must be at least equal to $500. There
will be a waiting period of at least thirty days for payment of any lump sum
commutation.
Upon commutation, the Annuity Payout Value or the remaining Guaranteed Payout
Duration payments, as applicable, will be discounted based on an interest rate
that we determine at our sole discretion (the "discount rate"). The discount
rate may be different than the interest rate used to establish payout rates. We
determine the discount rate based on a number of factors including then current
interest rate(s), investment assumptions and the additional anti-selection and
mortality risk we incur by permitting commutation. The higher the discount rate
and CDSC, the lower the amount that you will receive.
COMMUTED VALUE OF YOUR PERSONAL PENSION ACCOUNT WILL BE LESS THAN YOUR ANNUITY
PAYOUT VALUE. Commutation does not affect resumption of life contingent Personal
Pension Account Payouts at the conclusion of the applicable Guaranteed Payout
Duration.
Commuted Value is determined on the day we receive your written request.
HOW DO YOU REQUEST A SURRENDER?
Requests for full Surrenders terminating your Contract must be in writing.
Requests for partial Surrenders can be made in writing, by telephone or on the
Internet. We will send your money within seven days of receiving complete
instructions. However, we may postpone payment whenever: (a) the New York Stock
Exchange is closed, (b) trading on the New York Stock Exchange is restricted by
the SEC, (c) the SEC permits and orders postponement or (d) the SEC determines
that an emergency exists to restrict valuation.
Written Requests - Complete a Surrender Form or send us a letter, signed by you,
stating:
- the dollar amount that you want to receive, either before or after we
withhold taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
You must complete a Commutation Form to commute any portion of your Personal
Pension Account Annuity Payout Value or receive Commuted Value under applicable
Annuity Payout Options.
If there are joint Owners, both must authorize these transactions. For a partial
Surrender, specify the Sub-Accounts that you want your Surrender to come from
(this may be limited to pro-rata surrenders if optional benefits are elected);
otherwise, the Surrender will be taken in proportion to the value in each
Sub-Account.
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Telephone Requests - To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Owners, both must sign this form. By signing the form, you authorize
us to accept telephone instructions for partial Surrenders from either Owner.
Telephone authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on telephone Surrenders.
Internet Requests - To request a partial Surrender by internet; we must have
received your completed Internet Partial Withdrawal Program Enrollment Form. If
there are joint Owners, both must sign this form. By signing the form, you
authorize us to accept internet instructions for partial Surrenders from either
Owner. Internet authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on Internet Surrenders.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone and Internet Surrender instructions received before the end of a
Valuation Day will be processed at the end of that Valuation Day. Otherwise,
your request will be processed at the end of the next Valuation Day.
Completing a Power of Attorney form for another person to act on your behalf may
prevent you from making Surrenders via telephone and Internet.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders and Personal
Pension Account Payouts. If you make a Surrender or take a Personal Pension
Account Payout prior to age 59 1/2, there may be adverse tax consequences
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment or Personal Pension Account Payout. Taking these actions
before age 59 1/2 may also affect the continuing tax-qualified status of some
Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. CONSULT YOUR PERSONAL TAX ADVISER TO
DETERMINE WHETHER A SURRENDER IS PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX
PENALTY.
More than one Contract owned in the same calendar year - If you own more than
one Contract issued by us or our affiliates in the same calendar year, then
these Contracts may be treated as one Contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date.
Please see "Federal Tax Considerations" and "Information Regarding Tax-Qualified
Retirement Plans" for more information.
D. ANNUITY PAYOUTS
Generally speaking, when you annuitize your Contract, you begin the process of
converting Accumulation Units in what is known as the "payout phase." The payout
phase starts when you annuitize your Contract or with your Annuity Commencement
Date and ends when we make the last payment required under your Contract. You
may take Personal Pension Account Payouts without annuitizing Contract Value.
Once you annuitize your Contract, you may no longer make Personal Pension
Account Contributions. You must commence taking Annuity Payouts no later than
when you reach your Annuity Commencement Date. Funds allocated to the Personal
Pension Account will be paid to you under Annuity Payout Options Two and Eight.
Contract Value can only be annuitized under Annuity Payout Options One, Three,
Four, Five and Six. Please check with your Registered Representative to select
the Annuity Payout Option that best meets your income needs.
WHEN DO YOUR ANNUITY PAYOUTS BEGIN?
Personal Pension Account Payouts may begin at any time but we reserve the right
to require that you own your Contract for at least six months before you start
taking these payments. Contract Value may only be annuitized on the Annuity
Commencement Date.
Your Annuity Commencement Date cannot be earlier than your second Contract
Anniversary if choosing a fixed dollar Annuity Payout. The Annuity Commencement
Date may be immediate if electing a variable dollar amount Annuity Payout. In no
event; however, may the Annuity Commencement Date be later than:
- Annuitant's 90th birthday (or if the Owner is a Charitable Remainder Trust,
the Annuitant's 100th birthday);
- 10th Contract Anniversary (subject to state variation);
- The Annuity Commencement Date stated in an extension request (subject to
your Financial Intermediary's rules for granting extension requests)
received by us not less than 30 days prior to a scheduled Annuity
Commencement Date; or
- The date that you fully annuitize Accumulation Balance (assuming that no
Contract Value exists as of such date). Unless otherwise requested,
commencement of receipt of Personal Pension Account Payouts do not
constitute an Annuity Commencement Date.
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We reserve the right, in our sole discretion, to refuse to extend your Annuity
Commencement Date regardless of whether we may have granted extensions in the
past to you or other similarly situated investors. Your Financial Intermediary
may ask us to prohibit Annuity Commencement Date extensions beyond when the
Annuitant turns age 95. Please ask your Registered Representative whether you
are affected by any such prohibition and make sure that you fully understand the
implications this might have in regard to your Death Benefits.
Except as otherwise provided, the Annuity Calculation Date is when the amount of
your Annuity Payout is determined. This occurs within five Valuation Days before
your selected Annuity Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. We may at
times offer other Annuity Payout Options. We may change these Annuity Payout
Options at any time. Once we begin to make Annuity Payouts, the Annuity Payout
Option with respect to that portion of your Contract cannot be changed.
- OPTION ONE - LIFE ANNUITY
We make Annuity Payouts as long as the Annuitant is living. When the Annuitant
dies, we stop making Annuity Payouts. A Payee would receive only one Annuity
Payout if the Annuitant dies after the first payout, two Annuity Payouts if the
Annuitant dies after the second payout, and so forth.
- OPTION TWO - LIFE ANNUITY WITH A CASH REFUND
In general, we will make Annuity Payouts as long as the Annuitant is living.
However, when the Owner or joint Owner dies before the Annuity Commencement Date
(and the Annuitant is living or deceased), the Death Benefit will be paid
according to the standard Death Benefit rules. When the Annuitant dies after the
Annuity Commencement Date (and the Owner is living or deceased), then the
Beneficiary will receive the Death Benefit according to the standard Death
Benefit rules and Annuity Payouts cease.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
- OPTION THREE - LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as the Annuitant is living, but we at least
guarantee to make Annuity Payouts for a time period you select, between 5 years
and 100 years minus the Annuitant's age. If the Annuitant dies before the
guaranteed number of years has passed, then the Beneficiary may elect to
continue Annuity Payouts for the remainder of the guaranteed number of years or
receive the Commuted Value in one sum.
- OPTION FOUR - JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts until that
second Annuitant dies. When choosing this option, you must decide what will
happen to the Annuity Payouts after the first Annuitant dies. You must select
Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
- OPTION FIVE - JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A
PERIOD CERTAIN
We will make Annuity Payouts as long as either the Annuitant or Joint Annuitant
are living, but we at least guarantee to make Annuity Payouts for a time period
you select, between 5 years and 100 years minus your younger Annuitant's age. If
the Annuitant and the Joint Annuitant both die before the guaranteed number of
years have passed, then the Beneficiary may continue Annuity Payouts for the
remainder of the guaranteed number of years or receive the Commuted Value in one
sum.
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When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed dollar amount Annuity Payouts, these percentages represent
actual dollar amounts. The percentage will also impact the Annuity Payout amount
we pay while both Annuitants are living. If you pick a lower percentage, your
original Annuity Payouts will be higher while both Annuitants are alive.
- OPTION SIX - PAYMENTS FOR A PERIOD CERTAIN
We agree to make payments for a specified time. The minimum period that you can
select is 10 years during the first two Contract Years and 5 years after the
second Contract Anniversary. The maximum period that you can select is 100 years
minus your Annuitant's age. If, at the death of the Annuitant, Annuity Payouts
have been made for less than the time period selected, then the Beneficiary may
elect to continue the remaining Annuity Payouts or receive the Commuted Value in
one sum. You may not choose a fixed dollar amount Annuity Payout during the
first two Contract Years.
- OPTION SEVEN - RESERVED
- OPTION EIGHT - JOINT AND LAST SURVIVOR LIFE WITH CASH REFUND (NOT CURRENTLY
AVAILABLE)
In general, we will make Annuity Payouts as long as the Owner, and either
Annuitant or Joint Annuitant are living. When the Owner dies before the Annuity
Commencement Date (and the Annuitant or Joint Annuitant is living or deceased),
then the Death Benefit is paid according to the standard Death Benefit rules.
If death occurs after the Annuity Commencement Date, we will make Annuity
Payouts as long as either the Annuitant or the Joint Annuitant is living. When
one Annuitant dies, we continue to make Annuity Payouts at the elected
percentage until the second Annuitant dies. When the last Annuitant dies, then
the Death Benefit is paid according to the standard Death Benefit rules.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 75%, or
- Decrease to 50%.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
YOU CANNOT TERMINATE YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED ANNUITY PAYOUT OPTIONS TWO, THREE, FOUR, FIVE, SIX OR EIGHT. A CDSC, IF
APPLICABLE, MAY BE DEDUCTED.
Annuity Payout Option Two is only available for Personal Pension Account Payouts
from the Personal Pension Account. Annuity Payout Options One, Three, Four, Five
and Six are only available for Annuity Payouts from the Fixed Accumulation
Feature or Sub-Accounts. Annuity Payout Option Eight is only available for
Personal Pension Account Payouts from the Personal Pension Account and is not
currently available.
For certain qualified Contracts, if you elect an Annuity Payout Option with a
Period Certain, the guaranteed number of years must be less than the life
expectancy of the Annuitant at the time the Annuity Payouts begin. We compute
life expectancy using the IRS mortality tables.
AUTOMATIC ANNUITY PAYOUTS
If you do not elect an Annuity Payout Option, monthly Annuity Payouts will
automatically begin on the Annuity Commencement Date under Annuity Payout Option
Three. Automatic Annuity Payouts will be fixed dollar amount Annuity Payouts,
variable dollar amount Annuity Payouts, or a combination of fixed or variable
dollar amount Annuity Payouts, depending on the investment allocation of your
Account in effect on the Annuity Commencement Date. Automatic variable Annuity
Payouts will be based on an Assumed Investment Return equal to five (5%)
percent.
HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- monthly,
- quarterly,
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- semi-annually, or
- annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50.
DO YOU WANT ANNUITY PAYOUTS TO BE FIXED DOLLAR AMOUNT OR VARIABLE DOLLAR AMOUNT?
You may choose an Annuity Payout Option with fixed dollar amounts or variable
dollar amounts, depending on your income needs. You may not choose a fixed
dollar amount Annuity Payout during the first two Contract Years. If you elect
the Personal Pension Account, your Annuity Payout Option may only be a fixed
dollar amount.
- FIXED DOLLAR AMOUNT ANNUITY PAYOUTS
Once a fixed dollar amount Annuity Payout begins, you cannot change your
selection to receive variable dollar amount Annuity Payouts. You will receive
equal fixed dollar amount Annuity Payouts throughout the Annuity Payout period.
Fixed dollar amount Annuity Payout amounts are determined by multiplying the
Contract Value, minus any applicable Premium taxes, by an annuity rate set by
us. Annuity purchase rates may vary based on the aspect of the Contract
annuitized.
- VARIABLE DOLLAR AMOUNT ANNUITY PAYOUTS
Once a variable dollar amount Annuity Payout begins, you cannot change your
selection to receive a fixed dollar amount Annuity Payout. A variable dollar
amount Annuity Payout is based on the investment performance of the
Sub-Accounts. The variable dollar amount Annuity Payouts may fluctuate with the
performance of the Funds. To begin making variable dollar amount Annuity
Payouts, we convert the first Annuity Payout amount to a set number of Annuity
Units and then price those units to determine the Annuity Payout amount. The
number of Annuity Units that determines the Annuity Payout amount remains fixed
unless you transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable),
- the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table adjusted for projections based on accepted actuarial
principles; and
- the Assumed Investment Return ("AIR").
The total amount of the first variable dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable dollar amount Annuity Payout is
equal to the total of Annuity Units for each Sub-Account multiplied by the
Annuity Unit Value of each Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit Factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period. The Annuity Unit Factor offsets the
AIR used to calculate your first variable dollar amount Annuity Payout.
The first Annuity Payout will be based upon the AIR. The remaining Annuity
Payouts will fluctuate based on the performance of the Funds in relation to the
AIR. The degree of the fluctuation will depend on the AIR you select.
You can select one of the following AIRs offered, subject to state variations:
ANNUITY ANNUITY ANNUITY
AIR UNIT FACTOR AIR UNIT FACTOR AIR UNIT FACTOR
-------------------------------------------------------------------
3% 0.999919% 5% 0.999866% 6% 0.999840%
The greater the AIR, the greater the initial Annuity Payout. But a higher AIR
may result in a smaller potential growth in future Annuity Payouts when the
Sub-Accounts earn more than the AIR. On the other hand, a lower AIR results in a
lower initial Annuity Payout, but future Annuity Payouts have the potential to
be greater when the Sub-Accounts earn more than the AIR.
For example, if the Sub-Accounts earned exactly the same as the AIR, then the
second monthly Annuity Payout is the same as the first. If the Sub-Accounts
earned more than the AIR, then the second monthly Annuity Payout is higher than
the first. If the Sub-Accounts earned less than the AIR, then the second monthly
Annuity Payout is lower than the first.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR. The
degree of variation depends on the AIR you select.
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After the Annuity Calculation Date, you may transfer dollar amounts of Annuity
Units from one Sub-Account to another. On the day you make a transfer, the
dollar amounts are equal for both Sub-Accounts and the number of Annuity Units
will be different. We will transfer the dollar amount of your Annuity Units the
day we receive your written request if received before the close of the New York
Stock Exchange. Otherwise, the transfer will be made on the next Valuation Day.
All Sub-Account transfers must comply with applicable transfer restriction
policies.
- COMBINATION ANNUITY PAYOUT
You may choose to receive a combination of fixed dollar amount and variable
dollar amount Annuity Payouts as long as they total 100% of your Annuity Payout.
For example, you may choose to use forty (40%) percent fixed dollar amount and
sixty (60%) percent variable dollar amount to meet your income needs.
Combination Annuity Payouts are not available during the first two Contract
Years.
E. STANDARD DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The standard Death
Benefit is equal to your Account Balance (less Distribution Charge) calculated
as of the Valuation Day when we receive a certified death certificate or other
legal document acceptable to us. The calculated Death Benefit will remain
invested according to the Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. This means the Death
Benefit amount will fluctuate with the performance of the Account. When there is
more than one Beneficiary, we will calculate the Accumulation Units for each
Sub-Account and the dollar amount for the Fixed Accumulation Feature and
Personal Pension Account for each Beneficiary's portion of the proceeds.
We reserve the right to treat all deferred variable annuities that you buy from
us or our affiliates as a single contract for the purposes of determining your
total Death Benefits. These limits will be applied if you have $5 million or
more in total aggregate Account Balance. If applicable, the aggregate limit on
total Death Benefits payable by us or our affiliates will never exceed a maximum
of:
- $5 million of aggregate Deposits, as adjusted for partial Surrenders (for
e.g., dollar-for-dollar or proportional and Personal Pension Account Payouts
under all applicable contracts and associated riders; or
- Account Balance plus $1 million.
Please see the heading entitled "What kinds of Surrenders are available? -
Before the Annuity Commencement Date" under the Surrenders section and "What
effect does partial or full Surrenders have on your benefits under the rider?"
in the Return of Premium Death Benefit section for a discussion regarding when
partial Surrenders reduce your Death Benefit on either a dollar-for-dollar or
proportionate basis. Taking excess partial Surrenders may significantly
negatively affect your Death Benefit. Please consult with your Registered
Representative before making excess partial Surrenders to be sure that you fully
understand the ways such a decision will affect your Contract.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Death Benefit payment is $5,000 or more, the Beneficiary may elect to
have their Death Benefit paid through our "Safe Haven Program." Under this
program, the proceeds remain in our General Account and the Beneficiary will
receive a draft book. The Beneficiary can write one draft for total payment of
the Death Benefit, or keep the money in the General Account and write drafts as
needed. We will credit interest at a rate determined periodically in our sole
discretion. For federal income tax purposes, the Beneficiary will be deemed to
have received the lump sum payment on transfer of the Death Benefit amount to
the General Account. The interest will be taxable to the Beneficiary in the tax
year that it is credited. We may not offer the Safe Haven Program in all states
and we reserve the right to discontinue offering it at any time. Although there
are no direct charges for this program, we earn investment income from the
proceeds. The investment income we earn is likely more than the amount of
interest we credit; therefore, we make a profit from the difference.
The Beneficiary may elect to leave proceeds from the Death Benefit invested with
us for up to five years from the date of death of the Annuitant or Owner if
death occurred before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers (subject to applicable restrictions) and (b)
take Surrenders without paying CDSCs, if any. The Beneficiary may not make
Personal Pension Account Contributions. We shall endeavor to fully discharge the
last instructions from the Owner wherever possible or practical.
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The Beneficiary of a non-qualified Contract or IRA (prior to the required
distribution date) may also elect an annuity option that allows the Beneficiary
to take the Death Benefit in a series of payments spread over a period equal to
the Beneficiary's remaining life expectancy. Distributions are calculated based
on IRS life expectancy tables. This option is subject to different limitations
and conditions depending on whether the Contract is non-qualified or an IRA.
If the Owner dies before the Annuity Commencement Date, the Death Benefit must
be distributed within five years after death or be distributed under a
distribution option or Annuity Payout Option that satisfies the Alternatives to
the Required Distributions described below.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining value must be distributed at least
as rapidly as under the payment method being used as of the Owner's death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date.
If death occurs on or after the Annuity Commencement Date, there may be no
payout at death unless the Owner has elected an Annuity Payout Option that
permits the Beneficiary to elect to continue Annuity Payouts or receive the
Commuted Value.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
Owner There is a surviving joint The Annuitant is living or Joint Owner receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Beneficiary receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Owner's estate receives the
Owner and the Beneficiary deceased Death Benefit.
predeceases the Owner
Annuitant The Owner is living There is no named Contingent The Owner becomes the
Annuitant Contingent Annuitant and the
Contract continues. The Owner
may waive this presumption and
receive the Death Benefit.
Annuitant The Owner is living The Contingent Annuitant is Contingent Annuitant becomes
living the Annuitant, and the Contract
continues.
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
Owner The Annuitant is living Beneficiary becomes the Owner.
Annuitant The Owner is living Owner receives the payout at death.
Annuitant The Annuitant is also the Owner Beneficiary receives the payout at
death.
THESE ARE THE MOST COMMON SCENARIOS. SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT
RESULT IN A PAYOUT AT DEATH.
5. RETURN OF PREMIUM DEATH BENEFIT
OBJECTIVE
To provide a Death Benefit that we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The Death Benefit that
we will pay under this rider is in addition to your Personal Pension Account
Death Benefit.
WHEN CAN YOU BUY THE RIDER?
You can currently elect this benefit (called a "rider") only at the time that
you buy this Contract. This rider may not be available through all Registered
Representatives and may be subject to additional restrictions set by your
Registered Representative or us. We reserve the right to withdraw this rider at
any time. The maximum age of any Owner or Annuitant when electing this rider is
80.
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DOES ELECTING THIS RIDER FORFEIT YOUR ABILITY TO BUY OTHER RIDERS?
No.
HOW IS THE CHARGE FOR THIS RIDER CALCULATED?
The fee for the rider is based on Premium Payments, as adjusted for Surrenders
(as well as Benefit Balance transferred to Contract Value), as of each Contract
Anniversary. In the event of a change in ownership or upon Spousal Contract
continuation, the fee for the rider will be based on the Contract Value on the
date of any such change plus Premium Payments received after such date, as
adjusted for Surrenders. This charge will automatically be deducted from your
Contract Value on your Contract Anniversary prior to all other financial
transactions. A prorated charge will be deducted in the event of a full
Surrender of this Contract or this rider. The charge for the rider will be
withdrawn from each Sub-Account and the Fixed Accumulation Feature in the same
proportion that the value of each Sub-Account bears to the total Contract Value.
Except as otherwise provided below, we will continue to deduct this charge until
we begin to make Annuity Payouts or the rider is terminated. The rider charge
may limit access to the Fixed Accumulation Feature in certain states.
We reserve the right to change the rider charge up to the maximum fee described
in the Fee Summary at any time without notice. The rider charge may increase for
new investors. The rider charge may also prospectively increase upon certain
ownership changes or upon Spousal Contract continuation. We reserve the right to
charge a different rider charge based on your participation in approved
investment options.
IS THIS RIDER DESIGNED TO PAY YOU DEATH BENEFITS?
Yes. This Death Benefit is equal to the higher of Contract Value (minus
Distribution Charges) or Premium Payments, as adjusted for Surrenders. See
Example 1 under The Hartford's Return of Premium Death Benefit Examples in
Appendix A. In addition to this Death Benefit, you may also be entitled to
receive the Personal Pension Account Death Benefit which is equal to your
Benefit Balance. EVEN THOUGH YOUR BENEFIT BALANCE IS NOT SUBJECT TO PRINCIPAL
PROTECTION UNDER THIS RIDER, ANY PORTIONS OF YOUR BENEFIT BALANCE TRANSFERRED TO
SUB-ACCOUNTS AND/OR THE FIXED ACCUMULATION FEATURE ARE ALSO CONSIDERED TO BE
PART OF THE CONTRACT VALUE USED TO COMPUTE THIS DEATH BENEFIT. See Example 2
under The Hartford's Return of Premium Death Benefit Examples in Appendix A.
We calculate the Death Benefit when, and as of the Valuation Day, we receive a
certified death certificate or other legal document acceptable to us. The
calculated Death Benefit will remain invested according to the Owner's last
instructions until we receive complete written settlement instructions from the
Beneficiary. This means the Death Benefit amount will fluctuate with the
performance of the Account. When there is more than one Beneficiary, we will
calculate the Accumulation Units for each Sub-Account and the dollar amount for
the Fixed Accumulation Feature for each Beneficiary's portion of the proceeds.
Termination of this rider will result in the rescission of this Death Benefit
and result in your Beneficiary receiving the standard Death Benefit.
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining Contract Value must be distributed
at least as rapidly as under the payment method being used as of the Owner's
death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date. Please refer to the discussion under the caption "Who
will receive the Death Benefit" under Standard Death Benefits for more
information.
DOES THIS RIDER REPLACE THE STANDARD DEATH BENEFIT?
Yes.
CAN YOU TERMINATE THIS RIDER?
Yes. At anytime following the earliest of the fifth anniversary of the rider
effective date or Spousal Contract continuation, the Contract Owner may elect to
terminate this rider. If this rider is terminated, then a pro-rated rider charge
will be assessed on the termination date, and will no longer be assessed
thereafter. The Death Benefit will be reset to the standard Death Benefit. No
other optional benefit may be elected following the termination. A
Company-sponsored exchange of this rider will not be considered to be a
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termination by you of the rider. This rider will also terminate upon election of
a Death Benefit option (described in the "Standard Death Benefit" section) by
the Beneficiary (excluding Spousal Contract continuation).
WHAT EFFECT DOES PARTIAL OR FULL SURRENDERS HAVE ON YOUR BENEFITS UNDER THE
RIDER?
We calculate the adjustment to your aggregate Premium Payments for any Surrender
by reducing your aggregate Premium Payments on a dollar-for-dollar basis for any
Surrender within a Contract Year up to the Death Benefit withdrawal limit. The
"Death Benefit withdrawal limit" is five (5%) percent of aggregate Premium
Payments. If a change of ownership occurs or if Spousal Contract continuation is
elected, the Death Benefit withdrawal limit will be five (5%) percent of
Contract Value as of the date of such change plus Premium Payments made after
such date. For purposes of this rider, a Surrender also includes a transfer of
Contract Value to Benefit Balance. Any partial Surrender that causes cumulative
Surrenders during the Contract Year to exceed the Death Benefit withdrawal
limit, even if less than your permissible AWA (provided that such Surrender was
not made in accordance with our Automatic Income program for the purposes of
meeting Required Minimum Distribution requirements), will cause a proportionate
reduction in your Death Benefit. Partial Surrenders up to, but not in excess of
the Death Benefit withdrawal limit (assuming no ownership changes) will reduce
your Death Benefit on a dollar-for-dollar basis. Any and all partial Surrenders
in excess of your Death Benefit withdrawal limit, whether individually or in the
aggregate, will reduce your Death Benefit on a proportionate basis based on a
factor equal to 1 minus the excessive partial Surrender (which is the amount of
the Surrender in excess of the Death Benefit withdrawal limit) divided by the
sum of (i) Contract Value prior to such partial Surrender minus (ii) any
remaining Death Benefit withdrawal limit. Taking excess partial Surrenders may
significantly negatively affect your Death Benefit. Please consult with your
Registered Representative before making excess partial Surrenders to be sure
that you fully understand the ways such a decision will affect your Contract.
See Example 1 under the Return of Premium Examples in Appendix A for an
illustration of this calculation.
WHAT HAPPENS IF YOU CHANGE OWNERSHIP?
We reserve the right to approve all ownership changes. Certain approved changes
in ownership before the Annuity Commencement Date may cause a re-calculation of
the Death Benefit.
Any ownership change made within the first six months from the Contract issue
date (if prior to the Annuity Commencement Date) will have no impact on the
rider values as long as each succeeding Owner is less than the maximum rider age
limitation at the time of the change. We reserve the right to require you to
reallocate investments according to then applicable investment restrictions in
the event of an ownership change after six months from the rider's effective
date.
An ownership change made after the first six months of the Contract issue date
(if prior to the Annuity Commencement Date) will cause a reset of these
benefits. If the rider is not available for sale at the time of the ownership
change, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
If the rider is currently available for sale on the date of the ownership
change, we will continue the existing rider with respect to all benefits at the
rider charge currently being assessed on new sales (or the last declared maximum
rider fee).The Death Benefit will be recalculated to the lesser of the Contract
Value or the Death Benefit on the effective date of the ownership change.
If the oldest Owner after the change is greater than the age limitation of the
rider as of the trade date of the change, then we will terminate this rider
whereupon the Death Benefit will be reset to the standard Death Benefit. A final
pro-rated rider charge will be assessed on the termination date, and then will
no longer be assessed.
CAN YOUR SPOUSE CONTINUE YOUR DEATH BENEFIT?
Yes. If the Owner dies and the sole Beneficiary is the deceased Owner's Spouse
at the time of death, that Spouse may continue the Contract and this rider, if
then available. This right may be exercised only once during the term of the
Contract.
If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is not available
for sale, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is still
available for sale, the Death Benefit will be increased to the Contract Value if
higher than the Death Benefit as of the date of due proof of death and will
serve as the new basis for the benefit. The rider charge will be reset to the
rider charge then being assessed for new sales of the rider.
If the new Owner is age 81 or older at the time of the Spousal Contract
continuation, we will terminate this rider whereupon the Death Benefit will be
reset to the standard Death Benefit. A final pro-rated rider charge will be
assessed on the termination date and then will no longer be assessed.
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WHAT HAPPENS IF YOU ANNUITIZE YOUR CONTRACT?
Except as otherwise provided, if you elect to annuitize your Contract prior to
reaching the Annuity Commencement Date, you may only annuitize your Contract
Value. If your Contract reaches the Annuity Commencement Date, the Contract must
be annuitized unless we agree to extend the Annuity Commencement Date, in our
sole discretion. In this circumstance, the Contract may be annuitized under our
standard annuitization rules. This rider terminates once an Annuity Payout
Option is elected.
ARE THERE RESTRICTIONS ON HOW YOU MUST INVEST?
Yes. You may allocate your Contract Value to any Sub-Accounts(s), asset
allocation models, investment programs, fund of funds Sub-Accounts(s) or other
investment option(s) or you may design your own portfolio, provided that your
Fund selections comply with the investment restrictions in the following table:
CLASSIFICATION ALLOCATION
--------------------------------------------------------------------------------
Fixed investments Funds Minimum of 30% - to a maximum of 100%
Equity Investments - Maximum of 70%
- No more than 20% may be invested in
any one Fund in this category
Limited Investments Maximum of 20%
Multi-Asset Investments - Minimum of 0% - to a maximum of 100%
- May not be combined with Funds in the
above classifications
Please refer to Appendix C for the classification associated with each currently
offered Fund. Investing in the Personal Pension Account and Fixed Accumulation
Feature do not constitute a violation of these investment restrictions.
Not all asset allocation models, Funds or programs are available through all
Financial Intermediaries. The Personal Pension Account and Fixed Accumulation
Feature are not included within any classification.
We may, in our sole discretion, add, replace or delete Funds, programs,
classifications, allocations and asset allocation models from time to time. Not
all asset allocation models, Funds or programs are available through all
Financial Intermediaries. You will be provided with advance notification of any
investment restriction changes and you must invest any subsequent Premium
Payments in accordance with such updated investment restrictions.
You must participate in an asset rebalancing program. If on any Valuation Day,
your Contract Value is no longer invested within the permissible allocations in
the table above as a result of market fluctuations, we will not terminate the
rider. Instead, your Contract Value will be rebalanced quarterly in accordance
with your last compliant allocation instructions. All subsequent Premium
Payments must also be invested according to the classifications described in
this section.
YOU MAY PROVIDE INVESTMENT INSTRUCTIONS TO INVEST CONTRACT VALUE IN A MANNER
THAT VIOLATES THESE INVESTMENT RESTRICTIONS. ANY SUCH ACTION WILL, HOWEVER,
RESULT IN THE TERMINATION OF THIS RIDER. WE WILL NOT ACCEPT INSTRUCTIONS TO
VIOLATE THE INVESTMENT RESTRICTIONS FROM YOUR REGISTERED REPRESENTATIVE.
VIOLATING THESE INVESTMENT RESTRICTIONS SHALL RESULT IN THE TERMINATION OF YOUR
DEATH BENEFIT UNDER THIS RIDER.
If this rider is terminated due to failure to comply with the investment
restrictions, you will have a one time opportunity to reinstate the Death
Benefit. You will be notified in your confirmation statement that you have
violated these investment restrictions. The thirty calendar day reinstatement
period will begin from the date this rider is terminated. Your opportunity to
reinstate will be terminated if during the reinstatement period you make a
subsequent Premium Payment, take a partial Surrender, or make an ownership
change.
UPON REINSTATEMENT OF YOUR RIDER, YOUR PREMIUM PAYMENT WILL BE RESET AT THE
LOWER OF THE DEATH BENEFIT PRIOR TO THE REVOCATION OR CONTRACT VALUE AS OF THE
DATE OF THE REINSTATEMENT. WE WILL DEDUCT A PRORATED RIDER CHARGE ON YOUR
CONTRACT ANNIVERSARY FOLLOWING THE REINSTATEMENT FOR THE TIME PERIOD BETWEEN THE
REINSTATEMENT DATE AND YOUR FIRST CONTRACT ANNIVERSARY FOLLOWING THE
REINSTATEMENT. VIOLATION OF THESE INVESTMENT RESTRICTIONS COULD RESULT IN A
SERIOUS EROSION OF THE VALUE IN THIS RIDER.
We are not responsible for lost investment opportunities associated with the
implementation of these investment restrictions.
ARE THERE RESTRICTIONS ON THE AMOUNT OF SUBSEQUENT PREMIUM PAYMENTS?
Yes. We reserve the right to require our approval on all subsequent Premium
Payments received after the first twelve months. We may not accept any
subsequent Premium Payment which brings the total of such cumulative subsequent
Premium Payments in excess of $100,000 without prior approval. Following your
Annuity Commencement Date, we will no longer accept subsequent Premium Payments.
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CAN WE AGGREGATE CONTRACTS?
Yes. We reserve the right to treat all deferred variable annuities that you buy
from us or our affiliates where you have elected any optional death benefit
rider as a single contract for the purposes of determining your total Death
Benefits. These limits will be applied if you make $5 million or more in total
aggregate Deposits. If applicable, the aggregate limit on total Death Benefits
payable by us or our affiliates will never exceed a maximum of:
- $5 million of Deposits (as reduced by an adjustment for Surrenders), or
- Account Balance plus $1 million.
Any reduction in Death Benefits will be in proportion to the Contract Value of
each deferred variable annuity at the time of reduction.
OTHER INFORMATION
The rider may not be appropriate for all investors. Several factors, among
others, should be considered:
- The benefits under the rider cannot be directly or indirectly assigned,
collateralized, pledged or securitized in any way. Any such actions will
invalidate the rider and allow us to terminate the rider.
- We may terminate this rider based upon the following conditions: Spousal
Contract continuation, ownership changes, assignment and/or violation of the
investment restrictions. If we terminate the rider, it cannot be re-elected
by you.
- The selection of an Annuity Payout Option and the timing of the selection
may have an impact on the tax treatment of the Death Benefit. To receive
favorable tax treatment, the Annuity Payout Option selected: (a) cannot
extend beyond the Beneficiary's life or life expectancy, and (b) must begin
within one year of the date of death. If these conditions are not met, the
Death Benefit will be treated as a lump sum payment for tax purposes. This
sum will be taxable in the year in which it is considered received.
- Upon Spousal Contract continuation or ownership change, the Death Benefit
withdrawal limit upon which we reduce the Death Benefit will be adjusted to
equal five (5%) percent of the Contract Value as of the date of such change
plus Premium Payments received after such date.
- If the Owner dies and the sole Beneficiary is the Owner's Spouse, then the
Contract may continue with the Spouse as Owner through a Spousal Contract
continuation election, unless the Spouse elects to receive the Death Benefit
as a lump sum payment or as an Annuity Payout Option. If the Contract
continues with the Spouse as Owner, we will adjust the Contract Value to the
amount that we would have paid as the Death Benefit payment, had the Spouse
elected to receive the Death Benefit as a lump sum payment. Spousal Contract
continuation will only apply one time for each Contract. If you do not name
another Beneficiary at the time of continuation, the Beneficiary will
default to your estate.
- Participation in an automatic investment or income program may result in a
transaction during the reinstatement period causing you to lose your right
to reinstate the Death Benefit.
6. FURTHER INFORMATION
A. GLOSSARY
Except as provided elsewhere in this prospectus, the following capitalized terms
shall have the meaning ascribed below:
ACCOUNT: Any of the Sub-Accounts or the Fixed Accumulation Feature.
ACCOUNT BALANCE: The sum of your Contract Value and Benefit Balance (this term
is also referred to as the "Total Balance" in your Contract and marketing
materials).
ACCUMULATION BALANCE - The sum of all Personal Pension Account Contributions
increased by credited interest; minus any transfers into any other Account(s)
and any conversion into Annuity Payout Value.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert Premium Payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate Contract Value prior to Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE: Our overnight mailing address is: 1 Griffin Road North,
Windsor, CT 06095-1512. Our standard mailing address is: P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNUAL MAINTENANCE FEE: An annual charge deducted on a Contract Anniversary or
upon full Surrender.
ANNUAL WITHDRAWAL AMOUNT (AWA): The amount you may Surrender each Contract Year
without incurring a CDSC.
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ANNUITANT: The person on whose life the Contract is issued. Except as otherwise
provided, the Annuitant may not be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY COMMENCEMENT DATE: The first day of the first period for which a
distribution is received as an Annuity Payout under the Contract.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select. Annuity Payout also refers to Personal
Pension Account Payouts.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date, the death of the Contract Owner or Annuitant; or
annuitization(s) of Benefit Balance.
ANNUITY PAYOUT VALUE: The portion of your Benefit Balance converted into
Personal Pension Account Payouts, as reduced by future Personal Pension Account
Payouts.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive benefits pursuant to the terms of
the Contract upon the death of any Contract Owner or Annuitant, as the case may
be.
BENEFIT BALANCE: Personal Pension Account Contributions, as adjusted for
transfers to or from Contract Value, credited interest and/or annuitization.
Benefit Balance includes Annuity Payout Value, if any.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any Annuity Payout due and payable during
the Guaranteed Payout Duration. This amount is calculated using the Assumed
Investment Return for variable dollar amount Annuity Payouts and the applicable
discount rate determined by us for applicable fixed dollar amount Annuity
Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE (CDSC): The deferred sales charge, if
applicable, that may apply when you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals may receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT OWNER, OWNER OR YOU: The owner or holder of the Contract described in
this prospectus including any joint Owner(s). We do not capitalize "you" in the
prospectus.
CONTRACT VALUE: The total value of the Account on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: Except as otherwise provided, the amount payable if the Contract
Owner, joint Contract Owner or the Annuitant dies before the Annuity
Commencement Date.
DEPOSIT: The sum of allPremium Payments and Personal Pension Account
Contributions.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, the Fixed
Accumulation Feature may be called the Fixed Account. Not all classes of
Contracts we offer contain a Fixed Accumulation Feature.
FUND: A registered investment company or a series thereof in which assets of a
Sub-Account may be invested. We sometimes call the Funds you select a
"Sub-Account".
GUARANTEED PAYOUT DURATION: The time period (sometimes referred to as a "Period
Certain") specified in Annuity Payout Options Three, Five and Six; and with
respect to Annuity Payout Options Two and Eight, the time period equal to the
applicable Annuity Payout Value divided by the corresponding Personal Pension
Account Payout, rounded down.
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JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
1933 ACT: The Securities Act of 1933, as amended.
1934 ACT: The Securities Exchange Act of 1934, as amended.
1940 ACT: The Investment Company Act of 1940, as amended.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PERSONAL PENSION ACCOUNT CONTRIBUTIONS: Sums allocated to the Personal Pension
Account (after deduction of front-end sales charges, if applicable). Personal
Pension Account Contributions may take the form of Deposits or transfers of
Contract Value from Sub-Accounts or the Fixed Accumulation Feature (if
applicable).
PERSONAL PENSION ACCOUNT PAYOUTS: Regularly scheduled periodic payments of
Annuity Payout Value.
PREMIUM OR PREMIUM PAYMENT: Money sent to us to be invested in your Contract
(not taking into consideration any applicable sales charges). Unless otherwise
specified, a Premium Payment does not include Personal Pension Account
Contributions. Portions of your Benefit Balance transferred to Sub-Accounts
and/or the Fixed Accumulation Feature are initially considered to be Premium
Payments that become part of your Contract Value.
REMAINING GROSS PREMIUM: Premium Payments minus prior partial Surrenders in
excess of the AWA at the time of such partial Surrender.
SPOUSE: A person related to a Contract Owner by marriage pursuant to the Code.
SUB-ACCOUNT: A division of the Separate Account containing shares of a Fund.
There is a Sub-Account for each Fund. We sometimes call the Funds you select
your "Sub-Account".
SUB-ACCOUNT VALUE: The value of each Sub-Account on or before the Annuity
Calculation Date, which is determined on any day by multiplying the number of
Accumulation Units by the Accumulation Unit Value for each Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract. For the purposes
of optional riders only, a Surrender may also include a transfer of Contract
Value to Benefit Balance.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges (subject to rounding). Surrender Value does not
include the Commuted Value of your Personal Pension Account.
TARGET INCOME AGE - The year when Personal Pension Account Payouts are likely to
commence. Target Income Age establishes a 7-year guarantee window (three years
before and after) during which a guaranteed payout rate will be applied to your
Accumulation Balance.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange. The Exchange generally closes at 4:00 p.m. Eastern Time but may close
earlier on certain days and as conditions warrant.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
WE, US OR OUR: Hartford Life and Annuity Insurance Company or Hartford Life
Insurance Company, as the case may be.
YOU: The Owner including any joint Owner(s). We do not capitalize "you" or
"your" in this prospectus.
B. STATE VARIATIONS
The following section describes modifications to this prospectus required by one
or more state insurance departments as of the date of this prospectus. Unless
otherwise noted, variations apply to all forms of Contracts we issue. References
to certain state's variations do not imply that we actually offer Contracts in
each such state. These variations are subject to change without notice and
additional variations may be imposed as specific states approve new riders.
ALABAMA - The Fixed Accumulation Feature is not available. The DCA Plus Fixed
Accumulation Feature is available.
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CALIFORNIA - If you are 60 years old or older you must either elect the Senior
Protection Program, or elect to immediately allocate the initial Premium
Payments to the other investment options. Under the Senior Protection Program,
we will allocate your initial Premium Payment to a money market Fund for the
first 35 days your initial Premium Payment is invested. After the 35th day we
will automatically allocate your Contract Value according to your most current
investment instructions. If you elect the Senior Protection Program you will not
be able to participate in any InvestEase (if otherwise available) or Dollar Cost
Averaging Program until after the Program has terminated. The Dollar Cost
Averaging Plus, the Static Asset Allocation Models and certain Automatic Income
Programs are not available if you elect the Senior Protection Program. Under the
Senior Protection Program any subsequent Premium Payment received during the 35
days after the initial Premium Payment is invested will also be invested in a
money market Fund unless you direct otherwise. You may voluntarily terminate
your participation in the Senior Protection Program by contacting us in writing
or by telephone. You will automatically terminate your participation in the
Senior Protection Program if you allocate a subsequent Premium Payment to any
other investment option or transfer Contract Value from a money market Fund to
another investment option. When you terminate your participation in the Senior
Protection Program you may reallocate your Contract Value in the Program to
other investment options; or we will automatically reallocate your Contract
Value in the Program according to your original instructions 35 days after your
initial Premium Payment was invested.
CONNECTICUT, NEW HAMPSHIRE AND NEW JERSEY - A state recognized civil union
partner who is the designated beneficiary may exercise contract continuation
privileges if and when the Code is amended to recognize such "spouses" as
meeting federal tax distribution requirements (under current tax law, a "spouse"
is limited to married people of the opposite sex).
FLORIDA - The limit on Death Benefits imposed when aggregate Premium Payments
total $5 million or more does not apply.
MASSACHUSETTS - We will accept subsequent Premium Payments only until the
Annuitant's 63rd birthday or the third Contract Anniversary, whichever is later
(B Share Contracts). The Nursing Home Waiver is not available.
NEW JERSEY - The only AIRs available are 3% and 5%. The Nursing Home Waiver is
not available. Letters of Intent are not available as a basis to reduce sales
charges.
NEW YORK - A Contract issued by Hartford Life and Annuity Insurance Company is
not available in New York. The only AIRs available are 3% and 5%. The Nursing
Home Waiver is not available. Letters of Intent are not available as a basis to
reduce sales charges.
OKLAHOMA - The only AIRs available are 3% and 5%.
OREGON - We will accept subsequent Premium Payments during the first three
Contract Years (B Share Contracts). Owners may only sign up for DCA Plus
Programs that are 6 months or longer. You may not choose a fixed dollar amount
Annuity Payout. Annuity Payout Option Two is not available. The only AIRs
available are 3% and 5%.
PENNSYLVANIA - The Nursing Home Waiver minimum confinement period is changed
from 180 days to 90 days. You may not choose a fixed dollar amount Annuity
Payout. Annuity Payout Option Two is not available.
TEXAS - Letters of Intent are not available as a basis to reduce sales charges.
VERMONT - Eligible Investments owned by you, your Spouse or any immediate family
member may be included under the Rights of Accumulation Program.
WASHINGTON - In any year when no Premium Payment is paid into the Fixed
Accumulation Feature, any pro-rata portion of the fee taken from the Fixed
Accumulation Feature will be limited to interest earned in excess of the 3% for
that year.
C. MISCELLANEOUS
OWNERSHIP CHANGES - We reserve the right to approve all ownership changes,
including any assignment of your Contract (or any benefits) to others or the
pledging of your Contract as collateral. Certain approved changes in ownership
may cause a re-calculation of the benefits subject to applicable state law.
Generally, we will not re-calculate the benefits under your Contract so long as
the change in ownership does not affect the Owner and does not result in a
change in the tax identification number under the Contract. You may not change
the named Annuitant. However, if the Annuitant is still living, the Contingent
Annuitant may be changed at any time prior to the Annuity Commencement Date by
sending us written notice.
ASSIGNMENT - A non-qualified Contract may be assigned subject to the ownership
change restrictions above. We must be properly notified in writing of an
assignment. Any Annuity Payouts or Surrenders requested or scheduled before we
record an assignment will be made according to the instructions we have on
record. We are not responsible for determining the validity of an assignment.
Assigning a non-qualified Contract may require the payment of income taxes and
certain penalty taxes. A qualified Contract may not be transferred or otherwise
assigned (whether directly or used as collateral for a loan), unless allowed by
applicable law and approved by us in writing. We can withhold our consent for
any reason. We are not obligated to process any request for approval within any
particular time frame. Please consult a qualified tax adviser before assigning
your Contract.
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SPECULATIVE INVESTING - Do not purchase this contract if you plan to use it, or
any of its riders, for speculation, arbitrage, viatication or any other type of
collective investment scheme. Your Contract may not be traded on any stock
exchange or secondary market. By purchasing this contract you represent and
warrant that you are not using this Contract, or any of its riders, for
speculation, arbitrage, viatication or any other type of collective investment
scheme.
CONTRACT MODIFICATION - We may unilaterally modify the Contract to reflect,
among other things, changes in applicable tax law or interpretations of tax law,
but no modification will affect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable federal or state
law. No modification will affect the method by which Contract Values are
determined. Any modifications to the Contract will be filed with each state in
which the Contract is for sale. Contract changes will be communicated to Owners
through regular mail as an endorsement to their Contract.
MEDICAID BENEFITS - Medicaid estate planning may be important to people who are
concerned about long term care costs. Benefits associated with this variable
annuity may have an impact on your Medicaid eligibility and the assets
considered for Medicaid benefits. Ownership interests or beneficiary status
under this variable annuity could render you or your loved ones ineligible for
Medicaid. This may be particularly troubling if your Spouse or Beneficiary is
already receiving Medicaid benefits at the time of transfer or receipt of Death
Benefits. As certain ownership changes are either impermissible or are subject
to benefit resetting rules, you may want to carefully consider how you structure
the ownership and beneficiary status of your Contract. This discussion is
intended to provide a very general overview and does not constitute legal advice
or in any way suggest that you circumvent these rules. You should seek advice
from a competent elder law attorney to make informed decisions about how this
variable annuity may affect your plans.
D. LEGAL PROCEEDINGS
There continues to be significant federal and state regulatory activity relating
to financial services companies. Like other insurance companies, we are involved
in lawsuits, arbitrations, and regulatory/legal proceedings. Certain of the
lawsuits and legal actions the Company is involved in assert claims for
substantial amounts. While it is not possible to predict with certainty the
ultimate outcome of any pending or future case, legal proceeding or regulatory
action, we do not expect the ultimate result of any of these actions to result
in a material adverse effect on the Company or its Separate Accounts.
Nonetheless, given the large or indeterminate amounts sought in certain of these
actions, and the inherent unpredictability of litigation, an adverse outcome in
certain matters could, from time to time, have a material adverse effect on the
Company's results of operations or cash flows in particular quarterly or annual
periods.
E. HOW CONTRACTS ARE SOLD
We have entered into a distribution agreement with our affiliate Hartford
Securities Distribution Company, Inc. ("HSD") under which HSD serves as the
principal underwriter for the Contracts, which are offered on a continuous
basis. HSD is registered with the Securities and Exchange Commission under the
1934 Act as a broker-dealer and is a member of the Financial Industry Regulatory
Authority (FINRA). The principal business address of HSD is the same as ours.
PLANCO Financial Services, LLC, a subsidiary of Hartford Life Insurance Company,
provides marketing support for us. Woodbury Financial Services, Inc. is another
affiliated broker-dealer that sells this Contract.
HSD has entered into selling agreements with affiliated and unaffiliated
broker-dealers, and financial institutions ("Financial Intermediaries") for the
sale of the Contracts. We pay compensation to HSD for sales of the Contracts by
Financial Intermediaries. HSD, in its role as principal underwriter, did not
retain any underwriting commissions for the fiscal year ended December 31, 2008.
Contracts will be sold by individuals who have been appointed by us as insurance
agents and who are registered representatives of Financial Intermediaries
("Registered Representatives").
B and I share Contracts may be sold directly to the following individuals free
of any commission: 1) our current or retired officers, directors, trustees and
employees (and their families) and our corporate parent, affiliates and
subsidiaries; and 2) employees and Registered Representatives of Financial
Intermediaries. If applicable, we will credit the B share Contract with a credit
of 5.0% of the initial Deposit and each subsequent Deposit, if any. This
additional percentage of Deposit in no way affects current or future charges,
rights, benefits or account values of other Owners.
The financial advisory arrangement otherwise required in order to purchase I
share Contracts shall not be applicable to Hartford Leaders Series V individual
variable annuities bought by any of our current or retired officers, directors,
trustees and employees or those of our corporate parent, affiliates and
subsidiaries.
This prospectus does not constitute personalized investment or financial
planning advice or a recommendation to purchase this or any other variable
annuity. We reserve the right to modify, suspend, or terminate these privileges
at any time.
We list below types of arrangements that help to incentivize sales people to
sell our suite of variable annuities. Not all arrangements necessarily affect
each variable annuity. These types of arrangements could be viewed as creating
conflicts of interest.
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Financial Intermediaries receive commissions (described below under
"Commissions"). Certain selected Financial Intermediaries also receive
additional compensation (described below under "Additional Payments"). All or a
portion of the payments we make to Financial Intermediaries may be passed on to
Registered Representatives according to a Financial Intermediaries' internal
compensation practices.
Affiliated broker-dealers also employ individuals called "wholesalers" in the
sales process. Wholesalers typically receive commissions based on the type of
Contract or optional benefits sold. Commissions are based on a specified amount
of Deposits or Account Balance.
- COMMISSIONS
Up front commissions paid to Financial Intermediaries generally range from 0% to
up to 5% of each Deposit. Trail commissions (fees paid for customers that
maintain their Contracts generally for more than 1 year) range up to 1% of your
Account Balance. We pay no additional commissions with respect to assets moved
from the Personal Pension Account to Sub-Accounts or the Fixed Accumulation
Feature. We pay different commissions based on the Contract variation that you
buy. We may pay a lower commission for sales to Owners over age 80.
Commission arrangements vary from one Financial Intermediary to another. We are
not involved in determining your Registered Representative's compensation. Under
certain circumstances, your Registered Representative may be required to return
all or a portion of the commissions paid.
Check with your Registered Representative to verify whether your account is a
brokerage or an advisory account. Your interests may differ from ours and your
Registered Representative (or the Financial Intermediary with which they are
associated). Please ask questions to make sure you understand your rights and
any potential conflicts of interest. If you are an advisory client, your
Registered Representative (or the Financial Intermediary with which they are
associated) can be paid both by you and by us based on what you buy. Therefore,
profits, and your Registered Representative's (or their Financial
Intermediary's) compensation, may vary by product and over time. Contact an
appropriate person at your Financial Intermediary with whom you can discuss
these differences.
- ADDITIONAL PAYMENTS
Subject to FINRA and Financial Intermediary rules, we (or our affiliates) also
pay the following types of fees to among other things encourage the sale of this
Contract. These additional payments could create an incentive for your
Registered Representative, and the Financial Intermediary with which they are
associated, to recommend products that pay them more than others, which may not
necessarily be to your benefit.
ADDITIONAL
PAYMENT TYPE WHAT IT'S USED FOR
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Access Access to Registered Representatives and/or Financial Intermediaries such as one-on-one wholesaler
visits or attendance at national sales meetings or similar events.
Gifts & Entertainment Occasional meals and entertainment, tickets to sporting events and other gifts.
Marketing Joint marketing campaigns and/or Financial Intermediary event advertising/participation; sponsorship
of Financial Intermediary sales contests and/or promotions in which participants (including
Registered Representatives) receive prizes such as travel awards, merchandise and recognition;
client generation expenses.
Marketing Expense Pay Fund related parties for wholesaler support, training and marketing activities for certain
Allowances Funds.
Support Sales support through such things as providing hardware and software, operational and systems
integration, links to our website from a Financial Intermediary's websites; shareholder services
(including sub-accounting sponsorship of Financial Intermediary due diligence meetings; and/or
expense allowances and reimbursements).
Training Educational (due diligence), sales or training seminars, conferences and programs, sales and service
desk training, and/or client or prospect seminar sponsorships.
Visibility Inclusion of our products on a Financial Intermediary's "preferred list"; participation in, or
visibility at, national and regional conferences; and/or articles in Financial Intermediary
publications highlighting our products and services.
Volume Pay for the overall volume of their sales or the amount of money investing in our products.
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As of December 31, 2008, we have entered into ongoing contractual arrangements
to make Additional Payments to the following Financial Intermediaries for our
entire suite of variable annuities: AIG Advisors Group, Inc., (Advantage
Capital, AIG Financial Advisors, American General, FSC Securities Corporation,
Royal Alliance Assoc., Inc.), Allen & Company, AMTrust Investment Svcs Inc.,
Associated Securities, Banc of America Investment Services Inc., Bancwest
Investment Services, Inc., Cadaret, Grant & Co., Inc., Cambridge Investment
Research Inc., Capital Analyst Inc., Centaurus Financial, Inc., CCO Investment
Services Corp., Citigroup, Inc. (various divisions and affiliates), Comerica
Securities, Commonwealth Financial Network, Compass Brokerage, Inc., Crown
Capital Securities, L.P., Cuna Brokerage Services, Inc., Cuso Financial
Services, L.P., Edward D. Jones & Co., L.P., FFP Securities, Inc., First Allied
Securities, Inc., First Citizens Investor Services, First Montauk Securities
Corp., First Tennessee Brokerage Inc., Frost Brokerage Services, Inc., Great
American Advisors, Inc., H. Beck, Inc., H.D. Vest Investment Services
(subsidiary of Wells Fargo & Company), Harbour Investments, Inc., Heim & Young
Securities, Huntington Investment Company, Independent Financial Group LLC,
Infinex Financial Group, ING Advisors Network, (Financial Network Services (or
Investment) Corp., ING Financial Partners, Multi-Financial Securities, Primevest
Financial Services, Inc.,), Inter-Securities Inc., Investacorp, Inc., Investment
Professionals, Inc., Investors Capital Corp., J.J.B. Hilliard, James T. Borello
& Co., Janney Montgomery Scott, Inc., Jefferson Pilot Securities Corporation,
Key Investment Services, LaSalle Financial Services, Inc., Lincoln Financial
Advisors Corp. (marketing name for Lincoln National Corp.), Lincoln Financial
Securities Corp., Lincoln Investment Planning, LPL Financial Corporation, M&T
Securities, Inc., Merrill Lynch Pierce Fenner & Smith, MML Investor Services
Inc., Morgan Keegan & Company, Inc., Morgan Stanley & Co., Inc. (various
divisions and affiliates), Mutual Service Corporation, NatCity Investments,
National Planning Holdings (Invest Financial Corp., Investment Centers of
America, Inc., National Planning Corp., SII Investments, Inc.), Newbridge
Securities Corp., NEXT Financial Group, Inc., NFP Securities, Inc., Pension
Planners Securities, Inc., Prime Capital Services, Inc., Prospera Financial
Services, Inc., Raymond James & Associates, Inc., Raymond James Financial
Services, RBC Capital Markets., Robert W. Baird & Co. Inc., Rogan & Associates,
Securities America, Inc., Sigma Financial Corporation, Sorrento Pacific, Stifel
Nicolaus & Company, Incorporated, Summit Brokerage Services Inc., Sun Trust
Bank, TFS Securities, Inc., The Investment Center, Inc., Thurston, Springer,
Miller, Herd & Titak, Inc., Triad Advisors, Inc., U.S. Bancorp Investments,
Inc., UBOC Investment Services, Inc. (Union Bank of California, N.A.), UBS
Financial Services, Inc., Uvest Financial Services Group Inc., Vanderbilt
Securities, LLC, Wachovia Securities, LLC (various divisions), Walnut Street
Securities, Inc., Waterstone Financial Group, Wells Fargo Brokerage Services,
L.L.C., WaMu Investments, Inc., Woodbury Financial Services, Inc. (an affiliate
of ours).
Inclusion on this list does not imply that these sums necessarily constitute
"special cash compensation" as defined by FINRA Conduct Rule 2830(l)(4). We will
endeavor to update this listing annually and interim arrangements may not be
reflected. We assume no duty to notify any investor whether their Registered
Representative is or should be included in any such listing.
As of December 31, 2008, we have entered into arrangements to pay Marketing
Expense Allowances to the following Fund Companies (or affiliated parties) for
our entire suite of variable annuities: AIM Advisors, Inc., AllianceBernstein
Variable Products Series Funds & Alliance Bernstein Investment Research and
Management, Inc., American Variable Insurance Series & Capital Research and
Management Company, Franklin Templeton Services, LLC, Oppenheimer Variable
Account Funds & Oppenheimer Funds Distributor, Inc., Putnam Retail Management
Limited Partnership. Marketing Expense Allowances may vary based on the form of
Contract sold and the age of the purchaser. We will endeavor to update this
listing annually and interim arrangements may not be reflected. We assume no
duty to notify you whether any Financial Intermediary is or should be included
in any such listing. You are encouraged to review the prospectus for each Fund
for any other compensation arrangements pertaining to the distribution of Fund
shares.
For the fiscal year ended December 31, 2008, Additional Payments did not in the
aggregate exceed approximately $55.8 million (excluding corporate-sponsorship
related perquisites and Marketing Expense Allowances) or approximately 0.06% of
average total individual variable annuity assets. Marketing Expense Allowances
for this period did not exceed $7.9 million or approximately 0.25% of the
Premium Payments invested in a particular Fund during this period. Financial
Intermediaries that received Additional Payments in 2008, but do not have an
ongoing contractual relationship, are listed in the Statement of Additional
Information.
Financial Intermediaries that received Additional Payments in 2008, but do not
have an ongoing contractual relationship, are listed in the Statement of
Additional Information.
7. FEDERAL TAX CONSIDERATIONS
A. INTRODUCTION
The following summary of tax rules does not provide or constitute any tax
advice. It provides only a general discussion of certain of the expected federal
income tax consequences with respect to amounts contributed to, invested in or
received from a Contract, based on our understanding of the existing provisions
of the Internal Revenue Code ("Code"), Treasury Regulations thereunder, and
public interpretations thereof by the IRS (e.g., Revenue Rulings, Revenue
Procedures or Notices) or by published court decisions. This summary discusses
only certain federal income tax consequences to United States Persons, and does
not discuss state, local or foreign
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tax consequences. The term United States Persons means citizens or residents of
the United States, domestic corporations, domestic partnerships, trust or
estates that are subject to United States federal income tax, regardless of the
source of their income. See "Annuity Purchases by Nonresident Aliens and Foreign
Corporations," regarding annuity purchases by non-U.S. Persons or residents.
This summary has been prepared by us after consultation with tax counsel, but no
opinion of tax counsel has been obtained. We do not make any guarantee or
representation regarding any tax status (e.g., federal, state, local or foreign)
of any Contract or any transaction involving a Contract. In addition, there is
always a possibility that the tax treatment of an annuity contract could change
by legislation or other means (such as regulations, rulings or judicial
decisions). Moreover, it is always possible that any such change in tax
treatment could be made retroactive (that is, made effective prior to the date
of the change). Accordingly, you should consult a qualified tax adviser for
complete information and advice before purchasing a Contract.
In addition, although this discussion addresses certain tax consequences if you
use the Contract in various arrangements, including Charitable Remainder Trusts,
tax-qualified retirement arrangements, deferred compensation plans, split-dollar
insurance arrangements, or other employee benefit arrangements, this discussion
is not exhaustive. The tax consequences of any such arrangement may vary
depending on the particular facts and circumstances of each individual
arrangement and whether the arrangement satisfies certain tax qualification or
classification requirements. In addition, the tax rules affecting such an
arrangement may have changed recently, e.g., by legislation or regulations that
affect compensatory or employee benefit arrangements. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which to you
depends in part on its tax consequences, you should consult a qualified tax
adviser regarding the tax treatment of the proposed arrangement and of any
Contract used in it.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. SPECIAL
TAX RULES MAY APPLY WITH RESPECT TO CERTAIN SITUATIONS THAT ARE NOT DISCUSSED
HEREIN. EACH POTENTIAL PURCHASER OF A CONTRACT IS ADVISED TO CONSULT WITH A
QUALIFIED TAX ADVISER AS TO THE CONSEQUENCES OF ANY AMOUNTS INVESTED IN A
CONTRACT UNDER APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN TAX LAW.
B. TAXATION OF THE COMPANY AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of the Company which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account will not be taxed as a "regulated investment company" under
Subchapter M of Chapter 1 of the Code. Investment income and any realized
capital gains on assets of the Separate Account are reinvested and taken into
account in determining the value of the Accumulation and Annuity Units. As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
Currently, no taxes are due on interest, dividends and short-term or long-term
capital gain earned by the Separate Account with respect to the Contracts. The
Company is entitled to certain tax benefits related to the investment of company
assets, including assets of the Separate Account. These tax benefits, which may
include the foreign tax credit and the corporate dividends received deduction,
are not passed back to you since the Company is the owner of the assets from
which the tax benefits are derived.
C. TAXATION OF ANNUITIES - GENERAL PROVISIONS AFFECTING CONTRACTS NOT HELD IN
TAX-QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS AS OWNERS
Pursuant to Code Section 72(u), an annuity contract held by a taxpayer other
than a natural person generally is not treated as an annuity contract under the
Code. Instead, such a non-natural Contract Owner generally could be required to
include in gross income currently for each taxable year the excess of (a) the
sum of the Contract Value as of the close of the taxable year and all previous
distributions under the Contract over (b) the sum of net premiums paid for the
taxable year and any prior taxable year and the amount includable in gross
income for any prior taxable year with respect to the Contract under Section
72(u). However, Section 72(u) does not apply to:
- A contract the nominal owner of which is a non-natural person but the
beneficial owner of which is a natural person (e.g., where the non-natural
owner holds the contract as an agent for the natural person),
- A contract acquired by the estate of a decedent by reason of such decedent's
death,
- Certain contracts acquired with respect to tax-qualified retirement
arrangements,
- Certain contracts held in structured settlement arrangements that may
qualify under Code Section 130, or
- A single premium immediate annuity contract under Code Section 72(u)(4),
which provides for substantially equal periodic payments and an annuity
starting date that is no later than 1 year from the date of the contract's
purchase.
A non-natural Contract Owner that is a tax-exempt entity for federal tax
purposes (e.g., a tax-qualified retirement trust or a Charitable Remainder
Trust) generally would not be subject to federal income tax as a result of such
current gross income under Code
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Section 72(u). However, such a tax-exempt entity, or any annuity contract that
it holds, may need to satisfy certain tax requirements in order to maintain its
qualification for such favorable tax treatment. See, e.g., IRS Tech. Adv. Memo.
9825001 for certain Charitable Remainder Trusts.
Pursuant to Code Section 72(s), if the Contract Owner is a non-natural person,
the primary annuitant is treated as the "holder" in applying the required
distribution rules described below. These rules require that certain
distributions be made upon the death of a "holder." In addition, for a
non-natural owner, a change in the primary annuitant is treated as the death of
the "holder." However, the provisions of Code Section 72(s) do not apply to
certain contracts held in tax-qualified retirement arrangements or structured
settlement arrangements.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract." It is
unclear what value should be used in determining the "income on the
contract." We believe that the current Contract Value (determined without
regard to surrender charges) generally is an appropriate measure. However,
in some instances the IRS could take the position that the value should be
the current Contract Value (determined without regard to surrender charges)
increased by some measure of the value of certain future cash-value type
benefits.
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a withdrawal or partial surrender) is deemed to come
first from any such "income on the contract" and then from "investment in
the contract," and for these purposes such "income on the contract" shall
be computed by reference to any aggregation rule in subparagraph 2.c.
below. As a result, any such amount received or deemed received (1) shall
be includable in gross income to the extent that such amount does not
exceed any such "income on the contract," and (2) shall not be includable
in gross income to the extent that such amount does exceed any such
"income on the contract." If at the time that any amount is received or
deemed received there is no "income on the contract" (e.g., because the
gross value of the Contract does not exceed the "investment in the
contract" and no aggregation rule applies), then such amount received or
deemed received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between Spouses or
incident to divorce.
vi. In general, any amount actually received under the Contract as a Death
Benefit, including an optional Death Benefit, if any, will be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
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iii. Generally, non-periodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
iv. When annuitization of the Personal Pension Account has occurred, your
Benefit Balance will be calculated by using an actuarial present value
formula.
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same owner within the same calendar year (other than certain
contracts held in connection with tax-qualified retirement arrangements) will be
aggregated and treated as one annuity contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. An annuity
contract received in a tax-free exchange for another annuity contract or life
insurance contract may be treated as a new contract for this purpose. We believe
that for any Contracts subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added together to
determine the taxation under subparagraph 2.a., above, of amounts received or
deemed received prior to the Annuity Commencement Date. Withdrawals will first
be treated first as withdrawals of income until all of the income from all such
Contracts is withdrawn. In addition, the Treasury Department has specific
authority under the aggregation rules in Code Section 72(e)(12) to issue
regulations to prevent the avoidance of the income-out-first rules for
non-periodic distributions through the serial purchase of annuity contracts or
otherwise. As of the date of this prospectus, there are no regulations
interpreting these aggregation provisions.
d. 10% PENALTY TAX - APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions:
1. Distributions made on or after the date the recipient has attained
the age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient becoming disabled.
4. A distribution that is part of a scheduled series of substantially
equal periodic payments (not less frequently than annually) for the
life (or life expectancy) of the recipient (or the joint lives or
life expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions made under certain annuities issued in connection with
structured settlement agreements.
6. Distributions of amounts which are allocable to the "investment in
the contract" prior to August 14, 1982 (see next subparagraph e.).
7. Distributions purchased by an employer upon termination of certain
qualified plans and held by the employer until the employee
separates from service.
If the taxpayer avoids this 10% penalty tax by qualifying for the substantially
equal periodic payments exception and later such series of payments is modified
(other than by death or disability), the 10% penalty tax will be applied
retroactively to all the prior periodic payments (i.e., penalty tax plus
interest thereon), unless such modification is made after both (a) the taxpayer
has reached age 59 1/2 and (b) 5 years have elapsed since the first of these
periodic payments.
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED
PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income. In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such
post-exchange Contracts are generally subject to the rules described in this
subparagraph e.
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f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or Spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date
and before the entire interest in the Contract has been distributed,
the remaining portion of such interest shall be distributed at least
as rapidly as under the method of distribution being used as of the
date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract shall be distributed within 5 years
after such death; and
3. If the Contract Owner is not an individual, then for purposes of 1.
or 2. above, the primary annuitant under the Contract shall be
treated as the Contract Owner, and any change in the primary
annuitant shall be treated as the death of the Contract Owner. The
primary annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above
is payable to or for the benefit of a designated beneficiary, such
beneficiary may elect to have the portion distributed over a period that
does not extend beyond the life or life expectancy of the beneficiary.
Such distributions must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her Spouse, and the Annuitant or Contingent
Annuitant is living, such Spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above. This Spousal Contract
continuation shall apply only once for this Contract.
iv. Civil Union or Domestic Partner
Upon the death of the Contract Owner prior to the Annuity Commencement
Date, if the designated beneficiary is the surviving civil union or
domestic partner of the Contract Owner pursuant to a civil union or
domestic partnership recognized under state law, then such designated
beneficiary's right to continue the Contract as the succeeding Contract
Owner will be contingent, among other things, upon the treatment of such
designated beneficiary as the spouse of the Contract Owner under Code
Section 72(s) (or any successor provision). Currently, Federal tax law
only recognizes spouses if they are married individuals of the opposite
sex. Consequently, such designated beneficiary who is not recognized as a
"spouse" under Federal tax law will not be able to continue the Contract
and the entire interest in the Contract must be distributed within five
years of the Contract Owner's death or under the Alternative Election.
g. ADDITION OF RIDER OR MATERIAL CHANGE.
The addition of a rider to the Contract, or a material change in the Contract's
provisions, could cause it to be considered newly issued or entered into for tax
purposes, and thus could cause the Contract to lose certain grandfathered tax
status. Please contact your tax adviser for more information.
h. PARTIAL EXCHANGES.
The IRS in Rev. Rul. 2003-76 confirmed that the owner of an annuity contract can
direct its insurer to transfer a portion of the contract's cash value directly
to another annuity contract (issued by the same insurer or by a different
insurer), and such a direct transfer can qualify for tax-free exchange treatment
under Code Section 1035 (a "partial exchange"). However, Rev. Rul. 2003-76 also
refers to caveats and additional guidance in the companion Notice 2003-51, which
discusses cases in which a partial exchange is followed by a surrender,
withdrawal or other distribution from either the old contract or the new
contract. Notice 2003-51 specifically indicates that the IRS is considering (1)
under what circumstances it should treat a partial exchange followed by such a
distribution within 24 months as presumptively for "tax avoidance" purposes
(e.g., to avoid the income-out-first rules on amounts received under Code
Section 72) and (2) what circumstances it should treat as rebutting such a
presumption (e.g., death, disability, reaching age 59 1/2, divorce or loss of
employment). Notice 2003-51 was superseded by Revenue Procedure 2008-24,
effective for partial exchanges completed on or after June 30, 2008. Partial
exchanges completed on or after this date will qualify for tax free treatment
if: (1) no amounts are withdrawn from, or received in surrender of, either of
the contracts involved in the exchange during the 12 months beginning on the
date on which amounts are treated as received as premiums or other consideration
paid for the contract received in the exchange (the date of transfer); or (2)
the taxpayer demonstrates that certain conditions (e.g., death, disability,
reaching age 59 1/2, divorce, loss of employment) occurred between the date of
transfer and the date of the withdrawal or surrender. A transfer within the
scope of the revenue procedure, but not treated as a tax-free exchange, will be
treated as a taxable distribution, followed by a payment for a second contract.
Two annuity contracts that are the subject of a tax-free exchange pursuant
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to the revenue procedure will not be aggregated, even if issued by the same
insurance company. We advise you to consult with a qualified tax adviser as to
potential tax consequences before attempting any partial exchange.
The applicability of the IRS's partial exchange guidance to the splitting of an
annuity contract is not clear. You should consult with a tax adviser if you plan
to split an annuity contract as part of an exchange of annuity contracts.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your Contract be adequately
diversified. Code Section 817(h) provides that a variable annuity contract will
not be treated as an annuity contract for any period during which the
investments made by the separate account or Fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations under Code Section 817(h)
require, among other things, that:
- no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- no more than 70% is represented by any two investments,
- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the insurer
or the contract owner must agree to make adjustments or pay such amounts as may
be required by the IRS for the period during which the diversification
requirements were not met.
Fund shares may also be sold to tax-qualified plans pursuant to an exemptive
order and applicable tax laws. If Fund shares are sold to non-qualified plans,
or to tax-qualified plans that later lose their tax-qualified status, the
affected Funds may fail the diversification requirements of Code Section 817(h),
which could have adverse tax consequences for Contract Owners with premiums
allocated to affected Funds. In order to prevent a Fund diversification failure
from such an occurrence, the Company obtained a private letter ruling ("PLR")
from the IRS. As long as the Funds comply with certain terms and conditions
contained in the PLR, Fund diversification will not be prevented if purported
tax-qualified plans invest in the Funds. The Company and the Funds will monitor
the Funds' compliance with the terms and conditions contained in the PLR.
4. TAX OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax income deferral,
assets in the separate account supporting the contract must be considered to be
owned by the insurance company, and not by the contract owner, for tax purposes.
The IRS has stated in published rulings that a variable contract owner will be
considered the "owner" of separate account assets for income tax purposes if the
contract owner possesses sufficient incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. In circumstances
where the variable contract owner is treated as the "tax owner" of certain
separate account assets, income and gain from such assets would be includable in
the variable contract owner's gross income. The Treasury Department indicated in
1986 that it would provide guidance on the extent to which contract owners may
direct their investments to particular Sub-Accounts without being treated as tax
owners of the underlying shares. Although no such regulations have been issued
to date, the IRS has issued a number of rulings that indicate that this issue
remains subject to a facts and circumstances test for both variable annuity and
life insurance contracts.
Rev. Rul. 2003-92, amplified by Rev. Rul. 2007-7, indicates that, where
interests in a partnership offered in an insurer's separate account are not
available exclusively through the purchase of a variable insurance contract
(e.g., where such interests can be purchased directly by the general public or
others without going through such a variable contract), such "public
availability" means that such interests should be treated as owned directly by
the contract owner (and not by the insurer) for tax purposes, as if such
contract owner had chosen instead to purchase such interests directly (without
going through the variable contract). None of the shares or other interests in
the fund choices offered in our Separate Account for your Contract are available
for purchase except through an insurer's variable contracts or by other
permitted entities.
Rev. Rul. 2003-91 indicates that an insurer could provide as many as 20 fund
choices for its variable contract owners (each with a general investment
strategy, e.g., a small company stock fund or a special industry fund) under
certain circumstances, without causing such a contract owner to be treated as
the tax owner of any of the Fund assets. The ruling does not specify the number
of fund
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options, if any, that might prevent a variable contract owner from receiving
favorable tax treatment. As a result, although the owner of a Contract has more
than 20 fund choices, we believe that any owner of a Contract also should
receive the same favorable tax treatment. However, there is necessarily some
uncertainty here as long as the IRS continues to use a facts and circumstances
test for investor control and other tax ownership issues. Therefore, we reserve
the right to modify the Contract as necessary to prevent you from being treated
as the tax owner of any underlying assets.
5. CERTAIN TAX CONSIDERATIONS FOR FULL OR PARTIAL SETTLEMENT PAYMENTS FROM
THE PERSONAL PENSION ACCOUNT BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE.
Because the IRS has published no guidance on the tax treatment of contracts with
features resembling the Personal Pension Account arrangement, there is
necessarily some uncertainty as to how an annuity contract with a Personal
Pension Account will be treated for tax purposes and we advise you to consult
with a qualified tax adviser concerning such tax treatment before you deposit
amounts into the Personal Pension Account. With respect to the Personal Pension
Account, the Company plans to report any payments under a settlement of the
Personal Pension Account before the Annuity Commencement Date as amounts not
received as an annuity coming first from "income on the contract" (previously
described in subparagraph 2.a) based on a computation of "income on the
contract" for the entire Contract. After the Annuity Commencement Date, the
Company plans to report any continuing periodic settlement payments as amounts
received as an annuity to which a portion of the "investment in the contract"
(discussed in subparagraph 2.b) has been allocated consistent with Treas. Reg.
Section 1.72-6(b).
D. FEDERAL INCOME TAX WITHHOLDING
The portion of an amount received under a Contract that is taxable gross income
to the Payee is also subject to federal income tax withholding, pursuant to Code
Section 3405, which requires the following:
1. Non-Periodic Distributions. The portion of a non-periodic distribution
that is includable in gross income is subject to federal income tax
withholding unless an individual elects not to have such tax withheld
("election out"). We will provide such an "election out" form at the
time such a distribution is requested. If the necessary "election out"
form is not submitted to us in a timely manner, generally we are
required to withhold 10 percent of the includable amount of
distribution and remit it to the IRS.
2. Periodic Distributions (payable over a period greater than one year).
The portion of a periodic distribution that is includable in gross
income is generally subject to federal income tax withholding as if the
Payee were a married individual claiming 3 exemptions, unless the
individual elects otherwise. An individual generally may elect out of
such withholding, or elect to have income tax withheld at a different
rate, by providing a completed election form. We will provide such an
election form at the time such a distribution is requested. If the
necessary "election out" forms are not submitted to us in a timely
manner, we are required to withhold tax as if the recipient were
married claiming 3 exemptions, and remit this amount to the IRS.
Generally no "election out" is permitted if the distribution is delivered
outside the United States and any possession of the United States. Regardless of
any "election out" (or any amount of tax actually withheld) on an amount
received from a Contract, the Payee is generally liable for any failure to pay
the full amount of tax due on the includable portion of such amount received. A
Payee also may be required to pay penalties under estimated income tax rules, if
the withholding and estimated tax payments are insufficient to satisfy the
Payee's total tax liability.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to the section entitled "Information Regarding Tax-Qualified
Retirement Plans" for information relative to the types of plans for which it
may be used and the general explanation of the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and mandatory withholding on U.S. source taxable annuity
distributions at a 30% rate, unless a lower treaty rate applies and any required
tax forms are submitted to us. If withholding applies, we are required to
withhold tax at the 30% rate, or a lower treaty rate if applicable, and remit it
to the IRS. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence.
G. ESTATE, GIFT AND GENERATION-SKIPPING TAX AND RELATED TAX CONSIDERATIONS
Any amount payable upon a Contract Owner's death, whether before or after the
Annuity Commencement Date, is generally includable in the Contract Owner's
estate for federal estate tax purposes. Similarly, prior to the Contract Owner's
death, the payment of any amount from the Contract, or the transfer of any
interest in the Contract, to a beneficiary or other person for less than
adequate consideration may have federal gift tax consequences. In addition, any
transfer to, or designation of, a non-Spouse beneficiary who either is (1) 37
1/2 or more years younger than a Contract Owner or (2) a grandchild (or more
remote further
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descendent) of a Contract Owner may have federal generation-skipping-transfer
("GST") tax consequences under Code Section 2601. Regulations under Code Section
2662 may require us to deduct any such GST tax from your Contract, or from any
applicable payment, and pay it directly to the IRS. However, any federal estate,
gift or GST tax payment with respect to a Contract could produce an offsetting
income tax deduction for a beneficiary or transferee under Code Section 691(c)
(partially offsetting such federal estate or GST tax) or a basis increase for a
beneficiary or transferee under Code Section 691(c) or Section 1015(d). In
addition, as indicated above in "Distributions Prior to the Annuity Commencement
Date," the transfer of a Contract for less than adequate consideration during
the Contract Owner's lifetime generally is treated as producing an amount
received by such Contract Owner that is subject to both income tax and the 10%
penalty tax. To the extent that such an amount deemed received causes an amount
to be includable currently in such Contract Owner's gross income, this same
income amount could produce a corresponding increase in such Contract Owner's
tax basis for such Contract that is carried over to the transferee's tax basis
for such Contract under Code Section 72(e)(4)(C)(iii) and Section 1015.
H. TAX DISCLOSURE OBLIGATIONS
In some instances certain transactions must be disclosed to the IRS or penalties
could apply. See, for example, IRS Notice 2004-67. The Code also requires
certain "material advisers" to maintain a list of persons participating in such
"reportable transactions," which list must be furnished to the IRS upon request.
It is possible that such disclosures could be required by Hartford The Company,
the Owner(s) or other persons involved in transactions involving annuity
contracts. It is the responsibility of each party, in consultation with their
tax and legal advisers, to determine whether the particular facts and
circumstances warrant such disclosures.
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. State income tax rules applicable to tax-qualified retirement
plans often differ from federal income tax rules, and this summary does not
describe any of these differences. Because of the complexity of the tax rules,
owners, participants and beneficiaries are encouraged to consult their own tax
advisors as to specific tax consequences.
The Contracts are available to a variety of tax-qualified retirement plans and
arrangements (a "Qualified Plan" or "Plan"). Tax restrictions and consequences
for Contracts or accounts under each type of Qualified Plan differ from each
other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners, annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to terms and conditions of the Plans
themselves or limited by applicable law, regardless of the terms and conditions
of the Contract issued in connection therewith. Qualified Plans generally
provide for the tax deferral of income regardless of whether the Qualified Plan
invests in an annuity or other investment. You should consider if the Contract
is a suitable investment if you are investing through a Qualified Plan.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS MAY BE AVAILABLE. WE ARE NOT THE PLAN ADMINISTRATOR FOR ANY
QUALIFIED PLAN. THE PLAN ADMINISTRATOR OR CUSTODIAN, WHICHEVER IS APPLICABLE,
(BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT
NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN
BENEFITS, HANDLING ANY PROCESSING AND ADMINISTRATION OF QUALIFIED PLAN LOANS,
COMPLIANCE WITH REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE,
BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS.
OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY
DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT OR BENEFICIARY OF
THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO
FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE
AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND
RECORDS. IF YOU ARE PURCHASING A CONTRACT THROUGH A QUALIFIED PLAN, YOU SHOULD
CONSULT WITH YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU ALSO
SHOULD CONSULT WITH A QUALIFIED TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU
WITHDRAW ANY PORTION OF YOUR CONTRACT VALUE.
The tax rules applicable to Qualified Contracts and Qualified Plans, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of Qualified Plan, as well as the
terms and conditions of the Plan itself. Various tax penalties may apply to
contributions in excess of specified limits, plan distributions (including
loans) that do not comply with specified limits, and certain other transactions
relating to such Plans. Accordingly, this summary provides only general
information about the tax rules associated with use of a Qualified Contract in
such a Qualified Plan. In addition, some Qualified Plans are subject to
distribution and other requirements that are not incorporated into our
administrative procedures. Owners, participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable tax (and non-tax) law and any applicable
Qualified Plan terms. Because of the complexity of these rules, Owners,
participants and beneficiaries are advised to consult with a qualified tax
adviser as to specific tax consequences.
We do not currently offer the Contracts in connection with all of the types of
Qualified Plans discussed below, and may not offer the Contracts for all types
of Qualified Plans in the future.
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1. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS").
In addition to "traditional" IRAs governed by Code Sections 408(a) and (b)
("Traditional IRAs"), there are Roth IRAs governed by Code Section 408A, SEP
IRAs governed by Code Section 408(k), and SIMPLE IRAs governed by Code Section
408(p). Also, Qualified Plans under Code Section 401, 403(b) or 457(b) may elect
to provide for a separate account or annuity contract that accepts after-tax
employee contributions and is treated as a "Deemed IRA" under Code Section
408(q), which is generally subject to the same rules and limitations as
Traditional IRAs. Contributions to each of these types of IRAs are subject to
differing limitations. The following is a very general description of each type
of IRA for which a Contract is available.
a. TRADITIONAL IRAS
Traditional IRAs are subject to limits on the amounts that may be contributed
each year, the persons who may be eligible, and the time when minimum
distributions must begin. Depending upon the circumstances of the individual,
contributions to a Traditional IRA may be made on a deductible or non-deductible
basis. Failure to make required minimum distributions ("RMDs") when the Owner
reaches age 70 1/2 or dies, as described below, may result in imposition of a
50% penalty tax on any excess of the RMD amount over the amount actually
distributed. In addition, any amount received before the Owner reaches age 59
1/2 or dies is subject to a 10% penalty tax on premature distributions, unless a
special exception applies, as described below. Under Code Section 408(e), an IRA
may not be used for borrowing (or as security for any loan) or in certain
prohibited transactions, and such a transaction could lead to the complete tax
disqualification of an IRA.
You (or your surviving spouse if you die) may rollover funds tax-free from
certain existing Qualified Plans (such as proceeds from existing insurance
contracts, annuity contracts or securities) into a Traditional IRA under certain
circumstances, as indicated below. However, mandatory tax withholding of 20% may
apply to any eligible rollover distribution from certain types of Qualified
Plans if the distribution is not transferred directly to the Traditional IRA. In
addition, under Code Section 402(c)(11) a non-spouse "designated beneficiary" of
a deceased Plan participant may make a tax-free "direct rollover" (in the form
of a direct transfer between Plan fiduciaries, as described below in "Rollover
Distributions") from certain Qualified Plans to a Traditional IRA for such
beneficiary, but such Traditional IRA must be designated and treated as an
"inherited IRA" that remains subject to applicable RMD rules (as if such IRA had
been inherited from the deceased Plan participant).
IRAs generally may not invest in life insurance contracts. However, an annuity
contract that is used as an IRA may provide a death benefit that equals the
greater of the premiums paid or the contract's cash value. The Contract offers
an enhanced death benefit that may exceed the greater of the Contract Value or
total premium payments. The tax rules are unclear as to what extent an IRA can
provide a death benefit that exceeds the greater of the IRA's cash value or the
sum of the premiums paid and other contributions into the IRA. Please note that
the IRA rider for the Contract has provisions that are designed to maintain the
Contract's tax qualification as an IRA, and therefore could limit certain
benefits under the Contract (including endorsement, rider or option benefits) to
maintain the Contract's tax qualification.
b. SEP IRAS
Code Section 408(k) provides for a Traditional IRA in the form of an
employer-sponsored defined contribution plan known as a Simplified Employee
Pension ("SEP") or a SEP IRA. A SEP IRA can have employer contributions, and in
limited circumstances employee and salary reduction contributions, as well as
higher overall contribution limits than a Traditional IRA, but a SEP is also
subject to special tax-qualification requirements (e.g., on participation,
nondiscrimination and withdrawals) and sanctions. Otherwise, a SEP IRA is
generally subject to the same tax rules as for a Traditional IRA, which are
described above. Please note that the IRA rider for the Contract has provisions
that are designed to maintain the Contract's tax qualification as an IRA, and
therefore could limit certain benefits under the Contract (including
endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
c. SIMPLE IRAS
The Savings Incentive Match Plan for Employees of small employers ("SIMPLE
Plan") is a form of an employer-sponsored Qualified Plan that provides IRA
benefits for the participating employees ("SIMPLE IRAs"). Depending upon the
SIMPLE Plan, employers may make plan contributions into a SIMPLE IRA established
by each eligible participant. Like a Traditional IRA, a SIMPLE IRA is subject to
the 50% penalty tax for failure to make a full RMD, and to the 10% penalty tax
on premature distributions, as described below. In addition, the 10% penalty tax
is increased to 25% for amounts received during the 2-year period beginning on
the date you first participated in a qualified salary reduction arrangement
pursuant to a SIMPLE Plan maintained by your employer under Code Section
408(p)(2). Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions, and these are subject to different tax
limits from those for a Traditional IRA. Please note that the SIMPLE IRA rider
for the Contract has provisions that are designed to maintain the Contract's tax
qualification as an SIMPLE IRA, and therefore could limit certain benefits under
the Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
A SIMPLE Plan may designate a single financial institution (a Designated
Financial Institution) as the initial trustee, custodian or issuer (in the case
of an annuity contract) of the SIMPLE IRA set up for each eligible participant.
However, any such Plan also must allow
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each eligible participant to have the balance in his SIMPLE IRA held by the
Designated Financial Institution transferred without cost or penalty to a SIMPLE
IRA maintained by a different financial institution. Absent a Designated
Financial Institution, each eligible participant must select the financial
institution to hold his SIMPLE IRA, and notify his employer of this selection.
If we do not serve as the Designated Financial Institution for your employer's
SIMPLE Plan, for you to use one of our Contracts as a SIMPLE IRA, you need to
provide your employer with appropriate notification of such a selection under
the SIMPLE Plan. If you choose, you may arrange for a qualifying transfer of any
amounts currently held in another SIMPLE IRA for your benefit to your SIMPLE IRA
with us.
d. ROTH IRAS
Code Section 408A permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to limitations
on the amounts that may be contributed by the persons who may be eligible to
contribute, certain Traditional IRA restrictions, and certain RMD rules on the
death of the Contract Owner. Unlike a Traditional IRA, Roth IRAs are not subject
to RMD rules during the Contract Owner's lifetime. Generally, however, upon the
Owner's death the amount remaining in a Roth IRA must be distributed by the end
of the fifth year after such death or distributed over the life expectancy of a
designated beneficiary. The Owner of a Traditional IRA may convert a Traditional
IRA into a Roth IRA under certain circumstances. The conversion of a Traditional
IRA to a Roth IRA will subject the fair market value of the converted
Traditional IRA to federal income tax in the year of conversion. In addition to
the amount held in the converted Traditional IRA, the fair market value may
include the value of additional benefits provided by the annuity contract on the
date of conversion, based on reasonable actuarial assumptions. Tax-free
rollovers from a Roth IRA can be made only to another Roth IRA under limited
circumstances, as indicated below. After 2007, distributions from eligible
Qualified Plans can be "rolled over" directly (subject to tax) into a Roth IRA
under certain circumstances. Anyone considering the purchase of a Qualified
Contract as a Roth IRA or a "conversion" Roth IRA should consult with a
qualified tax adviser. Please note that the Roth IRA rider for the Contract has
provisions that are designed to maintain the Contract's tax qualification as a
Roth IRA, and therefore could limit certain benefits under the Contract
(including endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
2. QUALIFIED PENSION OR PROFIT-SHARING PLAN OR SECTION 401(k) PLAN
Provisions of the Code permit eligible employers to establish a tax-qualified
pension or profit sharing plan (described in Section 401(a), and Section 401(k)
if applicable, and exempt from taxation under Section 501(a)). Such a Plan is
subject to limitations on the amounts that may be contributed, the persons who
may be eligible to participate, the amounts of "incidental" death benefits, and
the time when RMDs must commence. In addition, a Plan's provision of incidental
benefits may result in currently taxable income to the participant for some or
all of such benefits. Amounts may be rolled over tax-free from a Qualified Plan
to another Qualified Plan under certain circumstances, as described below.
Anyone considering the use of a Qualified Contract in connection with such a
Qualified Plan should seek competent tax and other legal advice.
In particular, please note that these tax rules provide for limits on death
benefits provided by a Qualified Plan (to keep such death benefits "incidental"
to qualified retirement benefits), and a Qualified Plan (or a Qualified
Contract) often contains provisions that effectively limit such death benefits
to preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefits once RMDs begin, and Qualified Contracts are subject
to such limits. As a result, the amounts of certain benefits that can be
provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
3. TAX SHELTERED ANNUITY UNDER SECTION 403(b) ("TSA")
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations described in Code
Section 501(c)(3) to purchase a "tax-sheltered annuity" ("TSA") contract and,
subject to certain limitations, exclude employer contributions to a TSA from
such an employee's gross income. Generally, total contributions may not exceed
the lesser of an annual dollar limit (e.g., $49,000 in 2009) or 100% of the
employee's "includable compensation" for the most recent full year of service,
subject to other adjustments. There are also legal limits on annual elective
deferrals that a participant may be permitted to make under a TSA. In certain
cases, such as when the participant is age 50 or older, those limits may be
increased. A TSA participant should contact his plan administrator to determine
applicable elective contribution limits. Special provisions may allow certain
employees different overall limitations.
A TSA is subject to a prohibition against distributions from the TSA
attributable to contributions made pursuant to a salary reduction agreement,
unless such distribution is made:
a. after the employee reaches age 59 1/2;
b. upon the employee's separation from service;
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c. upon the employee's death or disability;
d. in the case of hardship (as defined in applicable law and in the case of
hardship, any income attributable to such contributions may not be
distributed); or
e. as a qualified reservist distribution upon certain calls to active
duty.
An employer sponsoring a TSA may impose additional restrictions on your TSA
through its plan document.
Please note that the TSA rider for the Contract has provisions that are designed
to maintain the Contract's tax qualification as a TSA, and therefore could limit
certain benefits under the Contract (including endorsement, rider or option
benefits) to maintain the Contract's tax qualification. In particular, please
note that tax rules provide for limits on death benefits provided by a Qualified
Plan (to keep such death benefits "incidental" to qualified retirement
benefits), and a Qualified Plan (or a Qualified Contract) often contains
provisions that effectively limit such death benefits to preserve the tax
qualification of the Qualified Plan (or Qualified Contract). In addition,
various tax-qualification rules for Qualified Plans specifically limit increases
in benefits once RMDs begin, and Qualified Contracts are subject to such limits.
As a result, the amounts of certain benefits that can be provided by any option
under a Qualified Contract may be limited by the provisions of the Qualified
Contract or governing Qualified Plan that are designed to preserve its tax
qualification. In addition, a life insurance contract issued after September 23,
2007 is generally ineligible to qualify as a TSA under Reg. Section
1.403(b)-8(c)(2).
Amounts may be rolled over tax-free from a TSA to another TSA or Qualified Plan
(or from a Qualified Plan to a TSA) under certain circumstances, as described
below. However, effective for TSA contract exchanges after September 24, 2007,
Reg. Section 1.403(b)-10(b) allows a TSA contract of a participant or
beneficiary under a TSA Plan to be exchanged tax-free for another eligible TSA
contract under that same TSA Plan, but only if all of the following conditions
are satisfied: (1) such TSA Plan allows such an exchange, (2) the participant or
beneficiary has an accumulated benefit after such exchange that is no less than
such participant's or beneficiary's accumulated benefit immediately before such
exchange (taking into account such participant's or beneficiary's accumulated
benefit under both TSA contracts immediately before such exchange), (3) the
second TSA contract is subject to distribution restrictions with respect to the
participant that are no less stringent than those imposed on the TSA contract
being exchanged, and (4) the employer for such TSA Plan enters into an agreement
with the issuer of the second TSA contract under which such issuer and employer
will provide each other from time to time with certain information necessary for
such second TSA contract (or any other TSA contract that has contributions from
such employer) to satisfy the TSA requirements under Code Section 403(b) and
other federal tax requirements (e.g., plan loan conditions under Code Section
72(p) to avoid deemed distributions). Such necessary information could include
information about the participant's employment, information about other
Qualified Plans of such employer, and whether a severance has occurred, or
hardship rules are satisfied, for purposes of the TSA distribution restrictions.
Consequently, you are advised to consult with a qualified tax advisor before
attempting any such TSA exchange, particularly because it requires an agreement
between the employer and issuer to provide each other with certain information.
In addition, the same Regulation provides corresponding rules for a transfer
from one TSA to another TSA under a different TSA Plan (e.g., for a different
eligible employer). We are no longer accepting any incoming exchange request, or
new contract application, for any individual TSA contract.
4. DEFERRED COMPENSATION PLANS UNDER SECTION 457 ("SECTION 457 PLANS")
Certain governmental employers, or tax-exempt employers other than a
governmental entity, can establish a Deferred Compensation Plan under Code
Section 457. For these purposes, a "governmental employer" is a State, a
political subdivision of a State, or an agency or an instrumentality of a State
or political subdivision of a State. A Deferred Compensation Plan that meets the
requirements of Code Section 457(b) is called an "Eligible Deferred Compensation
Plan" or "Section 457(b) Plan." Code Section 457(b) limits the amount of
contributions that can be made to an Eligible Deferred Compensation Plan on
behalf of a participant. Generally, the limitation on contributions is the
lesser of (1) 100% of a participant's includible compensation or (2) the
applicable dollar amount, equal to $15,000 for 2006 and thereafter ($16,500 for
2009). The $15,000 limit will be indexed for cost-of-living adjustments at $500
increments. The Plan may provide for additional "catch-up" contributions . In
addition, under Code Section 457(d) a Section 457(b) Plan may not make amounts
available for distribution to participants or beneficiaries before (1) the
calendar year in which the participant attains age 70 1/2, (2) the participant
has a severance from employment (including death), or (3) the participant is
faced with an unforeseeable emergency (as determined in accordance with
regulations).
Under Code Section 457(g) all of the assets and income of an Eligible Deferred
Compensation Plan for a governmental employer must be held in trust for the
exclusive benefit of participants and their beneficiaries. For this purpose,
annuity contracts and custodial accounts described in Code Section 401(f) are
treated as trusts. This trust requirement does not apply to amounts under an
Eligible Deferred Compensation Plan of a tax-exempt (non-governmental) employer.
In addition, this trust requirement does not apply to amounts held under a
Deferred Compensation Plan of a governmental employer that is not a Section
457(b) Plan. However, where the trust requirement does not apply, amounts held
under a Section 457 Plan must remain subject to the claims of the employer's
general creditors under Code Section 457(b)(6).
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5. TAXATION OF AMOUNTS RECEIVED FROM QUALIFIED PLANS
Except under certain circumstances in the case of Roth IRAs or Roth accounts in
certain Qualified Plans, amounts received from Qualified Contracts or Plans
generally are taxed as ordinary income under Code Section 72, to the extent that
they are not treated as a tax-free recovery of after-tax contributions or other
"investment in the contract." For annuity payments and other amounts received
after the Annuity Commencement Date from a Qualified Contract or Plan, the tax
rules for determining what portion of each amount received represents a tax-free
recovery of "investment in the contract" are generally the same as for
Non-Qualified Contracts, as described above.
For non-periodic amounts from certain Qualified Contracts or Plans, Code Section
72(e)(8) provides special rules that generally treat a portion of each amount
received as a tax-free recovery of the "investment in the contract," based on
the ratio of the "investment in the contract" over the Contract Value at the
time of distribution. However, in determining such a ratio, certain aggregation
rules may apply and may vary, depending on the type of Qualified Contract or
Plan. For instance, all Traditional IRAs owned by the same individual are
generally aggregated for these purposes, but such an aggregation does not
include any IRA inherited by such individual or any Roth IRA owned by such
individual.
In addition, penalty taxes, mandatory tax withholding or rollover rules may
apply to amounts received from a Qualified Contract or Plan, as indicated below,
and certain exclusions may apply to certain distributions (e.g., distributions
from an eligible Government Plan to pay qualified health insurance premiums of
an eligible retired public safety officer). Accordingly, you are advised to
consult with a qualified tax adviser before taking or receiving any amount
(including a loan) from a Qualified Contract or Plan.
6. PENALTY TAXES FOR QUALIFIED PLANS
Unlike Non-Qualified Contracts, Qualified Contracts are subject to federal
penalty taxes not just on premature distributions, but also on excess
contributions and failures to make required minimum distributions ("RMDs").
Penalty taxes on excess contributions can vary by type of Qualified Plan and
which person made the excess contribution (e.g., employer or an employee). The
penalty taxes on premature distributions and failures to make timely RMDs are
more uniform, and are described in more detail below.
a. PENALTY TAXES ON PREMATURE DISTRIBUTIONS
Code Section 72(t) imposes a penalty income tax equal to 10% of the taxable
portion of a distribution from certain types of Qualified Plans that is made
before the employee reaches age 59 1/2. However, this 10% penalty tax does not
apply to a distribution that is either:
(i) made to a beneficiary (or to the employee's estate) on or after the
employee's death;
(ii) attributable to the employee's becoming disabled under Code Section
72(m)(7);
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually - "SEPPs") made for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of such employee and a designated beneficiary ("SEPP
Exception"), and for certain Qualified Plans (other than IRAs) such a
series must begin after the employee separates from service;
(iv) (except for IRAs) made to an employee after separation from service
after reaching age 55 (or made after age 50 in the case of a qualified
public safety employee separated from certain government plans);
(v) (except for IRAs) made to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (a similar exception
for IRAs in Code Section 408(d)(6) covers certain transfers for the
benefit of a spouse or ex-spouse);
(vi) not greater than the amount allowable as a deduction to the employee
for eligible medical expenses during the taxable year;
(vii) certain qualified reservist distributions under Code Section
72(t)(2)(G) upon a call to active duty;
(viii) made an account of an IRS levy on the Qualified Plan under Code
Section 72(t)(2)(A)(vii); or
(ix) made as a "direct rollover" or other timely rollover to an Eligible
Retirement Plan, as described below.
In addition, the 10% penalty tax does not apply to a distribution from an IRA
that is either:
(x) made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions in Code Section
72(t)(2)(D) are met;
(xi) not in excess of the amount of certain qualifying higher education
expenses, as defined by Code Section 72(t)(7); or
(xii) for a qualified first-time home buyer and meets the requirements of
Code Section 72(t)(8).
If the taxpayer avoids this 10% penalty tax by qualifying for the SEPP Exception
and later such series of payments is modified (other than by death, disability
or a method change allowed by Rev. Rul. 2002-62), the 10% penalty tax will be
applied retroactively to all the
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prior periodic payments (i.e., penalty tax plus interest thereon), unless such
modification is made after both (a) the employee has reached age 59 1/2 and (b)
5 years have elapsed since the first of these periodic payments.
For any premature distribution from a SIMPLE IRA during the first 2 years that
an individual participates in a salary reduction arrangement maintained by that
individual's employer under a SIMPLE Plan, the 10% penalty tax rate is increased
to 25%.
b. RMDS AND 50% PENALTY TAX
THE RMD RULES GENERALLY DO NOT APPLY FOR THE 2009 TAX YEAR. HOWEVER, INDIVIDUALS
WHO DEFERRED 2008 RMDS UNTIL APRIL 1, 2009, MUST STILL TAKE AN RMD BY THAT DATE.
PLEASE CONSULT WITH A QUALIFIED TAX ADVISER OR YOUR QUALIFIED PLAN ADMINISTRATOR
TO DETERMINE HOW THIS CHANGE MAY AFFECT YOU.
If the amount distributed from a Qualified Contract or Plan is less than the
amount of the required minimum distribution ("RMD") for the year, the
participant is subject to a 50% penalty tax on the amount that has not been
timely distributed.
An individual's interest in a Qualified Plan generally must be distributed, or
begin to be distributed, not later than the Required Beginning Date. Generally,
the Required Beginning Date is April 1 of the calendar year following the later
of -
(i) the calendar year in which the individual attains age 70 1/2, or
(ii) (except in the case of an IRA or a 5% owner, as defined in the Code)
the calendar year in which a participant retires from service with the
employer sponsoring a Qualified Plan that allows such a later Required
Beginning Date.
The entire interest of the individual must be distributed beginning no later
than the Required Beginning Date over -
(a) the life of the individual or the lives of the individual and a
designated beneficiary (as specified in the Code), or
(b) over a period not extending beyond the life expectancy of the individual
or the joint life expectancy of the individual and a designated
beneficiary.
If an individual dies before reaching the Required Beginning Date, the
individual's entire interest generally must be distributed within 5 years after
the individual's death. However, this RMD rule will be deemed satisfied if
distributions begin before the close of the calendar year following the
individual's death to a qualifying designated beneficiary and distribution is
over the life of such designated beneficiary (or over a period not extending
beyond the life expectancy of such beneficiary). If the individual's surviving
spouse is the sole designated beneficiary, distributions may be delayed until
the deceased individual would have attained age 70 1/2.
If an individual dies after RMDs have begun for such individual, any remainder
of the individual's interest generally must be distributed at least as rapidly
as under the method of distribution in effect at the time of the individual's
death.
The RMD rules that apply while the Contract Owner is alive do not apply with
respect to Roth IRAs. The RMD rules applicable after the death of the Owner
apply to all Qualified Plans, including Roth IRAs. In addition, if the Owner of
a Traditional or Roth IRA dies and the Owner's surviving spouse is the sole
designated beneficiary, this surviving spouse may elect to treat the Traditional
or Roth IRA as his or her own.
The RMD amount for each year is determined generally by dividing the account
balance by the applicable life expectancy. This account balance is generally
based upon the account value as of the close of business on the last day of the
previous calendar year. RMD incidental benefit rules also may require a larger
annual RMD amount, particularly when distributions are made over the joint lives
of the Owner and an individual other than his or her spouse. RMDs also can be
made in the form of annuity payments that satisfy the rules set forth in
Regulations under the Code relating to RMDs.
In addition, in computing any RMD amount based on a contract's account value,
such account value must include the actuarial value of certain additional
benefits provided by the contract. As a result, electing an optional benefit
under a Qualified Contract may require the RMD amount for such Qualified
Contract to be increased each year, and expose such additional RMD amount to the
50% penalty tax for RMDs if such additional RMD amount is not timely
distributed.
7. TAX WITHHOLDING FOR QUALIFIED PLANS
Distributions from a Qualified Contract or Qualified Plan generally are subject
to federal income tax withholding requirements. These federal income tax
withholding requirements, including any "elections out" and the rate at which
withholding applies, generally are the same as for periodic and non-periodic
distributions from a Non-Qualified Contract, as described above, except where
the distribution is an "eligible rollover distribution" from a Qualified Plan
(described below in "ROLLOVER DISTRIBUTIONS"). In the latter case, tax
withholding is mandatory at a rate of 20% of the taxable portion of the
"eligible rollover distribution," to the extent it is not directly rolled over
to an IRA or other Eligible Retirement Plan (described below in "ROLLOVER
DISTRIBUTIONS"). Payees cannot elect out of this mandatory 20% withholding in
the case of such an "eligible rollover distribution."
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Also, special withholding rules apply with respect to distributions from
non-governmental Section 457(b) Plans, and to distributions made to individuals
who are neither citizens nor resident aliens of the United States.
Regardless of any "election out" (or any actual amount of tax actually withheld)
on an amount received from a Qualified Contract or Plan, the payee is generally
liable for any failure to pay the full amount of tax due on the includable
portion of such amount received. A payee also may be required to pay penalties
under estimated income tax rules, if the withholding and estimated tax payments
are insufficient to satisfy the payee's total tax liability.
8. ROLLOVER DISTRIBUTIONS
The current tax rules and limits for tax-free rollovers and transfers between
Qualified Plans vary according to (1) the type of transferor Plan and transferee
Plan, (2) whether the amount involved is transferred directly between Plan
fiduciaries (a "direct transfer" or a "direct rollover") or is distributed first
to a participant or beneficiary who then transfers that amount back into another
eligible Plan within 60 days (a "60-day rollover"), and (3) whether the
distribution is made to a participant, spouse or other beneficiary. Accordingly,
we advise you to consult with a qualified tax adviser before receiving any
amount from a Qualified Contract or Plan or attempting some form of rollover or
transfer with a Qualified Contract or Plan.
For instance, generally any amount can be transferred directly from one type of
Qualified Plan (e.g., a TSA) to the same type of Plan for the benefit of the
same individual, without limit (or federal income tax), if the transferee Plan
is subject to the same kinds of restrictions as the transferor Plan (e.g., a TSA
that is subject to the same kinds of salary reduction restrictions) and certain
other conditions to maintain the applicable tax qualification are satisfied
(e.g., as described above for TSA exchanges after September 24, 2007). Such a
"direct transfer" between the same kinds of Plan is generally not treated as any
form of "distribution" out of such a Plan for federal income tax purposes.
By contrast, an amount distributed from one type of Plan (e.g., a TSA) into a
different type of Plan (e.g., a Traditional IRA) generally is treated as a
"distribution" out of the first Plan for federal income tax purposes, and
therefore to avoid being subject to such tax, such a distribution must qualify
either as a "direct rollover" (made directly to another Plan fiduciary) or as a
"60-day rollover." The tax restrictions and other rules for a "direct rollover"
and a "60-day rollover" are similar in many ways, but if any "eligible rollover
distribution" made from certain types of Qualified Plan is not transferred
directly to another Plan fiduciary by a "direct rollover," then it is subject to
mandatory 20% withholding, even if it is later contributed to that same Plan in
a "60-day rollover" by the recipient. If any amount less than 100% of such a
distribution (e.g., the net amount after the 20% withholding) is transferred to
another Plan in a "60-day rollover", the missing amount that is not rolled over
remains subject to normal income tax plus any applicable penalty tax.
Under Code Sections 402(f)(2)(A) and 3405(c)(3) an "eligible rollover
distribution" (which is both eligible for rollover treatment and subject to 20%
mandatory withholding absent a "direct rollover") is generally any distribution
to an employee of any portion (or all) of the balance to the employee's credit
in any of the following types of "Eligible Retirement Plan": (1) a Qualified
Plan under Code Section 401(a) ("Qualified 401(a) Plan"), (2) a qualified
annuity plan under Code Section 403(a) ("Qualified Annuity Plan"), (3) a TSA
under Code Section 403(b), or (4) a governmental Section 457(b) Plan. However,
an "eligible rollover distribution" does not include any distribution that is
either -
a. an RMD amount;
b. one of a series of substantially equal periodic payments (not less
frequently than annually) made either (i) for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and a designated beneficiary, or (ii) for
a specified period of 10 years or more; or
c. any distribution made upon hardship of the employee.
Before making an "eligible rollover distribution," a Plan administrator
generally is required under Code Section 402(f) to provide the recipient with
advance written notice of the "direct rollover" and "60-day rollover" rules and
the distribution's exposure to the 20% mandatory withholding if it is not made
by "direct rollover." Generally, under Code Sections 402(c), 403(b)(8) and 457
(e)(16), a "direct rollover" or a "60-day rollover" of an "eligible rollover
distribution" can be made to a Traditional IRA or to another Eligible Retirement
Plan that agrees to accept such a rollover. However, the maximum amount of an
"eligible rollover distribution" that can qualify for a tax-free "60-day
rollover" is limited to the amount that otherwise would be includable in gross
income. By contrast, a "direct rollover" of an "eligible rollover distribution"
can include after-tax contributions as well, if the direct rollover is made
either to a Traditional IRA or to another form of Eligible Retirement Plan that
agrees to account separately for such a rollover, including accounting for such
after-tax amounts separately from the otherwise taxable portion of this
rollover. Separate accounting also is required for all amounts (taxable or not)
that are rolled into a governmental Section 457(b) Plan from either a Qualified
Section 401(a) Plan, Qualified Annuity Plan, TSA or IRA. These amounts, when
later distributed from the governmental Section 457(b) Plan, are subject to any
premature distribution penalty tax applicable to distributions from such a
"predecessor" Qualified Plan.
Rollover rules for distributions from IRAs under Code Sections 408(d)(3) and
408A(d)(3) also vary according to the type of transferor IRA and type of
transferee IRA or other Plan. For instance, generally no tax-free "direct
rollover" or "60-day rollover" can be made between a "NonRoth IRA" (Traditional,
SEP or SIMPLE IRA) and a Roth IRA, and a transfer from NonRoth IRA to a Roth
IRA, or a
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"conversion" of a NonRoth IRA to a Roth IRA, is subject to special rules. In
addition, generally no tax-free "direct rollover" or "60-day rollover" can be
made between an "inherited IRA" (NonRoth or Roth) for a beneficiary and an IRA
set up by that same individual as the original owner. Generally, any amount
other than an RMD distributed from a Traditional or SEP IRA is eligible for a
"direct rollover" or a "60-day rollover" to another Traditional IRA for the same
individual. Similarly, any amount other than an RMD distributed from a Roth IRA
is generally eligible for a "direct rollover" or a "60-day rollover" to another
Roth IRA for the same individual. However, in either case such a tax-free 60-day
rollover is limited to 1 per year (365-day period); whereas no 1-year limit
applies to any such "direct rollover." Similar rules apply to a "direct
rollover" or a "60-day rollover" of a distribution from a SIMPLE IRA to another
SIMPLE IRA or a Traditional IRA, except that any distribution of employer
contributions from a SIMPLE IRA during the initial 2-year period in which the
individual participates in the employer's SIMPLE Plan is generally disqualified
(and subject to the 25% penalty tax on premature distributions) if it is not
rolled into another SIMPLE IRA for that individual. Amounts other than RMDs
distributed from a Traditional or SEP IRA (or SIMPLE IRA after the initial
2-year period) also are eligible for a "direct rollover" or a "60-day rollover"
to an Eligible Retirement Plan (e.g., a TSA) that accepts such a rollover, but
any such rollover is limited to the amount of the distribution that otherwise
would be includable in gross income (i.e., after-tax contributions are not
eligible).
Special rollover rules also apply to (1) transfers or rollovers for the benefit
of a spouse (or ex-spouse) or a nonspouse designated beneficiary, (2) Plan
distributions of property, (3) distributions from a Roth account in certain
Plans, (4) recontributions within 3 years of "qualified hurricane distributions"
made before 2007 under Code Section 1400Q(a), (5) transfers from a Traditional
or Roth IRA to certain health savings accounts under Code Section 408(d)(9), and
(6) obtaining a waiver of the 60-day limit for a tax-free rollover from the IRS.
9. CERTAIN TAX CONSIDERATIONS WITH THE PERSONAL PENSION ACCOUNT IN QUALIFIED
PLANS
Because the IRS has published no guidance on the tax treatment of arrangements
resembling the Personal Pension Account, there is necessarily some uncertainty
as to how an annuity contract with a Personal Pension Account will be treated in
different types of Qualified Plans, and we advise you to consult with a
qualified tax adviser concerning such treatment before you deposit any amount
into a Personal Pension Account that is held in any Qualified Plan.
Among such tax issues for you to consider with a qualified tax adviser in such a
case are the following:
a. Any amounts received by you (or your payee) prior to your attaining
age 59 1/2 are generally subject to the penalty tax on premature
distributions described above, unless such an amount received can
qualify for an exception from such a penalty tax, e.g., scheduled
payments that qualify for the SEPP Exception. In addition, any
modification in payments qualifying for the SEPP Exception (e.g., by
commutation) can have adverse penalty tax consequences, as described
above.
b. The tax rules for satisfying RMD requirements vary according to both
the form of Qualified Plan (e.g., NonRoth or Roth IRA) and the form
of payment (e.g., periodic annuity payout or non-periodic
distribution from an account value). As a result, such variations
should be considered when RMD amounts need to be taken (e.g., after
age 70 1/2 or death). In addition, any modification in the form or
amount of such payments (e.g., by commutation) could have adverse tax
consequences, if such a modification does not satisfy an
IRS-recognized RMD exception (e.g., for an acceleration or other
change in periodic payments under Reg. Section 1.401(a) (9)-6, Q&A-1
and Q&A-14).
c. Any attempt to transfer an amount from the Benefit Balance to
Sub-Accounts or the Fixed Accumulation Feature (if available) that
exceeds the threshold for such a transfer will be treated by us as a
form of annuitization distribution from the Personal Pension
Account, and thus may not qualify as a tax-free direct transfer.
Instead, such an attempted excess transfer could be treated for tax
purposes as a potentially taxable distribution out of the entire
annuity contract, followed by a contribution back into the same
contract. While such a distribution from an IRA may qualify for
60-day rollover treatment (if it is not needed to satisfy RMD
requirements), only one such tax-free 60-day rollover is allowed for
any 365-day period for any individual from all of such individual's
IRAs. Failing such tax-free rollover treatment, such a distribution
could be subject to both income and penalty tax, and any deemed
contribution back into the contract may be subject to an excise tax
on excess contributions, particularly after age 70 1/2. IN ADDITION,
ANY SUCH DISTRIBUTION FROM A NON-IRA FORM OF QUALIFIED PLAN MAY BE
SUBJECT TO THE 20% MANDATORY WITHHOLDING TAX, UNLESS SUCH
DISTRIBUTION IS AN RMD OR OTHERWISE AVOIDS CLASSIFICATION AS AN
"ELIGIBLE ROLLOVER DISTRIBUTION," AS DESCRIBED ABOVE.
59
-------------------------------------------------------------------------------
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
GENERAL INFORMATION
Safekeeping of Assets
Experts
Non-Participating
Misstatement of Age or Sex
Principal Underwriter
Additional Payments
PERFORMANCE RELATED INFORMATION
Total Return for all Sub-Accounts
Yield for Sub-Accounts
Money Market Sub-Accounts
Additional Materials
Performance Comparisons
ACCUMULATION UNIT VALUES
FINANCIAL STATEMENTS
APP A-1
-------------------------------------------------------------------------------
APPENDIX A - EXAMPLES
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
PERSONAL PENSION ACCOUNT APP A-2
RETURN OF PREMIUM DEATH BENEFIT APP A-8
REMAINING GROSS PREMIUM APP A-9
APP A-2
-------------------------------------------------------------------------------
PERSONAL PENSION ACCOUNT EXAMPLES
EXAMPLE 1: STANDARD ILLUSTRATIONS WITH A PARTIAL INCOME STREAM
Assume the initial Personal Pension Account Contribution is equal to $100,000
(no sums are invested in the Fixed Accumulation Feature or Sub-Accounts). Assume
that in Contract Year 7, the Owner requested to commence an income stream based
on $50,000 of Annuity Payout Value during the guarantee window. For the purposes
of this Example, the Contract Owner chose a Target Income Age of 64.
Hypothetical credited and payout rates are illustrated below.
A. To understand how your guaranteed payout rates are set during your guarantee
window (shaded area), see Guaranteed Payout Rates in Contract Years 1
through 7. In this Example, the guaranteed payout rate is locked in at
Contract Year 7 when Personal Pension Account Payouts commence.
B. Credited interest rates vary during the duration of your Contract as
illustrated in column 4. In this illustration, credited interest rates
change at the 10th Contract Year and again at the 20th Contract Year.
C. Please refer to the last column in Contract Year 23 for an example of how
Personal Pension Account Payouts will continue for the life of the
Annuitant, Owner or joint Owner even though Annuity Payout Value has been
exhausted.
CREDITED
CONTRACT BENEFIT INTEREST
YEAR AGE BALANCE RATE
----------------------------------------------------------------------
0 60 $ 100,000 5.00%
1 61 105,000 5.00%
2 62 110,250 5.00%
3 63 115,763 5.00%
GUARANTEE 4 64 121,551 5.00%
WINDOW 5 65 127,628 5.00%
6 66 134,010 5.00%
7 67 140,710 5.00%
8 68 142,009 5.00%
9 69 143,535 5.00%
10 70 145,299 3.00%
11 71 145,212 3.00%
12 72 145,220 3.00%
13 73 145,326 3.00%
14 74 145,532 3.00%
15 75 145,841 3.00%
16 76 146,256 3.00%
17 77 146,781 3.00%
18 78 147,419 3.00%
19 79 148,173 3.00%
20 80 149,047 1.50%
21 81 147,927 1.50%
22 82 146,839 1.50%
23 83 147,568 1.50%
PERSONAL
ANNUITY GUARANTEED PENSION
ACCUMULATION PAYOUT PAYOUT RATES ACCOUNT
BALANCE VALUE (PER 1000) PAYOUTS(2)
------------ --------------------------------------------------------------------------
$ 100,000
105,000 61.99
110,250 62.33
115,763 62.72
GUARANTEE 121,551 63.16
WINDOW 127,628 63.65
134,010 64.17
90,710 (1) 50,000 64.73 $ 3,237
95,246 46,763 $ 3,237
100,008 43,527 $ 3,237
105,008 40,290 $ 3,237
108,158 37,054 $ 3,237
111,403 33,817 $ 3,237
114,745 30,581 $ 3,237
118,188 27,344 $ 3,237
121,733 24,108 $ 3,237
125,385 20,871 $ 3,237
129,147 17,634 $ 3,237
133,021 14,398 $ 3,237
137,012 11,161 $ 3,237
141,122 7,925 $ 3,237
143,239 4,688 $ 3,237
145,388 1,452 $ 3,237
147,568 0 $ 3,237
(1) Accumulation Balance is reduced by $50,000 that is converted into the
Annuity Payout Value. CDSC's and Premium tax have not been applied in this
Example. If the $50,000 was instead commuted into a Commuted Value
(assuming a hypothetical discount rate of 6%), the Commuted Value would be
$32,294. The remaining Accumulation Balance can be converted into Annuity
Payout Value at a later date for additional Personal Pension Account
Payouts.
(2) These Personal Pension Account Payouts shall continue for the life of the
Annuitant, Owner or joint Owner pursuant to Annuity Payout Option Two.
APP A-3
-------------------------------------------------------------------------------
EXAMPLE 2
Assume a $100,000 initial Personal Pension Account Contribution was made at a
time when we declared a hypothetical credited rate of 4% and that a $15,000
subsequent Personal Pension Account Contribution was made when we declared a
hypothetical credited rate of 3.75%. Your Benefit Balance would increase as
follows:
PERSONAL PERSONAL TOTAL
PENSION ACCOUNT CREDITED PENSION ACCOUNT CREDITED BENEFIT
AGE CONTRIBUTION RATE CONTRIBUTION RATE BALANCE
--------------------------------------------------------------------------------------------------------------------
55 First $100,000 $100,000
56 Deposit 4.00% $104,000
57 4.00% $108,160
58 4.00% $112,486
59 4.00% Second $15,000 $131,986
60 4.00% Deposit 3.75% $137,228
61 4.00% 3.75% $142,678
62 4.00% 3.75% $148,345
63 4.00% 3.75% $154,237
64 4.00% 3.75% $160,362
65 4.00% 3.75% $166,732
EXAMPLE 3: BENEFIT BALANCE TRANSFER (IN-BOUND)
The following example illustrates the impact on various values associated to the
Contract when a transfer from the Sub-Accounts to the Personal Pension Account
occurs. Assume that the Owner makes a Premium Payment of $100,000 into the
Sub-Accounts and then elects to transfer $5,000 from the Sub-Accounts to the
Personal Pension Account, in which event:
TRANSFER FROM
SUB-ACCOUNTS TO THE
PERSONAL PENSION ACCOUNT
BEFORE VALUE AFTER VALUE
--------------------------------------------------------------------------------
Contract Value (assumed) $130,000 $125,000
Remaining Gross Premium $100,000 $100,000
Annual Withdrawal Amount $5,000 $0
Return of Premium Death Benefit $100,000 $95,000
Benefit Balance $0 $5,000
- The Contract Value is reduced by the amount of the transfer ($5,000).
- The Remaining Gross Premium associated to the Sub-Accounts is not reduced by
the amount of the transfer as Remaining Gross Premium is only reduced for
Surrenders or transfers in excess of the Annual Withdrawal Amount.
- The Annual Withdrawal Amount is reduced by the amount of the transfer
($5,000) as transfers (and Surrenders) reduce the Annual Withdrawal Amount.
- The Return of Premium Death Benefit is reduced dollar for dollar for the
amount of the transfer ($5,000).
- Assuming that there were no sums previously invested in the Personal Pension
Account, the Benefit Balance is increased by this amount.
APP A-4
-------------------------------------------------------------------------------
BENEFIT BALANCE TRANSFER (OUT-BOUND)
The following example illustrates the impact on various values associated to the
Contract when a transfer from the Personal Pension Account to the Sub-Accounts
occurs. Assume that the Owner makes a Personal Pension Account Contribution of
$100,000 into the Personal Pension Account and then elects to transfer the
maximum available transfer from the Personal Pension Account to the
Sub-Accounts. The out-bound transfer restriction considers the following
factors:
END OF YEAR MAXIMUM OF A, B, C A B C
-------------------------------------------------------------------
1 $4,120 $4,120 $3,000 $0
2 $4,120 $4,073 $2,966 $4,120
Where ,
- Column A equals four (4%) percent of the Accumulation Balance as of the
prior Contract Anniversary. Assume that the $100,000 Personal Pension
Account Contribution earns a credited interest rate of 3%.
- Column B equals the amount of interest credited to the Accumulation Balance
over the most recent full Contract Year.
- Column C equals the amount of Accumulation Balance transferred to Contract
Value during the most recent full Contract Year.
Applying these factors, the following table shows how various Contract benefits
change:
TRANSFER FROM PERSONAL PENSION ACCOUNT TO THE
SUB-ACCOUNTS
END OF YEAR 1
BEFORE VALUE AFTER VALUE
--------------------------------------------------------------------------------
Contract Value (assumed) $130,000 $134,120
Remaining Gross Premium $100,000 $104,120
Annual Withdrawal Amount $5,000 $5,206
Return of Premium Death Benefit $100,000 $104,120
Benefit Balance $103,000 $98,880
- The Accumulation Balance is reduced by the amount of the transfer ($4,120).
- The Remaining Gross Premium associated to the Sub-Accounts is increased by
the amount of the transfer as the transfer from the Personal Pension Account
to the Sub-Accounts is considered a subsequent Premium Payment.
- The Annual Withdrawal Amount is increased by 5% of the transfer amount
($206) as the transfer from the Personal Pension Account to the Sub-Accounts
is considered a subsequent Premium Payment.
- The Return of Premium Death Benefit is increased dollar for dollar for the
amount of the transfer ($4,120).
- The Contract Value is increased by the amount of the transfer ($4,120).
APP A-5
-------------------------------------------------------------------------------
EXAMPLE 4A: FULL COMMUTATION WITH COMMUTED VALUE
Assume that the Owner desires to start taking all Personal Pension Account
Payouts and then fully commute the Personal Pension Account Payouts in year 20,
which is outside of their guarantee window. For the purposes of this Example,
the Contract Owner chose a Target Income Age of 64. The Owner does not terminate
their Contract and therefore Personal Pension Account Payouts will resume after
the Guaranteed Payout Duration (assuming that all relevant persons are alive).
Also, assume that the initial Personal Pension Account Contribution is equal to
$100,000 and no Premium Payments have been invested in the Fixed Accumulation
Feature or Sub-Accounts.
CONTRACT BENEFIT ACCUMULATION CREDITED
YEAR AGE BALANCE BALANCE RATE
-------------------------------------------------------------------------------------------------
0 60 $100,000 $ 100,000 5.00 %
1 61 105,000 105,000 5.00 %
2 62 110,250 110,250 5.00 %
3 63 115,763 115,763 5.00 %
GUARANTEE 4 64 121,551 121,551 5.00 %
WINDOW 5 65 127,628 127,628 5.00 %
6 66 134,010 134,010 5.00 %
7 67 140,710 140,710 5.00 %
8 68 147,746 147,746 5.00 %
9 69 155,133 155,133 5.00 %
10 70 162,889 162,889 3.00 %
11 71 167,776 167,776 3.00 %
12 72 172,809 172,809 3.00 %
13 73 177,994 177,994 3.00 %
14 74 183,334 183,334 3.00 %
15 75 188,834 188,834 3.00 %
16 76 194,499 194,499 3.00 %
17 77 200,333 200,333 3.00 %
18 78 206,343 206,343 3.00 %
19 79 212,534 212,534 3.00 %
20 80 218,910 $ 0 (2) 1.50 %
21 81 n/a N/A n/a (3)
22 82 n/a N/A n/a
23 83 n/a N/A n/a
24 84 n/a N/A n/a
25 85 n/a N/A n/a
26 86 n/a N/A n/a
27 87 n/a N/A n/a
28 88 n/a N/A n/a
29 89 n/a N/A n/a
30 90 n/a N/A n/a
ANNUITY
PAYOUT PAYOUT RATES COMMUTED
VALUE (PER 1000)(1) VALUE PAYOUTS
------------ -------------------------------------------------------------
$ 0 61.68
$ 0 61.99 $ 0
$ 0 62.33 $ 0
$ 0 62.72 $ 0
GUARANTEE $ 0 63.16 $ 0
WINDOW $ 0 63.65 $ 0
$ 0 64.17 $ 0
$ 0 64.73 $ 0
$ 0 65.31 $ 0
$ 0 65.91 $ 0
$ 0 66.56 $ 0
$ 0 69.14 $ 0
$ 0 71.94 $ 0
$ 0 74.99 $ 0
$ 0 78.32 $ 0
$ 0 81.96 $ 0
$ 0 85.92 $ 0
$ 0 90.11 $ 0
$ 0 94.63 $ 0
$ 0 99.55 $ 0
$ 218,910 105.02 (6) $156,367 (5) $ 0 (4)
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A $ 22,989 (7)
N/A N/A N/A $ 22,989 (7)
(1) Payout Rates are only guaranteed if Personal Pension Account Payouts begin
within the guarantee window. Payouts that begin outside the guarantee
window are generally established using rates set at our discretion, subject
to the terms of your Contract. We cannot speculate what payout rates could
be when commencing Personal Pension Account Payouts outside of the
guarantee window. These rates may be as high as, but will never be greater
than, the payout rates guaranteed for Personal Pension Account Payouts we
set at the time of your Personal Pension Account Contributions. Payout
amounts will be no lower than the non-forfeiture amount described in the
Owner's contract.
(2) The Accumulation Balance is depleted to $0 based on being converted to
Annuity Payout Value. CDSCs and Premium tax are not shown in this Example.
APP A-6
-------------------------------------------------------------------------------
(3) Interest is no longer credited under the Personal Pension Account.
(4) The Personal Pension Account Payout is derived by multiplying the Annuity
Payout Value by the payout rate applicable to the year in which commutation
is requested and dividing by 1,000. In this case, $218,910*$105.02/1,000 =
$22,989. However, in this example, Personal Pension Account Payouts are
commuted and paid to the Owner in one lump sum. Life contingent Personal
Pension Account Payouts may resume after the Guarantee Payout Duration if
the Annuitant and Owner are living and have not terminated the Contract as
illustrated in years 29 and 30.
(5) The Commuted Value depicted is based on commutation of the Annuity Payout
Value (in this Example, is the same as the Benefit Balance because this is
a full commutation) of $218,910 using a hypothetical discount rate of 6%.
The Commuted Value is equal to the present value of the Personal Pension
Account Payout(s) associated with the Annuity Payout Value over the
Guaranteed Payout Duration (i.e., $218,910/$22,989, rounded down = 9 years)
calculated using this discount rate.
(6) Hypothetical Payout Rate used because Personal Pension Accounts and
subsequent commutation occur outside of the guarantee window.
(7) Lifetime Personal Pension Account Payouts resume because in this Example
the Annuitant is still living. The Owner would give up these lifetime
Personal Pension Account Payouts if he or she terminated the Contract.
APP A-7
-------------------------------------------------------------------------------
EXAMPLE 4B: PARTIAL COMMUTATION WITH COMMUTED VALUE
Assume that the Owner desires to start taking Personal Pension Account Payouts
and commute half of the Personal Pension Account Payouts in year 20, which is
outside of their guarantee window. In this Example, the guarantee window is
represented by the shaded area in years 1 though 7. Year 20 "Before" illustrates
how the Annuity Payout Value is split in half to serve as the basis for Personal
Pension Account Payouts and the Commuted Value. Year 20 "After" illustrates the
amounts paid to the Owner in the form of Personal Pension Account Payouts and
Commuted Value. The Owner does not terminate their Contract and therefore
Personal Pension Account Payouts will resume after the Guaranteed Payout
Duration (assuming that all relevant persons are alive). The Guaranteed Payout
Duration in this Example is illustrated as the shaded rows corresponding to
Contract Years 20 through 28. Assume the initial Deposit is equal to $100,000
and no sums are invested in the Fixed Accumulation Feature or Sub-Accounts.
ANNUITY
CONTRACT BENEFIT ACCUMULATION CREDITED PAYOUT
YEAR AGE BALANCE BALANCE RATE VALUE 1
------------------------------------------------------------------------------------------
0 60 $100,000 $ 100,000 5.00% $ 0
1 61 105,000 105,000 5.00% $ 0
2 62 110,250 110,250 5.00% $ 0
3 63 115,763 115,763 5.00% $ 0
4 64 121,551 121,551 5.00% $ 0
5 65 127,628 127,628 5.00% $ 0
6 66 134,010 134,010 5.00% $ 0
7 67 140,710 140,710 5.00% $ 0
8 68 147,746 147,746 5.00% $ 0
9 69 155,133 155,133 5.00% $ 0
10 70 162,889 162,889 3.00% $ 0
11 71 167,776 167,776 3.00% $ 0
12 72 172,809 172,809 3.00% $ 0
13 73 177,994 177,994 3.00% $ 0
14 74 183,334 183,334 3.00% $ 0
15 75 188,834 188,834 3.00% $ 0
16 76 194,499 194,499 3.00% $ 0
17 77 200,333 200,333 3.00% $ 0
18 78 206,343 206,343 3.00% $ 0
19 79 212,534 212,534 3.00% $ 0
20 BEFORE 80 218,910 $ 0 (2) 1.50% $ 109,455
20 AFTER 80 $ 97,960 $ 0 (2) n/a $ 97,960
21 81 $ 86,465 N/A n/a (3) $ 86,465
22 82 $ 74,970 N/A n/a $ 74,970
23 83 $ 63,475 N/A n/a $ 63,475
24 84 $ 51,980 N/A n/a $ 51,980
25 85 $ 40,485 N/A n/a $ 40,485
26 86 $ 28,990 N/A n/a $ 28,990
27 87 $ 17,495 N/A n/a $ 17,495
28 88 $ 6,000 N/A n/a $ 6,000
29 89 $ 0 N/A n/a $ 0
30 90 $ 0 N/A n/a $ 0
31 91 $ 0 N/A n/a $ 0
ANNUITY
CONTRACT PAYOUT COMMUTED PAYOUT RATES
YEAR VALUE 2 VALUE (PER 1000)(1) PAYOUTS
------------ ---------------------------------------------------------------------------
0 $ 0 61.68
1 $ 0 61.99 $ 0
2 $ 0 62.33 $ 0
3 $ 0 62.72 $ 0
4 $ 0 63.16 $ 0
5 $ 0 63.65 $ 0
6 $ 0 64.17 $ 0
7 $ 0 64.73 $ 0
8 $ 0 65.31 $ 0
9 $ 0 65.91 $ 0
10 $ 0 66.56 $ 0
11 $ 0 69.14 $ 0
12 $ 0 71.94 $ 0
13 $ 0 74.99 $ 0
14 $ 0 78.32 $ 0
15 $ 0 81.96 $ 0
16 $ 0 85.92 $ 0
17 $ 0 90.11 $ 0
18 $ 0 94.63 $ 0
19 $ 0 99.55 $ 0
20 BEFORE (4) $ 109,455 (4)
20 AFTER (5) $ 0 $ 78,185 (7) 105.02 (8) $ 11,495 (6)
21 $ 0 N/A N/A $ 11,495
22 $ 0 N/A N/A $ 11,495
23 $ 0 N/A N/A $ 11,495
24 $ 0 N/A N/A $ 11,495
25 $ 0 N/A N/A $ 11,495
26 $ 0 N/A N/A $ 11,495
27 $ 0 N/A N/A $ 11,495
28 $ 0 N/A N/A $ 11,495
29 $ 0 N/A N/A $ 22,989 (9)
30 $ 0 N/A N/A $ 22,989
31 $ 0 N/A N/A $ 22,989
(1) Payout Rates are only guaranteed if Personal Pension Account Payouts begin
within the guarantee window. Personal Pension Account Payouts that begin
outside the guarantee window are generally established using rates set at
our discretion, subject to the terms of your Contract. We cannot speculate
what payout rates could be when commencing Personal Pension Account Payouts
outside of the guarantee window. These rates may be as high as, but will
never be greater than, the payout rates guaranteed for Personal Pension
Account Payouts we set at the time of your Personal Pension Account
Contributions. Payout amounts will be no lower than the non-forfeiture
amount described in the Owner's contract.
(2) The Accumulation Balance is depleted to $0 based on all amounts being
converted to Annuity Payout Value. CDSCs and Premium tax not shown in the
Example.
(3) Interest is no longer credited under the Personal Pension Account.
APP A-8
-------------------------------------------------------------------------------
(4) In year 20, the Owner elected to commute half of their Annuity Payout Value
and receive the remaining half in the form of Personal Pension Account
Payouts. Thus, the Accumulation Balance of $210,910 is split in half.
$109,455 is converted into Annuity Payout Value and will serve as the basis
for Personal Pension Account Payouts. The remaining $109,455 will serve as
the basis for the Commuted Value calculation.
(5) The Annuity Payout Value of $109,455 is reduced by the Personal Pension
Account Payout of $11,495, leaving an Annuity Payout Value of $97,960
remaining.
(6) The Personal Pension Account Payout is derived by multiplying the Annuity
Payout Value by the appropriate payout rate and dividing by 1,000. In this
case, $109,455*105.02/1,000 = $11,495. However, in this example, half of
the Personal Pension Account Payouts are commuted and paid to the Owner in
one lump sum. Life contingent Personal Pension Account Payouts may resume
after the Guarantee Payout Duration if the Annuitant and Owner are living
as illustrated in years 29, 30, and 31.
(7) The Commuted Value depicted is based on commutation of half of the Annuity
Payout Value, or $109,455, using a hypothetical discount rate of 6%. The
Commuted Value is equal to the present value of the Personal Pension
Account Payout(s) associated with the Annuity Payout Value over the
remaining Guaranteed Payout Duration (i.e., $109,455/$11,495, rounded down
= 9) calculated using the discount rate.
(8) A hypothetical Payout Rate is used because Personal Pension Account Payouts
and commutation occur outside of the guarantee window.
(9) In this case, the lifetime Personal Pension Account Payouts for each
Annuity Payout Value is $11,495 ($109,455*105.02/1000 = $11,495). When
combined, these lifetime Personal Pension Account Payouts equal $22,989.
Lifetime Personal Pension Account Payouts begin because in this Example the
Annuitant is still living. The Owner would give up these lifetime Personal
Pension Account Payouts if he or she terminated the Contract.
RETURN OF PREMIUM DEATH BENEFIT EXAMPLES
EXAMPLE 1: ASSUME YOUR INITIAL PREMIUM PAYMENT IS $100,000. IN CONTRACT YEAR 1
YOU APPLY A SUBSEQUENT PREMIUM PAYMENT OF $50,000. IN CONTRACT YEAR 3 YOU TAKE A
PARTIAL SURRENDER FOR $1,000 AND IN THE SAME CONTRACT YEAR YOU TAKE ANOTHER
PARTIAL SURRENDER FOR $10,000, YOUR CONTRACT VALUE IMMEDIATELY FOLLOWING IS
$173,000.
YOUR INITIAL VALUE:
$100,000
VALUE AFTER THE SUBSEQUENT PREMIUM PAYMENT OF $50,000:
$150,000, which is the prior value increased by the amount of the subsequent
Premium Payments
VALUE AFTER THE PARTIAL SURRENDER ($1,000):
$149,000, which is the prior value reduced dollar-for-dollar by the amount of
the Surrender because it is within the withdrawal limit
VALUE AFTER THE ADDITIONAL PARTIAL SURRENDER ($10,000):
$139,674.22, which is the prior value reduced first dollar-for-dollar by the
amount of the Surrender not in excess of 5% of Premium Payments ($6,500) and
then proportional for the amount in excess of 5% of Premium Payments ($3,500).
The proportionate reduction is determined by first determining the factor:
1 - (excess Surrender/(Contract Value prior to the Surrender - Death Benefit
withdrawal limit remaining)
1- ($3,500/($173,000 + $10,000 - $6,500) = .980169971
Once the factor is determined the value prior to the Surrender is first reduced
dollar-for-dollar by the amount of the Surrender not in excess of the Death
Benefit withdrawal limit:
$149,000 - $6,500 =$142,500
This value is then multiplied by the factor:
$142,500 * .980169971 = $139,674.22
The death benefit would be the Contract Value or $173,000. You will also receive
the Personal Pension Account death benefit equal to any remaining Benefit
Balance.
EXAMPLE 2: SAME FACTS AS ABOVE EXCEPT THE BENEFIT BALANCE AT THE TIME OF DEATH
WAS EQUAL TO $100,000.
The Death Benefit would be $273,000 (Return of Premium Death Benefit = $173,000
+ Personal Pension Account Death Benefit = $100,000).
APP A-9
-------------------------------------------------------------------------------
REMAINING GROSS PREMIUM EXAMPLES
EXAMPLE 1: ILLUSTRATES A PARTIAL SURRENDER THAT IS LESS THAN THE AWA IN A DOWN
MARKET. ASSUME A PARTIAL SURRENDER TAKEN IN CONTRACT YEAR 2 EQUALS $5,000.
VALUES PRIOR TO THE PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $90,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the partial Surrender is $85,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender was equal to
the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0, as the AWA was not exceeded
EXAMPLE 2: ILLUSTRATES A PARTIAL SURRENDER IN EXCESS OF THE AWA IN A DOWN
MARKET, THE NON-CUMULATIVE FEATURE OF THE AWA AND IMPACTS TO FUTURE AWA
CALCULATIONS. ASSUME TWO PARTIAL SURRENDERS ARE TAKEN IN CONTRACT YEAR 2, FOR
$5,000 EACH. ANOTHER PARTIAL SURRENDER IS TAKEN IN CONTRACT YEAR 3 FOR $15,000.
VALUES PRIOR TO THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $90,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the first partial Surrender is $85,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender was equal to
the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0 because the AWA was not exceeded
VALUES PRIOR TO THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the second partial Surrender is $75,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $0
- Your Remaining Gross Premiums are $100,000
APP A-10
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VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $70,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $95,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($5,000) of
the AWA
- The CDSC applied to this $5,000 partial Surrender is $350, which is the
amount of the partial Surrender in excess of the AWA ($5,000) multiplied by
7%
VALUES PRIOR TO THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the third partial Surrender is $78,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $9,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premium is $95,000
VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $68,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
has been taken (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $85,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($10,000)
of the AWA
- The CDSC applied to this $15,000 partial Surrender is $700, which is the
amount of the partial Surrender in excess of the AWA ($10,000) multiplied by
7%
EXAMPLE 3: ILLUSTRATES A PARTIAL SURRENDER IN EXCESS OF THE AWA IN AN UP MARKET,
THE NON-CUMULATIVE FEATURE OF THE AWA AND IMPACTS TO FUTURE AWA CALCULATIONS.
ASSUME BOTH PARTIAL SURRENDERS ARE TAKEN IN CONTRACT YEAR 1 FOR $10,000 EACH.
ANOTHER PARTIAL SURRENDER IS TAKEN IN CONTRACT YEAR 3 FOR $15,000
VALUES PRIOR TO THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $110,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $10,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $10,000, which are your earnings
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the first partial Surrender is $100,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender did not
exceed the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0 because the AWA was not exceeded
APP A-11
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VALUES PRIOR TO THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the second partial Surrender is $100,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $0
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $90,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $90,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($10,000)
of the AWA
- The CDSC applied to this $10,000 partial Surrender is $700, which is the
amount of the partial Surrender in excess of the AWA ($10,000) multiplied by
7%
VALUES PRIOR TO THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the third partial Surrender is $99,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $9,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $9,000, which are your earnings
- Your Remaining Gross Premiums are $90,000
VALUES AFTER THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the third partial surrender is $84,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $84,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($6,000) of
the AWA
- The CDSC applied to this $15,000 partial Surrender is $420, which is the
amount of the partial Surrender in excess of the AWA ($6,000) multiplied by
7%
EXAMPLE 4: ILLUSTRATES A FULL SURRENDER CALCULATION WITH ONE OF TWO PREMIUM
PAYMENTS OUT OF THE APPLICABLE CDSC SCHEDULE. ASSUME TWO PREMIUM PAYMENTS WERE
MADE FOR $100,000 EACH. ONE PAYMENT WAS APPLIED IN THE BEGINNING OF CONTRACT
YEAR 1, THE SECOND IN THE BEGINNING OF CONTRACT YEAR 3. A FULL SURRENDER IS
TAKEN IN CONTRACT YEAR 8.
VALUES PRIOR TO THE FULL SURRENDER:
- Your total Premium Payments are $200,000
- Your Contract Value just prior to the full Surrender is $300,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $100,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $200,000, which is the premium out of CDSC schedule ($100,000) plus
your earnings
- Your Remaining Gross Premium for the second Premium Payment (still in CDSC)
is $100,000
APP A-12
-------------------------------------------------------------------------------
VALUES AFTER THE FULL SURRENDER:
- Your Contract Value after the full Surrender is $0
- The CDSC applied to this $300,000 full Surrender is $4,000, which is the
maximum of the full Surrender or Remaining Gross Premium, reduced by the AWA
($100,000) multiplied by 4%
EXAMPLE 5: ILLUSTRATES A FULL SURRENDER CALCULATION IN A DOWN MARKET.
VALUES PRIOR TO THE FULL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the full Surrender is $50,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FULL SURRENDER:
- Your Contract Value after the full Surrender is $0
- The CDSC applied to this $50,000 full Surrender is $6,650, which is the
maximum of the full Surrender or Remaining Gross Premium reduced by the AWA
($95,000) multiplied by 7% (using the 7-year CDSC schedule applicable to the
"Core" Hartford Leaders variable annuity Contract)
APP B-1
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APPENDIX B - ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the financial
statements for the Separate Account included in the Statement of Additional
Information.
There are several classes of Accumulation Unit Values under the Contract
depending on the number of optional benefits you select. The table below shows
only the highest and lowest possible Accumulation Unit Value, assuming you
select no optional benefits or assuming you select all optional benefits. A
table showing all classes of Accumulation Unit Values corresponding to all
combinations of optional benefits is shown in the Statement of Additional
Information, which you may obtain free of charge by contacting us.
There is no information available because as of December 31, 2008, the
Sub-Accounts had not yet commenced operations.
APP C-1
-------------------------------------------------------------------------------
APPENDIX C - FUND DATA
I. INVESTMENT OPTIONS (STANDARD)
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. CORE EQUITY FUND - SERIES Growth of capital Invesco Aim Advisors, Inc. Equity
II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. INTERNATIONAL GROWTH FUND Long-term growth of capital Invesco Aim Advisors, Inc. Equity
- SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. MID CAP CORE EQUITY FUND Long-term capital growth Invesco Aim Advisors, Inc. Limited
- SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. POWERSHARES ETF To provide total return consistent Invesco Aim Advisors, Inc. Multi-Asset
ALLOCATION FUND - SERIES II with a moderate level of risk Sub-adviser: Advisory entities
relative to the broad stock market. affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. SMALL CAP EQUITY FUND - Long-term capital growth Invesco Aim Advisors, Inc. Limited
SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
ALLIANCEBERNSTEIN VARIABLE PRODUCTS
SERIES FUND, INC.
ALLIANCEBERNSTEIN VPS BALANCED Maximize total return consistent with AllianceBernstein L.P. Multi-Asset
WEALTH STRATEGY PORTFOLIO - CLASS Advisor's determination of reasonable
B risk
ALLIANCEBERNSTEIN VPS Long-term capital growth AllianceBernstein L.P. Equity
INTERNATIONAL VALUE PORTFOLIO -
CLASS B
ALLIANCEBERNSTEIN VPS SMALL/MID Long-term capital growth AllianceBernstein L.P. Equity
CAP VALUE PORTFOLIO - CLASS B
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
FIDELITY VIP CONTRAFUND(R) Seeks long-term capital appreciation Fidelity Management & Research Equity
PORTFOLIO - SERVICE CLASS 2 Company
Sub-advised by FMR Co., Inc. and
other Fidelity affiliates
FIDELITY VIP MID CAP PORTFOLIO - Long-term capital growth Fidelity Management & Research Equity
SERVICE CLASS 2 Company
Sub-advised by FMR Co., Inc. and
other Fidelity affiliates
FIDELITY VIP STRATEGIC INCOME Limited
PORTFOLIO - SERVICE CLASS 2
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
FRANKLIN FLEX CAP GROWTH Seeks capital appreciation Franklin Advisers, Inc. Equity
SECURITIES FUND - CLASS 4
APP C-2
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
FRANKLIN INCOME SECURITIES FUND - Seeks to maximize income while Franklin Advisers, Inc. Limited
CLASS 4 maintaining prospects for capital
appreciation
FRANKLIN RISING DIVIDENDS Equity
SECURITIES FUND - CLASS 4
FRANKLIN SMALL CAP VALUE Seeks long-term total return Franklin Advisory Services, LLC Limited
SECURITIES FUND - CLASS 4
FRANKLIN SMALL-MID CAP GROWTH Seeks long-term capital growth Franklin Advisers, Inc. Limited
SECURITIES FUND - CLASS 4
FRANKLIN STRATEGIC INCOME Seeks a high level of current income, Franklin Advisers, Inc. Limited
SECURITIES FUND - CLASS 4 with capital appreciation over the
long term as a secondary goal
MUTUAL GLOBAL DISCOVERY SECURITIES Seeks capital appreciation Franklin Mutual Advisers, LLC Equity
FUND - CLASS 4 (1) Sub-advised by Franklin Templeton
Investment Management Limited
MUTUAL SHARES SECURITIES FUND - Capital appreciation, with income as Franklin Mutual Advisers, LLC Equity
CLASS 4 a secondary goal
TEMPLETON FOREIGN SECURITIES FUND Seeks long-term capital growth Templeton Investment Counsel, LLC Equity
- CLASS 4
TEMPLETON GLOBAL BOND SECURITIES Seeks high current income, consistent Franklin Advisers, Inc. Limited
FUND - CLASS 4 (2) with preservation of capital, with
capital appreciation as a secondary
consideration
TEMPLETON GROWTH SECURITIES FUND - Seeks long-term capital growth Templeton Global Advisors Limited Equity
CLASS 4 Sub-advised by Templeton Asset
Management Ltd.
HARTFORD HLS SERIES FUND II, INC.
HARTFORD GROWTH OPPORTUNITIES HLS Capital appreciation Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD U.S. GOVERNMENT Maximize total return with a high Hartford Investment Financial Fixed
SECURITIES HLS FUND - CLASS IA level of current income consistent Services, LLC.
with prudent investment risk Sub-advised by Hartford Investment
Management Company
HARTFORD SERIES FUND, INC.
AMERICAN FUNDS ASSET ALLOCATION Seeks high total return consistent Hartford Investment Financial Equity
HLS FUND - CLASS IB with preservation of capital over the Services, LLC.
long term Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS BLUE CHIP INCOME Seeks to produce income exceeding the Hartford Investment Financial Equity
AND GROWTH HLS FUND - CLASS IB average yield on U.S. stocks Services, LLC.
generally (as represented by the Sub-advised by Hartford Investment
average yield on the S&P 500 Index) Management Company
and to provide an opportunity for
growth of principal consistent with
sound common stock investing.
AMERICAN FUNDS BOND HLS FUND - Seeks to maximize current income and Hartford Investment Financial Fixed
CLASS IB preservation of capital Services, LLC.
Sub-advised by Hartford Investment
Management Company
APP C-3
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL BOND HLS Seeks a high level of total return Hartford Investment Financial Limited
FUND - CLASS IB over the long term Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL GROWTH AND Seeks growth of capital and current Hartford Investment Financial Equity
INCOME HLS FUND - CLASS IB income Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL GROWTH HLS Seeks growth of capital Hartford Investment Financial Equity
FUND - CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL SMALL Seeks growth of capital Hartford Investment Financial Limited
CAPITALIZATION HLS FUND - CLASS Services, LLC.
IB Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GROWTH HLS FUND - Seeks growth of capital Hartford Investment Financial Equity
CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GROWTH-INCOME HLS Seeks growth of capital and income Hartford Investment Financial Equity
FUND - CLASS IB over time Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS INTERNATIONAL HLS Seeks growth of capital Hartford Investment Financial Equity
FUND - CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS NEW WORLD HLS FUND Seeks growth of capital Hartford Investment Financial Limited
- CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD CAPITAL APPRECIATION HLS Growth of capital Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD DISCIPLINED EQUITY HLS Growth of capital Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD DIVIDEND AND GROWTH HLS High level of current income Hartford Investment Financial Equity
FUND - CLASS IA consistent with growth of capital Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD GLOBAL EQUITY HLS FUND - Seeks long term capital appreciation Hartford Investment Financial Equity
CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD GLOBAL GROWTH HLS FUND - Growth of capital Hartford Investment Financial Equity
CLASS IA (3) Services, LLC.
Sub-advised by Wellington Management
Company, LLP
APP C-4
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH HLS FUND - CLASS Seeks long-term capital appreciation Hartford Investment Financial Equity
IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD HIGH YIELD HLS FUND - High current income with growth of Hartford Investment Financial Limited
CLASS IA capital as a secondary objective Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD INDEX HLS FUND - CLASS IB Seeks to provide investment results Hartford Investment Financial Equity
which approximate the price and yield Services, LLC.
performance of publicly traded common Sub-advised by Hartford Investment
stocks in the aggregate Management Company
HARTFORD INTERNATIONAL Long-term capital growth Hartford Investment Financial Equity
OPPORTUNITIES HLS FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD MONEY MARKET HLS FUND - Maximum current income consistent Hartford Investment Financial Fixed
CLASS IA* with liquidity and preservation of Services, LLC.
capital Sub-advised by Hartford Investment
Management Company
HARTFORD SMALL COMPANY HLS FUND - Growth of capital Hartford Investment Financial Limited
CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP and Hartford Investment
Management Company
HARTFORD TOTAL RETURN BOND HLS Competitive total return, with income Hartford Investment Financial Fixed
FUND - CLASS IA as a secondary objective Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD VALUE HLS FUND - CLASS IA Long-term total return Hartford Investment Financial Equity
Services, LLC.
Sub-advised by Wellington Management
Company, LLP
MFS(R) VARIABLE INSURANCE TRUST
MFS(R) GROWTH SERIES - SERVICE Seeks capital appreciation MFS Investment Management Equity
CLASS
MFS(R) INVESTORS TRUST SERIES - Seeks capital appreciation MFS Investment Management Equity
SERVICE CLASS
MFS(R) RESEARCH BOND SERIES - Total return with an emphasis on high MFS Investment Management Fixed
SERVICE CLASS current income, but also considering
capital appreciation.
MFS(R) TOTAL RETURN SERIES - Seeks total return MFS Investment Management Multi-Asset
SERVICE CLASS
MFS(R) VALUE SERIES - SERVICE Seeks capital appreciation MFS Investment Management Equity
CLASS
PUTNAM VARIABLE TRUST
PUTNAM VT EQUITY INCOME FUND - Capital growth and current income Putnam Investment Management, LLC Equity
CLASS IB
PUTNAM VT INVESTORS FUND - CLASS Long-term growth of capital and any Putnam Investment Management, LLC Equity
IB increased income that results from
this growth
APP C-5
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND - CLASS IB Seeks capital appreciation Putnam Investment Management, LLC Equity
FIXED ACCUMULATION FEATURE** Preservation of capital General Account N/A
NOTES
(1) Formerly Mutual Discovery Securities Fund - Class 4
(2) Formerly Templeton Global Income Securities Fund - Class 4
(3) Formerly Hartford Global Leaders HLS Fund - Class IA
* In a low interest rate environment, yields for money market funds, after
deduction of Contract charges may be negative even though the fund's yield,
before deducting for such charges, is positive. If you allocate a portion of
your Contract Value to a money market Sub-Account or participate in an Asset
Allocation Program where Contract Value is allocated to a money market
Sub-Account, that portion of your Contract Value may decrease in value.
** The Fixed Accumulation Feature is not a Sub-Account and the Company does not
provide investment advice in connection with this feature. The Fixed
Accumulation Feature is currently not available to A Share and I Share
products.
II. UNDERLYING FUNDS (PROPRIETARY)
FUND ADVISER OBJECTIVE B SHARE C SHARE I SHARE CLASSIFICATION
------------------------------------------------------------------------------------------------------------------------
To obtain a Statement of Additional Information, please
complete the form below and mail to:
The Hartford
Attn: Individual Markets Group
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information to me at the
following address:
----------------------------------------------------------------
Name
----------------------------------------------------------------
Address
----------------------------------------------------------------
City/State Zip Code
Contract Name
Issue Date
PART B
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
HARTFORD LEADERS SERIES V
This Statement of Additional Information is not a prospectus. The information
contained in this document should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to The Hartford, Attn: Individual
Markets Group, P.O. Box 5085, Hartford, CT 06102-5085.
Date of Prospectus: August 14, 2009
Date of Statement of Additional Information: August 14, 2009
TABLE OF CONTENTS
GENERAL INFORMATION 2
Safekeeping of Assets 2
Experts 2
Non-Participating 2
Misstatement of Age or Sex 2
Principal Underwriter 2
Additional Payments 2
PERFORMANCE RELATED INFORMATION 6
Total Return for all Sub-Accounts 6
Yield for Sub-Accounts 6
Money Market Sub-Accounts 7
Additional Materials 7
Performance Comparisons 7
ACCUMULATION UNIT VALUES 8
FINANCIAL STATEMENTS SA-2
2
-------------------------------------------------------------------------------
GENERAL INFORMATION
SAFEKEEPING OF ASSETS
We hold title to the assets of the Separate Account. The assets are kept
physically segregated and are held separate and apart from our general corporate
assets. Records are maintained of all purchases and redemptions of the
underlying fund shares held in each of the Sub-Accounts.
EXPERTS
The consolidated balance sheets of Hartford Life Insurance Company (the
"Company") as of December 31, 2008 and 2007, and the related consolidated
statements of income, changes in stockholder's equity and cash flows for each of
the three years in the period ended December 31, 2008 have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report dated February 11, 2009 (April 29, 2009 as to the effects
of the change in reporting entity structure and the retrospective adoption of
FASB Statement No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL
STATEMENTS described in Note 1 and Note 17) (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to the
Company's change in its method of accounting for the fair value measurement of
financial instruments in 2008) and the statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Seven (the "Account") as of
December 31, 2008, and the related statements of operations and changes in net
assets for the respective stated periods then ended have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report dated February 18, 2009, which reports are both included
in this Statement of Additional Information. Such financial statements are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. The principal business address of Deloitte &
Touche LLP is City Place, 32nd Floor, 185 Asylum Street, Hartford, Connecticut
06103-3402.
With respect to the unaudited interim financial information for the periods
ended June 30, 2009 and 2008 which is incorporated by reference herein, Deloitte
& Touche LLP, an independent registered public accounting firm, have applied
limited procedures in accordance with the standards of the Public Company
Accounting Oversight Board (United States) for a review of such information.
However, as stated in their report included in the Company's Quarterly Reports
on Form 10-Q for the quarter ended June 30, 2009 and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
NON-PARTICIPATING
The Contract is non-participating and we pay no dividends.
MISSTATEMENT OF AGE OR SEX
If an Annuitant's age or sex was misstated on the Contract, any Contract
payments or benefits will be determined using the correct age and sex. If we
have overpaid Annuity Payouts, an adjustment, including interest on the amount
of the overpayment, will be made to the next Annuity Payout or Payouts. If we
have underpaid due to a misstatement of age or sex, we will credit the next
Annuity Payout with the amount we underpaid and credit interest.
PRINCIPAL UNDERWRITER
The Contracts, which are offered continuously, are distributed by Hartford
Securities Distribution Company, Inc. ("HSD"). HSD serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a Broker-Dealer and is a member of the National
Association of Securities Dealers, Inc. HSD is an affiliate of ours. Both HSD
and Hartford are ultimately controlled by The Hartford Financial Services Group,
Inc. The principal business address of HSD is the same as ours.
We currently pay HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to HSD in its role as Principal Underwriter has been: 2008: $53,980,236;
2007: $125,061,889; and 2006: $122,003,581.
ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
As stated in the prospectus, we (or our affiliates) pay Additional Payments to
Financial Intermediaries. In addition to the Financial Intermediaries listed in
the prospectus with whom we have an ongoing contractual arrangement to make
Additional Payments, listed
3
-------------------------------------------------------------------------------
below are all Financial Intermediaries that received Additional Payments in 2008
of items such as sponsorship of meetings, education seminars, and travel and
entertainment, whether or not an ongoing contractual relationship exists.
A.G. Edwards & Sons, Inc., Abacus Investments, Inc., ABD Financial Services,
Inc., Access Financial Group, Inc., Access Investments, Inc., Acument
Securities, Inc., Addison Avenue Federal Credit Union, ADP Broker-Dealer, Inc.,
Advanced Advisor Group, Advanced Equities, Inc., Advantage Capital Corp.,
Advisory Group Equity Services Ltd., AFA Financial Group, LLC., Affinity Bank,
AFS Brokerage, Inc., AIG Equity Sales Corp., AIG Financial Advisors, AIG
Retirement Advisors, Inc., AIM Distributors, Inc., Aim Investments, Alamo
Capital, All Nevada Insurance, Allegacy Federal Credit Union, Allegheny
Investments Ltd., Allen & Co. of Florida, Inc., Alliance Bank,
AllianceBernstein, AllianceBernstein Investment Research, AllState Financial
Services, LLC., Altura Credit Union, AMCORE Bank, NA., Amcore Investment
Services, Inc., American Bank, NA., American Classic Securities, American Funds
& Trusts, Inc., American General Securities Inc., American Heritage Federal
Credit Union, American Independent Securities Group, American Independent
Securities, Inc., American Investors Company, American Investors Group, American
Municipal Securities, Inc., American Portfolios Financial Services, American
Securities Group, Inc., American Trust & Savings Bank, Ameriprise Financial
Services, Inc., Ameritas Investment Corp., Ameritrade, Inc., Ames Community
Bank, Amsouth Bank, Amsouth Investment Services, AmTrust Bank, Amtrust
Investment Services, Inc., Anchor Bank, Anderson & Strudwick, Inc., Andrew
Garrett, Inc., Arlington Securities, Inc., Arrowhead Central Credit Union,
Arvest Asset Management, Arvest Bank, Ascend Financial Services, Inc., Askar
Corp., Asset Management Securities Corp., Associated Bank, NA., Associated
Financial Services, Inc., Associated Investment Services, Inc., Associated
Securities Corp., Astoria Federal Savings & Loan Association, Atlantic
Securities, Inc., Avisen Securities, Inc., AXA Advisors, LLC., Ayre Investments,
B.B. Graham & Co., B.C. Ziegler and Company, Banc of America Investment
Services, Inc., Bancnorth Investment Group, Inc., Bancorpsouth Investment
Services, Inc., BancWest Investment Services, Inc., Bank of Albuquerque, NA.,
Bank of America, Bank of Clarendon, Bank of Clarke County, Bank of Stockton,
Bank of Texas, Bank of the Commonwealth, Bank of the South, Bank of the West,
Bankers & Investors Co., Bankers Life and Casualty, Banknorth, BankUnited, FSB,
BankWest, Inc., Bannon, Ohanesian & Lecours, Inc., Banorte Securities, Banorte
Securities International, Bates Securities, Inc., BB&T Investment Services,
Inc., BCG Securities, Inc., Beaconsfield Financial Services., Inc., Benchmark
Investments, Inc., Beneficial Investment Services, Bernard Herold & Co., Inc.,
Berthel, Fisher & Co. Financial Services, Inc., Bethpage Federal Credit Union,
BI Investments, LLC., Bodell Overcash Anderson & Co., Boeing Employees Credit
Union, BOSC, Inc., Brecek & Young Advisors, Inc., Brighton Securities Corp.,
Britton & Koontz Bank, N.A., Broad Street Securities, Inc., Broker Dealer
Financial Services Corp., Brokersxpress LLC., Brookstone Securities, Inc.,
Brookstreet Securities Corp., Brown Advisory Securities Inc., Brown,
Lisle/Cummings, Inc., Bruce A Lefavi Securities, Inc., Busey Bank, Butler, Wick
& Co., Inc., C.R.I. Securities, Inc., Cadaret, Grant & Co., Inc., California
Bank & Trust, California Credit Union, California National Bank, Calton &
Associates, Inc., Cambridge Investment Research, Inc., Cambridge Legacy Sec.,
LLC., Cambridge State Bank, Cantella & Co., Inc., Capital Analysts, Inc.,
Capital Bank, Capital Brokerage Corporation, Capital Choice, Capital City Bank,
Capital Financial Services, Inc., Capital Growth Resources, Capital Investment
Group, Inc., Capital Investment Services, Inc., Capital One Investments
Services, LLC., Capital Securities Investment Corp., Capital Securities
Management, Capital Select Investments Corp., Capital Wealth Advisors, Inc.,
Capital West Securities, Inc., CapitalBank, Capitol Federal Savings Bank,
Capitol Securities Management, Inc., Carolina First Bank, Carolinas Investment
Consulting LLC., Cary Street Partners, LLC., Cascade Investment Group, Inc., CCF
Investments, Inc., CCO Investment Services Corp., Centaurus Financial, Inc.,
Centennial Securities Co., Inc., Central State Bank, Central Virginia Bank,
Century National Bank, Century Securities Associates, Inc., CFD Investments,
Inc., Chapin, Davis, Charles Schwab, Chase Investments Services Corp., Chemical
Bank West, Chevy Chase Financial Services, CIBC World Markets Corp., Citadel
Federal Credit Union, Citi Bank, Citicorp Investment Services, Citigroup Global
Markets, Inc., Citizens & Farmers Bank, Citizens Bank, Citizens Business Bank,
City Bank, City Securities Corporation, Coastal Federal Credit Union, Coburn &
Meredith, Inc., Colonial Bank, N.A., Colonial Brokerage, Inc., Comerica Bank,
Comerica Securities, Commerce Bank, N.A., Commerce Brokerage Services, Inc.,
Commerce Capital Markets, Inc., Commercial & Savings Bank/Mllrsbrg, Commercial
Federal Bank, Commonwealth Bank & Trust Co., Commonwealth Financial Network,
Commonwealth Investment Services, Inc., Community Bank, Community Bank & Trust,
Community Credit Union, Community Investment Services, Inc., Compass Bank,
Compass Brokerage, Inc., Comprehensive Financial Services, Conservative
Financial Services., Inc., Coordinated Capital Securities, Inc., Country Club
Financial Services., Inc., Countrywide Bank, Countrywide Investment Services,
Inc., Credit Union West, Crews & Associates, Inc., Crowell, Weedon & Co., Crown
Capital Securities, LLP, CUE, Cullum & Burks Securities, Inc., Cumberland
Brokerage Corp., Cuna Brokerage Services, Inc., Cuso Financial Services, LLP.,
CW Securities, LLC., D.A. Davidson & Company, Davenport & Company LLC., David A.
Noyes & Company, David Lerner Associates, Inc., DaVinci Capital Management,
Inc., Dawson James Securities, Inc., Delta Equity Services Corp., Delta Trust
Investment, Inc., Deutsche Bank Securities, Inc., DeWaay Financial Network, DFCU
Financial Federal Credit Union, Dilworth, Diversified Securities, Inc., Dominion
Investor Services., Inc., Dorsey & Company, Inc., Dougherty & Company LLC.,
Dubuque Bank & Trust Co., Dumon Financial, Duncan-Williams, Inc., Dupaco
Community Credit Union, Eagle Bank, Eagle One Financial, Eagle One Investments,
LLC., Eastern Bank, Eastern Financial Florida Credit Union, ECM Securities
Corporation, EDI Financial, Inc., Edward Jones, Effex National Security, Eisner
Securities, Inc., Emclaire Financial Corp., Emerson Equity, LLC., Empire Bank,
Empire Financial Group, Inc., Empire Securities Corporation, Emporia State Bank
& Trust Co., Ensemble Financial Services, Inc., EPlanning Securities, Inc.,
Equitable Bank, Equitas America, LLC, Equity Services, Inc., ESL Federal Credit
Union, Essex Financial Services, Inc., Essex National Securities, Inc., Essex
Securities, LLC., Evans National Bank, EVB, Evolve Securities, Inc., Excel
Securities &
4
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Assoc., Inc., Fairport Capital, Inc., Fairwinds Credit Union, Farmers National
Bank, Farmers National Bank/Canfield, Feltl & Company, Ferris/Baker Watts, FFP
Securities, Inc., Fidelity Bank, Fidelity Brokerage Services., LLC., Fidelity
Federal Bank & Trust, Fidelity Investments, Fifth Third Bank, Fifth Third
Securities, FIMCO Securities Group,Inc., Financial Center Credit Union,
Financial Network Investment Corp., Financial Partners Credit Union, Financial
Planning Consultants, Financial Security Management, Inc., Financial West Group,
Fintegra LLC., First Allied Securities, First America Bank, First American Bank,
First Bank, First Brokerage America, First Citizens Bank, First Citizens
Financial Plus, Inc., First Citizens Investor Services, First Command Financial
Planning, First Commonwealth Bank, First Commonwealth Federal Credit Union,
First Community Bank, First Community Bank, N.A., First Federal Bank, First
Federal Savings & Loan of Charlston, First Financial Bank, First Financial
Equity Corp., First Global Securities, Inc., First Harrison Bank, First
Heartland Capital Inc., First Hope Bank, First Investment Services, First
MidAmerica Investment Corp., First Midwest Bank, First Midwest Securities, First
Montauk Securities, First National Bank, First National Investments Inc, First
Niagara Bank, First Northern Bank of Dixon, First Place Bank, First Southeast
Investment Services, First St. Louis Securities, Inc., First Tennessee Bank,
First Tennessee Brokerage, Inc., First Wall Street Corporation, First Western
Securities Inc., FirstMerit Securities, Inc., FiServ Investor Services, Inc.,
Flagstar Bank, FSB, Florida Investment Advisers, Flushing Savings Bank, FSB, FMN
Capital Corporation, FNB Brokerage Services, Inc., FNIC F.I.D. Div., Folger
Nolan Fleming Douglas, Foothill Securities, Inc., Foresters Equity Services,
Inc., Fortune Financial Services, Founders Financial Securities, LLC., Fox and
Company, Franklin Bank, Franklin/Templeton Dist., Inc., Freedom Financial, Inc.,
Fremont Bank, Frontier Bank, Frost Brokerage Services Inc., Frost National Bank,
FSC Securities Corporation, FSIC, Fulcrum Securities, Inc., Gateway Bank and
Trust Company, Geneos Wealth Management, Inc., Genworth Financial Securities
Corp., GIA Financial Group, L.L.C., Girard Securities Inc., Global Brokerage
Services, Gold Coast Securities, Inc., Golden One Credit Union, Great American
Advisors, Inc., Great American Investors, Inc., Great Lakes Capital, Inc.,
Greenberg Financial Group, Gregory J Schwartz & Co., Inc., Gunnallen Financial,
Inc., GWN Securities, Inc., H&R Block Financial Advisers, Inc., H. Beck, Inc.,
H.D.Vest Investment Services, Haas Financial Products, Inc., Hancock Bank,
Hancock Investments Services, Harbor Financial Services, LLC., Harbour
Investments, Inc., Harger and Company, Inc., Harold Dance Investments, Harris
Investor Services, Inc., Harvest Capital LLC, Hawthorne Securities Corp., Hazard
& Siegel, Inc., Hazlett, Burt & Watson, Inc., HBW Securities, LLC, HCSB,
Heartland Investment Associates, Inc., Heim & Young Securities, Inc., Heim Young
& Associates, Inc., Hibernia Investments, LLC, Hibernia National Bank, High
Country Bank, High Ridge Insurance Services, Hilliard Lyons, HNB National Bank,
Home Savings & Loan Company of Youngstown, Home Savings Bank, Horizon Bank,
Hornor, Townsend & Kent, Inc., Horwitz & Associates, Inc., Howe Barnes
Investments, Inc., HRC Investment Services, Inc., HSBC Bank USA, National
Associates, HSBC International, HSBC Securities (USA) Inc., Huntingdon
Securities Corp., Huntington Investment Co., Huntington National Bank,
Huntington Valley Bank, Huntleigh Securities Corp., IBC Investments, IBN
Financial Services, Inc., ICBA Financial Services Corp., IFG Network Securities,
Inc., IFMG Securities, Inc., IMS Securities, Inc., Independent Financial
Securities Inc., Independent Financial Group, LLC., Indiana Merchant Banking &
Brokerage, Infinex Investment, Inc., Infinity Securities, Co., Inc., ING
Financial Advisors, LLC, ING Financial Partners, Innovative Solutions,
Integrated Financial Inc., Intercarolina Financial Services, Inc., Interpacific
Investor Services, InterSecurities, Inc., INTRUST Bank, NA., Intrust Brokerage
Inc., Invesmart Securities, LLC., INVEST Financial Corporation, Investacorp,
Inc., Investment Center, Inc., Investment Centers of America, Investment
Management Corp., Investment Network, Inc., Investment Planners, Inc.,
Investment Professionals, Inc., Investment Security Corp., Investors Capital
Corp., Investors Resources Group, Inc., Iowa State Bank, ISG Equity Sales
Corporation, J.B. Hanauer & Co., J.J.B Hilliard, W.L.Lyons LLC., J.P. Turner &
Co., J.W. Cole Financial, Inc., Jack V Butterfield Investment Co., Jackson
Securities, LLC., Jacksonville Savings Bank, James C. Butterfield, Inc., Janney
Montgomery Scott, Inc., Jefferson Pilot Securities Corp., Jesup & Lamont
Securities Corp., JHW Financial Services, Inc., JHW Securities, JJB Hilliard/WL
Lyons, Inc., Jones Bains Sides Investments Group, Joseph James Financial
Services, Kalos Capital, Inc., Kaplan & Co., Securities Inc., KCD Financial,
Inc., Keesler Federal Credit Union, Kern National Federal Credit Union, Kern
Schools Federal Credit Union, Key Bank, Key Investment Services, LLC., Key
Investor Services, KeyBank, NA., KeyPoint Credit Union, Kinecta Credit Union,
Kirkwood Bank & Trust Co., KleinBank, KMS Financial Services, Inc., Kovack
Securities, Inc., L.F. Financial, LLC., L.M. Kohn & Company, LaBrunerie
Financial Services, Inc., Lake Area Bank, Lake Community Bank, Landmark Credit
Union, Lara, Shull & May, LTD., LaSalle Financial Services, Inc., LaSalle Street
Securities, Inc., Lawrence Jorgenson, Legacy Asset Securities, Inc., Legacy
Financial Services, Inc., Legend Equities Corporation, Legends Bank, Legg
Mason/Citigroup Global Market, Leigh Baldwin & Co., LLC., Leonard & Company,
Lesko Securities Inc., Leumi Investment Services, Inc., Lexington Investment
Co., Inc., LFA, Liberty Group, LLC., Liberty Securities Corporation, Lifemark
Securities Corp., Lincoln Financial Advisors Corp., Lincoln Investment Planning,
Inc., Linsco/Private Ledger, LOC Federal Credit Union, Lockheed Federal Credit
Union, Lombard Securities, Inc., Long Island Financial Group, Lord, Abbett &
Co., Lowell & Company, Inc., LPL Financial, M Holdings Securities, Inc., M&I
Bank, M&I Brokerage Services, Inc., M&I Financial Advisors, Inc., M&T Bank, M&T
Securities, Inc., M. Griffith, Inc., M.L. Stern & Co. Inc., Madison Avenue
Securities, Inc., Madison Bank & Trust, Main Street Securities, LLC., Manarin
Securities Corp., Manna Financial Services Corp., Mascoma Savings Bank, Mass
Institute of Technology Credit Union, Mass Mutual, Maxim Group LLC., McGinn,
Smith & Co., Inc., McNally Financial Services Corp.; Means Investment Co., Inc.,
Medallion Equities, Inc., Medallion Investment Services Inc., Mercantile Bank,
Mercantile Brokerage Services Inc., Mercantile Trust & Savings Bank, Merrill
Lynch Inc., Merrimac Corporate Securities, Inc., Mesirow Financial, Inc.,
MetLife Securities, Inc., MFS Fund Distributors, Inc., MICG Investment
Management, Michigan Catholic Credit Union, Michigan Securities, Inc., Mid
Atlantic Capital Corp., MidAmerica Financial Services Inc., Mid-Atlantic
Securities, Inc., Midwestern Sec Trading CO, LLC., Milkie/Ferguson
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Investments, Mission Federal Credit Union, MMC Securities Corp., MML Investor
Services, Inc., Moloney Securities Co., Inc., Money Concepts Capital Corp, Money
Management Advisory Inc., Moors & Cabot, Inc., Morgan Keegan & Co., Inc., Morgan
Peabody, Inc., Morgan Stanley & Co., Inc., MSCS Financial Services, LLC., MTL
Equity Products, Inc., Multi-Financial Securities Corp., Multiple Financial
Services., Inc., Mutual Funds Assoc., Inc., Mutual Securities, Inc., Mutual
Service Corp., NatCity Investments, National Bank & Trust, National City Bank of
Midwest, National Financial Services Corp., National Investors Services,
National Pension & Group Consultant, National Planning Corporation, National
Securities Corp., Nations Financial Group, Inc., Nationwide Investment Service
Corp., Navy Federal Brokerage Services, Navy Federal Credit Union, NBC Financial
Services, NBC Securities, Inc., NBT Bank, Neidiger, Tucker, Bruner, Inc., Nelson
Securities, Inc., Networth Strategic, New England Securities Corp., New Horizon
Asset Management Group, LLC., NewAlliance Bank, NewAlliance Investments, Inc.,
Newbridge Securities Corp., Nexity Financial Services, Inc., Next Financial
Group, NFB Investment Services Corp., NFP Securities, Inc., NIA Securities,
LLC., Nodaway Valley Bank, Nollenberger Capital Partners, North Ridge Securities
Corp., Northeast Securities, Inc., Northern Trust Company, Northern Trust
Securities, Inc., Northridge Capital Corp., Northwestern Mutual Investment
Services, Inc., Nutmeg Securities, Ltd., NYLIFE Securities Inc., O.N. Equity
Sales Co., Oak Tree Securities, Inc., Oakbrook Financial Group, Inc., Oberlin
Financial Corporation, OFG Financial Services, Inc., Ogilvie Security Advisors
Corp., Ohio National Equities, Inc., O'Keefe Shaw & Company, Old National Bank,
ON Equity Sales Co., OneAmerica Securities Inc., Oppenheimer and Co., Inc.,
Orange County Teachers Federal Credit Union, P & A Financial Sec's Inc., Pacific
Cascade Federal Credit Union, Pacific Financial Assoc., Pacific West Securities,
Inc., Packerland Brokerage Services, Inc., Paragon Bank & Trust, Park Avenue
Securities, Parsonex Securities, Inc., Partnervest Securities, Inc., Patapsco
Bank, Patelco Credit Union, Paulson Investment Company Inc., Peachtree Capital
Corporation, Penn Plaza Brokerage, Pension Planners Securities Inc., Pentagon
Federal Credit Union, Peoples Bank, Peoples Community Bank, Peoples Securities,
Inc., Peoples United Bank, PFIC Securities Corp, Pillar Financial Services,
Pimco Funds, PlanMember Securities Corp., PMK Securities & Research Inc., PNC
Bank Corp., PNC Investments LLC., Premier America Credit Union, Prime Capital
Services, Inc., PrimeSolutions Securities, Inc, PrimeVest Financial Services,
Princor Financial Service Corp., ProEquities, Inc., Professional Asset
Management, Inc., Prospera Financial Services, Protected Investors of America,
Provident Bank, Provident Savings Bank, F.S.B., Pruco Securities Corp., Purshe,
Kaplin & Sterling, Putnam Investments, Putnam Savings Bank, QA3 Financial Corp.,
Quest Capital Strategies, Inc., Quest Securities, Inc., Quest Tar, Questar
Capital Corp., R.M. Stark & Co., Raymond James & Associates, Inc., Raymond James
Financial Services, Inc., RBC Capital Markets Corp., RBC Centura Bank, RBC
Centura Securities, Inc., RBC Dain Rauscher Inc., Regal Discount Securities,
Inc., Regal Securities, Inc., Regency Securities Inc., Regions Bank, Reliance
Securities, LLC., Resource Horizons Group, LLC., R-G Crown Bank, Rhodes
Securities, Inc., Rice Pontes Capital, Inc., Ridgeway & Conger, Inc., River City
Bank, RiverStone Wealth Management, Inc., RNR Securities LLC., Robert B. Ausdal
& Co., Inc., Robert W. Baird & Co. Inc., Robinson & Robinson, Inc., Rogan &
Associates, Inc., Rogan, Rosenberg & Assoc., Inc., Rothschild Investment Corp.,
Royal Alliance Associates, Inc., Royal Securities Company, Rushmore Securities
Corp., Rydex Distributors, Inc., S F Police Credit Union, S.C. Parker & Co.,
Inc., Sage, Rutty & Co., Inc., Sammons Securities Company LLC., San Mateo County
Employees Credit Union, Sanders Morris Harris Inc., Sandy Spring Bank, Sawtooth
Securities, LLC., Saxony Securities, Inc., SCF Securities, Inc., School
Employees Credit Union, Scott & Stringfellow, Inc., Seacoast Investor Services
Inc., Seacoast National Bank, Securian Financial Services, Securities America,
Inc., Securities Equity Group, Securities Service Network, Inc., Security
Service Federal Credit Union, Shields & Company, Sicor Securities Inc., Sigma
Financial Corporation, Signator Investors Inc., Signature Bank, Signature
Financial Group, Inc., Signature Securities Group, SII Investments, Silicone
Valley Securities, SMH Capital, Smith Barney, Smith Barney Bank Advisor, Smith
Hayes Financial Services Corp., Sorrento Pacific Financial LLC., Source Capital
Group, Inc., South Carolina Bank & Trust, South Valley Bank & Trust, South
Valley Wealth Management, Southeast Investments NA Inc., Southern MO Bank of
Marshfield, SouthTrust Securities, Inc., Southwest Securities, Inc., Sovereign
Bank, Space Coast Credit Union, Spectrum Capital, Inc., Spelman & Co., Inc.,
Spire Securities, LLC., Stanford Group Company, Stephen A. Kohn & Associates,
Stephens, Inc., Sterling Savings Bank, Sterne Agee & Leach, Inc., Stifel,
Nicolaus & Co., Inc., Stock Depot Inc, Stockcross, Inc., Stofan, Agazzi &
Company, Inc., Strand Atkinson Williams York, Strategic Alliance Corp.,
Strategic Financial Alliance, Summit Bank, Summit Brokerage Services Inc.,
Summit Equities, Inc., Summitalliance Securities, LLC., SunAmerica, Sunset
Financial Services, Inc., SunTrust Investment Services, Inc., Superior Bank,
Surrey Bank & Trust, Susquehanna Bank, SWBC Investment Company, SWS Financial
Services, Symetra Investment Services Inc., Synergy Investment Group, Synovus
Securities, T.J. Raney & Sons, Inc., Taylor Securities, Inc., TD Bancnorth,
National Assoc., TD Waterhouse Investor Services, Inc., Technology Credit Union,
Telesis Community Credit Union, Telhio Credit Union, TFS Securities, Inc., The
Advisors Group, Inc., The Capital Group Sec. Inc., The Concord Equity Group,
LLC., The Golden 1 Credit Union, The Huntington Investment Co., The Huntington
Investment Company, The Legend Gray, Thomasville National Bank, Thoroughbred
Financial Services, LLC., Thrasher & Company, Thrivent Investment Management,
Inc., Thurston, Springer, Miller, Her, TierOne Bank, TimeCapital Securities
Corp., Tower Square Securities, Inc., TradeStar Investments, Inc., Transamerica
Financial Advisor, TransWest Credit Union, Tri Counties Bank, Triad Advisors,
Inc., Tri-County Financial Group, Inc., Triequa Capital Corporation, Triune
Capital Advisors, Troy Bank & Trust, Trustmark National Bank, Trustmont
Financial Group Inc., U.S Bank, UBS Financial Services, Inc., UBS International;
UBS Private Banking, UMB Bank, UMB Financial Services, Inc., UMB Scout Brokerage
Services, Union Bank, Union Bank & Trust, Union Bank Company, Union Bank of
California, N.A., Union Bank of Chandler, Union Capital Company, Union Savings
Bank, UnionBanc Investment Services, United Bank, Inc., United Brokerage
Services, Inc., United Community Bank, United Financial Group, United Planners
Financial Services of America, United Securities Alliance Inc., Univest
Investments, Inc., US Alliance Credit
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Union, US Bancorp Investments, US Bank, N.A., USA Financial Securities Corp.,
USAllianz Securities, Inc., USI Securities, UVest Financial Services, V.B.C.
Securities, VALIC Financial Advisors, Inc., ValMark Securities, Van Kampen
Investments, Inc., VanDerbilt Securities, LLC., Veritrust Financial, LLC.,
VFinance Investments, Inc., Vinson Assoc., Vision Bank, Vision Invstmnt
Services, Inc., Vision Securities, Inc., Vorpahl Wing Securities, VSR Financial
Services, Inc., VYstar Credit Union, Waccamaw Bank, Wachovia Bank, Wachovia
Securities Inc. Financial Network, Wachovia Securities ISG, Wachovia Securities
LLC., Waddell & Reed, Inc., Wakulla Bank, Wald Group, Wall Street Electronica,
Inc., Wall Street Financial Group, Walnut Street Securities, Inc., WAMU, WaMu
Investments, Inc., Washington Mutual, Wasserman & Associates, Waterstone
Financial Group, Wayne Hummer Investments LLC., Wayne Savings Community Bank,
Wealth Management Services, Webster Bank, Webster Investments, Wedbush Morgan
Securities Inc., Weitzel Financial Services Inc., Wells Fargo Investments, Wells
Fargo Securities Independent, Wells Federal Bank, Wellstone Securities, LLC.,
WesBanco Bank, Inc., WesBanco Securities, Inc., Wescom Credit Union, Wescom
Financial Services, West Alabama Bank & Trust, West Coast Bank, Westamerica
Bank, Western Federal Credit Union, Western International Securities, Westfield
Bakerink Brozak LLC., Westminster Financial Investment, Westminster Financial
Securities, Inc., Westport Securities, L.L.C., WFG Securities Corp., Whitney
National Bank, Whitney Securities, LLC., Wilbank Securities, Wiley Bros.-
Aintree Capital, William C. Burnside & Company, Wilmington Brokerage Services,
Wilmington Trust Co., Windsor Securities, Inc., WM Financial Services, Inc.,
Woodbury Financial Services, Inc., Woodforest National Bank, Woodlands
Securities Corp., Woodmen Financial Services Inc., Woodstock Financial Group,
Inc., Workman Securities Corp., World Equity Group Inc., World Group Securities,
Inc., Worth Financial Group, Inc., WRP Investments, Inc., Wunderlich Securities
Inc., XCU Capital Corp., Inc., Xerox Credit Union, Zeigler Investment Services.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
TOTAL RETURN FOR ALL SUB-ACCOUNTS
When a Sub-Account advertises its standardized total return, it will be
calculated on a quarterly basis from the date the underlying fund is made
available in the Separate Account for one, five and ten year periods or some
other relevant periods if the underlying fund has not been in existence for at
least ten years. Total return is measured by comparing the value of an
investment in the Sub-Account at the beginning of the relevant period to the
value of the investment at the end of the period. To calculate standardized
total return, the Total Annual Fund Operating Expenses, applicable Sales
Charges, Distribution Charge, Separate Account Annual Expenses, and the Annual
Maintenance Fee are deducted from a hypothetical initial Premium Payment of
$1,000.00. Standardized total returns do not include charges for optional
benefit riders.
The formula we use to calculate standardized total return is P(1+T) TO THE POWER
OF n = ERV. In this calculation, "P" represents a hypothetical initial premium
payment of $1,000.00, "T" represents the average annual total return, "n"
represents the number of years and "ERV" represents the redeemable value at the
end of the period.
The Sub-Account may advertise a non-standardized total return. These figures
will be calculated on a monthly basis from the inception date of the underlying
fund for one, five and ten year periods or other relevant periods.
Non-standardized total return is measured in the same manner as the standardized
total return described above, except that non-standardized total return does not
include the Annual Maintenance Fee, Distribution Charge, or Sales Charges.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The Sub-Account may also advertise adjusted non-standardized total return. These
figures will be calculated on a monthly basis from the inception date of the
underlying fund for one, five and ten year periods or other relevant periods.
Adjusted non-standardized total return is measured in the same manner as the
standardized total return described above.
A Sub-Account may advertise non-standardized total returns for periods predating
its inception as an investment option in this variable annuity. Such
non-standardized total returns reflect the adjusted historical returns of the
underlying Fund in which the Sub-Account invests, as adjusted for certain
Separate Account annual expenses (Mortality and Expense Risk Charges and
Administrative Fees), but excludes adjustments for optional riders or deductions
for Annual Maintenance Fees, sales charges, premium taxes and federal/state
taxes (including possible penalties). To the extent that a Sub-Account invests
in a Feeder Fund (a Feeder Fund is a fund that invests all of its assets into a
corresponding Master Fund), the Feeder Fund's performance for periods pre-dating
the inception of the Feeder Fund and/or its inclusion within a Separate Account
may include the performance of the Master Fund since the inception of the Master
Fund, as adjusted for the Feeder Fund's operating expenses. In such case, the
performance of a Feeder Fund will be lower than the corresponding Master Fund
because of Feeder Fund operating expenses. Performance may include the effect of
waivers and reimbursements, in the absence of which performance may have been
lower.
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YIELD FOR SUB-ACCOUNTS
If applicable, the Sub-Accounts may advertise yield in addition to total return.
At any time in the future, yields may be higher or lower than past yields and
past performance is no indication of future performance.
The standardized yield will be computed for periods beginning with the inception
of the Sub-Account in the following manner. The net investment income per
Accumulation Unit earned during a one-month period is divided by the
Accumulation Unit Value on the last day of the period.
The formula we use to calculate yield is: YIELD = 2[(a - b/cd +1) TO THE POWER
OF 6 - 1]. In this calculation, "a" represents the net investment income earned
during the period by the underlying fund, "b" represents the expenses accrued
for the period, "c" represents the average daily number of Accumulation Units
outstanding during the period and "d" represents the maximum offering price per
Accumulation Unit on the last day of the period.
MONEY MARKET SUB-ACCOUNTS
At any time in the future, current and effective yields may be higher or lower
than past yields and past performance is no indication of future performance.
Current yield of a money market fund Sub-Account is calculated for a seven-day
period or the "base period" without taking into consideration any realized or
unrealized gains or losses on shares of the underlying fund. The first step in
determining yield is to compute the base period return. We take a hypothetical
account with a balance of one Accumulation Unit of the Sub-Account and
calculates the net change in its value from the beginning of the base period to
the end of the base period. We then subtract an amount equal to the total
deductions for the Contract and then divides that number by the value of the
account at the beginning of the base period. The result is the base period
return or "BPR." Once the base period return is calculated, we then multiply it
by 365/7 to compute the current yield. Current yield is calculated to the
nearest hundredth of one percent.
The formula for this calculation is YIELD = BPR x (365/7), where BPR = (A -
B)/C. "A" is equal to the net change in value of a hypothetical account with a
balance of one Accumulation Unit of the Sub-Account from the beginning of the
base period to the end of the base period. "B" is equal to the amount that
Hartford deducts for mortality and expense risk charge, any applicable
administrative charge and the Annual Maintenance Fee. "C" represents the value
of the Sub-Account at the beginning of the base period.
Effective yield is also calculated using the base period return. The effective
yield is calculated by adding 1 to the base period return and raising that
result to a power equal to 365 divided by 7 and subtracting 1 from the result.
The calculation we use is:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) TO THE POWER OF 365/7] - 1.
ADDITIONAL MATERIALS
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for any alternatives.
PERFORMANCE COMPARISONS
Each Sub-Account may from time to time include in advertisements the ranking of
its performance figures compared with performance figures of other annuity
contract's sub-accounts with the same investment objectives which are created by
Lipper Analytical Services, Morningstar, Inc. or other recognized ranking
services.
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ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the financial
statements for the Separate Account included in this Statement of Additional
Information.
There are several classes of Accumulation Unit Values under the Contract
depending on the number of optional benefits you select. The table below shows
all possible Accumulation Unit Values corresponding to all combinations of
optional benefits. A table showing only the highest and lowest possible
Accumulation Unit Values is shown in the prospectus, which assumes you select
either no optional benefits or all optional benefits.
There are no accumulated unit values because as of December 31, 2008, the
Sub-Accounts had not commenced operations.
PART A
HUNTINGTON HARTFORD LEADERS
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 4/1/99)
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 12/8/86)
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102 - 5085
[TELEPHONE ICON] 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES)
[COMPUTER ICON] WWW.HARTFORDINVESTOR.COM
[THE HARTFORD LOGO]
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This prospectus describes information you should know before you purchase Series
III of the Huntington Hartford Leaders variable annuity. The prospectus
describes a contract between each Owner and joint Owner ("you") and Hartford
Life and Annuity Insurance Company or Hartford Life Insurance Company ("us,"
"we" or "our"). This is an individual, deferred, flexible-premium variable
annuity. This variable annuity allows you to allocate your Deposit among the
following portfolio companies:
X AIM Variable Insurance Funds
X AllianceBernstein Variable Products Series Fund, Inc.
X Fidelity Variable Insurance Products Funds
X Franklin Templeton Variable Insurance Products Trust
X Hartford HLS Series Fund II
X Hartford Series Fund, Inc.
X Huntington Funds
X MFS(R) Variable Insurance Trust
X Putnam Variable Trust
You may also allocate your Deposit to the Personal Pension Account and/or the
Fixed Accumulation Feature. The Fixed Accumulation Feature is not available for
every Contract class.
This prospectus refers to the following Contract classes:
X B Share (Core)
X C Share (Access)
X I Share (Advisory)
The Contract class will be selected on your application and identified in your
Contract. Not every Contract class or optional rider may be available from your
Financial Intermediary. The I share class is offered through registered
investment/financial advisors. Other available Contract classes offered through
select Financial Intermediaries are not described in this Prospectus and may be
subject to different charges.
Please read this prospectus carefully before investing and keep it for your
records and for future reference. You can also contact us to get a Statement of
Additional Information free of charge. The Statement of Additional Information
contains more information about this Contract and, like this prospectus, is
filed with the Securities and Exchange Commission ("SEC" or "Commission").
Although we file this prospectus and the Statement of Additional Information
with the SEC, the SEC doesn't approve or disapprove these securities or
determine if the information in this prospectus is truthful or complete. Anyone
who represents that the SEC does these things may be guilty of a criminal
offense. This prospectus and the Statement of Additional Information can also be
obtained from us or the SEC's website (www.sec.gov).
This variable annuity may not be suitable for everyone. This variable annuity
may not be appropriate for people who do not have a long investment time horizon
and is not appropriate for people who intend to engage in market timing. You
will get NO ADDITIONAL TAX ADVANTAGE from this variable annuity if you are
investing in a variable annuity through a tax-advantaged retirement plan (such
as a 401(k) plan or Individual Retirement Account ("IRA")). This prospectus is
not intended to provide tax, accounting or legal advice.
We are not an investment adviser nor are we registered as such with the SEC or
any state securities regulatory authority. We are not acting in any fiduciary
capacity with respect to your investment. This information does not constitute
personalized investment advice or financial planning advice.
NOT INSURED BY FDIC OR ANY MAY LOSE NOT A DEPOSIT OF OR GUARANTEED BY [NOT] FDIC
FEDERAL GOVERNMENT AGENCY VALUE ANY BANK OR ANY BANK AFFILIATE [NOT] BANK
--------------------------------------------------------------------------------
PROSPECTUS DATED: AUGUST 14, 2009
STATEMENT OF ADDITIONAL INFORMATION DATED: AUGUST 14, 2009
2
-------------------------------------------------------------------------------
CONTENTS
PAGE
--------------------------------------------------------------------------------
1. INTRODUCTION 3
2. FEE SUMMARY 4
3. MANAGEMENT OF THE CONTRACT 10
The Company 10
The General Account 10
The Separate Account 10
The Funds 10
Fixed Accumulation Feature 12
Personal Pension Account 13
4. INFORMATION ON YOUR ACCOUNT 17
a. Opening an Account 17
b. Charges and Fees 24
c. Surrenders 27
d. Annuity Payouts 29
e. Standard Death Benefit 33
5. RETURN OF PREMIUM DEATH BENEFIT 35
6. FURTHER INFORMATION 38
a. Glossary 38
b. State Variations 41
c. Miscellaneous 41
d. Legal Proceedings 42
e. How Contracts Are Sold 42
7. FEDERAL TAX CONSIDERATIONS/ TAX-QUALIFIED RETIREMENT PLANS 44
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 59
APPENDIX A - EXAMPLES APP A-1
APPENDIX B - ACCUMULATION UNIT VALUES APP B-1
APPENDIX C - FUND DATA APP C-1
3
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1. INTRODUCTION
HOW TO BUY THIS VARIABLE ANNUITY
[Thumbs up] CHOOSE A CONTRACT CLASS
MORTALITY &
MINIMUM INITIAL EXPENSE RISK
DEPOSIT NON- AND MAXIMUM
QUALIFIED QUALIFIED ADMINISTRATIVE UP-FRONT
CONTRACT CONTRACT SALES & OTHER CHARGES CHARGES COMMISSION
-----------------------------------------------------------------------------------------------------------------------------------
B SHARE $2,000 $5,000 8 year Contingent Deferred Sales Charge and 0.50% 5%
Distribution Charge
C SHARE $2,000 $10,000 1 year Contingent Deferred Sales Charge 1.35% 1%
I SHARE $5,000 $10,000 None 0.30% 0%
This table does not show Fund expenses, Premium taxes, Distribution Charges, and
optional rider fees.
[Thumbs up] CHOOSE INVESTMENT OPTIONS
X Sub-Accounts - Funds with different investment strategies, objectives and
risk/reward profiles.
X Fixed Accumulation Feature (B share class only) - A fixed interest account.
X Personal Pension Account - A fixed interest account designed to provide
lifetime payouts.
Subject to limitations, you may move your investment among each of these
options.
[Thumbs up] CHOOSE AN OPTIONAL FEATURE (IF DESIRED)
OPTIONAL FEATURE GENERAL PURPOSE
------------------------------------------------------------------------
Return of Premium Death Benefit* Guaranteed Minimum Death Benefit
* Investment restrictions apply.
Optional features may not be available through your Financial Intermediary.
[In writing] COMPLETE OUR APPLICATION OR ORDER REQUEST AND SUBMIT IT TO YOUR
FINANCIAL INTERMEDIARY FOR APPROVAL.
$ PAY THE APPLICABLE MINIMUM INITIAL DEPOSIT.
4
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2. FEE SUMMARY
THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
BUYING, OWNING AND SURRENDERING YOUR VARIABLE ANNUITY. THE FIRST TABLE DESCRIBES
THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY OR SURRENDER
THIS VARIABLE ANNUITY. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
CONTRACT OWNER TRANSACTION EXPENSES
B SHARE C SHARE I SHARE
------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE (CDSC) (1) None
1 7% 2%
2 7%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9+ 0%
SURRENDER FEE None None None
TRANSFER FEE None None None
(1) Each Deposit has its own CDSC schedule.
CONTRACT OWNER PERIODIC EXPENSES
THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
AND ON A DAILY BASIS (EXCEPT AS NOTED) DURING THE TIME THAT YOU OWN THE VARIABLE
ANNUITY, NOT INCLUDING ANNUAL FUND FEES AND EXPENSES.
B SHARE C SHARE I SHARE
------------------------------------------------------------------------------------------
ANNUAL MAINTENANCE FEE (2) $30 $30 $30
DISTRIBUTION CHARGE (3) 0.75% None None
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily
Contract Value excluding Fixed Accumulation Feature
investments)
Mortality and Expense Risk Charge 0.30% 1.15% 0.10%
Administrative Charge 0.20% 0.20% 0.20%
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 0.50% 1.35% 0.30%
MAXIMUM OPTIONAL CHARGES
Return of Premium Death Benefit (4) 0.75% 0.75% 0.75%
(2) Fee waived if Account Balance is $50,000 or more on your Contract
Anniversary.
(3) The Distribution Charge is based on a percentage of Remaining Gross
Premium. Each Premium Payment has its own Distribution Charge schedule. The
Distribution Charge is reduced to 0% after the completion of eight years
after each respective Premium Payment.
(4) Charge based on a percentage of Premium Payments adjusted for Surrenders on
each Contract Anniversary. Current rider charge is 0.30%.
THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING
EXPENSES CHARGED BY THE FUNDS THAT YOU MAY PAY ON A DAILY BASIS DURING THE TIME
THAT YOU OWN THIS VARIABLE ANNUITY. MORE DETAIL CONCERNING EACH FUND'S FEES AND
EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND.
MINIMUM MAXIMUM
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.44% 2.37%
(expenses that are deducted from Underlying Fund assets,
including management fees, distribution
and/or service fees (12b-1) fees, and other expenses.
5
-------------------------------------------------------------------------------
THE LAST TABLE SHOWS THE TOTAL ANNUAL FUND OPERATING EXPENSES FOR EACH
UNDERLYING FUND. ACTUAL FEES AND EXPENSES FOR THE UNDERLYING FUNDS VARY DAILY.
AS A RESULT, THE FEES AND EXPENSES FOR ANY GIVEN DAY MAY BE GREATER OR LESS THAN
THE TOTAL ANNUAL FUND OPERATING EXPENSES LISTED BELOW. MORE DETAIL CONCERNING
EACH UNDERLYING FUND'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH
FUND. THESE EXPENSES MAY VARY FROM YEAR TO YEAR.
ANNUAL FUND OPERATING EXPENSES
AS OF THE FUND'S YEAR END
(As a percentage of net assets)
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 0.61% 0.25% 0.29% 0.01%
AIM V.I. International
Growth Fund - Series II 0.71% 0.25% 0.35% 0.02%
AIM V.I. Mid Cap Core Equity
Fund - Series II 0.72% 0.25% 0.32% 0.03%
AIM V.I. PowerShares ETF
Allocation Fund - Series II 0.67% 0.25% 0.89% 0.56%
AIM V.I. Small Cap Equity
Fund - Series II 0.75% 0.25% 0.34% 0.01%
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 0.55% 0.25% 0.22% N/A
AllianceBernstein VPS
International Value
Portfolio - Class B 0.74% 0.25% 0.07% N/A
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 0.75% 0.25% 0.11% N/A
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.56% 0.25% 0.10% N/A
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.56% 0.25% 0.12% N/A
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.57% 0.25% 0.16% N/A
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 0.68% 0.35% 0.31% 0.04%
Franklin Income Securities
Fund - Class 4 0.45% 0.35% 0.02% N/A
Franklin Rising Dividends
Securities Fund - Class 4 0.60% 0.35% 0.02% 0.01%
Franklin Small Cap Value
Securities Fund - Class 4 0.52% 0.35% 0.16% 0.01%
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 0.50% 0.35% 0.28% 0.02%
Franklin Strategic Income
Securities Fund - Class 4 0.37% 0.35% 0.25% 0.01%
Mutual Global Discovery
Securities Fund - Class 4 0.80% 0.35% 0.18% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 1.16% 0.01% N/A 1.15% (1)(2)(3)(4)
AIM V.I. International
Growth Fund - Series II 1.33% 0.01% N/A 1.32% (1)(2)(3)(4)
AIM V.I. Mid Cap Core Equity
Fund - Series II 1.32% 0.03% N/A 1.29% (1)(2)(3)(4)
AIM V.I. PowerShares ETF
Allocation Fund - Series II 2.37% 1.38% N/A 0.99% (1)(2)(4)(5)
AIM V.I. Small Cap Equity
Fund - Series II 1.35% N/A N/A 1.35% (1)(4)(6)
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 1.02% 0.02% N/A 1.00% (7)
AllianceBernstein VPS
International Value
Portfolio - Class B 1.06% N/A N/A 1.06%
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 1.11% N/A N/A 1.11%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.91% N/A N/A 0.91% (8)
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.93% N/A N/A 0.93% (8)
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.98% N/A N/A 0.98%
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 1.38% 0.31% N/A 1.07% (9)(12)
Franklin Income Securities
Fund - Class 4 0.82% N/A N/A 0.82% (10)
Franklin Rising Dividends
Securities Fund - Class 4 0.98% N/A N/A 0.98%
Franklin Small Cap Value
Securities Fund - Class 4 1.04% N/A N/A 1.04% (12)
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 1.15% N/A N/A 1.15% (12)
Franklin Strategic Income
Securities Fund - Class 4 0.98% N/A N/A 0.98% (12)
Mutual Global Discovery
Securities Fund - Class 4 1.33% N/A N/A 1.33% (11)
6
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DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 0.60% 0.35% 0.13% N/A
Templeton Foreign Securities
Fund - Class 4 0.64% 0.35% 0.15% 0.02%
Templeton Global Bond
Securities Fund - Class 4 0.47% 0.35% 0.11% N/A
Templeton Growth Securities
Fund - Class 4 0.74% 0.35% 0.04% N/A
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.61% N/A 0.03% N/A
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.45% N/A 0.01% N/A
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.65% 0.25% 0.09% N/A
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 0.75% 0.25% 0.17% N/A
American Funds Bond HLS Fund
- Class IB 0.50% 0.25% 0.05% N/A
American Funds Global Bond
HLS Fund - Class IB 0.75% 0.25% 0.10% N/A
American Funds Global Growth
and Income HLS Fund - Class
IB 0.80% 0.25% 0.06% N/A
American Funds Global Growth
HLS Fund - Class IB 1.00% 0.25% 0.12% N/A
American Funds Global Small
Capitalization HLS Fund -
Class IB 0.80% 0.25% 0.11% N/A
American Funds Growth HLS
Fund - Class IB 0.75% 0.25% 0.03% N/A
American Funds Growth-
Income HLS Fund - Class IB 0.70% 0.25% 0.04% N/A
American Funds International
HLS Fund - Class IB 0.85% 0.25% 0.04% N/A
American Funds New World HLS
Fund -
Class IB 1.10% 0.25% 0.09% N/A
Hartford Capital
Appreciation HLS Fund -
Class IA 0.63% N/A 0.04% N/A
Hartford Disciplined Equity
HLS Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Dividend and Growth
HLS Fund -
Class IA 0.64% N/A 0.03% N/A
Hartford Global Equity HLS
Fund - Class IA 0.95% N/A 0.07% N/A
Hartford Global Growth HLS
Fund - Class IA 0.71% N/A 0.04% N/A
Hartford Growth HLS Fund -
Class IA 0.80% N/A 0.04% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 1.08% N/A N/A 1.08%
Templeton Foreign Securities
Fund - Class 4 1.16% N/A N/A 1.16% (12)
Templeton Global Bond
Securities Fund - Class 4 0.93% N/A N/A 0.93% (13)
Templeton Growth Securities
Fund - Class 4 1.13% N/A N/A 1.13% (10)
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.64% N/A N/A 0.64%
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.46% N/A N/A 0.46%
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.99% 0.40% 0.32% 0.91% (14)
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 1.17% 0.50% 0.43% 1.10% (14)
American Funds Bond HLS Fund
- Class IB 0.80% 0.25% 0.40% 0.95% (14)
American Funds Global Bond
HLS Fund - Class IB 1.10% 0.50% 0.59% 1.19% (14)
American Funds Global Growth
and Income HLS Fund - Class
IB 1.11% 0.55% 0.62% 1.18% (14)
American Funds Global Growth
HLS Fund - Class IB 1.37% 0.75% 0.55% 1.17% (14)
American Funds Global Small
Capitalization HLS Fund -
Class IB 1.16% 0.55% 0.74% 1.35% (14)
American Funds Growth HLS
Fund - Class IB 1.03% 0.50% 0.33% 0.86% (14)
American Funds Growth-
Income HLS Fund - Class IB 0.99% 0.45% 0.28% 0.82% (14)
American Funds International
HLS Fund - Class IB 1.14% 0.60% 0.52% 1.06% (14)
American Funds New World HLS
Fund -
Class IB 1.44% 0.85% 0.81% 1.40% (14)
Hartford Capital
Appreciation HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Disciplined Equity
HLS Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Dividend and Growth
HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Global Equity HLS
Fund - Class IA 1.02% 0.10% N/A 0.92% (15)
Hartford Global Growth HLS
Fund - Class IA 0.75% N/A N/A 0.75%
Hartford Growth HLS Fund -
Class IA 0.84% N/A N/A 0.84%
7
-------------------------------------------------------------------------------
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.70% N/A 0.04% N/A
Hartford Index HLS Fund -
Class IB 0.30% 0.25% 0.02% N/A
Hartford International
Opportunities HLS Fund -
Class IA 0.67% N/A 0.04% N/A
Hartford Money Market HLS
Fund - Class IA 0.40% N/A 0.04% N/A
Hartford Small Company HLS
Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Total Return Bond
HLS Fund - Class IA 0.46% N/A 0.03% N/A
Hartford Value HLS Fund -
Class IA 0.81% N/A 0.03% N/A
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 0.75% 0.25% 0.08% N/A
MFS(R) Investors Trust
Series - Service Class 0.75% 0.25% 0.09% N/A
MFS(R) Research Bond Series
- Service Class 0.50% 0.25% 0.14% N/A
MFS(R) Total Return Series -
Service Class 0.74% 0.25% 0.07% N/A
MFS(R) Value Series -
Service Class 0.75% 0.25% 0.09% N/A
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 0.65% 0.25% 0.13% 0.02%
Putnam VT Investors Fund -
Class IB 0.65% 0.25% 0.12% N/A
Putnam VT Voyager Fund -
Class IB 0.64% 0.25% 0.08% 0.01%
HUNTINGTON FUNDS
Huntington VA Dividend
Capture Fund 0.60% N/A 0.31% 0.01%
Huntington VA Growth Fund 0.60% N/A 0.27% 0.02%
Huntington VA Income Equity
Fund 0.60% N/A 0.32% N/A
Huntington VA International
Equity Fund 0.60% N/A 0.43% 0.04%
Huntington VA Macro 100 Fund 0.60% N/A 0.38% 0.01%
Huntington VA Mid Corp
America Fund 0.60% N/A 0.33% 0.04%
Huntington VA Mortgage
Securities Fund 0.60% N/A 0.44% 0.03%
Huntington VA New Economy
Fund 0.60% N/A 0.33% 0.08%
Huntington VA Rotating
Markets Fund 0.60% N/A 0.33% 0.68%
Huntington VA Situs Fund 0.60% N/A 0.35% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.74% N/A N/A 0.74%
Hartford Index HLS Fund -
Class IB 0.57% N/A N/A 0.57%
Hartford International
Opportunities HLS Fund -
Class IA 0.71% N/A N/A 0.71%
Hartford Money Market HLS
Fund - Class IA 0.44% N/A N/A 0.44%
Hartford Small Company HLS
Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Total Return Bond
HLS Fund - Class IA 0.49% N/A N/A 0.49%
Hartford Value HLS Fund -
Class IA 0.84% N/A N/A 0.84%
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 1.08% N/A N/A 1.08% (16)
MFS(R) Investors Trust
Series - Service Class 1.09% N/A N/A 1.09% (16)
MFS(R) Research Bond Series
- Service Class 0.89% N/A N/A 0.89% (16)
MFS(R) Total Return Series -
Service Class 1.06% N/A N/A 1.06% (16)
MFS(R) Value Series -
Service Class 1.09% N/A N/A 1.09% (16)
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 1.05% N/A N/A 1.05% (17)
Putnam VT Investors Fund -
Class IB 1.02% N/A N/A 1.02% (18)
Putnam VT Voyager Fund -
Class IB 0.98% N/A N/A 0.98% (17)
HUNTINGTON FUNDS
Huntington VA Dividend
Capture Fund 0.92% N/A N/A 0.92% (19)
Huntington VA Growth Fund 0.89% N/A N/A 0.89% (19)
Huntington VA Income Equity
Fund 0.92% N/A N/A 0.92%
Huntington VA International
Equity Fund 1.07% N/A N/A 1.07% (19)
Huntington VA Macro 100 Fund 0.99% N/A N/A 0.99% (19)
Huntington VA Mid Corp
America Fund 0.97% N/A N/A 0.97% (19)
Huntington VA Mortgage
Securities Fund 1.07% N/A N/A 1.07% (19)
Huntington VA New Economy
Fund 1.01% N/A N/A 1.01% (19)
Huntington VA Rotating
Markets Fund 1.61% N/A N/A 1.61% (19)
Huntington VA Situs Fund 0.95% N/A N/A 0.95%
* The 12b-1 fees deducted from these classes cover certain distribution,
shareholder support and administrative services provided by intermediaries
(the insurance company, broker dealer or other service provider).
NOTES
(1) Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Net Annual Fund Operating Expenses listed above may exceed the
expense limit numbers. The impact of the acquired fund fees and expense are
included in the total returns of the Fund.
8
-------------------------------------------------------------------------------
(2) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to
100% of the net advisory fees Invesco Aim receives from the affiliated
money market funds on investments by the Fund of uninvested cash (excluding
investments of cash collateral from securities lending) in such affiliated
money market funds. Fee Waiver reflects this agreement.
(3) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.45% of average daily net assets.
(4) Except as otherwise noted, figures shown in the table are for the year
ended December 31, 2008 and are expressed as a percentage of the Fund's
average daily net assets. There is no guarantee that actual expenses will
be the same as those shown in the table.
(5) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 0.43% of average daily net assets.
(6) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.40% of average daily net assets.
(7) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Portfolio's operating expenses.
This waiver extends through April 30, 2010 and may be extended by the
Adviser for additional one-year terms.
(8) A portion of the brokerage commissions that the fund pays may be reimbursed
and used to reduce the fund's expenses. In addition, through arrangements
with the fund's custodian, credits realized as a result of un-invested cash
balances are used to reduce the fund's custodian expenses. Including these
reductions, the total class operating expenses would have been: Fidelity
VIP Contrafund Portfolio Initial Class - 0.65%; Fidelity VIP Contrafund
Portfolio Service Class 2 - 0.90%; Fidelity VIP Growth Portfolio Initial
Class - 0.67%; Fidelity VIP Growth Portfolio Service Class 2 - 0.92%;
Fidelity VIP Mid Cap Portfolio Service Class 2 - 0.92%; Fidelity Overseas
Portfolio Initial Class - 0.84%. These offsets may be discontinued at any
time.
(9) The investment manager and administrator have contractually agreed to waive
or limit their respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that common annual Fund operating
expenses (i.e., a combination of investment management fees, fund
administration fees, and other expenses, but excluding Rule 12b-1 fees and
acquired fund fees and expenses) do not exceed 0.72% (other than certain
non-routine expenses or costs, including those relating to litigation,
indemnification, reorganizations, and liquidations) until April 30, 2010.
This waiver is separate from the waiver related to the Sweep Money Fund.
(10) The Fund administration fee is paid indirectly through the management fee.
(11) The Fund's name changed from Mutual Discovery Securities Fund effective as
of May 1, 2009.
(12) The manager has agreed in advance to reduce its fee from assets invested by
the Fund in a Franklin Templeton money market fund (the Sweep Money Fund
which is "the acquired fund" in this case) to the extent of the Fund's fees
and expenses of the acquired fund. This reduction is required by the
Trust's board of trustees and an exemptive order by the Securities and
Exchange Commission; this arrangement will continue as long as the
exemptive order is relied upon.
(13) The Fund's name changed from Templeton Global Income Securities Fund
effective as of May 1, 2009.
(14) Because the Feeder Fund invests all of its assets in the Master Fund, the
Feeder Fund will bear its own fees and expenses and its proportionate share
of the fees and expenses of the Master Fund. The amounts shown under
"Master Fund Expenses" include the advisory fee (before non-contractual fee
waiver). The Annual Fund Operating Expense table and the Examples reflect
the estimated expenses of both the Feeder Fund and the Master Fund.
The Class I shares of the Master Funds do not have a sales charge (load) or
a distribution and service (12b-1) fee.
HL Advisors has entered into a contractual agreement with Hartford Series
Fund, Inc (the Company") under which it will waive a portion of its
advisory fee for such time as the fund is operated as a feeder fund,
because during the that time it will not be providing the portfolio
management portion of the advisory and management services to be provided
under its investment management with the Company. The fee waiver will
continue as long as the fund is part of a master-feeder structure unless
the Board of Directors approves a change in or elimination of the waiver.
Currently, the fund waivers are as follows: American Funds Asset Allocation
HLS Fund - 0.40%; American Funds Blue Chip and Growth HLS Fund - 0.50%;
American Fund Bond HLS Fund - 0.25%; American Funds Global Bond HLS Fund -
0.50%; American Funds Global Growth and Income HLS Fund - 0.55%; American
Funds Global Growth HLS Fund - 0.75%; American Fund Global Small
Capitalization HLS Fund - 0.55%; American Funds Growth HLS Fund - 0.50%;
American Funds Growth-Income HLS Fund - 0.45%; American Funds International
HLS Fund - 0.60%; American Funds New World HLS Fund - 0.85%.
(15) Effective August 25, 2008 HL Advisors contractually agreed to waive a
portion of its management fees until May 1, 2010. While such waiver is in
effect, using the most recent fiscal year average net assets, the
management fee is 0.85% and the total annual operating expenses are 0.92%.
(16) The fund's Rule 12b-1 plan permits it to pay distribution and/or service
fees to support the sale and distribution of the fund's Service Class
shares and the services provided by financial intermediaries. The maximum
rates that may be charged under the plan, together with details of any fee
reduction arrangements, are set forth under "Distribution and Service
Fees."
(17) "Total Annual Fund Operating Expenses" includes the amount from "Acquired
Fund Fees and Expenses" column, which is an estimate of expenses
attributable to the fund's investments in other investment companies, based
on the total annual fund operating expenses of such companies as reported
in their most recent shareholder reports (net of any applicable expense
limitations). These indirect expenses will vary from time to time depending
on the fund's investments in other investment companies and their operating
expenses
(18) Includes estimated expenses attributable to the fund's investments in other
investment companies that the fund bears indirectly.
(19) Because the Funds invest in other Funds, they are a shareholder of those
Underlying Funds and indirectly bear their proportionate share of the
operating expenses, including management fees, of the Underlying Funds.
These expenses are deducted from the Underlying Funds before their share
prices are calculated and are in addition to the direct fees and expenses
borne by the Funds and their shareholders that are also described in the
fee tables above. All of the above expenses of the Funds and Acquired
(Underlying) Funds use their expense ratios for their most recent fiscal
year. These estimates may vary considerably based on future asset levels of
the Funds, the availability of Acquired (Underlying) Funds, the amount of
Funds' assets invested in Acquired (Underlying) Funds at any point in time,
and the fluctuation of the expense ratios of the Acquired (Underlying)
Funds.
9
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EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THIS
VARIABLE ANNUITY WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITIES. LET'S
SAY, HYPOTHETICALLY, THAT YOUR ANNUAL INVESTMENT RETURN IS FIVE (5%) PERCENT AND
THAT YOUR FEES AND EXPENSES TODAY WERE AS HIGH AS POSSIBLE INCLUDING THE
ELECTION OF THE HIGHEST POSSIBLE OPTIONAL CHARGES (I.E., THE HARTFORD'S RETURN
OF PREMIUM DEATH BENEFIT). THE EXAMPLE ILLUSTRATES THE EFFECT OF FEES AND
EXPENSES THAT YOU COULD INCUR (OTHER THAN TAXES). YOUR ACTUAL FEES AND EXPENSES
MAY VARY. FOR EVERY $10,000 INVESTED (EXCLUDING PERSONAL PENSION ACCOUNT
CONTRIBUTIONS AND AMOUNTS ALLOCATED TO THE FIXED ACCUMULATION FEATURE), HERE'S
HOW MUCH YOU WOULD PAY UNDER EACH OF THE THREE SCENARIOS POSED:
(1) If you Surrender your variable annuity at the end of the applicable time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $1137 $2092 $2858 $4630
C Share $676 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
(2) If you annuitize at the end of the applicable time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $294 $1245 $2199 $4525
C Share $381 $1355 $2332 $4782
I Share $274 $1041 $1822 $3841
(3) If you do not Surrender your variable annuity:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------------------------------------------------------
B Share $474 $1425 $2379 $4630
C Share $486 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
When Premium Payments are credited to your Funds, they are converted into
Accumulation Units by dividing the amount of your Premium Payments minus any
Premium taxes, by the Accumulation Unit Value for that Valuation Day. All
classes of Accumulation Unit Values may be obtained, free of charge, by
contacting us. See Appendix B - Accumulation Unit Values for additional
information. You can find financial statements for us and the Separate Account
in the Statement of Additional Information.
10
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3. MANAGEMENT OF THE CONTRACT
THE COMPANY
We are a stock life insurance company engaged in the business of writing life
insurance and individual and group annuities. Hartford Life Insurance Company is
authorized to do business in all states of the United States and the District of
Columbia. Hartford Life and Annuity Insurance Company is authorized to do
business in Puerto Rico, the District of Columbia, and all states of the United
States except New York. Hartford Life Insurance Company was originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Hartford Life and Annuity Insurance Company was
originally incorporated under the laws of Wisconsin on January 9, 1956, and
subsequently redomiciled to Connecticut. Hartford Life and Annuity Insurance
Company is a subsidiary of Hartford Life Insurance Company. Our corporate
offices are located in Simsbury, Connecticut. Neither company cross guarantees
the obligations of the other. We are ultimately controlled by The Hartford
Financial Services Group, Inc.
All guarantees under the Contract are subject to each issuing company's
financial strength and claims-paying capabilities. We provide information about
our financial strength in reports filed with the SEC (Hartford Life Insurance
Company only) and/or state insurance departments. For example, Hartford Life
Insurance Company files annual reports (Form 10-K), quarterly reports (Form
10-Q) and periodic reports (Form 8-K) with the SEC. Forms 10-K and 10-Q include
information such as our financial statements, management discussion and analysis
of the previous year of operations, risk factors, and other information. Form
8-K reports are used to communicate important developments that are not
otherwise disclosed in the other forms described above. You may read or copy
these reports at the SEC's Public Reference Room at 100 F. Street N.E., Room
1580, Washington, D.C. 20549-2001. You may also obtain reports and other
information about us by contacting us using the information stated on the cover
page of this prospectus, visiting our website at www.hartfordinvestor.com or
visiting the SEC's website at www.sec.gov. You may also obtain reports and other
financial information about us by contacting your state insurance department.
THE GENERAL ACCOUNT
The Fixed Accumulation Feature and the Personal Pension Account are part of our
General Account. Any amounts that we are obligated to pay under the Fixed
Accumulation Feature and the Personal Pension Account and any other payment
obligation we undertake under the Contract are subject to our financial strength
and claims-paying ability and our long-term ability to make such payments. We
invest the assets of the General Account according to the laws governing the
investments of insurance company general accounts. The General Account is not a
bank account and is not insured by the FDIC or any other government agency. We
receive a benefit from all amounts held in our General Account. Amounts in our
General Account are available to our general creditors. We issue other types of
insurance policies and financial products and pay our obligations under these
products from our assets in the General Account.
THE SEPARATE ACCOUNT
We set aside and invest the assets of some of our annuity contracts, including
these Contracts, in a Separate Account. These Separate Accounts are registered
as unit investment trusts under the 1940 Act. This registration does not involve
supervision by the SEC of the management or the investment practices of a
Separate Account or us. Separate Accounts meet the definition of "Separate
Account" under federal securities law. The Separate Accounts referenced in this
prospectus hold only assets for variable annuity contracts. These Separate
Accounts:
- hold assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract;
- are not subject to the liabilities arising out of any other business we may
conduct;
- are not affected by the rate of return of our General Account or by the
investment performance of any of our other Separate Accounts;
- may be subject to liabilities of other variable annuity contracts offered by
this Separate Account which are not described in this prospectus; and
- are credited with income and gains, and takes losses, whether or not
realized, from the assets they hold without regard to our other income,
gains or loss.
We do not guarantee the investment results of the Separate Account.
THE FUNDS
The Funds available for investment are not the same mutual funds that you can
buy through your Registered Representative even though they may have similar
investment strategies and the same portfolio managers. Each Fund has varying
degrees of investment risk. Funds are also subject to separate fees and expenses
such as management fees, distribution and operating expenses. "Master-feeder" or
"fund of funds" ("feeder funds") invest substantially all of their assets in
other funds and will therefore bear a pro-rata share of fees and expenses
incurred by both funds. This will reduce your investment return. Please contact
us to obtain a copy of the
11
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prospectuses for each Fund (or for any feeder funds). Read these prospectuses
carefully before investing. We do not guarantee the investment results of any
Fund. Certain Funds may not be available in all states and in all Contract
classes.
MIXED AND SHARED FUNDING - Fund shares may be sold to our other separate
accounts, our insurance company affiliates or other unaffiliated insurance
companies to serve as an underlying investment for variable annuity contracts
and variable life insurance policies, pursuant to a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Owners, and other contract owners investing
these Funds. If a material conflict arose, we will consider what action may be
appropriate, including removing the Fund from the Separate Account or replacing
the Fund with another underlying fund.
VOTING RIGHTS - We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Funds' shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted;
- send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract;
- arrange for the handling and tallying of proxies received from Owners;
- vote all Fund shares attributable to your Contract according to instructions
received from you, and
- vote all Fund shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any shareholder meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease. As a result of proportional voting, a small number of Owners
could determine the outcome of a proposition subject to shareholder vote.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS - Subject to any applicable law,
we may make certain changes to the Funds offered under your Contract. We may, in
our sole discretion, establish new Funds. New Funds may be made available to
existing Owners as we deem appropriate. We may also close one or more Funds to
additional Premium Payments or transfers from existing Funds. We may liquidate
one or more Sub-Accounts if the board of directors of any Fund determines that
such actions are prudent. Unless otherwise directed, investment instructions
will be automatically updated to reflect the Fund surviving after any merger,
substitution or liquidation.
We may eliminate the shares of any of the Funds from the Contract for any reason
and we may substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Fund will not be made until we have
the approval of the SEC and we have notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of the
Owners, the Separate Account may be operated as a management company under the
1940 Act or any other form permitted by law, may be de-registered under the 1940
Act in the event such registration is no longer required, or may be combined
with one or more other Separate Accounts.
FEES WE RECEIVE FROM FUNDS AND RELATED PARTIES - We receive substantial and
varying administrative service payments (referred to as "revenue sharing
payments") and Rule 12b-1 fees from certain Funds or related parties. We
consider revenue sharing payments and Rule 12b-1 fees among a number of factors
when deciding to add or keep a Fund that we offer through the Contract. We
collect these payments and fees under agreements between us and a Fund's
principal underwriter, transfer agent, investment adviser and/or other entities
related to the Fund. We expect to make a profit on these fees.
The availability of these types of arrangements creates an incentive for us to
seek and offer Funds (and classes of shares of such Funds) that pay us revenue
sharing. Other funds (or available classes of shares) may have lower fees and
better overall investment performance. As of December 31, 2008, we have entered
into arrangements to receive administrative service payments and/or Rule 12b-1
fees from each of the following Fund complexes (or affiliated entities): AIM
Advisors, Inc., AllianceBernstein Variable Products Series Funds & Alliance
Bernstein Investments, American Variable Insurance Series & Capital Research and
Management Company, Branch Banking & Trust Company, Evergreen Investment
Services Inc., Fidelity Distributors Corporation, Fidelity Investments
Institutional Operations Company, Franklin Templeton Services, LLC, The
Huntington Funds, Lord Abbett Series Fund & Lord Abbett Distributor, LLC, MFS
Fund Distributors, Inc. & Massachusetts Financial Services Company, Merrill
Lynch Asset Management & Princeton Funds Distributor, Morgan Stanley
Distribution, Inc. & Morgan Stanley Investment Management & The Universal
Institutional Funds, MTB Investment Advisors, Inc., Banc of America Advisors,
LLC, JPMorgan Investment Advisors, Inc., Oppenheimer Variable Account Funds &
Oppenheimer Funds Distributor, Inc., Pioneer Variable Contracts Trust & Pioneer
Investment Management, Inc. & Pioneer Funds Distributor, Inc., Prudential
Investment Management Services, LLC, Putnam Retail Management Limited
Partnership, SunTrust Securities, Inc. & Trusco Capital Management, Inc., UBS
Financial Services, Inc.,
12
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Van Kampen Life Investment Trust & Van Kampen Asset Management, Van Kampen
Funds, The Victory Variable Insurance Funds & Victory Capital Management, Inc. &
Victory Capital Advisers, Inc. and Wells Fargo Variable Trust & Wells Fargo Fund
Management, LLC.
We are affiliated with Hartford Series Fund, Inc. and Hartford HLS Series Fund
II, Inc. (collectively, the "HLS Funds") based on our affiliation with their
investment advisers HL Investment Advisors, LLC and Hartford Investment
Management Company. In addition to investment advisory fees, we, or our other
insurance company affiliates, receive fees to provide, among other things,
administrative, processing, accounting and shareholder services for the HLS
Funds.
Not all Fund complexes pay the same amounts of revenue sharing payments and/or
Rule 12b-1 fees. Therefore, the amount of fees we collect may be greater or
smaller based on the Funds you select. Revenue sharing payments and Rule 12b-1
fees did not exceed 0.50% and 0.35%, respectively, in 2008, and are not expected
to exceed 0.50% and 0.35%, respectively, in 2009, of the annual percentage of
the average daily net assets (for instance, in 2008, assuming that you invested
in a Fund that paid us the maximum fees and you maintained a hypothetical
average balance of $10,000, we would collect a total of $85 from that Fund). For
the fiscal year ended December 31, 2008, revenue sharing payments and Rule 12b-1
fees did not collectively exceed approximately $145.6 million. These fees do not
take into consideration indirect benefits received by offering HLS Funds as
investment options.
FIXED ACCUMULATION FEATURE
INTERESTS IN THE FIXED ACCUMULATION FEATURE ARE NOT REGISTERED UNDER THE 1933
ACT AND THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED AS AN INVESTMENT
COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE FIXED ACCUMULATION FEATURE
NOR ANY OF ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE
1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE
DISCLOSURE REGARDING THE FIXED ACCUMULATION FEATURE. THE FOLLOWING DISCLOSURE
ABOUT THE FIXED ACCUMULATION FEATURE IS SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND
COMPLETENESS OF DISCLOSURES. THE FIXED ACCUMULATION FEATURE IS NOT OFFERED IN
ALL CONTRACT CLASSES AND IS NOT AVAILABLE IN ALL STATES.
We guarantee that we will credit interest to amounts you allocate to the Fixed
Accumulation Feature at a minimum rate that meets your State's minimum
non-forfeiture requirements. Non-forfeiture rates vary from state-to-state. We
may credit a rate higher than the minimum rate. We reserve the right to declare
different rates of interest depending on when amounts are allocated or
transferred to the Fixed Accumulation Feature. This means that amounts at any
designated time may be credited with a different rate of interest than the rate
previously credited to such amounts and to amounts allocated or transferred at
any other designated time. We will periodically publish the Fixed Accumulation
Feature interest rates currently in effect. There is no specific formula for
determining interest rates and, except as specifically stated above, no
assurances are offered as to future rates in excess of non-forfeiture rates.
Some of the factors that we may consider in determining whether to credit
interest are: general economic trends, rates of return currently available for
the types of investments and durations that match our liabilities and
anticipated yields on our investments; regulatory and tax requirements; and
competitive factors. Fixed Accumulation Feature interest rates may vary by
State.
We will account for any deductions, Surrenders or transfers from the Fixed
Accumulation Feature on a "first-in, first-out" basis (i.e., oldest investments
will be liquidated first).
ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED ACCUMULATION FEATURE
IN EXCESS OF THE MINIMUM GUARANTEED INTEREST RATE WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCUMULATION
FEATURE MAY NOT EXCEED THE MINIMUM GUARANTEED INTEREST RATE FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates in our sole
discretion.
We may restrict your ability to allocate Contract Value, Benefit Balance or
Premium Payments to the Fixed Accumulation Feature (and vice versa) at any time
in our sole discretion. We may close the Fixed Accumulation Feature to new
Premium Payments or transfers of existing Contract Value and/or Benefit Balance.
Except as otherwise provided, during each Contract Year, you may make transfers
out of the Fixed Accumulation Feature to Sub-Accounts or the Personal Pension
Account, subject to the transfer restrictions discussed below. All transfer
allocations must be in whole numbers (e.g., 1%). Each Contract Year you may
transfer the greater of:
- thirty (30%) percent of the Contract Value in the Fixed Accumulation Feature
as of the last Contract Anniversary. When we calculate the 30%, we add
Premium Payments allocated to the Fixed Accumulation Feature, transfers from
Sub-Accounts and transfers from the Personal Pension Account made after that
date but before the next Contract Anniversary. These restrictions also apply
to systematic transfers. The 30% does not include Contract Value in any DCA
Plus Program; or
- an amount equal to your largest previous transfer from the Fixed
Accumulation Feature in any one Contract Year.
We apply these restrictions to all transfers from the Fixed Accumulation
Feature, including all systematic transfers and Dollar Cost Averaging Programs,
except for transfers under our DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer any amount up to 100% of the amount to be
invested at the renewal rate. You must make this transfer request within 60 days
of being notified of the renewal rate.
We may defer transfers and partial Surrenders from the Fixed Accumulation
Feature for up to six months from the date of your request.
13
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You must wait six months after your most recent transfer from the Fixed
Accumulation Feature before moving Sub-Account Values or Benefit Balance back to
the Fixed Accumulation Feature. If you make systematic transfers from the Fixed
Accumulation Feature under a Dollar Cost Averaging Program or DCA Plus Program,
you must wait six months after your last systematic transfer before moving
Contract Value or Benefit Balance back to the Fixed Accumulation Feature.
As a result of these limitations, it may take a significant amount of time
(i.e., several years) to move Contract Value in the Fixed Accumulation Feature
to Sub-Accounts and/or Personal Pension Account and therefore this may not
provide an effective short term defensive strategy.
PERSONAL PENSION ACCOUNT
INTERESTS IN THE PERSONAL PENSION ACCOUNT ARE NOT REGISTERED UNDER THE 1933 ACT
AND THE PERSONAL PENSION ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE PERSONAL PENSION ACCOUNT NOR ANY OF
ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR
THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE DISCLOSURES
REGARDING THE PERSONAL PENSION ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE
PERSONAL PENSION ACCOUNT IS SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURES. THE PERSONAL PENSION ACCOUNT MAY NOT BE AVAILABLE TO ALL TYPES OF
QUALIFIED PLANS, OWNERSHIP ARRANGEMENTS, OR IN ALL STATES.
WHAT IS THE PERSONAL PENSION ACCOUNT?
THE FOLLOWING IS A BRIEF SUMMARY OF THE PERSONAL PENSION ACCOUNT. YOU SHOULD
READ THIS ENTIRE SECTION OF THE PROSPECTUS TO MAKE SURE THAT YOU UNDERSTAND THE
IMPORTANT LIMITATIONS AND RESTRICTIONS APPLICABLE TO THE PERSONAL PENSION
ACCOUNT.
The Personal Pension Account is like the Fixed Accumulation Feature because you
receive a fixed interest rate investment return. So, like the Fixed Accumulation
Feature, you can invest in the Personal Pension Account if you want a steadier
return than you would receive from the Sub-Accounts, where your return depends
on the investment performance of the Funds you select.
While the Personal Pension Account and Fixed Accumulation Feature both offer a
fixed interest rate return, the Personal Pension Account is designed to serve a
different purpose than the Fixed Accumulation Feature. The Fixed Accumulation
Feature is designed to serve as a conventional accumulation-oriented investment
-you put money in to build up your investment, and you can then withdraw money
to meet financial needs as they arise. You can also transfer some or all of your
investment to the Sub-Accounts or the Personal Pension Account, and your
beneficiaries receive a death benefit if you die. The Personal Pension Account
is designed to serve a different purpose - it has features and guarantees you
can use to design your own personal pension plan to provide you with life-long
income payments without having to use the Sub-Accounts or Fixed Accumulation
Feature for that purpose. These guarantees let you know in advance how much your
income payments will be in the future. While you can take income payments from
the Fixed Accumulation Feature too, the amount of those income payments is not
guaranteed in advance.
Why would you invest in the Fixed Accumulation Feature if the Personal Pension
Account gives you income guarantees and more flexibility structuring income
payments? The reason is that to give you the guarantees and income payment
flexibility, we had to place significant restrictions on how much you can
transfer out of the Personal Pension Account in any year as well as on your
ability to receive lump sum payments - instead of SURRENDERINGpart or all of the
amounts you have built up in the Personal Pension Account, you can get a lump
sum payment only by specifying some or all of the payments you are receiving,
and then COMMUTING them into one lump sum. When you invest in the Personal
Pension Account, you may end up getting less than you would have if you invested
in the Fixed Accumulation Feature. This is the tradeoff you have to accept in
return for getting the additional flexibility and guarantees that let you design
your own personal pension plan.
THERE ARE CERTAIN CONDITIONS THAT MUST BE SATISFIED FOR YOU TO RECEIVE
GUARANTEED INCOME PAYMENTS FROM YOUR PERSONAL PENSION ACCOUNT INVESTMENT,
INCLUDING STARTING TO TAKE PAYMENTS BEFORE THE END OF A SPECIFIED PERIOD. YOU
SHOULD READ THE REST OF THIS PROSPECTUS AND YOUR CONTRACT CAREFULLY TO MAKE SURE
YOU UNDERSTAND ALL OF THESE CONDITIONS.
AS YOU READ THE REMAINDER OF THIS SECTION OF THE PROSPECTUS, WHICH PROVIDES YOU
WITH MORE DETAILED INFORMATION ABOUT HOW THE PERSONAL PENSION ACCOUNT WORKS, YOU
SHOULD KEEP IN MIND THESE IMPORTANT POINTS:
- YOUR ABILITY TO MAKE TRANSFERS FROM THE PERSONAL PENSION ACCOUNT IS
SIGNIFICANTLY LIMITED BECAUSE THE PERSONAL PENSION ACCOUNT RESTRICTS
LIQUIDITY DUE TO TRANSFER LIMITATIONS AND THE POTENTIAL LOSS OF VALUE AS A
RESULT OF COMMUTATION. ACCORDINGLY, YOU SHOULD ENSURE THAT YOUR INVESTMENTS
IN THE FIXED ACCUMULATION FEATURE AND THE SUB-ACCOUNTS WILL BE ADEQUATE TO
MEET YOUR LIQUIDITY NEEDS.
- BECAUSE THE PERSONAL PENSION ACCOUNT IS DESIGNED AS A LONG-TERM RETIREMENT
FUNDING VEHICLE, IT HAS GUARANTEED PAYOUT RATES APPLICABLE ONLY FOR PERSONAL
PENSION ACCOUNT PAYMENTS COMMENCED BEFORE THE EXPIRATION OF YOUR SPECIFIED
"GUARANTEE WINDOW" (AS DESCRIBED BELOW).
14
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- THE PERSONAL PENSION ACCOUNT PROVIDES CERTAIN ADDITIONAL FLEXIBILITY WITH
RESPECT TO STRUCTURING INCOME PAYMENTS - YOU CAN CONVERT PART OF YOUR
INVESTMENT IN THE PERSONAL PENSION ACCOUNT INTO INCOME PAYMENTS AT A
PARTICULAR TIME RATHER THAN YOUR ENTIRE INVESTMENT, AND YOU MAY ESTABLISH
DIFFERENT INCOME STREAMS.
- AT ANY GIVEN TIME, CREDITED RATES AVAILABLE UNDER THE PERSONAL PENSION
ACCOUNT MAY BE HIGHER OR LOWER THAN INTEREST RATES OFFERED UNDER THE FIXED
ACCUMULATION FEATURE.
- YOU MAY USE THE PERSONAL PENSION ACCOUNT TO ESTABLISH STREAMS OF INCOME
PAYMENTS THAT WILL CONTINUE FOR AS LONG AS YOU, THE ANNUITANT OR A JOINT
OWNER ARE ALIVE.
- IF YOU REQUEST A LUMP SUM PAYMENT, WE COMMUTE THE AMOUNT OF THE PAYMENTS
THAT WOULD HAVE BEEN MADE DURING THE "GUARANTEED PAYOUT DURATION" (AS
DESCRIBED BELOW). PAYMENTS WILL COMMENCE AGAIN IF YOU THE ANNUITANT OR A
JOINT OWNER LIVE PAST THE GUARANTEED PAYOUT DURATION.
- IF YOU TERMINATE THIS CONTRACT, YOU GIVE UP YOUR RIGHT TO FUTURE "PERSONAL
PENSION ACCOUNT PAYOUTS" (AS DESCRIBED BELOW).
HOW DOES THE PERSONAL PENSION ACCOUNT WORK?
CONTRIBUTIONS. You invest in the Personal Pension Account through Personal
Pension Account Contributions. The first Personal Pension Account Contribution
becomes your initial investment called your "Benefit Balance." The Benefit
Balance will be increased by the amount of each subsequent Personal Pension
Account Contribution, transfers into the Personal Pension Account from the Fixed
Accumulation Feature and Sub-Accounts and accrued interest. Unlike the Fixed
Accumulation Feature, the Benefit Balance is not indicative of what you would
receive as a lump sum.
Once you start taking Personal Pension Account Payouts, as described below, your
Benefit Balance is divided into an "Accumulation Balance" and "Annuity Payout
Value." Annuity Payout Value refers to the sums used to fund your Personal
Pension Account Payouts and anything remaining is referred to as your
Accumulation Balance. Because you may convert all or any portion of your
Accumulation Balance into Personal Pension Account Payouts at different times,
you may have more than one Annuity Payout Value.
The minimum initial Personal Pension Account Contribution is $10,000. Our prior
approval may be required for any single or cumulative Personal Pension Account
Contribution of $1 million or more. Each subsequent Personal Pension Account
Contribution must be at least $1,000. If made through an approved investment
Program, subsequent Personal Pension Account Contributions minimums must be met
over the course of the Contract Year or the duration of the investment Program,
if less. FAILURE TO MAINTAIN A MINIMUM ACCUMULATION BALANCE OF $5,000 WILL
RESULT IN PREMATURE COMMENCEMENT OF PENSION ACCOUNT PAYOUTS. You may not make
any Personal Pension Account Contributions after the Annuity Commencement Date.
INTEREST CREDITING - We guarantee that we will credit interest to amounts that
you allocate to the Personal Pension Account at a minimum rate of 1.5% (called a
"credited rate(s)"). We may credit a rate higher than the minimum credited rate.
We expect to make a profit in setting credited rates. Different credited rates
may apply during the course of your investment in the Personal Pension Account.
Credited rates will continue to apply to your Accumulation Balance until the
earliest of when you commence taking Personal Pension Account Payouts, the
Annuity Commencement Date or when we pay the Death Benefit. Credited rates will
not apply to your Annuity Payout Value(s).
We reserve the right to periodically establish new credited rates that will be
applied to new Personal Pension Account Contributions. This means that all or
portions of your Accumulation Balance may earn interest at different credited
rates. See Examples 1, 2 and 4 under the Personal Pension Account Examples in
Appendix A for an illustration of how different credited rates may apply during
the term of your Contract. There is no specific formula for determining credited
rates and no assurances are offered as to future credited rates and their
applicability. Some of the factors that we may consider in determining credited
rates include, but are not limited to, general economic trends, rates of return
currently available for the types of investments and durations that match these
or our general liabilities and anticipated yields on our investments; regulatory
and tax requirements; and competitive factors.
PERSONAL PENSION ACCOUNT PAYOUTS - You may tell us to start paying you income
payments called "Personal Pension Account Payouts" at any time or at different
times until your Annuity Commencement Date. Subsequent Premium Payments can be
made into Sub-Accounts and/or the Fixed Accumulation Feature after Personal
Pension Account Payouts have begun (if received before your Annuity Commencement
Date).
As noted above, your ability to receive lump sum payments from the Personal
Pension Account is limited. You do not withdraw any part of your Benefit Balance
in the same way that you can surrender your Contract Value from Sub-Accounts or
the Fixed Accumulation Feature. Rather, you must convert Accumulation Balance
into an Annuity Payout Value that is then used to set your Personal Pension
Account Payouts. You may surrender any or all of your Contract Value without
affecting your Annuity Payout Value, or you may commute any or all of your
Annuity Payout Value without affecting your Contract Value. However, you may
terminate your Contract by (a) fully surrendering all of your Contract Value in
the Sub-Accounts and Fixed Accumulation Feature; (b) commuting your Annuity
Payout Value in your Personal Pension Account (as discussed in more detail
below); and (c) giving up your right to Personal Pension Account Payouts.
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You will automatically start receiving Personal Pension Account Payouts on your
Annuity Commencement Date. Personal Pension Account Payouts will be paid in the
manner described in Annuity Payout Option Two or Eight under the heading "When
do your Annuity Payouts begin?" under the Annuity Payouts section below. We
reserve the right to require that you own your Contract for at least six months
before you start receiving Personal Pension Account Payouts. For Qualified
Contracts, we reserve the right to require that you start taking Personal
Pension Account Payouts no later than when the Annuitant turns age 70 1/2. An
annual benefit increase option may also be elected to adjust Personal Pension
Account Payouts, subject to availability.
We calculate the amount of your Personal Pension Account Payouts by applying the
applicable payout rate to your Accumulation Balance. We will provide you with a
guaranteed payout rate each time that you make a new Personal Pension Amount
Contribution. Payout rates are set at our sole discretion. There is no specific
formula for determining payout rates and, except as specifically provided below,
there is no assurance as to future payout rates. Payout rates may vary based on
Contract class and distribution channel. Some of the factors that we may
consider in determining payout rates include, but are not limited to, general
economic trends, rates of return currently available for the types of
investments and durations that match our liabilities and anticipated yields on
our investments; regulatory and tax requirements; competitive factors and
mortality tables (including age and gender factors). When you first make a
Personal Pension Account Contribution, you will be required to choose a Target
Income Age at which you are likely to begin taking Personal Pension Account
Payouts. The Target Income Age cannot exceed twenty (20) years from the oldest
Annuitant's age at the time of investment or age 80. Except as provided below,
the Target Income Age cannot be changed.
We will use the guaranteed payout rate(s) to calculate Personal Pension Account
Payouts if you commence taking Personal Pension Account Payouts during the
timeframe that begins three (3) years prior to the Target Income Age and ends
three (3) years after the Target Income Age (this seven year period is referred
to as the "guarantee window"). If you commence taking Personal Pension Account
Payouts at any time outside of the guarantee window, then we will calculate your
Personal Pension Account Payouts using payout rate(s) that we then determine at
our sole discretion. This payout rate will not exceed the guaranteed payout rate
nor will the corresponding Personal Pension Account Payout be less than any
guaranteed minimum provided in your Contract. The existence of guaranteed payout
rates, among other things, distinguishes the Personal Pension Account from the
way we treat annuitization of your Contract Value and investments in the Fixed
Accumulation Feature at the end of the accumulation phase of your Contract. See
Examples 1 and 4 under the Personal Pension Account Examples in Appendix A for
an illustration of Personal Pension Account Payouts during the guarantee window.
LUMP SUM PAYMENTS - You may commute any or all of your Annuity Payout Value to
get a lump sum payment from the Personal Pension Account. The way we do this is
to calculate the number of Personal Pension Account Payouts (corresponding to
the Annuity Payout Value that you seek to commute) that when added together will
equal the amount of your commutation request, and then the time period over
which these Personal Pension Account Payouts would have otherwise been made is
called the "Guaranteed Payout Duration." Personal Pension Account Payouts will
resume after the Guaranteed Payout Duration for so long as you, the Annuitant or
a joint Owner are alive.
You should understand that if you commute you will receive less than your
Annuity Payout Value. The amount you receive over time depends on a number of
factors, including the difference between interest rates currently being
credited and the discount rate used upon commutation, how long you have invested
in the Personal Pension Account and whether you (or the Annuitant) live long
enough so that Personal Pension Account Payouts start up again after the
Guaranteed Payout Duration. Please refer to "What kinds of Surrenders are
available" and "What is the Commuted Value" in the Surrenders section as well as
Example 4 under the Personal Pension Account Examples in Appendix A for more
information about how commutation works.
TRANSFERS - Each Contract Year, you may transfer a portion of your Accumulation
Balance to the Fixed Accumulation Feature or Sub-Accounts without having to
comply with the annuitization and commutation requirements discussed above. All
transfer allocations must be in whole numbers (e.g., 1%). The maximum amount of
Accumulation Balance that may be transferred is the highest of:
- four (4%) percent of your Accumulation Balance as of your prior
Contract Anniversary;
- the amount of interest credited to your Accumulation Balance over the
most recent full Contract Year; or
- the amount of Accumulation Balance transferred to Contract Value
during the most recent full Contract Year.
We reserve the right to: (a) limit the number of transfers from the Personal
Pension Account; (b) make you wait six months after your most recent transfer
from the Personal Pension Account before moving Contract Value back into the
Personal Pension Account; or (c) revoke this privilege at any time. Amounts
transferred out of the Personal Pension Account will reduce the Accumulation
Balance by the amount transferred. Amounts transferred from the Personal Pension
Account to the Fixed Accumulation Feature or the Sub-Accounts will be treated as
a subsequent Premium Payment and become part of your Contract Value. You may
also transfer Contract Value from your Sub-Accounts or Fixed Accumulation
Feature, to the Accumulation Balance (such transfers will reduce the amount of
your optional Death Benefit, Annual Withdrawal Amount (AWA) and Remaining Gross
Premiums). If applicable, no CDSC will be applied to Accumulation Balance
transferred to Sub-Accounts or the Fixed Accumulation Feature, or vice versa. No
transfers may be
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made to or from the Personal Pension Account after the Annuity Commencement
Date. See Example 3 under the Personal Pension Account Examples in Appendix A
for an illustration of transfers into your Personal Pension Account.
AS A RESULT OF THESE OUT-BOUND TRANSFER RESTRICTIONS, IT MAY TAKE A SIGNIFICANT
AMOUNT OF TIME (I.E., SEVERAL YEARS) TO MOVE ACCUMULATION BALANCE TO
SUB-ACCOUNTS OR THE FIXED ACCUMULATION FEATURE AND THEREFORE THIS MAY NOT
PROVIDE AN EFFECTIVE SHORT TERM DEFENSIVE STRATEGY. PLEASE REFER TO EXAMPLE 3
UNDER THE PERSONAL PENSION ACCOUNT EXAMPLES IN APPENDIX A FOR AN ILLUSTRATION OF
TRANSFER RESTRICTIONS.
DEATH BENEFIT - The Personal Pension Account includes a Death Benefit equal to
your Benefit Balance. This Death Benefit is considered to be part of the
standard Death Benefit or any optional Death Benefit that you elect. Your
Personal Pension Account Death Benefit increases as a result of additional
Personal Pension Account Contributions and transfers into the Personal Pension
Account. YOUR PERSONAL PENSION ACCOUNT DEATH BENEFIT DECREASES AS YOU TAKE
PERSONAL PENSION ACCOUNT PAYOUTS AND MAY BE ELIMINATED OVER TIME. Benefit
Balance transfers to Sub-Accounts and/or the Fixed Accumulation Feature also
decrease your Personal Pension Account Death Benefit but because these amounts
are converted into Contract Value, they become part of the standard Death
Benefit and/or optional Death Benefit. YOUR BENEFIT BALANCE IS NOT GUARANTEED AS
PART OF ANY OPTIONAL DEATH BENEFIT RIDER.
Personal Pension Account Payouts will generally terminate upon notification to
us of the death of the Owner, joint Owner or Annuitant, if prior to the Annuity
Commencement Date; or upon notification to us of the Annuitant's death, if after
the Annuity Commencement Date. The method of payment of the Death Benefit will
be subject to the restrictions contained in the "Standard Death Benefit" section
of this Prospectus.
Your Benefit Balance will be converted into Contract Value and transferred to
the Money Market Sub-Account without annuitization and commutation. Unless
otherwise stated below, Contract Value may not be reallocated back into the
Personal Pension Account. The Contingent Annuitant may reinvest Contract Value
back into the Personal Pension Account and establish a new guarantee window,
target income age and receive then applicable credited rates. If Spousal
Contract continuation is elected, your Spouse can either continue to maintain
the Personal Pension Account and resume Personal Pension Account Payouts, if
applicable, or instruct us to transfer Benefit Balance to the Money Market
Sub-Account. Your Spouse may then reinvest Contract Value back into the Personal
Pension Account by establishing a new guarantee window and target income age.
New crediting rates will apply.
OTHER INFORMATION - We will account for any Personal Pension Account
Contributions, Personal Pension Account Payouts, interest, and deductions
separately and on a first-in, first-out basis for the purposes of determining
which credited rates are associated with each Personal Pension Account
Contribution. Personal Pension Account Payouts are not cumulative and may not be
advanced, commuted or accelerated, except as explicitly stated in this
prospectus. Subject to applicable state insurance law, the Personal Pension
Account does not establish a cash surrender benefit. We may close the Personal
Pension Account to new Personal Pension Account Contributions at any time
without notice. We may also make the Personal Pension Account available only
through enrollment in one or more investment Programs that we establish.
Special consideration should be given by Personal Pension Account investors who
are under age 40 to the twenty-year limitation on setting your Target Income Age
and the absence of guaranteed payout rates applied if Personal Pension Account
Payouts commence outside of your guarantee window.
The Personal Pension Account should not be confused with a pension plan under
The Employee Retirement Income Security Act of 1974, as amended (ERISA). Neither
we nor any of our affiliates assume any fiduciary duties with regard to this
Contract, as such terms are defined under ERISA laws and regulations. The
Personal Pension Account is not a defined benefit plan guaranteed by the Pension
Benefit Guaranty Corporation (PBGC) or any federal or state government agency.
This feature is not a corporate pension plan issued by us or our affiliates.
In summary, the Personal Pension Account is designed for the long-term investor
who is willing to forego some degree of liquidity in exchange for, among other
things, deferred lifetime income in the form of Personal Pension Account
Payouts. This feature restricts liquidity through transfer and commutation
restrictions. The amount ultimately received as a consequence of your investment
in the Personal Pension Account is not predictable because of the uncertainty of
factors such as how long you have invested in the Personal Pension Account,
interest rates in effect at the time of investment and commutation, and how long
you receive lifetime Personal Pension Account Payouts. If you partially commute
your Personal Pension Account Payouts, you will retain the right to collect life
contingent Personal Pension Account Payouts that resume after the applicable
Guaranteed Payout Duration. HOWEVER, IF YOU ELECT TO TERMINATE YOUR CONTRACT,
YOU WILL GIVE UP YOUR RIGHT TO THESE FUTURE LIFE CONTINGENT PERSONAL PENSION
ACCOUNT PAYOUTS. YOU SHOULD THEREFORE CONSULT WITH YOUR REGISTERED
REPRESENTATIVE OR A TRUSTED ADVISER BEFORE TERMINATING YOUR CONTRACT TO BE SURE
THAT YOU UNDERSTAND THESE IMPORTANT IMPLICATIONS. Please refer to "What kinds of
Surrenders are available" and "What is the Commuted Value" in the Surrenders
section as well as Example 4 under the Personal Pension Account Examples in
Appendix A for more information.
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4. INFORMATION ON YOUR ACCOUNT
A. OPENING AN ACCOUNT
WHO CAN BUY THIS CONTRACT?
The Contract is an individual or group tax-deferred variable annuity Contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- any trustee or custodian for a retirement plan qualified under Section
401(a) of the Code;
- individual Retirement Annuities adopted according to Section 408 of the
Code;
- employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state; and
- certain eligible deferred compensation plans as defined in Section 457 of
the Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other Qualified
Plan receives tax-deferred treatment under the Code.
We no longer accept any incoming 403(b) exchanges, transfers or applications for
403(b) individual annuity contracts or additional investments into any
individual annuity contract funded through a 403(b) plan.
The Personal Pension Account may not be available to all types of Qualified
Plans.
HOW DO YOU PURCHASE A CONTRACT?
You may only purchase a Contract through a Financial Intermediary. A Registered
Representative will work with you to complete and submit an application or an
order request form. Part of this process will include an assessment as to
whether this variable annuity may be suitable for you. Prior to recommending the
purchase or exchange of a deferred variable annuity, your Registered
Representative shall make reasonable efforts to obtain certain information about
you and your investment needs. This recommendation will be independently
reviewed by a principal within your Financial Intermediary. Your initial Deposit
will not be invested in any Account and/or the Personal Pension Account during
this period.
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account. When
you open an account, your Financial Intermediary will ask for your name,
address, date of birth and other information that will allow us to identify you.
They may also ask to see your driver's license or other identifying documents.
Non-Resident Alien (NRA) application submissions require our prior approval.
The minimum initial Deposit required to buy this Contract varies based on the
type of investment, Contract class and whether you enroll in a systematic
investment Program such as the InvestEase(R) Program. Financial Intermediaries
may impose requirements regarding the form of payment they will accept. Deposits
not actually received by us within the time period provided below will result in
the rejection of your application or order request.
Deposits sent to us must be made in U.S. dollars and checks must be drawn on
U.S. banks. We do not accept cash, third party checks or double endorsed checks.
We reserve the right to limit the number of checks processed at one time. If
your check does not clear, your purchase will be cancelled and you could be
liable for any losses or fees incurred. A check must clear our account through
our Administrative Office to be considered to be in good order.
We reserve the right to impose special conditions on anyone who seeks our prior
approval to purchase a Contract with Deposits of $1 million or more. In order to
request prior approval, you must submit a completed enhanced due diligence form
prior to the submission of your application:
- if you are seeking to purchase a Contract with an initial Deposit of $1
million or more;
- if total Deposits, aggregated by social security number or taxpayer
identification number, equal $1 million or more; and
- for all applications where the Owner or joint Owner are non-resident aliens.
You and your Annuitant must not be older than age 80 on the date that your
Contract is issued. You must be of minimum legal age in the state where the
Contract is being purchased or a guardian must act on your behalf. Optional
riders are subject to additional maximum issue age restrictions.
We urge you to discuss with your Registered Representative which share class is
suitable for your needs. Share class availability and/or mortality and expense
risk charge arrangements may vary based on the Financial Intermediary selling
this variable annuity to you.
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Charges affect your overall rate of return on your Contract Value. In
determining whether to invest in a share class that imposes a contingent
deferred sales charge, you might consider whether higher mortality and expense
risk and distribution charges out weigh the benefits of contingent deferred
sales charges that reduce, or are eliminated, over time. For instance, those
investing over $100,000 may find a front-end sales charge class share to be more
economically advantageous than a contingent deferred sales charge share class.
Finally, in determining whether to invest in a share class offered through a
financial advisor, you might consider how the fee charged by your advisor bears
in relation to the costs associated with investing in other share classes that
impose higher fees.
CAN YOU CANCEL YOUR CONTRACT AFTER YOU PURCHASE IT?
Yes. If for any reason you are not satisfied with your Contract, simply return
it within ten days after you receive it with a written request for cancellation
that indicates your tax-withholding instructions. In some states, you may be
allowed more time to cancel your Contract. We may require additional
information, including a signature guarantee, before we can cancel your
Contract.
Unless otherwise required by state law, we will pay you your Account Balance
(minus applicable expenses) as of the Valuation Day we receive your properly
completed request to cancel and will refund any sales or Contract charges
incurred during the period you owned the Contract. The Account Balance may be
more or less than your Deposits depending upon the investment performance of
your Contract. This means that you bear the risk of any decline in your Account
Balance until we receive your notice of cancellation. In certain states,
however, we are required to return your Deposit without deduction for any fees
or charges.
HOW ARE DEPOSITS APPLIED TO YOUR CONTRACT?
Your initial Deposit will usually be invested within two Valuation Days of our
actual receipt in-hand at our Administrative Office of both a properly completed
application or order request and the Deposit; both being in good order. If we
receive a subsequent Deposit before the end of a Valuation Day, it will be
invested on the same Valuation Day. If we receive your subsequent Deposit after
the end of a Valuation Day, it will be invested on the next Valuation Day. If we
receive a subsequent Deposit on a non-Valuation Day, the amount will be invested
on the next Valuation Day. Unless we receive new instructions, we will invest
all Deposits based on your last instructions on record. We will send you a
confirmation when we invest your Deposit.
If the request or other information accompanying the initial Deposit is
incomplete or not in good order when received, we will hold the money in a
non-interest bearing account for up to five Valuation Days (from the Valuation
Day that we actually receive your initial Deposit at our Administrative Office)
while we try to obtain complete information. If we cannot obtain the information
within five Valuation Days, we will either return the Deposit and explain why it
could not be processed or keep the Deposit if you authorize us to keep it until
you provide the necessary information.
Generally, we will receive your application or order request (whether for an
initial purchase or a subsequent investment) after your Financial Intermediary
has completed a suitability review. We will then consider if your investment is
in good order. While the suitability and good order process is underway,
Deposits will not be applied to your Contract. You will not earn any interest on
Deposits even if they have been sent to us or deposited into our bank account.
We are not responsible for gains or lost investment opportunities incurred
during this review period or if your Financial Intermediary asks us to unwind a
transaction based on their review of your Registered Representative's
recommendations. Your Financial Institution, and we, may directly or indirectly
earn income on your Deposits. For more information, contact your Registered
Representative.
HOW IS CONTRACT VALUE CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of the value of the Fixed Accumulation Feature, if
applicable, and all Funds, and does not include Benefit Balance. There are two
things that affect the value of your Sub-Accounts: (1) the number of
Accumulation Units, and (2) the Accumulation Unit Value. Contract Value is
determined by multiplying the number of Accumulation Units by the Accumulation
Unit Value. On any Valuation Day the investment performance of the Sub-Accounts
will fluctuate with the performance of the Funds.
When Premium Payments are credited to Sub-Accounts within your Account, they are
converted into Accumulation Units by dividing the amount of your Premium
Payments, minus any Premium taxes, by the Accumulation Unit Value for that day.
The more Premium Payments you make to your Account, the more Accumulation Units
you will own. You decrease the number of Accumulation Units you have by
requesting partial or full Surrenders, settling a Death Benefit claim or by
annuitizing your Contract or as a result of the application of certain Contract
charges.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- the net asset value per share plus applicable distributions per share of
each Fund at the end of the current Valuation Day; reduced by
- the net asset value per share of each Fund at the end of the prior Valuation
Day; reduced by
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- contract charges including the deductions for the mortality and expense risk
charge and any other periodic expenses and administrative charges, divided
by the number of days in the year multiplied by the number of days in the
valuation period.
We will send you a statement at least annually.
WHAT OTHER WAYS CAN YOU INVEST?
You may enroll in the following features (sometimes called a "Program") for no
additional fee. Not all Programs are available with all Contract variations.
- INVESTEASE
This electronic funds transfer feature allows you to have money automatically
transferred from your checking or savings account and deposited into your
Contract on a monthly or quarterly basis. It can be changed or discontinued at
any time. The minimum amount for each transfer is $50. You can elect to have
transfers made into any available Fund, the Fixed Accumulation Feature, or the
Personal Pension Account. You cannot use this Program to invest in the DCA Plus
Programs.
- STATIC ASSET ALLOCATION MODELS
This feature allows you to select an asset allocation model based on several
potential factors including your risk tolerance, time horizon, investment
objectives, or your preference to invest in certain Funds or Fund families.
Based on these factors, you can select one of several asset allocation models,
with each specifying percentage allocations among various Funds available under
your Contract. Some asset allocation models are based on generally accepted
investment theories that take into account the historic returns of different
asset classes (e.g., equities, bonds or cash) over different time periods. Other
asset allocation models focus on certain potential investment strategies that
could possibly be achieved by investing in particular Funds or Fund families and
are not based on such investment theories. Static asset allocation models
offered from time to time are reflected in your application and marketing
materials. You may obtain a copy of the current models by contacting your
Financial Intermediary.
You may invest in an asset allocation model through the Dollar Cost Averaging
Program where the Fixed Accumulation Feature, Personal Pension Account, or a DCA
Plus Program is the source of the assets to be invested in the asset allocation
model you have chosen. You can also participate in these asset allocation models
while enrolled in the InvestEase or Automatic Income Program.
You can switch asset allocation models up to twelve times per year. Your ability
to elect or switch into and between asset allocation models may be restricted
based on Fund abusive trading restrictions.
Your investments in an asset allocation model will be rebalanced quarterly to
reflect the model's original percentages and you may cancel your model at any
time subject to investment restrictions for maintaining certain optional riders.
We have no discretionary authority or control over your investment decisions.
These asset allocation models are based on then available Funds and do not
include the Fixed Accumulation Feature or the Personal Pension Account. We make
available educational information and materials (e.g., risk tolerance
questionnaire, pie charts, graphs, or case studies) that can help you select an
asset allocation model, but we do not recommend asset allocation models or
otherwise provide advice as to what asset allocation model may be appropriate
for you.
While we will not alter allocation percentages used in any asset allocation
model, allocation weightings could be affected by mergers, liquidations, fund
substitutions or closures. Availability of these models is subject to Fund
company restrictions. Please refer to "What Restrictions Are There on your
Ability to Make a Sub-Account Transfer?" for more information.
You will not be provided with information regarding periodic updates to the
Funds and allocation percentages in the asset allocation models, and we will not
reallocate your Contract Value based on those updates. Information on updated
asset allocation models may be obtained by contacting your Registered
Representative. If you wish to update your asset allocation model, you may do so
by terminating your existing model and re-enrolling into a new one. Investment
alternatives other than these asset allocation models are available that may
enable you to invest your Contract Value with similar risk and return
characteristics. When considering an asset allocation model for your individual
situation, you should consider your other assets, income and investments in
addition to this annuity.
Asset allocation does not guarantee that your Contract Value will increase nor
will it protect against a decline if market prices fall. If you choose to
participate in an asset allocation program, you are responsible for determining
which asset allocation model is best for you. Tools used to assess your risk
tolerance may not be accurate and could be useless if your circumstances change
over time. Although each asset allocation model is intended to maximize returns
given various levels of risk tolerance, an asset allocation model may not
perform as intended. Market, asset class or allocation option class performance
may differ in the future from historical performance and from the assumptions
upon which the asset allocation model is based, which could cause an asset
allocation model to be ineffective or less effective in reducing volatility. An
asset allocation model may perform better or worse than any single Fund,
allocation option or any other combination of Funds or allocation options. In
addition, the timing of your investment and automatic rebalancing may affect
performance. Quarterly rebalancing and periodic updating of asset allocation
models can cause their
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component Funds to incur transactional expenses to raise cash for money flowing
out of Funds or to buy securities with money flowing into the Funds. Moreover,
large outflows of money from the Funds may increase the expenses attributable to
the assets remaining in the Funds. These expenses can adversely affect the
performance of the relevant Funds and of the asset allocation models. In
addition, these inflows and outflows may cause a Fund to hold a large portion of
its assets in cash, which could detract from the achievement of the Fund's
investment objective, particularly in periods of rising market prices. For
additional information regarding the risks of investing in a particular Fund,
see that Fund's prospectus.
Additional considerations apply for qualified Contracts with respect to Static
Asset Allocation Model Programs. Neither we, nor any third party service
provider, nor any of their respective affiliates, is acting as a fiduciary under
The Employee Retirement Income Security Act of 1974, as amended (ERISA) or the
Code, in providing any information or other communication contemplated by any
Program, including, without limitation, any asset allocation models. That
information and communications are not intended, and may not serve as a primary
basis for your investment decisions with respect to your participation in a
Program. Before choosing to participate in a Program, you must determine that
you are capable of exercising control and management of the assets of the plan
and of making an independent and informed decision concerning your participation
in the Program. Also, you are solely responsible for determining whether and to
what extent the Program is appropriate for you and the assets contained in the
qualified Contract. Qualified Contracts are subject to additional rules
regarding participation in these Programs. It is your responsibility to ensure
compliance of any recommendation in connection with any asset allocation model
with governing plan documents.
- ASSET REBALANCING
In asset rebalancing, you select a portfolio of Funds, and we will rebalance
your assets at the specified frequency to reflect the original allocation
percentages you selected (choice of frequency may be limited when certain
optional riders are elected). You can also combine this Program with others such
as the Automatic Income Program, InvestEase and DCA Programs (subject to
restrictions). You may designate only one set of asset allocation instructions
at a time.
- DOLLAR COST AVERAGING PROGRAMS
We offer three Dollar Cost Averaging Programs:
- DCA Plus
- Fixed Amount DCA
- Earnings/Interest DCA
DCA Plus - These programs allow you to earn a fixed rate of interest on
investments. These Programs are different from the Fixed Accumulation Feature or
the Personal Pension Account. We determine, in our sole discretion, the interest
rates to be credited. These interest rates may vary depending on the Contract
class you purchased and the date the request for the Program is received. Please
consult your Registered Representative to determine the interest rate for your
Program.
You may elect either the "12-Month Transfer Program" or the "6-Month Transfer
Program".
- Under the 12-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 12 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 12 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 7 but no more than 12 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Under the 6-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 6 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 6 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 3 but no more than 6 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Each time you make a subsequent Premium Payment, you can invest in a
different rate lock program. Any subsequent investments made considered a
separate rate lock Program investment. You can invest in up to 5 different
rate lock Programs at one time.
- You must invest at least $5,000 in each rate lock program ($2,000 for
qualified plan transfers or rollovers, including IRAs). We will
pre-authorize transfers from our Fixed Accumulation Feature subject to
restrictions.
- Pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions in good order.
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- If a DCA Plus payment is received without enrollment instructions and a DCA
Plus Program is active on the Contract, we will set up the new Program to
mirror the existing one. If a DCA Plus payment is received without
enrollment instructions and a DCA Plus Program is not active on the
Contract, but is the future investment allocation and a static asset
allocation model is active on the Contract, we will set up the new Program
to move Funds to the Static Asset Allocation Model. Otherwise, we will
contact your investment professional to obtain complete instructions. If we
do not receive in good order enrollment instructions within the 15 day
timeframe noted above, we will refund the Program payment for further
instruction.
- If your Program payment is less than the required minimum amount, we will
invest into the destination Funds or the Personal Pension Account indicated
on the Program instructions accompanying the payment. If Program
instructions were not provided and a DCA Plus Program is active on the
Contract, we will apply the payment to the destination Funds or the Personal
Pension Account of the current DCA Plus Program. Otherwise, we will contact
your investment professional to obtain further investment instructions.
- The credited interest rate used under the DCA Plus Programs is not earned on
the full amount of your Premium Payment for the entire length of the Program
because Program transfers to Sub-Accounts or the Personal Pension Account
decrease the amount of your Premium Payment remaining in the Program.
- You may elect to terminate your involvement in this Program at any time.
Upon cancellation, all the amounts remaining in the Program will be
immediately transferred to the Funds or the Personal Pension Account you
designated.
Fixed Amount DCA - This feature allows you to regularly transfer (monthly or
quarterly) a fixed amount from the Fixed Accumulation Feature (if available
based on the form of Contract selected) or any Fund(s) into different Fund(s) or
the Personal Pension Account. This program begins in 15 days unless you instruct
us otherwise. You must make at least three transfers in order to remain in this
Program.
Earnings/Interest DCA - This feature allows you to regularly transfer (monthly
or quarterly) the earnings (i.e., any gains over the previous month's or
quarter's value) from your investment in the Fixed Accumulation Feature (if
available based on the form of Contract selected) or any Fund(s) into other
Fund(s) or the Personal Pension Account. This program begins two business days
plus the frequency selected unless you instruct us otherwise. You must make at
least three transfers in order to remain in this Program.
- AUTOMATIC INCOME PROGRAM
This systematic withdrawal feature allows you to make partial Surrenders up to
5% of your total Premium Payments each Contract Year. You can designate the
Funds to be surrendered from and also choose the frequency of partial Surrenders
(monthly, quarterly, semiannual, or annually). The Personal Pension Account is
not an eligible source Fund for partial Surrenders facilitated through the
Automatic Income Program. The minimum amount of each Surrender is $100. Amounts
taken under this program will count towards the AWA and may be subject to a
CDSC. If received prior to age 59 1/2, may have adverse tax consequences,
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment. You may satisfy Code Section 72(t)/(q) requirements by
enrolling in this program. Please see the "Federal Tax Considerations" section
and consult your tax adviser for information about the tax consequences
associated with your Contract. Your level of participation in this program may
result in your exceeding permissible withdrawal limits under certain optional
riders.
- OTHER PROGRAM CONSIDERATIONS
- You may terminate your enrollment in any Program at any time.
- We may discontinue, modify or amend any of these Programs at any time. We
will automatically and unilaterally amend your enrollment instructions if:
- any Fund is merged or substituted into another Fund - then your
allocations will be directed to the surviving Fund; or
- any Fund is liquidated - then your allocations to that Fund will be
directed to any available money market Fund following prior
notifications prior to reallocation.
You may always provide us with updated instructions following any of these
events.
- Continuous or periodic investment neither insures a profit nor protects
against a loss in declining markets. Because these Programs involve
continuous investing regardless of fluctuating price levels, you should
carefully consider your ability to continue investing through periods of
fluctuating prices.
- These Programs may be modified, terminated or adversely impacted by the
imposition of Fund trading policies.
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CAN YOU TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
Yes. During those phases of your Contract when transfers are permissible, you
may make transfers between Funds and/or Benefit Balance according to the
following policies and procedures, as they may be amended from time to time.
- WHAT IS A SUB-ACCOUNT TRANSFER?
A Sub-Account transfer is a transaction requested by you that involves
reallocating part or all of your Contract Value among the Funds available in
your Contract. Your transfer request will be processed as of the end of the
Valuation Day that it is received in good order. Otherwise, your request will be
processed on the following Valuation Day. We will send you a confirmation when
we process your transfer. You are responsible for verifying transfer
confirmations and promptly advising us of any errors within 30 days of receiving
the confirmation.
- WHAT HAPPENS WHEN YOU REQUEST A SUB-ACCOUNT TRANSFER?
Many Owners request Sub-Account transfers. Some request transfers into
(purchases) a particular Sub-Account, and others request transfers out of
(redemptions) a particular Sub-Account. In addition, some Owners allocate new
Premium Payments to Sub-Accounts, and others request Surrenders. We combine all
the daily requests to transfer out of a Sub-Account along with all Surrenders
from that Sub-Account and determine how many shares of that Fund we would need
to sell to satisfy all Owners' "transfer-out" requests. At the same time, we
also combine all the daily requests to transfer into a particular Sub-Account or
new Premium Payments allocated to that Sub-Account and determine how many shares
of that Fund we would need to buy to satisfy all contract owners' "transfer-in"
requests.
In addition, many of the Funds that are available as investment options in our
variable annuity products are also available as investment options in variable
life insurance policies, retirement plans, funding agreements and other products
offered by us or our affiliates. Each day, investors and participants in these
other products engage in similar transfer transactions.
We take advantage of our size and available technology to combine sales of a
particular Fund for many of the variable annuities, variable life insurance
policies, retirement plans, funding agreements or other products offered by us
or our affiliates. We also combine transfer-out requests and transfer-in
requests. We then "net" these trades by offsetting purchases against
redemptions. Netting trades has no impact on the net asset value of the Fund
shares that you purchase or sell. This means that we sometimes reallocate shares
of a Fund rather than buy new shares or sell shares of the Fund.
For example, if we combine all transfer-out requests of a stock Fund with all
other transfer-out requests of that Fund from all our other products, we may
have to sell $1 million dollars of that Fund on any particular day. However, if
other Owners and the owners of other products offered by us, want to transfer-in
an amount equal to $300,000 of that same Fund, then we would send a sell order
to the Fund for $700,000 (a $1 million sell order minus the purchase order of
$300,000) rather than making two or more transactions.
- WHAT RESTRICTIONS ARE THERE ON YOUR ABILITY TO MAKE A SUB-ACCOUNT TRANSFER?
FIRST, YOU MAY MAKE ONLY ONE SUB-ACCOUNT TRANSFER REQUEST EACH DAY. We count all
Sub-Account transfer activity that occurs on any one Valuation Day as one
"Sub-Account transfer", however, you cannot transfer the same Contract Value
more than once a Valuation Day.
EXAMPLES
TRANSFER REQUEST PER VALUATION DAY PERMISSIBLE?
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Transfer $10,000 from a money market Sub-Account to a growth Sub-Account Yes
Transfer $10,000 from a money market Sub-Account to any number of other Sub-Accounts Yes
(dividing the $10,000 among the other Sub-Accounts however you chose)
Transfer $10,000 from any number of different Sub-Accounts to any number of other Yes
Sub-Accounts
Transfer $10,000 from a money market Sub-Account to a growth Sub-Account and then, before No
the end of that same Valuation Day, transfer the same $10,000 from the growth Sub-Account
to an international Sub-Account
SECOND, YOU ARE ALLOWED TO SUBMIT A TOTAL OF 20 SUB-ACCOUNT TRANSFERS EACH
CONTRACT YEAR (the "Transfer Rule") by U.S. Mail, Voice Response Unit, Internet
or telephone. Once you have reached the maximum number of Sub-Account transfers,
you may only submit any additional Sub-Account transfer requests and any trade
cancellation requests in writing through U.S. Mail or overnight delivery
service. In other words, Voice Response Unit, Internet or telephone transfer
requests will not be honored. We may, but are not obligated to, notify you when
you are in jeopardy of approaching these limits. For example, we will send you a
letter after your 10th Sub-Account transfer to remind you about the Transfer
Rule. After your 20th transfer request, our computer system will not allow you
to do another Sub-Account transfer by telephone, Voice Response Unit or via the
Internet. You will then be instructed to send your Sub-Account transfer request
by U.S. Mail or overnight delivery service.
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We reserve the right to aggregate your Contracts (whether currently existing or
those recently surrendered) for the purposes of enforcing these restrictions.
The Transfer Rule does not apply to Sub-Account transfers that occur
automatically as part of a Company sponsored asset allocation or Dollar Cost
Averaging Program. Reallocations made based on a Fund merger or liquidation also
do not count toward this transfer limit. Restrictions may vary based on state
law.
We make no assurances that the Transfer Rule is or will be effective in
detecting or preventing market timing.
THIRD, POLICIES HAVE BEEN DESIGNED TO RESTRICT EXCESSIVE SUB-ACCOUNT
TRANSFERS. You should not purchase this Contract if you want to make frequent
Sub-Account transfers for any reason. In particular, don't purchase this
Contract if you plan to engage in "market timing," which includes frequent
transfer activity into and out of the same Fund, or frequent Sub-Account
transfers in order to exploit any inefficiencies in the pricing of a Fund. Even
if you do not engage in market timing, certain restrictions may be imposed.
Generally, you are subject to Fund trading policies, if any. We are obligated to
provide, at the Fund's request, tax identification numbers and other shareholder
identifying information contained in our records to assist Funds in identifying
any pattern or frequency of Sub-Account transfers that may violate their trading
policy. In certain instances, we have agreed to serve as a Fund's agent to help
monitor compliance with that Fund's trading policy.
We are obligated to follow each Fund's instructions regarding enforcement of
their trading policy. Penalties for violating these policies may include, among
other things, temporarily or permanently limiting or banning you from making
Sub-Account transfers into a Fund or other funds within that fund complex. We
are not authorized to grant an exception to a Fund's trading policy. Please
refer to each Fund's prospectus for more information. Transactions that cannot
be processed because of Fund trading policies will be considered not in good
order.
In certain circumstances, Fund trading policies do not apply or may be limited.
For instance:
- Certain types of Financial Intermediaries may not be required to provide us
with shareholder information.
- "Excepted funds" such money market funds and any Fund that affirmatively
permits short-term trading of its securities may opt not to adopt this type
of policy. This type of policy may not apply to any Financial Intermediary
that a Fund treats as a single investor.
- A Fund can decide to exempt categories of Contract holders whose Contracts
are subject to inconsistent trading restrictions or none at all.
- Non-shareholder initiated purchases or redemptions may not always be
monitored. These include Sub-Account transfers that are executed: (i)
automatically pursuant to a company-sponsored contractual or systematic
program such as transfers of assets as a result of "dollar cost averaging"
programs, asset allocation programs, automatic rebalancing programs, annuity
payouts, or systematic withdrawal programs; (ii) as a result of the payment
of a Death Benefit; (iii) as a result of any deduction of charges or fees
under a Contract; or (iv) as a result of payments such as scheduled
contributions, scheduled withdrawals or Surrenders, retirement plan salary
reduction contributions, or planned Premium Payments.
POSSIBILITY OF UNDETECTED ABUSIVE TRADING OR MARKET TIMING. We may not be able
to detect or prevent all abusive trading or market timing activities. For
instance:
- Since we net all the purchases and redemptions for a particular Fund for
this and many of our other products, transfers by any specific market timer
could be inadvertently overlooked.
- Certain forms of variable annuities and types of Funds may be attractive to
market timers. We cannot provide assurances that we will be capable of
addressing possible abuses in a timely manner.
- These policies apply only to individuals and entities that own this Contract
or have the right to make transfers (regardless of whether requests are made
by you or anyone else acting on your behalf). However, the Funds that make
up the Sub-Accounts of this Contract are also available for use with many
different variable life insurance policies, variable annuity products and
funding agreements, and are offered directly to certain qualified retirement
plans. Some of these products and plans may have less restrictive transfer
rules or no transfer restrictions at all.
- In some cases, we are unable to count the number of Sub-Account transfers
requested by group annuity participants co-investing in the same Funds
("Participants") or enforce the Transfer Rule because we do not keep
Participants' account records for a Contract. In those cases, the
Participant account records and Participant Sub-Account transfer information
are kept by such owners or its third party service provider. These owners
and third party service providers may provide us with limited information or
no information at all regarding Participant Sub-Account transfers.
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HOW ARE YOU AFFECTED BY FREQUENT SUB-ACCOUNT TRANSFERS?
We are not responsible for losses or lost investment opportunities associated
with the effectuation of these policies. Frequent Sub-Account transfers may
result in the dilution of the value of the outstanding securities issued by a
Fund as a result of increased transaction costs and lost investment
opportunities typically associated with maintaining greater cash positions. This
can adversely impact Fund performance and, as a result, the performance of your
Contract Value. This may also lower the Death Benefit paid to your Beneficiary
or lower Annuity Payouts for your Payee as well as reduce the value of other
optional benefits available under your Contract.
Separate Account investors could be prevented from purchasing Fund shares if we
reach an impasse on the execution of a Fund's trading instructions. In other
words, a Fund complex could refuse to allow new purchases of shares by all our
variable product investors if the Fund and we cannot reach a mutually acceptable
agreement on how to treat an investor who, in a Fund's opinion, has violated the
Fund's trading policy.
In some cases, we do not have the tax identification number or other identifying
information requested by a Fund in our records. In those cases, we rely on the
Contract Owner to provide the information. If the Contract Owner does not
provide the information, we may be directed by the Fund to restrict the Owner
from further purchases of Fund shares. In those cases, all participants under a
plan funded by the Contract will also be precluded from further purchases of
Fund shares.
MAIL, TELEPHONE AND INTERNET TRANSFERS
You may make transfers through the mail or your Financial Intermediary. You may
also make transfers by calling us or through our website. Transfer instructions
received by telephone before the end of any Valuation Day will be carried out at
the end of that day. Otherwise, the instructions will be carried out at the end
of the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
us at the time and date stated on the electronic acknowledgement we return to
you. If the time and date indicated on the acknowledgement is before the end of
any Valuation Day, the instructions will be carried out at the end of that
Valuation Day. Otherwise, the instructions will be carried out at the end of the
next Valuation Day. If you do not receive an electronic acknowledgement, you
should contact us as soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly reporting any
inaccuracy or discrepancy to us and your Registered Representative. Any verbal
communication should be re-confirmed in writing.
Telephone or Internet transfer requests may currently only be cancelled by
calling us before the end of the Valuation Day you made the transfer request.
We, our agents or our affiliates are NOT responsible for losses resulting from
telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that Contract Owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We may suspend, modify,
or terminate telephone or electronic transfer privileges at any time.
POWER OF ATTORNEY
You may authorize another person to conduct financial and other transactions on
your behalf by submitting a completed power of attorney form that meets the
power of attorney requirements of your resident state law. Once we have the
completed form on file, we will accept transaction requests, including transfer
instructions, subject to our transfer restrictions, from your designated third
party until we receive new instructions in writing from you.
B. CHARGES AND FEES
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for assuming mortality and expense risks under the
Contract. This charge is deducted from your Sub-Account Value.
The mortality and expense risk charge is broken into charges for mortality risks
and for an expense risk:
- Mortality Risk - There are two types of mortality risks that we assume,
those made while your Premium Payments are accumulating and those made once
Annuity Payouts have begun.
During the accumulation phase of your Contract, we are required to cover any
difference between the Death Benefit paid and the Surrender Value. These
differences may occur in periods of declining value or in periods where any
CDSCs would have been applicable. The risk that we bear during this period is
that actual mortality rates, in aggregate, may exceed expected mortality rates.
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Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. The
risk that we bear during this period is that the actual mortality rates, in
aggregate, may be lower than the expected mortality rates.
- Expense Risk - We also bear an expense risk that the sales charges (if
applicable), Distribution Charge (if applicable) and the Annual Maintenance
Fee collected before the Annuity Commencement Date may not be enough to
cover the actual cost of selling, distributing and administering the
Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
Fund selected, your Annuity Payouts will NOT be affected by (a) the actual
mortality experience of our annuitants, or (b) our actual expenses if they are
greater than the deductions stated in the Contract. Because we cannot be certain
how long our Annuitants will live, we charge this percentage fee based on the
mortality tables currently in use. The mortality and expense risk charge enables
us to keep our commitments and to pay you as planned. If the mortality and
expense risk charge under a Contract is insufficient to cover our actual costs,
we will bear the loss. If the mortality and expense risk charge exceeds these
costs, we keep the excess as profit. We may use these profits, as well as
revenue sharing and Rule 12b-1 fees received from certain Funds, for any proper
corporate purpose including, among other things, payment of sales expenses,
including the fees paid to distributors. We expect to make a profit from the
mortality and expense risk charge.
ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and your Account. The annual charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Account Balance at
either of those times is less than $50,000. The charge is deducted
proportionately from each Sub-Account in which you are invested.
We will waive the Annual Maintenance Fee if your Account Balance is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Owners who own more than
one Contract with a combined Account Balance between $50,000 and $100,000. If
you have multiple Contracts with a combined Account Balance of $100,000 or
greater, we will waive the Annual Maintenance Fee on all Contracts. However, we
may limit the number of waivers to a total of six Contracts. We also may waive
the Annual Maintenance Fee under certain other conditions. We do not include
Contracts from our Putnam Hartford line of variable annuity Contracts with the
Contracts when we combine Account Balance for purposes of this waiver.
ADMINISTRATIVE CHARGE
We apply a daily administration charge against all Contract Values held in the
Separate Account during both the accumulation and annuity phases of the
Contract. This charge compensates us for administrative expenses that exceed
revenues from the Annual Maintenance Fee described above. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
DISTRIBUTION CHARGE
We apply an annual distribution charge against all Remaining Gross Premiums
invested in B share class Contracts (the "Distribution Charge"). The
Distribution Charge will apply to each Premium Payment that has been invested
for eight years or less and will be deducted on each Contract Anniversary. Each
Premium Payment has its own Distribution Charge schedule. The Distribution
Charge will also apply to any partial Surrender in excess of the AWA. The
Distribution Charge is intended to compensate us for a portion of our
acquisition expenses, including promotion and distribution of the Contract. A
proportional Distribution Charge will be deducted upon:
- partial Surrenders in excess of the AWA (partial Surrenders are taken on a
first-in, first-out basis);
- full Surrender;
- full or partial Annuitization, and/or
- the date we receive due proof of death of the Owner, joint Owner, or the
Annuitant and upon a corresponding full Surrender and/or annuitization. Upon
such death, a proportional Distribution Charge will be applied on receipt of
due proof of death and upon a Death Benefit distribution if elected at a
later date.
If a Beneficiary elects to continue under any of the available options described
under the "Standard Death Benefits" section below, we will continue to deduct
the Distribution Charge based on the portion of Remaining Gross Premium
applicable for that Beneficiary. The Distribution Charge is taken proportionally
out of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by
your state (in which event we will deduct the Distribution Charge from other
Sub-Accounts).
PREMIUM TAXES
We deduct Premium taxes, if required, by a state or other government agency.
Some states collect these taxes when Deposits are made; others collect at
annuitization. Since we pay Premium taxes when they are required by applicable
law, we may deduct them
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from your Contract when we pay the taxes, upon Surrender, or on the Annuity
Commencement Date. The premium tax rate varies by state or municipality and
currently ranges from 0 - 3.5%.
SALES CHARGES
CONTINGENT DEFERRED SALES CHARGES (CDSC) - B AND C SHARE CONTRACTS ONLY
We may deduct a CDSC when you make Surrenders from your Contract. We may also
deduct a CDSC in connection with certain Annuity Payout Options. This charge is
designed to recover the expense of distributing the Contracts that are
surrendered before distribution expenses have been recouped from revenue
generated by these Contracts. Each Deposit has its own CDSC schedule. Only
amounts invested for less than the requisite holding period are subject to a
CDSC.
In computing the CDSC, Surrenders will be taken:
1st - from the AWA;
2nd - from Contract Value subject to a CDSC on a first-in, first-out basis; and
3rd - from remaining Contract Value.
CDSC is charged based on the type of transaction:
- Partial Surrenders: To calculate the CDSC when you make a partial Surrender,
we apply the applicable CDSC percentage to the amount of the Surrender in
excess of the AWA that is eligible for CDSC.
- Full Surrenders: If you fully Surrender your Contract, we apply the
applicable CDSC percentage to the greater of Contract Value or Remaining
Gross Premiums minus the AWA.
- Annuity Payouts: To calculate the CDSC when you take an Annuity Payout
pursuant to certain Annuity Payout Options, we apply the applicable CDSC to
Commuted Value.
Please refer to Examples 1 through 5 under the Remaining Gross Premium Examples
in Appendix A for an illustration of these computations.
The following are NOT subject to a CDSC:
- Annual Withdrawal Amount (AWA) - During each Contract Year when a CDSC
applies, you may take partial Surrenders up to the greater of:
1. 5% of the total Premium Payments that are otherwise subject to CDSC, or
2. Contract Value minus Remaining Gross Premiums.
We compute the AWA as of the end of the Valuation Day when a partial
Surrender request is received by us in good order. The AWA is calculated
by comparing two values. First, total Premium Payments subject to a CDSC
is multiplied by 5%. Next, the total Remaining Gross Premiums is
subtracted from the Contract Value. The greater of the two calculations
is the applicable AWA at the end of that particular Valuation Day. This
method for calculating CDSCs is used for the current and all future
partial Surrenders. All reductions from your Premium Payments will be
made on a first-in, first-out basis. The financial impact of the CDSC
will be greater during declining market conditions. These amounts are
different for Contracts issued to a Charitable Remainder Trust.
The AWA may vary on a daily basis because of fluctuations in Contract
Value. If you do not take maximum AWA one Contract Year, you may not take
more than the maximum AWA in a subsequent Contract Year. The AWA does not
apply to Personal Pension Account Payouts.
- Transfers from Sub-Accounts or the Fixed Accumulation Feature to the
Personal Pension Account.
- If you are a patient in a certified long-term care facility or other
eligible facility - CDSC will be waived for a partial or full Surrender if
you, the joint Owner or the Annuitant, are confined for at least 180
calendar days to a:
- facility recognized as a general hospital by the proper authority of
the state in which it is located or the Joint Commission on the
Accreditation of Hospitals;
- facility certified as a hospital or long-term care facility; or
- nursing home licensed by the state in which it is located and offers
the services of a registered nurse 24 hours a day.
For this waiver to apply, you must:
- have owned the Contract continuously since it was issued,
- provide written proof of your eligibility satisfactory to us, and
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- request the Surrender within 91 calendar days after the last day that
you are an eligible patient in a recognized facility or nursing home.
This waiver is not available if the Owner, the joint Owner or the Annuitant
is in a facility or nursing home when you purchase the Contract. We will
not waive any CDSC applicable to any Premium Payments made while you are in
an eligible facility or nursing home. This waiver can be used any time
after the first 180 days in a certified long-term care facility or other
eligible facility up until ninety days after exiting such a facility. This
waiver may not be available in all states.
- Upon death of the Annuitant or any Contract Owner(s) - CDSC will be waived
if the Annuitant or any Contract Owner(s) dies.
- Upon Annuitization - CDSC will be waived when you annuitize the Contract.
However, we will charge a CDSC if the Contract is Surrendered during the
CDSC period under an Annuity Payout Option which allows commutation.
- For Required Minimum Distributions - CDSC will be waived for any Annuitant
age 70 1/2 or older with a Contract held under an IRA who Surrenders an
amount equal to the Required Minimum Distribution for one year's required
minimum distribution for that Contract Year. All requests for Required
Minimum Distributions must be in writing.
- For substantially equal periodic payments - CDSC will be waived if you take
partial Surrenders under the Automatic Income Program where you receive a
scheduled series of substantially equal periodic payments for the greater of
five years or to age 59 1/2.
- Upon cancellation during the Right to Cancel Period - CDSC will be waived if
you cancel your Contract during the Right to Cancel Period.
- Exchanges - As an accommodation, we may, in our sole discretion, time-credit
CDSC for the time that you held an annuity previously issued by us.
- Settlements - We may, in our sole discretion, waive or time-credit CDSCs in
connection with the settlement of disputes or if required by regulatory
authorities.
CHARGES AGAINST THE FUNDS
Annual Fund Operating Expenses - The Separate Account purchases shares of the
Funds at net asset value. The net asset value of the Fund reflects investment
advisory fees, distribution fees, operating expenses and administrative expenses
already deducted from the assets of the Funds. These charges are described in
the Funds' prospectuses and the Fee Summary.
REDUCED FEES AND CHARGES
We may offer, in our discretion, reduced fees and charges for certain Contracts
(including employer sponsored savings plans) which may result in decreased costs
and expenses.
C. SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
BEFORE THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - When you Surrender or terminate your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium taxes, CDSCs, a pro-rated portion of optional
benefit charges, if applicable, distribution charges and the Annual Maintenance
Fee. The Surrender Value may be more or less than the amount of the Premium
Payments made to a Contract.
For information on how termination of the Contract impacts the Personal Pension
Account, see "Personal Pension Account" section above.
Partial Surrenders - You may request a partial Surrender of Contract Value at
any time before the Annuity Commencement Date. We will deduct any applicable
CDSC and Distribution Charge. You can ask us to deduct the CDSC and Distribution
Charge from the amount you are Surrendering or from your remaining Contract
Value. If we deduct the CDSC from your remaining Contract Value, that amount
will also be subject to CDSC. This is our default option.
Both full and partial Surrenders of Contract Value are taken proportionally out
of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by your
state.
There are several restrictions on partial Surrenders of Contract Value before
the Annuity Commencement Date:
- the partial Surrender of Contract Value must be at least equal to
$500, and
- your Account Balance must be equal to or greater than our then
current Minimum Amount Rule that we establish according to our then
current policies and procedures. The "Minimum Amount Rule" refers to
the minimum Contract Value that you must maintain within this
Contract. If you fail to comply with the Minimum Amount Rule, we
reserve the right to fully terminate your Contract. The Minimum
Amount Rule varies by share class. Currently the Minimum Amount Rule
for class I share
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Contracts is $500 and is $2,000 for Class B and C Shares. We may increase
the Minimum Amount Rule from time to time but in no event shall the
Minimum Amount Rule exceed $2,000 (Class I Shares) or $10,000 (Class B
and C Shares).
You may only commute all or a portion of Personal Pension Account Payouts by
following the procedures described below in the "After the Annuity Commencement
Date" section below.
Withdrawals will reduce your standard Death Benefit on a dollar-for-dollar
basis. Please consult with your Registered Representative to be sure that you
fully understand the ways such a decision will affect your Contract.
AFTER THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - You may Surrender and thus terminate your
Contract on or after the Annuity Commencement Date only if you selected Annuity
Payout Options Two, Three, Five, Six and Eight. IN THE EVENT YOU TAKE A FULL
SURRENDER AND THUS TERMINATE ANNUITY PAYOUT OPTIONS TWO, THREE, FIVE, OR EIGHT,
YOU WILL FORFEIT THE LIFE CONTINGENT PAYMENTS PAYABLE UNDER THESE OPTIONS. Upon
Contract termination, we pay you the Commuted Value, minus any applicable CDSCs
and Premium tax.
Partial Surrenders/Commutation - Partial Surrenders and/or commutation are
permitted after the Annuity Commencement Date if you select the Annuity Payout
Option Two, Three, Five, or Six, or Eight. You may withdraw amounts equal to the
Commuted Value of the payments that we would have made during the Guaranteed
Payout Duration. See Example 4 and footnote 3 under the Personal Pension Account
Examples in Appendix A for an illustration of Personal Pension Account Commuted
Value and the computation of Guaranteed Payout Duration. If you select the
Annuity Payout Options Two or Eight, the Guaranteed Payout Duration will be
equivilant to the Annuity Payout Value divided by the Annuity Payout amount,
rounded down. To qualify under these Annuity Payout Options you must make the
request before the Guaranteed Payout Duration expires. Both full and partial
Surrenders of Contract Value are taken proportionally out of the Sub-Accounts
and the Fixed Accumulation Feature unless prohibited by your state. We will
deduct any applicable CDSCs.
If you elect to withdraw the entire Commuted Value of the Annuity Payouts we
would have made during the Guaranteed Payout Duration, we will not make any
Annuity Payouts during the remaining Guaranteed Payout Duration. If you elect to
withdraw only some of the Commuted Value of the Annuity Payouts we would have
made during the Guaranteed Payout Duration, we will reduce the remaining Annuity
Payouts during the remaining Guaranteed Payout Duration on a first-in, first-out
basis. ONCE THE GUARANTEED PAYOUT DURATION HAS EXPIRED, YOU MAY RESUME RECEIVING
ANNUITY PAYOUTS PROVIDED THAT YOU, A JOINT OWNER OR THE ANNUITANT IS ALIVE AND
YOU HAVE NOT TERMINATED YOUR CONTRACT.
Annuity Payout Options may not be available if the Contract is issued to qualify
under Code Sections 401, 408, or 457.
WHAT IS THE COMMUTED VALUE?
You may choose to accelerate Annuity Payouts under certain Annuity Payout
Options to be received in one lump sum. This is referred to as "commuting" your
Annuity Payout.
The amount that you request to commute must be at least equal to $500. There
will be a waiting period of at least thirty days for payment of any lump sum
commutation.
Upon commutation, the Annuity Payout Value or the remaining Guaranteed Payout
Duration payments, as applicable, will be discounted based on an interest rate
that we determine at our sole discretion (the "discount rate"). The discount
rate may be different than the interest rate used to establish payout rates. We
determine the discount rate based on a number of factors including then current
interest rate(s), investment assumptions and the additional anti-selection and
mortality risk we incur by permitting commutation. The higher the discount rate
and CDSC, the lower the amount that you will receive.
COMMUTED VALUE OF YOUR PERSONAL PENSION ACCOUNT WILL BE LESS THAN YOUR ANNUITY
PAYOUT VALUE. Commutation does not affect resumption of life contingent Personal
Pension Account Payouts at the conclusion of the applicable Guaranteed Payout
Duration.
Commuted Value is determined on the day we receive your written request.
HOW DO YOU REQUEST A SURRENDER?
Requests for full Surrenders terminating your Contract must be in writing.
Requests for partial Surrenders can be made in writing, by telephone or on the
Internet. We will send your money within seven days of receiving complete
instructions. However, we may postpone payment whenever: (a) the New York Stock
Exchange is closed, (b) trading on the New York Stock Exchange is restricted by
the SEC, (c) the SEC permits and orders postponement or (d) the SEC determines
that an emergency exists to restrict valuation.
Written Requests - Complete a Surrender Form or send us a letter, signed by you,
stating:
- the dollar amount that you want to receive, either before or after we
withhold taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
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You must complete a Commutation Form to commute any portion of your Personal
Pension Account Annuity Payout Value or receive Commuted Value under applicable
Annuity Payout Options.
If there are joint Owners, both must authorize these transactions. For a partial
Surrender, specify the Sub-Accounts that you want your Surrender to come from
(this may be limited to pro-rata surrenders if optional benefits are elected);
otherwise, the Surrender will be taken in proportion to the value in each
Sub-Account.
Telephone Requests - To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Owners, both must sign this form. By signing the form, you authorize
us to accept telephone instructions for partial Surrenders from either Owner.
Telephone authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on telephone Surrenders.
Internet Requests - To request a partial Surrender by internet; we must have
received your completed Internet Partial Withdrawal Program Enrollment Form. If
there are joint Owners, both must sign this form. By signing the form, you
authorize us to accept internet instructions for partial Surrenders from either
Owner. Internet authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on Internet Surrenders.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone and Internet Surrender instructions received before the end of a
Valuation Day will be processed at the end of that Valuation Day. Otherwise,
your request will be processed at the end of the next Valuation Day.
Completing a Power of Attorney form for another person to act on your behalf may
prevent you from making Surrenders via telephone and Internet.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders and Personal
Pension Account Payouts. If you make a Surrender or take a Personal Pension
Account Payout prior to age 59 1/2, there may be adverse tax consequences
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment or a Personal Pension Account Payout. Taking these actions
before age 59 1/2 may also affect the continuing tax-qualified status of some
Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. CONSULT YOUR PERSONAL TAX ADVISER TO
DETERMINE WHETHER A SURRENDER IS PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX
PENALTY.
More than one Contract owned in the same calendar year - If you own more than
one Contract issued by us or our affiliates in the same calendar year, then
these Contracts may be treated as one Contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date.
Please see "Federal Tax Considerations" and "Information Regarding Tax-Qualified
Retirement Plans" for more information.
D. ANNUITY PAYOUTS
Generally speaking, when you annuitize your Contract, you begin the process of
converting Accumulation Units in what is known as the "payout phase." The payout
phase starts when you annuitize your Contract or with your Annuity Commencement
Date and ends when we make the last payment required under your Contract. You
may take Personal Pension Account Payouts without annuitizing Contract Value.
Once you annuitize your Contract, you may no longer make Personal Pension
Account Contributions. You must commence taking Annuity Payouts no later than
when you reach your Annuity Commencement Date. Funds allocated to the Personal
Pension Account will be paid to you under Annuity Payout Options Two and Eight.
Contract Value can only be annuitized under Annuity Payout Options One, Three,
Four, Five and Six. Please check with your Registered Representative to select
the Annuity Payout Option that best meets your income needs.
WHEN DO YOUR ANNUITY PAYOUTS BEGIN?
Personal Pension Account Payouts may begin at any time but we reserve the right
to require that you own your Contract for at least six months before you start
taking these payments. Contract Value may only be annuitized on the Annuity
Commencement Date.
Your Annuity Commencement Date cannot be earlier than your second Contract
Anniversary if choosing a fixed dollar Annuity Payout. The Annuity Commencement
Date may be immediate if electing a variable dollar amount Annuity Payout. In no
event; however, may the Annuity Commencement Date be later than:
- Annuitant's 90th birthday (or if the Owner is a Charitable Remainder Trust,
the Annuitant's 100th birthday);
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- 10th Contract Anniversary (subject to state variation);
- The Annuity Commencement Date stated in an extension request (subject to
your Financial Intermediary's rules for granting extension requests)
received by us not less than 30 days prior to a scheduled Annuity
Commencement Date; or
- The date that you fully annuitize Accumulation Balance (assuming that no
Contract Value exists as of such date). Unless otherwise requested,
commencement of receipt of Personal Pension Account Payouts do not
constitute an Annuity Commencement Date.
We reserve the right, in our sole discretion, to refuse to extend your Annuity
Commencement Date regardless of whether we may have granted extensions in the
past to you or other similarly situated investors. Your Financial Intermediary
may ask us to prohibit Annuity Commencement Date extensions beyond when the
Annuitant turns age 95. Please ask your Registered Representative whether you
are affected by any such prohibition and make sure that you fully understand the
implications this might have in regard to your Death Benefits.
Except as otherwise provided, the Annuity Calculation Date is when the amount of
your Annuity Payout is determined. This occurs within five Valuation Days before
your selected Annuity Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. We may at
times offer other Annuity Payout Options. We may change these Annuity Payout
Options at any time. Once we begin to make Annuity Payouts, the Annuity Payout
Option with respect to that portion of your Contract cannot be changed.
- OPTION ONE - LIFE ANNUITY
We make Annuity Payouts as long as the Annuitant is living. When the Annuitant
dies, we stop making Annuity Payouts. A Payee would receive only one Annuity
Payout if the Annuitant dies after the first payout, two Annuity Payouts if the
Annuitant dies after the second payout, and so forth.
- OPTION TWO - LIFE ANNUITY WITH A CASH REFUND
In general, we will make Annuity Payouts as long as the Annuitant is living.
However, when the Owner or joint Owner dies before the Annuity Commencement Date
(and the Annuitant is living or deceased), the Death Benefit will be paid
according to the standard Death Benefit rules. When the Annuitant dies after the
Annuity Commencement Date (and the Owner is living or deceased), then the
Beneficiary will receive the Death Benefit according to the standard Death
Benefit rules and Annuity Payouts cease.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
- OPTION THREE - LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as the Annuitant is living, but we at least
guarantee to make Annuity Payouts for a time period you select, between 5 years
and 100 years minus the Annuitant's age. If the Annuitant dies before the
guaranteed number of years has passed, then the Beneficiary may elect to
continue Annuity Payouts for the remainder of the guaranteed number of years or
receive the Commuted Value in one sum.
- OPTION FOUR - JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts until that
second Annuitant dies. When choosing this option, you must decide what will
happen to the Annuity Payouts after the first Annuitant dies. You must select
Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
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- OPTION FIVE - JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A
PERIOD CERTAIN
We will make Annuity Payouts as long as either the Annuitant or Joint Annuitant
are living, but we at least guarantee to make Annuity Payouts for a time period
you select, between 5 years and 100 years minus your younger Annuitant's age. If
the Annuitant and the Joint Annuitant both die before the guaranteed number of
years have passed, then the Beneficiary may continue Annuity Payouts for the
remainder of the guaranteed number of years or receive the Commuted Value in one
sum.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed dollar amount Annuity Payouts, these percentages represent
actual dollar amounts. The percentage will also impact the Annuity Payout amount
we pay while both Annuitants are living. If you pick a lower percentage, your
original Annuity Payouts will be higher while both Annuitants are alive.
- OPTION SIX - PAYMENTS FOR A PERIOD CERTAIN
We agree to make payments for a specified time. The minimum period that you can
select is 10 years during the first two Contract Years and 5 years after the
second Contract Anniversary. The maximum period that you can select is 100 years
minus your Annuitant's age. If, at the death of the Annuitant, Annuity Payouts
have been made for less than the time period selected, then the Beneficiary may
elect to continue the remaining Annuity Payouts or receive the Commuted Value in
one sum. You may not choose a fixed dollar amount Annuity Payout during the
first two Contract Years.
- OPTION SEVEN - RESERVED
- OPTION EIGHT - JOINT AND LAST SURVIVOR LIFE WITH CASH REFUND (NOT CURRENTLY
AVAILABLE)
In general, we will make Annuity Payouts as long as the Owner, and either
Annuitant or Joint Annuitant are living. When the Owner dies before the Annuity
Commencement Date (and the Annuitant or Joint Annuitant is living or deceased),
then the Death Benefit is paid according to the standard Death Benefit rules.
If death occurs after the Annuity Commencement Date, we will make Annuity
Payouts as long as either the Annuitant or the Joint Annuitant is living. When
one Annuitant dies, we continue to make Annuity Payouts at the elected
percentage until the second Annuitant dies. When the last Annuitant dies, then
the Death Benefit is paid according to the standard Death Benefit rules.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 75%, or
- Decrease to 50%.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
YOU CANNOT TERMINATE YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED ANNUITY PAYOUT OPTIONS TWO, THREE, FOUR, FIVE, SIX OR EIGHT. A CDSC, IF
APPLICABLE, MAY BE DEDUCTED.
Annuity Payout Option Two is only available for Personal Pension Account Payouts
from the Personal Pension Account. Annuity Payout Options One, Three, Four, Five
and Six are only available for Annuity Payouts from the Fixed Accumulation
Feature or Sub-Accounts. Annuity Payout Option Eight is only available for
Personal Pension Account Payouts from the Personal Pension Account and is not
currently available.
For certain qualified Contracts, if you elect an Annuity Payout Option with a
Period Certain, the guaranteed number of years must be less than the life
expectancy of the Annuitant at the time the Annuity Payouts begin. We compute
life expectancy using the IRS mortality tables.
AUTOMATIC ANNUITY PAYOUTS
If you do not elect an Annuity Payout Option, monthly Annuity Payouts will
automatically begin on the Annuity Commencement Date under Annuity Payout Option
Three. Automatic Annuity Payouts will be fixed dollar amount Annuity Payouts,
variable dollar amount Annuity Payouts, or a combination of fixed or variable
dollar amount Annuity Payouts, depending on the investment allocation of your
Account in effect on the Annuity Commencement Date. Automatic variable Annuity
Payouts will be based on an Assumed Investment Return equal to five (5%)
percent.
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HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- monthly,
- quarterly,
- semi-annually, or
- annually.
Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50.
DO YOU WANT ANNUITY PAYOUTS TO BE FIXED DOLLAR AMOUNT OR VARIABLE DOLLAR AMOUNT?
You may choose an Annuity Payout Option with fixed dollar amounts or variable
dollar amounts, depending on your income needs. You may not choose a fixed
dollar amount Annuity Payout during the first two Contract Years. If you elect
the Personal Pension Account, your Annuity Payout Option may only be a fixed
dollar amount.
- FIXED DOLLAR AMOUNT ANNUITY PAYOUTS
Once a fixed dollar amount Annuity Payout begins, you cannot change your
selection to receive variable dollar amount Annuity Payouts. You will receive
equal fixed dollar amount Annuity Payouts throughout the Annuity Payout period.
Fixed dollar amount Annuity Payout amounts are determined by multiplying the
Contract Value, minus any applicable Premium taxes, by an annuity rate set by
us. Annuity purchase rates may vary based on the aspect of the Contract
annuitized.
- VARIABLE DOLLAR AMOUNT ANNUITY PAYOUTS
Once a variable dollar amount Annuity Payout begins, you cannot change your
selection to receive a fixed dollar amount Annuity Payout. A variable dollar
amount Annuity Payout is based on the investment performance of the
Sub-Accounts. The variable dollar amount Annuity Payouts may fluctuate with the
performance of the Funds. To begin making variable dollar amount Annuity
Payouts, we convert the first Annuity Payout amount to a set number of Annuity
Units and then price those units to determine the Annuity Payout amount. The
number of Annuity Units that determines the Annuity Payout amount remains fixed
unless you transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable),
- the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table adjusted for projections based on accepted actuarial
principles; and
- the Assumed Investment Return ("AIR").
The total amount of the first variable dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable dollar amount Annuity Payout is
equal to the total of Annuity Units for each Sub-Account multiplied by the
Annuity Unit Value of each Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit Factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period. The Annuity Unit Factor offsets the
AIR used to calculate your first variable dollar amount Annuity Payout.
The first Annuity Payout will be based upon the AIR. The remaining Annuity
Payouts will fluctuate based on the performance of the Funds in relation to the
AIR. The degree of the fluctuation will depend on the AIR you select.
You can select one of the following AIRs offered, subject to state variations:
ANNUITY ANNUITY ANNUITY
AIR UNIT FACTOR AIR UNIT FACTOR AIR UNIT FACTOR
-------------------------------------------------------------------
3% 0.999919% 5% 0.999866% 6% 0.999840%
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The greater the AIR, the greater the initial Annuity Payout. But a higher AIR
may result in a smaller potential growth in future Annuity Payouts when the
Sub-Accounts earn more than the AIR. On the other hand, a lower AIR results in a
lower initial Annuity Payout, but future Annuity Payouts have the potential to
be greater when the Sub-Accounts earn more than the AIR.
For example, if the Sub-Accounts earned exactly the same as the AIR, then the
second monthly Annuity Payout is the same as the first. If the Sub-Accounts
earned more than the AIR, then the second monthly Annuity Payout is higher than
the first. If the Sub-Accounts earned less than the AIR, then the second monthly
Annuity Payout is lower than the first.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR. The
degree of variation depends on the AIR you select.
After the Annuity Calculation Date, you may transfer dollar amounts of Annuity
Units from one Sub-Account to another. On the day you make a transfer, the
dollar amounts are equal for both Sub-Accounts and the number of Annuity Units
will be different. We will transfer the dollar amount of your Annuity Units the
day we receive your written request if received before the close of the New York
Stock Exchange. Otherwise, the transfer will be made on the next Valuation Day.
All Sub-Account transfers must comply with applicable transfer restriction
policies.
- COMBINATION ANNUITY PAYOUT
You may choose to receive a combination of fixed dollar amount and variable
dollar amount Annuity Payouts as long as they total 100% of your Annuity Payout.
For example, you may choose to use forty (40%) percent fixed dollar amount and
sixty (60%) percent variable dollar amount to meet your income needs.
Combination Annuity Payouts are not available during the first two Contract
Years.
E. STANDARD DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The standard Death
Benefit is equal to your Account Balance (less Distribution Charge) calculated
as of the Valuation Day when we receive a certified death certificate or other
legal document acceptable to us. The calculated Death Benefit will remain
invested according to the Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. This means the Death
Benefit amount will fluctuate with the performance of the Account. When there is
more than one Beneficiary, we will calculate the Accumulation Units for each
Sub-Account and the dollar amount for the Fixed Accumulation Feature and
Personal Pension Account for each Beneficiary's portion of the proceeds.
We reserve the right to treat all deferred variable annuities that you buy from
us or our affiliates as a single contract for the purposes of determining your
total Death Benefits. These limits will be applied if you have $5 million or
more in total aggregate Account Balance. If applicable, the aggregate limit on
total Death Benefits payable by us or our affiliates will never exceed a maximum
of:
- $5 million of aggregate Deposits, as adjusted for partial Surrenders (for
e.g., dollar-for-dollar or proportional) and Personal Pension Account
Payouts under all applicable contracts and associated riders; or
- Account Balance plus $1 million.
Please see the heading entitled "What kinds of Surrenders are available? -
Before the Annuity Commencement Date" under the Surrenders section and "What
effect does partial or full Surrenders have on your benefits under the rider?"
in the Return of Premium Death Benefit section for a discussion regarding when
partial Surrenders reduce your Death Benefit on either a dollar-for-dollar or
proportionate basis. Taking excess partial Surrenders may significantly
negatively affect your Death Benefit. Please consult with your Registered
Representative before making excess partial Surrenders to be sure that you fully
understand the ways such a decision will affect your Contract.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Death Benefit payment is $5,000 or more, the Beneficiary may elect to
have their Death Benefit paid through our "Safe Haven Program." Under this
program, the proceeds remain in our General Account and the Beneficiary will
receive a draft book. The Beneficiary can write one draft for total payment of
the Death Benefit, or keep the money in the General Account and write drafts as
needed. We will credit interest at a rate determined periodically in our sole
discretion. For federal income tax purposes, the Beneficiary will be deemed to
have received the lump sum payment on transfer of the Death Benefit amount to
the General Account.
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The interest will be taxable to the Beneficiary in the tax year that it is
credited. We may not offer the Safe Haven Program in all states and we reserve
the right to discontinue offering it at any time. Although there are no direct
charges for this program, we earn investment income from the proceeds. The
investment income we earn is likely more than the amount of interest we credit;
therefore, we make a profit from the difference.
The Beneficiary may elect to leave proceeds from the Death Benefit invested with
us for up to five years from the date of death of the Annuitant or Owner if
death occurred before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers (subject to applicable restrictions) and (b)
take Surrenders without paying CDSCs, if any. The Beneficiary may not make
Personal Pension Account Contributions. We shall endeavor to fully discharge the
last instructions from the Owner wherever possible or practical.
The Beneficiary of a non-qualified Contract or IRA (prior to the required
distribution date) may also elect an annuity option that allows the Beneficiary
to take the Death Benefit in a series of payments spread over a period equal to
the Beneficiary's remaining life expectancy. Distributions are calculated based
on IRS life expectancy tables. This option is subject to different limitations
and conditions depending on whether the Contract is non-qualified or an IRA.
If the Owner dies before the Annuity Commencement Date, the Death Benefit must
be distributed within five years after death or be distributed under a
distribution option or Annuity Payout Option that satisfies the Alternatives to
the Required Distributions described below.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining value must be distributed at least
as rapidly as under the payment method being used as of the Owner's death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date.
If death occurs on or after the Annuity Commencement Date, there may be no
payout at death unless the Owner has elected an Annuity Payout Option that
permits the Beneficiary to elect to continue Annuity Payouts or receive the
Commuted Value.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
Owner There is a surviving joint The Annuitant is living or Joint Owner receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Beneficiary receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Owner's estate receives the
Owner and the Beneficiary deceased Death Benefit.
predeceases the Owner
Annuitant The Owner is living There is no named Contingent The Owner becomes the
Annuitant Contingent Annuitant and the
Contract continues. The Owner
may waive this presumption and
receive the Death Benefit.
Annuitant The Owner is living The Contingent Annuitant is Contingent Annuitant becomes
living the Annuitant, and the Contract
continues.
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
Owner The Annuitant is living Beneficiary becomes the Owner.
Annuitant The Owner is living Owner receives the payout at death.
Annuitant The Annuitant is also the Owner Beneficiary receives the payout at
death.
THESE ARE THE MOST COMMON SCENARIOS. SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT
RESULT IN A PAYOUT AT DEATH.
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5. RETURN OF PREMIUM DEATH BENEFIT
OBJECTIVE
To provide a Death Benefit that we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The Death Benefit that
we will pay under this rider is in addition to your Personal Pension Account
Death Benefit.
WHEN CAN YOU BUY THE RIDER?
You can currently elect this benefit (called a "rider") only at the time that
you buy this Contract. This rider may not be available through all Registered
Representatives and may be subject to additional restrictions set by your
Registered Representative or us. We reserve the right to withdraw this rider at
any time. The maximum age of any Owner or Annuitant when electing this rider is
80.
DOES ELECTING THIS RIDER FORFEIT YOUR ABILITY TO BUY OTHER RIDERS?
No.
HOW IS THE CHARGE FOR THIS RIDER CALCULATED?
The fee for the rider is based on Premium Payments, as adjusted for Surrenders
(as well as Benefit Balance transferred to Contract Value), as of each Contract
Anniversary. In the event of a change in ownership or upon Spousal Contract
continuation, the fee for the rider will be based on the Contract Value on the
date of any such change plus Premium Payments received after such date, as
adjusted for Surrenders. This charge will automatically be deducted from your
Contract Value on your Contract Anniversary prior to all other financial
transactions. A prorated charge will be deducted in the event of a full
Surrender of this Contract or this rider. The charge for the rider will be
withdrawn from each Sub-Account and the Fixed Accumulation Feature in the same
proportion that the value of each Sub-Account bears to the total Contract Value.
Except as otherwise provided below, we will continue to deduct this charge until
we begin to make Annuity Payouts or the rider is terminated. The rider charge
may limit access to the Fixed Accumulation Feature in certain states.
We reserve the right to change the rider charge up to the maximum fee described
in the Fee Summary at any time without notice. The rider charge may increase for
new investors. The rider charge may also prospectively increase upon certain
ownership changes or upon Spousal Contract continuation. We reserve the right to
charge a different rider charge based on your participation in approved
investment options.
IS THIS RIDER DESIGNED TO PAY YOU DEATH BENEFITS?
Yes. This Death Benefit is equal to the higher of Contract Value (minus
Distribution Charges) or Premium Payments, as adjusted for Surrenders. See
Example 1 under The Hartford's Return of Premium Death Benefit Examples in
Appendix A. In addition to this Death Benefit, you may also be entitled to
receive the Personal Pension Account Death Benefit which is equal to your
Benefit Balance. EVEN THOUGH YOUR BENEFIT BALANCE IS NOT SUBJECT TO PRINCIPAL
PROTECTION UNDER THIS RIDER, ANY PORTIONS OF YOUR BENEFIT BALANCE TRANSFERRED TO
SUB-ACCOUNTS AND/OR THE FIXED ACCUMULATION FEATURE ARE ALSO CONSIDERED TO BE
PART OF THE CONTRACT VALUE USED TO COMPUTE THIS DEATH BENEFIT. See Example 2
under The Hartford's Return of Premium Death Benefit Examples in Appendix A.
We calculate the Death Benefit when, and as of the Valuation Day, we receive a
certified death certificate or other legal document acceptable to us. The
calculated Death Benefit will remain invested according to the Owner's last
instructions until we receive complete written settlement instructions from the
Beneficiary. This means the Death Benefit amount will fluctuate with the
performance of the Account. When there is more than one Beneficiary, we will
calculate the Accumulation Units for each Sub-Account and the dollar amount for
the Fixed Accumulation Feature for each Beneficiary's portion of the proceeds.
Termination of this rider will result in the rescission of this Death Benefit
and result in your Beneficiary receiving the standard Death Benefit.
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining Contract Value must be distributed
at least as rapidly as under the payment method being used as of the Owner's
death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date. Please refer to the discussion under the caption "Who
will receive the Death Benefit" under Standard Death Benefits for more
information.
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DOES THIS RIDER REPLACE THE STANDARD DEATH BENEFIT?
Yes.
CAN YOU TERMINATE THIS RIDER?
Yes. At anytime following the earliest of the fifth anniversary of the rider
effective date or Spousal Contract continuation, the Contract Owner may elect to
terminate this rider. If this rider is terminated, then a pro-rated rider charge
will be assessed on the termination date, and will no longer be assessed
thereafter. The Death Benefit will be reset to the standard Death Benefit. No
other optional benefit may be elected following the termination. A
Company-sponsored exchange of this rider will not be considered to be a
termination by you of the rider. This rider will also terminate upon election of
a Death Benefit option (described in the "Standard Death Benefit" section) by
the Beneficiary (excluding Spousal Contract continuation).
WHAT EFFECT DOES PARTIAL OR FULL SURRENDERS HAVE ON YOUR BENEFITS UNDER THE
RIDER?
We calculate the adjustment to your aggregate Premium Payments for any Surrender
by reducing your aggregate Premium Payments on a dollar-for-dollar basis for any
Surrender within a Contract Year up to the Death Benefit withdrawal limit. The
"Death Benefit withdrawal limit" is five (5%) percent of aggregate Premium
Payments. If a change of ownership occurs or if Spousal Contract continuation is
elected, the Death Benefit withdrawal limit will be five (5%) percent of
Contract Value as of the date of such change plus Premium Payments made after
such date. For purposes of this rider, a Surrender also includes a transfer of
Contract Value to Benefit Balance. Any partial Surrender that causes cumulative
Surrenders during the Contract Year to exceed the Death Benefit withdrawal
limit, even if less than your permissible AWA (provided that such Surrender was
not made in accordance with our Automatic Income program for the purposes of
meeting Required Minimum Distribution requirements), will cause a proportionate
reduction in your Death Benefit. Partial Surrenders up to, but not in excess of
the Death Benefit withdrawal limit (assuming no ownership changes) will reduce
your Death Benefit on a dollar-for-dollar basis. Any and all partial Surrenders
in excess of your Death Benefit withdrawal limit, whether individually or in the
aggregate, will reduce your Death Benefit on a proportionate basis based on a
factor equal to 1 minus the excessive partial Surrender (which is the amount of
the Surrender in excess of the Death Benefit withdrawal limit) divided by the
sum of (i) Contract Value prior to such partial Surrender minus (ii) any
remaining Death Benefit withdrawal limit. Taking excess partial Surrenders may
significantly negatively affect your Death Benefit. Please consult with your
Registered Representative before making excess partial Surrenders to be sure
that you fully understand the ways such a decision will affect your Contract.
See Example 1 under the Return of Premium Examples in Appendix A for an
illustration of this calculation.
WHAT HAPPENS IF YOU CHANGE OWNERSHIP?
We reserve the right to approve all ownership changes. Certain approved changes
in ownership before the Annuity Commencement Date may cause a re-calculation of
the Death Benefit.
Any ownership change made within the first six months from the Contract issue
date (if prior to the Annuity Commencement Date) will have no impact on the
rider values as long as each succeeding Owner is less than the maximum rider age
limitation at the time of the change. We reserve the right to require you to
reallocate investments according to then applicable investment restrictions in
the event of an ownership change after six months from the rider's effective
date.
An ownership change made after the first six months of the Contract issue date
(if prior to the Annuity Commencement Date) will cause a reset of these
benefits. If the rider is not available for sale at the time of the ownership
change, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
If the rider is currently available for sale on the date of the ownership
change, we will continue the existing rider with respect to all benefits at the
rider charge currently being assessed on new sales (or the last declared maximum
rider fee).The Death Benefit will be recalculated to the lesser of the Contract
Value or the Death Benefit on the effective date of the ownership change.
If the oldest Owner after the change is greater than the age limitation of the
rider as of the trade date of the change, then we will terminate this rider
whereupon the Death Benefit will be reset to the standard Death Benefit. A final
pro-rated rider charge will be assessed on the termination date, and then will
no longer be assessed.
CAN YOUR SPOUSE CONTINUE YOUR DEATH BENEFIT?
Yes. If the Owner dies and the sole Beneficiary is the deceased Owner's Spouse
at the time of death, that Spouse may continue the Contract and this rider, if
then available. This right may be exercised only once during the term of the
Contract.
If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is not available
for sale, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
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If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is still
available for sale, the Death Benefit will be increased to the Contract Value if
higher than the Death Benefit as of the date of due proof of death and will
serve as the new basis for the benefit. The rider charge will be reset to the
rider charge then being assessed for new sales of the rider.
If the new Owner is age 81 or older at the time of the Spousal Contract
continuation, we will terminate this rider whereupon the Death Benefit will be
reset to the standard Death Benefit. A final pro-rated rider charge will be
assessed on the termination date and then will no longer be assessed.
WHAT HAPPENS IF YOU ANNUITIZE YOUR CONTRACT?
Except as otherwise provided, if you elect to annuitize your Contract prior to
reaching the Annuity Commencement Date, you may only annuitize your Contract
Value. If your Contract reaches the Annuity Commencement Date, the Contract must
be annuitized unless we agree to extend the Annuity Commencement Date, in our
sole discretion. In this circumstance, the Contract may be annuitized under our
standard annuitization rules. This rider terminates once an Annuity Payout
Option is elected.
ARE THERE RESTRICTIONS ON HOW YOU MUST INVEST?
Yes. You may allocate your Contract Value to any Sub-Accounts(s), asset
allocation models, investment programs, fund of funds Sub-Accounts(s) or other
investment option(s) or you may design your own portfolio, provided that your
Fund selections comply with the investment restrictions in the following table:
CLASSIFICATION ALLOCATION
--------------------------------------------------------------------------------
Fixed investments Funds Minimum of 30% - to a maximum of 100%
Equity Investments - Maximum of 70%
- No more than 20% may be invested in
any one Fund in this category
Limited Investments Maximum of 20%
Multi-Asset Investments - Minimum of 0% - to a maximum of 100%
- May not be combined with Funds in the
above classifications
Please refer to Appendix C for the classification associated with each currently
offered Fund. Investing in the Personal Pension Account and Fixed Accumulation
Feature do not constitute a violation of these investment restrictions.
Not all asset allocation models, Funds or programs are available through all
Financial Intermediaries. The Personal Pension Account and Fixed Accumulation
Feature are not included within any classification.
We may, in our sole discretion, add, replace or delete Funds, programs,
classifications, allocations and asset allocation models from time to time. Not
all asset allocation models, Funds or programs are available through all
Financial Intermediaries. You will be provided with advance notification of any
investment restriction changes and you must invest any subsequent Premium
Payments in accordance with such updated investment restrictions.
You must participate in an asset rebalancing program. If on any Valuation Day,
your Contract Value is no longer invested within the permissible allocations in
the table above as a result of market fluctuations, we will not terminate the
rider. Instead, your Contract Value will be rebalanced quarterly in accordance
with your last compliant allocation instructions. All subsequent Premium
Payments must also be invested according to the classifications described in
this section.
YOU MAY PROVIDE INVESTMENT INSTRUCTIONS TO INVEST CONTRACT VALUE IN A MANNER
THAT VIOLATES THESE INVESTMENT RESTRICTIONS. ANY SUCH ACTION WILL, HOWEVER,
RESULT IN THE TERMINATION OF THIS RIDER. WE WILL NOT ACCEPT INSTRUCTIONS TO
VIOLATE THE INVESTMENT RESTRICTIONS FROM YOUR REGISTERED REPRESENTATIVE.
VIOLATING THESE INVESTMENT RESTRICTIONS SHALL RESULT IN THE TERMINATION OF YOUR
DEATH BENEFIT UNDER THIS RIDER.
If this rider is terminated due to failure to comply with the investment
restrictions, you will have a one time opportunity to reinstate the Death
Benefit. You will be notified in your confirmation statement that you have
violated these investment restrictions. The thirty calendar day reinstatement
period will begin from the date this rider is terminated. Your opportunity to
reinstate will be terminated if during the reinstatement period you make a
subsequent Premium Payment, take a partial Surrender, or make an ownership
change.
UPON REINSTATEMENT OF YOUR RIDER, YOUR PREMIUM PAYMENT WILL BE RESET AT THE
LOWER OF THE DEATH BENEFIT PRIOR TO THE REVOCATION OR CONTRACT VALUE AS OF THE
DATE OF THE REINSTATEMENT. WE WILL DEDUCT A PRORATED RIDER CHARGE ON YOUR
CONTRACT ANNIVERSARY FOLLOWING THE REINSTATEMENT FOR THE TIME PERIOD BETWEEN THE
REINSTATEMENT DATE AND YOUR FIRST CONTRACT ANNIVERSARY FOLLOWING THE
REINSTATEMENT. VIOLATION OF THESE INVESTMENT RESTRICTIONS COULD RESULT IN A
SERIOUS EROSION OF THE VALUE IN THIS RIDER.
We are not responsible for lost investment opportunities associated with the
implementation of these investment restrictions.
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ARE THERE RESTRICTIONS ON THE AMOUNT OF SUBSEQUENT PREMIUM PAYMENTS?
Yes. We reserve the right to require our approval on all subsequent Premium
Payments received after the first twelve months. We may not accept any
subsequent Premium Payment which brings the total of such cumulative subsequent
Premium Payments in excess of $100,000 without prior approval. Following your
Annuity Commencement Date, we will no longer accept subsequent Premium Payments.
CAN WE AGGREGATE CONTRACTS?
Yes. We reserve the right to treat all deferred variable annuities that you buy
from us or our affiliates where you have elected any optional death benefit
rider as a single contract for the purposes of determining your total Death
Benefits. These limits will be applied if you make $5 million or more in total
aggregate Deposits. If applicable, the aggregate limit on total Death Benefits
payable by us or our affiliates will never exceed a maximum of:
- $5 million of Deposits (as reduced by an adjustment for Surrenders), or
- Account Balance plus $1 million.
Any reduction in Death Benefits will be in proportion to the Contract Value of
each deferred variable annuity at the time of reduction.
OTHER INFORMATION
The rider may not be appropriate for all investors. Several factors, among
others, should be considered:
- The benefits under the rider cannot be directly or indirectly assigned,
collateralized, pledged or securitized in any way. Any such actions will
invalidate the rider and allow us to terminate the rider.
- We may terminate this rider based upon the following conditions: Spousal
Contract continuation, ownership changes, assignment and/or violation of the
investment restrictions. If we terminate the rider, it cannot be re-elected
by you.
- The selection of an Annuity Payout Option and the timing of the selection
may have an impact on the tax treatment of the Death Benefit. To receive
favorable tax treatment, the Annuity Payout Option selected: (a) cannot
extend beyond the Beneficiary's life or life expectancy, and (b) must begin
within one year of the date of death. If these conditions are not met, the
Death Benefit will be treated as a lump sum payment for tax purposes. This
sum will be taxable in the year in which it is considered received.
- Upon Spousal Contract continuation or ownership change, the Death Benefit
withdrawal limit upon which we reduce the Death Benefit will be adjusted to
equal five (5%) percent of the Contract Value as of the date of such change
plus Premium Payments received after such date.
- If the Owner dies and the sole Beneficiary is the Owner's Spouse, then the
Contract may continue with the Spouse as Owner through a Spousal Contract
continuation election, unless the Spouse elects to receive the Death Benefit
as a lump sum payment or as an Annuity Payout Option. If the Contract
continues with the Spouse as Owner, we will adjust the Contract Value to the
amount that we would have paid as the Death Benefit payment, had the Spouse
elected to receive the Death Benefit as a lump sum payment. Spousal Contract
continuation will only apply one time for each Contract. If you do not name
another Beneficiary at the time of continuation, the Beneficiary will
default to your estate.
- Participation in an automatic investment or income program may result in a
transaction during the reinstatement period causing you to lose your right
to reinstate the Death Benefit.
6. FURTHER INFORMATION
A. GLOSSARY
Except as provided elsewhere in this prospectus, the following capitalized terms
shall have the meaning ascribed below:
ACCOUNT: Any of the Sub-Accounts or the Fixed Accumulation Feature.
ACCOUNT BALANCE: The sum of your Contract Value and Benefit Balance (this term
is also referred to as the "Total Balance" in your Contract and marketing
materials).
ACCUMULATION BALANCE - The sum of all Personal Pension Account Contributions
increased by credited interest; minus any transfers into any other Account(s)
and any conversion into Annuity Payout Value.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert Premium Payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate Contract Value prior to Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
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ADMINISTRATIVE OFFICE: Our overnight mailing address is: 1 Griffin Road North,
Windsor, CT 06095-1512. Our standard mailing address is: P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNUAL MAINTENANCE FEE: An annual charge deducted on a Contract Anniversary or
upon full Surrender.
ANNUAL WITHDRAWAL AMOUNT (AWA): The amount you may Surrender each Contract Year
without incurring a CDSC.
ANNUITANT: The person on whose life the Contract is issued. Except as otherwise
provided, the Annuitant may not be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY COMMENCEMENT DATE: The first day of the first period for which a
distribution is received as an Annuity Payout under the Contract.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select. Annuity Payout also refers to Personal
Pension Account Payouts.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date, the death of the Contract Owner or Annuitant; or
annuitization(s) of Benefit Balance.
ANNUITY PAYOUT VALUE: The portion of your Benefit Balance converted into
Personal Pension Account Payouts, as reduced by future Personal Pension Account
Payouts.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive benefits pursuant to the terms of
the Contract upon the death of any Contract Owner or Annuitant, as the case may
be.
BENEFIT BALANCE: Personal Pension Account Contributions, as adjusted for
transfers to or from Contract Value, credited interest and/or annuitization.
Benefit Balance includes Annuity Payout Value, if any.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any Annuity Payout due and payable during
the Guaranteed Payout Duration. This amount is calculated using the Assumed
Investment Return for variable dollar amount Annuity Payouts and the applicable
discount rate determined by us for applicable fixed dollar amount Annuity
Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE (CDSC): The deferred sales charge, if
applicable, that may apply when you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals may receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT OWNER, OWNER OR YOU: The owner or holder of the Contract described in
this prospectus including any joint Owner(s). We do not capitalize "you" in the
prospectus.
CONTRACT VALUE: The total value of the Account on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: Except as otherwise provided, the amount payable if the Contract
Owner, joint Contract Owner or the Annuitant dies before the Annuity
Commencement Date.
DEPOSIT: The sum of allPremium Payments and Personal Pension Account
Contributions.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, the Fixed
Accumulation Feature may be called the Fixed Account. Not all classes of
Contracts we offer contain a Fixed Accumulation Feature.
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FUND: A registered investment company or a series thereof in which assets of a
Sub-Account may be invested. We sometimes call the Funds you select a
"Sub-Account".
GUARANTEED PAYOUT DURATION: The time period (sometimes referred to as a "Period
Certain") specified in Annuity Payout Options Three, Five and Six; and with
respect to Annuity Payout Options Two and Eight, the time period equal to the
applicable Annuity Payout Value divided by the corresponding Personal Pension
Account Payout, rounded down.
JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
1933 ACT: The Securities Act of 1933, as amended.
1934 ACT: The Securities Exchange Act of 1934, as amended.
1940 ACT: The Investment Company Act of 1940, as amended.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PERSONAL PENSION ACCOUNT CONTRIBUTIONS: Sums allocated to the Personal Pension
Account (after deduction of front-end sales charges, if applicable). Personal
Pension Account Contributions may take the form of Deposits or transfers of
Contract Value from Sub-Accounts or the Fixed Accumulation Feature (if
applicable).
PERSONAL PENSION ACCOUNT PAYOUTS: Regularly scheduled periodic payments of
Annuity Payout Value.
PREMIUM OR PREMIUM PAYMENT: Money sent to us to be invested in your Contract
(not taking into consideration any applicable sales charges). Unless otherwise
specified, a Premium Payment does not include Personal Pension Account
Contributions. Portions of your Benefit Balance transferred to Sub-Accounts
and/or the Fixed Accumulation Feature are initially considered to be Premium
Payments that become part of your Contract Value.
REMAINING GROSS PREMIUM: Premium Payments minus prior partial Surrenders in
excess of the AWA at the time of such partial Surrender.
SPOUSE: A person related to a Contract Owner by marriage pursuant to the Code.
SUB-ACCOUNT: A division of the Separate Account containing shares of a Fund.
There is a Sub-Account for each Fund. We sometimes call the Funds you select
your "Sub-Account".
SUB-ACCOUNT VALUE: The value of each Sub-Account on or before the Annuity
Calculation Date, which is determined on any day by multiplying the number of
Accumulation Units by the Accumulation Unit Value for each Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract. For the purposes
of optional riders only, a Surrender may also include a transfer of Contract
Value to Benefit Balance.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges (subject to rounding). Surrender Value does not
include the Commuted Value of your Personal Pension Account.
TARGET INCOME AGE - The year when Personal Pension Account Payouts are likely to
commence. Target Income Age establishes a 7-year guarantee window (three years
before and after) during which a guaranteed payout rate will be applied to your
Accumulation Balance.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange. The Exchange generally closes at 4:00 p.m. Eastern Time but may close
earlier on certain days and as conditions warrant.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
WE, US OR OUR: Hartford Life and Annuity Insurance Company or Hartford Life
Insurance Company, as the case may be.
YOU: The Owner including any joint Owner(s). We do not capitalize "you" or
"your" in this prospectus.
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B. STATE VARIATIONS
The following section describes modifications to this prospectus required by one
or more state insurance departments as of the date of this prospectus. Unless
otherwise noted, variations apply to all forms of Contracts we issue. References
to certain state's variations do not imply that we actually offer Contracts in
each such state. These variations are subject to change without notice and
additional variations may be imposed as specific states approve new riders.
ALABAMA - The Fixed Accumulation Feature is not available. The DCA Plus Fixed
Accumulation Feature is available.
CALIFORNIA - If you are 60 years old or older you must either elect the Senior
Protection Program, or elect to immediately allocate the initial Premium
Payments to the other investment options. Under the Senior Protection Program,
we will allocate your initial Premium Payment to a money market Fund for the
first 35 days your initial Premium Payment is invested. After the 35th day we
will automatically allocate your Contract Value according to your most current
investment instructions. If you elect the Senior Protection Program you will not
be able to participate in any InvestEase (if otherwise available) or Dollar Cost
Averaging Program until after the Program has terminated. The Dollar Cost
Averaging Plus, the Static Asset Allocation Models and certain Automatic Income
Programs are not available if you elect the Senior Protection Program. Under the
Senior Protection Program any subsequent Premium Payment received during the 35
days after the initial Premium Payment is invested will also be invested in a
money market Fund unless you direct otherwise. You may voluntarily terminate
your participation in the Senior Protection Program by contacting us in writing
or by telephone. You will automatically terminate your participation in the
Senior Protection Program if you allocate a subsequent Premium Payment to any
other investment option or transfer Contract Value from a money market Fund to
another investment option. When you terminate your participation in the Senior
Protection Program you may reallocate your Contract Value in the Program to
other investment options; or we will automatically reallocate your Contract
Value in the Program according to your original instructions 35 days after your
initial Premium Payment was invested.
CONNECTICUT, NEW HAMPSHIRE AND NEW JERSEY - A state recognized civil union
partner who is the designated beneficiary may exercise contract continuation
privileges if and when the Code is amended to recognize such "spouses" as
meeting federal tax distribution requirements (under current tax law, a "spouse"
is limited to married people of the opposite sex).
FLORIDA - The limit on Death Benefits imposed when aggregate Premium Payments
total $5 million or more does not apply.
MASSACHUSETTS - We will accept subsequent Premium Payments only until the
Annuitant's 63rd birthday or the third Contract Anniversary, whichever is later
(B Share Contracts). The Nursing Home Waiver is not available.
NEW JERSEY - The only AIRs available are 3% and 5%. The Nursing Home Waiver is
not available. Letters of Intent are not available as a basis to reduce sales
charges.
NEW YORK - A Contract issued by Hartford Life and Annuity Insurance Company is
not available in New York. The only AIRs available are 3% and 5%. The Nursing
Home Waiver is not available. Letters of Intent are not available as a basis to
reduce sales charges.
OKLAHOMA - The only AIRs available are 3% and 5%.
OREGON - We will accept subsequent Premium Payments during the first three
Contract Years (B Share Contracts). Owners may only sign up for DCA Plus
Programs that are 6 months or longer. You may not choose a fixed dollar amount
Annuity Payout. Annuity Payout Option Two is not available. The only AIRs
available are 3% and 5%.
PENNSYLVANIA - The Nursing Home Waiver minimum confinement period is changed
from 180 days to 90 days. You may not choose a fixed dollar amount Annuity
Payout. Annuity Payout Option Two is not available.
TEXAS - Letters of Intent are not available as a basis to reduce sales charges.
VERMONT - Eligible Investments owned by you, your Spouse or any immediate family
member may be included under the Rights of Accumulation Program.
WASHINGTON - In any year when no Premium Payment is paid into the Fixed
Accumulation Feature, any pro-rata portion of the fee taken from the Fixed
Accumulation Feature will be limited to interest earned in excess of the 3% for
that year.
C. MISCELLANEOUS
OWNERSHIP CHANGES - We reserve the right to approve all ownership changes,
including any assignment of your Contract (or any benefits) to others or the
pledging of your Contract as collateral. Certain approved changes in ownership
may cause a re-calculation of the benefits subject to applicable state law.
Generally, we will not re-calculate the benefits under your Contract so long as
the change in ownership does not affect the Owner and does not result in a
change in the tax identification number under the Contract. You may not change
the named Annuitant. However, if the Annuitant is still living, the Contingent
Annuitant may be changed at any time prior to the Annuity Commencement Date by
sending us written notice.
ASSIGNMENT - A non-qualified Contract may be assigned subject to the ownership
change restrictions above. We must be properly notified in writing of an
assignment. Any Annuity Payouts or Surrenders requested or scheduled before we
record an assignment will be
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made according to the instructions we have on record. We are not responsible for
determining the validity of an assignment. Assigning a non-qualified Contract
may require the payment of income taxes and certain penalty taxes. A qualified
Contract may not be transferred or otherwise assigned (whether directly or used
as collateral for a loan), unless allowed by applicable law and approved by us
in writing. We can withhold our consent for any reason. We are not obligated to
process any request for approval within any particular time frame. Please
consult a qualified tax adviser before assigning your Contract.
SPECULATIVE INVESTING - Do not purchase this contract if you plan to use it, or
any of its riders, for speculation, arbitrage, viatication or any other type of
collective investment scheme. Your Contract may not be traded on any stock
exchange or secondary market. By purchasing this contract you represent and
warrant that you are not using this Contract, or any of its riders, for
speculation, arbitrage, viatication or any other type of collective investment
scheme.
CONTRACT MODIFICATION - We may unilaterally modify the Contract to reflect,
among other things, changes in applicable tax law or interpretations of tax law,
but no modification will affect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable federal or state
law. No modification will affect the method by which Contract Values are
determined. Any modifications to the Contract will be filed with each state in
which the Contract is for sale. Contract changes will be communicated to Owners
through regular mail as an endorsement to their Contract.
MEDICAID BENEFITS - Medicaid estate planning may be important to people who are
concerned about long term care costs. Benefits associated with this variable
annuity may have an impact on your Medicaid eligibility and the assets
considered for Medicaid benefits. Ownership interests or beneficiary status
under this variable annuity could render you or your loved ones ineligible for
Medicaid. This may be particularly troubling if your Spouse or Beneficiary is
already receiving Medicaid benefits at the time of transfer or receipt of Death
Benefits. As certain ownership changes are either impermissible or are subject
to benefit resetting rules, you may want to carefully consider how you structure
the ownership and beneficiary status of your Contract. This discussion is
intended to provide a very general overview and does not constitute legal advice
or in any way suggest that you circumvent these rules. You should seek advice
from a competent elder law attorney to make informed decisions about how this
variable annuity may affect your plans.
D. LEGAL PROCEEDINGS
There continues to be significant federal and state regulatory activity relating
to financial services companies. Like other insurance companies, we are involved
in lawsuits, arbitrations, and regulatory/legal proceedings. Certain of the
lawsuits and legal actions the Company is involved in assert claims for
substantial amounts. While it is not possible to predict with certainty the
ultimate outcome of any pending or future case, legal proceeding or regulatory
action, we do not expect the ultimate result of any of these actions to result
in a material adverse effect on the Company or its Separate Accounts.
Nonetheless, given the large or indeterminate amounts sought in certain of these
actions, and the inherent unpredictability of litigation, an adverse outcome in
certain matters could, from time to time, have a material adverse effect on the
Company's results of operations or cash flows in particular quarterly or annual
periods.
E. HOW CONTRACTS ARE SOLD
We have entered into a distribution agreement with our affiliate Hartford
Securities Distribution Company, Inc. ("HSD") under which HSD serves as the
principal underwriter for the Contracts, which are offered on a continuous
basis. HSD is registered with the Securities and Exchange Commission under the
1934 Act as a broker-dealer and is a member of the Financial Industry Regulatory
Authority (FINRA). The principal business address of HSD is the same as ours.
PLANCO Financial Services, LLC, a subsidiary of Hartford Life Insurance Company,
provides marketing support for us. Woodbury Financial Services, Inc. is another
affiliated broker-dealer that sells this Contract.
HSD has entered into selling agreements with affiliated and unaffiliated
broker-dealers, and financial institutions ("Financial Intermediaries") for the
sale of the Contracts. We pay compensation to HSD for sales of the Contracts by
Financial Intermediaries. HSD, in its role as principal underwriter, did not
retain any underwriting commissions for the fiscal year ended December 31, 2008.
Contracts will be sold by individuals who have been appointed by us as insurance
agents and who are registered representatives of Financial Intermediaries
("Registered Representatives").
B and I share Contracts may be sold directly to the following individuals free
of any commission: 1) our current or retired officers, directors, trustees and
employees (and their families) and our corporate parent, affiliates and
subsidiaries; and 2) employees and Registered Representatives of Financial
Intermediaries. If applicable, we will credit the B share Contract with a credit
of 5.0% of the initial Deposit and each subsequent Deposit, if any. This
additional percentage of Deposit in no way affects current or future charges,
rights, benefits or account values of other Owners.
The financial advisory arrangement otherwise required in order to purchase I
share Contracts shall not be applicable to Hartford Leaders Series V individual
variable annuities bought by any of our current or retired officers, directors,
trustees and employees or those of our corporate parent, affiliates and
subsidiaries.
This prospectus does not constitute personalized investment or financial
planning advice or a recommendation to purchase this or any other variable
annuity. We reserve the right to modify, suspend, or terminate these privileges
at any time.
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We list below types of arrangements that help to incentivize sales people to
sell our suite of variable annuities. Not all arrangements necessarily affect
each variable annuity. These types of arrangements could be viewed as creating
conflicts of interest.
Financial Intermediaries receive commissions (described below under
"Commissions"). Certain selected Financial Intermediaries also receive
additional compensation (described below under "Additional Payments"). All or a
portion of the payments we make to Financial Intermediaries may be passed on to
Registered Representatives according to a Financial Intermediaries' internal
compensation practices.
Affiliated broker-dealers also employ individuals called "wholesalers" in the
sales process. Wholesalers typically receive commissions based on the type of
Contract or optional benefits sold. Commissions are based on a specified amount
of Deposits or Account Balance.
- COMMISSIONS
Up front commissions paid to Financial Intermediaries generally range from 0% to
up to 5% of each Deposit. Trail commissions (fees paid for customers that
maintain their Contracts generally for more than 1 year) range up to 1% of your
Account Balance. We pay no additional commissions with respect to assets moved
from the Personal Pension Account to Sub-Accounts or the Fixed Accumulation
Feature. We pay different commissions based on the Contract variation that you
buy. We may pay a lower commission for sales to Owners over age 80.
Commission arrangements vary from one Financial Intermediary to another. We are
not involved in determining your Registered Representative's compensation. Under
certain circumstances, your Registered Representative may be required to return
all or a portion of the commissions paid.
Check with your Registered Representative to verify whether your account is a
brokerage or an advisory account. Your interests may differ from ours and your
Registered Representative (or the Financial Intermediary with which they are
associated). Please ask questions to make sure you understand your rights and
any potential conflicts of interest. If you are an advisory client, your
Registered Representative (or the Financial Intermediary with which they are
associated) can be paid both by you and by us based on what you buy. Therefore,
profits, and your Registered Representative's (or their Financial
Intermediary's) compensation, may vary by product and over time. Contact an
appropriate person at your Financial Intermediary with whom you can discuss
these differences.
- ADDITIONAL PAYMENTS
Subject to FINRA and Financial Intermediary rules, we (or our affiliates) also
pay the following types of fees to among other things encourage the sale of this
Contract. These additional payments could create an incentive for your
Registered Representative, and the Financial Intermediary with which they are
associated, to recommend products that pay them more than others, which may not
necessarily be to your benefit.
ADDITIONAL
PAYMENT TYPE WHAT IT'S USED FOR
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Access Access to Registered Representatives and/or Financial Intermediaries such as one-on-one wholesaler
visits or attendance at national sales meetings or similar events.
Gifts & Entertainment Occasional meals and entertainment, tickets to sporting events and other gifts.
Marketing Joint marketing campaigns and/or Financial Intermediary event advertising/participation; sponsorship
of Financial Intermediary sales contests and/or promotions in which participants (including
Registered Representatives) receive prizes such as travel awards, merchandise and recognition;
client generation expenses.
Marketing Expense Pay Fund related parties for wholesaler support, training and marketing activities for certain
Allowances Funds.
Support Sales support through such things as providing hardware and software, operational and systems
integration, links to our website from a Financial Intermediary's websites; shareholder services
(including sub-accounting sponsorship of Financial Intermediary due diligence meetings; and/or
expense allowances and reimbursements).
Training Educational (due diligence), sales or training seminars, conferences and programs, sales and service
desk training, and/or client or prospect seminar sponsorships.
Visibility Inclusion of our products on a Financial Intermediary's "preferred list"; participation in, or
visibility at, national and regional conferences; and/or articles in Financial Intermediary
publications highlighting our products and services.
Volume Pay for the overall volume of their sales or the amount of money investing in our products.
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As of December 31, 2008, we have entered into ongoing contractual arrangements
to make Additional Payments to the following Financial Intermediaries for our
entire suite of variable annuities: AIG Advisors Group, Inc., (Advantage
Capital, AIG Financial Advisors, American General, FSC Securities Corporation,
Royal Alliance Assoc., Inc.), Allen & Company, AMTrust Investment Svcs Inc.,
Associated Securities, Banc of America Investment Services Inc., Bancwest
Investment Services, Inc., Cadaret, Grant & Co., Inc., Cambridge Investment
Research Inc., Capital Analyst Inc., Centaurus Financial, Inc., CCO Investment
Services Corp., Citigroup, Inc. (various divisions and affiliates), Comerica
Securities, Commonwealth Financial Network, Compass Brokerage, Inc., Crown
Capital Securities, L.P., Cuna Brokerage Services, Inc., Cuso Financial
Services, L.P., Edward D. Jones & Co., L.P., FFP Securities, Inc., First Allied
Securities, Inc., First Citizens Investor Services, First Montauk Securities
Corp., First Tennessee Brokerage Inc., Frost Brokerage Services, Inc., Great
American Advisors, Inc., H. Beck, Inc., H.D. Vest Investment Services
(subsidiary of Wells Fargo & Company), Harbour Investments, Inc., Heim & Young
Securities, Huntington Investment Company, Independent Financial Group LLC,
Infinex Financial Group, ING Advisors Network, (Financial Network Services (or
Investment) Corp., ING Financial Partners, Multi-Financial Securities, Primevest
Financial Services, Inc.,), Inter-Securities Inc., Investacorp, Inc., Investment
Professionals, Inc., Investors Capital Corp., J.J.B. Hilliard, James T. Borello
& Co., Janney Montgomery Scott, Inc., Jefferson Pilot Securities Corporation,
Key Investment Services, LaSalle Financial Services, Inc., Lincoln Financial
Advisors Corp. (marketing name for Lincoln National Corp.), Lincoln Financial
Securities Corp., Lincoln Investment Planning, LPL Financial Corporation, M&T
Securities, Inc., Merrill Lynch Pierce Fenner & Smith, MML Investor Services
Inc., Morgan Keegan & Company, Inc., Morgan Stanley & Co., Inc. (various
divisions and affiliates), Mutual Service Corporation, NatCity Investments,
National Planning Holdings (Invest Financial Corp., Investment Centers of
America, Inc., National Planning Corp., SII Investments, Inc.), Newbridge
Securities Corp., NEXT Financial Group, Inc., NFP Securities, Inc., Pension
Planners Securities, Inc., Prime Capital Services, Inc., Prospera Financial
Services, Inc., Raymond James & Associates, Inc., Raymond James Financial
Services, RBC Capital Markets., Robert W. Baird & Co. Inc., Rogan & Associates,
Securities America, Inc., Sigma Financial Corporation, Sorrento Pacific, Stifel
Nicolaus & Company, Incorporated, Summit Brokerage Services Inc., Sun Trust
Bank, TFS Securities, Inc., The Investment Center, Inc., Thurston, Springer,
Miller, Herd & Titak, Inc., Triad Advisors, Inc., U.S. Bancorp Investments,
Inc., UBOC Investment Services, Inc. (Union Bank of California, N.A.), UBS
Financial Services, Inc., Uvest Financial Services Group Inc., Vanderbilt
Securities, LLC, Wachovia Securities, LLC (various divisions), Walnut Street
Securities, Inc., Waterstone Financial Group, Wells Fargo Brokerage Services,
L.L.C., WaMu Investments, Inc., Woodbury Financial Services, Inc. (an affiliate
of ours).
Inclusion on this list does not imply that these sums necessarily constitute
"special cash compensation" as defined by FINRA Conduct Rule 2830(l)(4). We will
endeavor to update this listing annually and interim arrangements may not be
reflected. We assume no duty to notify any investor whether their Registered
Representative is or should be included in any such listing.
As of December 31, 2008, we have entered into arrangements to pay Marketing
Expense Allowances to the following Fund Companies (or affiliated parties) for
our entire suite of variable annuities: AIM Advisors, Inc., AllianceBernstein
Variable Products Series Funds & Alliance Bernstein Investment Research and
Management, Inc., American Variable Insurance Series & Capital Research and
Management Company, Franklin Templeton Services, LLC, Oppenheimer Variable
Account Funds & Oppenheimer Funds Distributor, Inc., Putnam Retail Management
Limited Partnership. Marketing Expense Allowances may vary based on the form of
Contract sold and the age of the purchaser. We will endeavor to update this
listing annually and interim arrangements may not be reflected. We assume no
duty to notify you whether any Financial Intermediary is or should be included
in any such listing. You are encouraged to review the prospectus for each Fund
for any other compensation arrangements pertaining to the distribution of Fund
shares.
For the fiscal year ended December 31, 2008, Additional Payments did not in the
aggregate exceed approximately $55.8 million (excluding corporate-sponsorship
related perquisites and Marketing Expense Allowances) or approximately 0.06% of
average total individual variable annuity assets. Marketing Expense Allowances
for this period did not exceed $7.9 million or approximately 0.25% of the
Premium Payments invested in a particular Fund during this period. Financial
Intermediaries that received Additional Payments in 2008, but do not have an
ongoing contractual relationship, are listed in the Statement of Additional
Information.
Financial Intermediaries that received Additional Payments in 2008, but do not
have an ongoing contractual relationship, are listed in the Statement of
Additional Information.
7. FEDERAL TAX CONSIDERATIONS
A. INTRODUCTION
The following summary of tax rules does not provide or constitute any tax
advice. It provides only a general discussion of certain of the expected federal
income tax consequences with respect to amounts contributed to, invested in or
received from a Contract, based on our understanding of the existing provisions
of the Internal Revenue Code ("Code"), Treasury Regulations thereunder, and
public interpretations thereof by the IRS (e.g., Revenue Rulings, Revenue
Procedures or Notices) or by published court decisions. This summary discusses
only certain federal income tax consequences to United States Persons, and does
not discuss state, local or foreign
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tax consequences. The term United States Persons means citizens or residents of
the United States, domestic corporations, domestic partnerships, trust or
estates that are subject to United States federal income tax, regardless of the
source of their income. See "Annuity Purchases by Nonresident Aliens and Foreign
Corporations," regarding annuity purchases by non-U.S. Persons or residents.
This summary has been prepared by us after consultation with tax counsel, but no
opinion of tax counsel has been obtained. We do not make any guarantee or
representation regarding any tax status (e.g., federal, state, local or foreign)
of any Contract or any transaction involving a Contract. In addition, there is
always a possibility that the tax treatment of an annuity contract could change
by legislation or other means (such as regulations, rulings or judicial
decisions). Moreover, it is always possible that any such change in tax
treatment could be made retroactive (that is, made effective prior to the date
of the change). Accordingly, you should consult a qualified tax adviser for
complete information and advice before purchasing a Contract.
In addition, although this discussion addresses certain tax consequences if you
use the Contract in various arrangements, including Charitable Remainder Trusts,
tax-qualified retirement arrangements, deferred compensation plans, split-dollar
insurance arrangements, or other employee benefit arrangements, this discussion
is not exhaustive. The tax consequences of any such arrangement may vary
depending on the particular facts and circumstances of each individual
arrangement and whether the arrangement satisfies certain tax qualification or
classification requirements. In addition, the tax rules affecting such an
arrangement may have changed recently, e.g., by legislation or regulations that
affect compensatory or employee benefit arrangements. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which to you
depends in part on its tax consequences, you should consult a qualified tax
adviser regarding the tax treatment of the proposed arrangement and of any
Contract used in it.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. SPECIAL
TAX RULES MAY APPLY WITH RESPECT TO CERTAIN SITUATIONS THAT ARE NOT DISCUSSED
HEREIN. EACH POTENTIAL PURCHASER OF A CONTRACT IS ADVISED TO CONSULT WITH A
QUALIFIED TAX ADVISER AS TO THE CONSEQUENCES OF ANY AMOUNTS INVESTED IN A
CONTRACT UNDER APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN TAX LAW.
B. TAXATION OF THE COMPANY AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of the Company which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account will not be taxed as a "regulated investment company" under
Subchapter M of Chapter 1 of the Code. Investment income and any realized
capital gains on assets of the Separate Account are reinvested and taken into
account in determining the value of the Accumulation and Annuity Units. As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
Currently, no taxes are due on interest, dividends and short-term or long-term
capital gain earned by the Separate Account with respect to the Contracts. The
Company is entitled to certain tax benefits related to the investment of company
assets, including assets of the Separate Account. These tax benefits, which may
include the foreign tax credit and the corporate dividends received deduction,
are not passed back to you since the Company is the owner of the assets from
which the tax benefits are derived.
C. TAXATION OF ANNUITIES - GENERAL PROVISIONS AFFECTING CONTRACTS NOT HELD IN
TAX-QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS AS OWNERS
Pursuant to Code Section 72(u), an annuity contract held by a taxpayer other
than a natural person generally is not treated as an annuity contract under the
Code. Instead, such a non-natural Contract Owner generally could be required to
include in gross income currently for each taxable year the excess of (a) the
sum of the Contract Value as of the close of the taxable year and all previous
distributions under the Contract over (b) the sum of net premiums paid for the
taxable year and any prior taxable year and the amount includable in gross
income for any prior taxable year with respect to the Contract under Section
72(u). However, Section 72(u) does not apply to:
- A contract the nominal owner of which is a non-natural person but the
beneficial owner of which is a natural person (e.g., where the non-natural
owner holds the contract as an agent for the natural person),
- A contract acquired by the estate of a decedent by reason of such decedent's
death,
- Certain contracts acquired with respect to tax-qualified retirement
arrangements,
- Certain contracts held in structured settlement arrangements that may
qualify under Code Section 130, or
- A single premium immediate annuity contract under Code Section 72(u)(4),
which provides for substantially equal periodic payments and an annuity
starting date that is no later than 1 year from the date of the contract's
purchase.
A non-natural Contract Owner that is a tax-exempt entity for federal tax
purposes (e.g., a tax-qualified retirement trust or a Charitable Remainder
Trust) generally would not be subject to federal income tax as a result of such
current gross income under Code
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Section 72(u). However, such a tax-exempt entity, or any annuity contract that
it holds, may need to satisfy certain tax requirements in order to maintain its
qualification for such favorable tax treatment. See, e.g., IRS Tech. Adv. Memo.
9825001 for certain Charitable Remainder Trusts.
Pursuant to Code Section 72(s), if the Contract Owner is a non-natural person,
the primary annuitant is treated as the "holder" in applying the required
distribution rules described below. These rules require that certain
distributions be made upon the death of a "holder." In addition, for a
non-natural owner, a change in the primary annuitant is treated as the death of
the "holder." However, the provisions of Code Section 72(s) do not apply to
certain contracts held in tax-qualified retirement arrangements or structured
settlement arrangements.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract." It is
unclear what value should be used in determining the "income on the
contract." We believe that the current Contract Value (determined without
regard to surrender charges) generally is an appropriate measure. However,
in some instances the IRS could take the position that the value should be
the current Contract Value (determined without regard to surrender charges)
increased by some measure of the value of certain future cash-value type
benefits.
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a withdrawal or partial surrender) is deemed to come
first from any such "income on the contract" and then from "investment in
the contract," and for these purposes such "income on the contract" shall
be computed by reference to any aggregation rule in subparagraph 2.c.
below. As a result, any such amount received or deemed received (1) shall
be includable in gross income to the extent that such amount does not
exceed any such "income on the contract," and (2) shall not be includable
in gross income to the extent that such amount does exceed any such
"income on the contract." If at the time that any amount is received or
deemed received there is no "income on the contract" (e.g., because the
gross value of the Contract does not exceed the "investment in the
contract" and no aggregation rule applies), then such amount received or
deemed received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between Spouses or
incident to divorce.
vi. In general, any amount actually received under the Contract as a Death
Benefit, including an optional Death Benefit, if any, will be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
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iii. Generally, non-periodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
iv. When annuitization of the Personal Pension Account has occurred, your
Benefit Balance will be calculated by using an actuarial present value
formula.
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same owner within the same calendar year (other than certain
contracts held in connection with tax-qualified retirement arrangements) will be
aggregated and treated as one annuity contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. An annuity
contract received in a tax-free exchange for another annuity contract or life
insurance contract may be treated as a new contract for this purpose. We believe
that for any Contracts subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added together to
determine the taxation under subparagraph 2.a., above, of amounts received or
deemed received prior to the Annuity Commencement Date. Withdrawals will first
be treated first as withdrawals of income until all of the income from all such
Contracts is withdrawn. In addition, the Treasury Department has specific
authority under the aggregation rules in Code Section 72(e)(12) to issue
regulations to prevent the avoidance of the income-out-first rules for
non-periodic distributions through the serial purchase of annuity contracts or
otherwise. As of the date of this prospectus, there are no regulations
interpreting these aggregation provisions.
d. 10% PENALTY TAX - APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions:
1. Distributions made on or after the date the recipient has attained
the age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient becoming disabled.
4. A distribution that is part of a scheduled series of substantially
equal periodic payments (not less frequently than annually) for the
life (or life expectancy) of the recipient (or the joint lives or
life expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions made under certain annuities issued in connection with
structured settlement agreements.
6. Distributions of amounts which are allocable to the "investment in
the contract" prior to August 14, 1982 (see next subparagraph e.).
7. Distributions purchased by an employer upon termination of certain
qualified plans and held by the employer until the employee
separates from service.
If the taxpayer avoids this 10% penalty tax by qualifying for the substantially
equal periodic payments exception and later such series of payments is modified
(other than by death or disability), the 10% penalty tax will be applied
retroactively to all the prior periodic payments (i.e., penalty tax plus
interest thereon), unless such modification is made after both (a) the taxpayer
has reached age 59 1/2 and (b) 5 years have elapsed since the first of these
periodic payments.
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED
PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income. In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such
post-exchange Contracts are generally subject to the rules described in this
subparagraph e.
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f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or Spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date
and before the entire interest in the Contract has been distributed,
the remaining portion of such interest shall be distributed at least
as rapidly as under the method of distribution being used as of the
date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract shall be distributed within 5 years
after such death; and
3. If the Contract Owner is not an individual, then for purposes of 1.
or 2. above, the primary annuitant under the Contract shall be
treated as the Contract Owner, and any change in the primary
annuitant shall be treated as the death of the Contract Owner. The
primary annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above
is payable to or for the benefit of a designated beneficiary, such
beneficiary may elect to have the portion distributed over a period that
does not extend beyond the life or life expectancy of the beneficiary.
Such distributions must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her Spouse, and the Annuitant or Contingent
Annuitant is living, such Spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above. This Spousal Contract
continuation shall apply only once for this Contract.
iv. Civil Union or Domestic Partner
Upon the death of the Contract Owner prior to the Annuity Commencement
Date, if the designated beneficiary is the surviving civil union or
domestic partner of the Contract Owner pursuant to a civil union or
domestic partnership recognized under state law, then such designated
beneficiary's right to continue the Contract as the succeeding Contract
Owner will be contingent, among other things, upon the treatment of such
designated beneficiary as the spouse of the Contract Owner under Code
Section 72(s) (or any successor provision). Currently, Federal tax law
only recognizes spouses if they are married individuals of the opposite
sex. Consequently, such designated beneficiary who is not recognized as a
"spouse" under Federal tax law will not be able to continue the Contract
and the entire interest in the Contract must be distributed within five
years of the Contract Owner's death or under the Alternative Election.
g. ADDITION OF RIDER OR MATERIAL CHANGE.
The addition of a rider to the Contract, or a material change in the Contract's
provisions, could cause it to be considered newly issued or entered into for tax
purposes, and thus could cause the Contract to lose certain grandfathered tax
status. Please contact your tax adviser for more information.
h. PARTIAL EXCHANGES.
The IRS in Rev. Rul. 2003-76 confirmed that the owner of an annuity contract can
direct its insurer to transfer a portion of the contract's cash value directly
to another annuity contract (issued by the same insurer or by a different
insurer), and such a direct transfer can qualify for tax-free exchange treatment
under Code Section 1035 (a "partial exchange"). However, Rev. Rul. 2003-76 also
refers to caveats and additional guidance in the companion Notice 2003-51, which
discusses cases in which a partial exchange is followed by a surrender,
withdrawal or other distribution from either the old contract or the new
contract. Notice 2003-51 specifically indicates that the IRS is considering (1)
under what circumstances it should treat a partial exchange followed by such a
distribution within 24 months as presumptively for "tax avoidance" purposes
(e.g., to avoid the income-out-first rules on amounts received under Code
Section 72) and (2) what circumstances it should treat as rebutting such a
presumption (e.g., death, disability, reaching age 59 1/2, divorce or loss of
employment). Notice 2003-51 was superseded by Revenue Procedure 2008-24,
effective for partial exchanges completed on or after June 30, 2008. Partial
exchanges completed on or after this date will qualify for tax free treatment
if: (1) no amounts are withdrawn from, or received in surrender of, either of
the contracts involved in the exchange during the 12 months beginning on the
date on which amounts are treated as received as premiums or other consideration
paid for the contract received in the exchange (the date of transfer); or (2)
the taxpayer demonstrates that certain conditions (e.g., death, disability,
reaching age 59 1/2, divorce, loss of employment) occurred between the date of
transfer and the date of the withdrawal or surrender. A transfer within the
scope of the revenue procedure, but not treated as a tax-free exchange, will be
treated as a taxable distribution, followed by a payment for a second contract.
Two annuity contracts that are the subject of a tax-free exchange pursuant
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to the revenue procedure will not be aggregated, even if issued by the same
insurance company. We advise you to consult with a qualified tax adviser as to
potential tax consequences before attempting any partial exchange.
The applicability of the IRS's partial exchange guidance to the splitting of an
annuity contract is not clear. You should consult with a tax adviser if you plan
to split an annuity contract as part of an exchange of annuity contracts.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your Contract be adequately
diversified. Code Section 817(h) provides that a variable annuity contract will
not be treated as an annuity contract for any period during which the
investments made by the separate account or Fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations under Code Section 817(h)
require, among other things, that:
- no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- no more than 70% is represented by any two investments,
- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the insurer
or the contract owner must agree to make adjustments or pay such amounts as may
be required by the IRS for the period during which the diversification
requirements were not met.
Fund shares may also be sold to tax-qualified plans pursuant to an exemptive
order and applicable tax laws. If Fund shares are sold to non-qualified plans,
or to tax-qualified plans that later lose their tax-qualified status, the
affected Funds may fail the diversification requirements of Code Section 817(h),
which could have adverse tax consequences for Contract Owners with premiums
allocated to affected Funds. In order to prevent a Fund diversification failure
from such an occurrence, the Company obtained a private letter ruling ("PLR")
from the IRS. As long as the Funds comply with certain terms and conditions
contained in the PLR, Fund diversification will not be prevented if purported
tax-qualified plans invest in the Funds. The Company and the Funds will monitor
the Funds' compliance with the terms and conditions contained in the PLR.
4. TAX OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax income deferral,
assets in the separate account supporting the contract must be considered to be
owned by the insurance company, and not by the contract owner, for tax purposes.
The IRS has stated in published rulings that a variable contract owner will be
considered the "owner" of separate account assets for income tax purposes if the
contract owner possesses sufficient incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. In circumstances
where the variable contract owner is treated as the "tax owner" of certain
separate account assets, income and gain from such assets would be includable in
the variable contract owner's gross income. The Treasury Department indicated in
1986 that it would provide guidance on the extent to which contract owners may
direct their investments to particular Sub-Accounts without being treated as tax
owners of the underlying shares. Although no such regulations have been issued
to date, the IRS has issued a number of rulings that indicate that this issue
remains subject to a facts and circumstances test for both variable annuity and
life insurance contracts.
Rev. Rul. 2003-92, amplified by Rev. Rul. 2007-7, indicates that, where
interests in a partnership offered in an insurer's separate account are not
available exclusively through the purchase of a variable insurance contract
(e.g., where such interests can be purchased directly by the general public or
others without going through such a variable contract), such "public
availability" means that such interests should be treated as owned directly by
the contract owner (and not by the insurer) for tax purposes, as if such
contract owner had chosen instead to purchase such interests directly (without
going through the variable contract). None of the shares or other interests in
the fund choices offered in our Separate Account for your Contract are available
for purchase except through an insurer's variable contracts or by other
permitted entities.
Rev. Rul. 2003-91 indicates that an insurer could provide as many as 20 fund
choices for its variable contract owners (each with a general investment
strategy, e.g., a small company stock fund or a special industry fund) under
certain circumstances, without causing such a contract owner to be treated as
the tax owner of any of the Fund assets. The ruling does not specify the number
of fund
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options, if any, that might prevent a variable contract owner from receiving
favorable tax treatment. As a result, although the owner of a Contract has more
than 20 fund choices, we believe that any owner of a Contract also should
receive the same favorable tax treatment. However, there is necessarily some
uncertainty here as long as the IRS continues to use a facts and circumstances
test for investor control and other tax ownership issues. Therefore, we reserve
the right to modify the Contract as necessary to prevent you from being treated
as the tax owner of any underlying assets.
5. CERTAIN TAX CONSIDERATIONS FOR FULL OR PARTIAL SETTLEMENT PAYMENTS FROM
THE PERSONAL PENSION ACCOUNT BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE.
Because the IRS has published no guidance on the tax treatment of contracts with
features resembling the Personal Pension Account arrangement, there is
necessarily some uncertainty as to how an annuity contract with a Personal
Pension Account will be treated for tax purposes and we advise you to consult
with a qualified tax adviser concerning such tax treatment before you deposit
amounts into the Personal Pension Account. With respect to the Personal Pension
Account, the Company plans to report any payments under a settlement of the
Personal Pension Account before the Annuity Commencement Date as amounts not
received as an annuity coming first from "income on the contract" (previously
described in subparagraph 2.a) based on a computation of "income on the
contract" for the entire Contract. After the Annuity Commencement Date, the
Company plans to report any continuing periodic settlement payments as amounts
received as an annuity to which a portion of the "investment in the contract"
(discussed in subparagraph 2.b) has been allocated consistent with Treas. Reg.
Section 1.72-6(b).
D. FEDERAL INCOME TAX WITHHOLDING
The portion of an amount received under a Contract that is taxable gross income
to the Payee is also subject to federal income tax withholding, pursuant to Code
Section 3405, which requires the following:
1. Non-Periodic Distributions. The portion of a non-periodic distribution
that is includable in gross income is subject to federal income tax
withholding unless an individual elects not to have such tax withheld
("election out"). We will provide such an "election out" form at the
time such a distribution is requested. If the necessary "election out"
form is not submitted to us in a timely manner, generally we are
required to withhold 10 percent of the includable amount of
distribution and remit it to the IRS.
2. Periodic Distributions (payable over a period greater than one year).
The portion of a periodic distribution that is includable in gross
income is generally subject to federal income tax withholding as if the
Payee were a married individual claiming 3 exemptions, unless the
individual elects otherwise. An individual generally may elect out of
such withholding, or elect to have income tax withheld at a different
rate, by providing a completed election form. We will provide such an
election form at the time such a distribution is requested. If the
necessary "election out" forms are not submitted to us in a timely
manner, we are required to withhold tax as if the recipient were
married claiming 3 exemptions, and remit this amount to the IRS.
Generally no "election out" is permitted if the distribution is delivered
outside the United States and any possession of the United States. Regardless of
any "election out" (or any amount of tax actually withheld) on an amount
received from a Contract, the Payee is generally liable for any failure to pay
the full amount of tax due on the includable portion of such amount received. A
Payee also may be required to pay penalties under estimated income tax rules, if
the withholding and estimated tax payments are insufficient to satisfy the
Payee's total tax liability.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to the section entitled "Information Regarding Tax-Qualified
Retirement Plans" for information relative to the types of plans for which it
may be used and the general explanation of the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and mandatory withholding on U.S. source taxable annuity
distributions at a 30% rate, unless a lower treaty rate applies and any required
tax forms are submitted to us. If withholding applies, we are required to
withhold tax at the 30% rate, or a lower treaty rate if applicable, and remit it
to the IRS. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence.
G. ESTATE, GIFT AND GENERATION-SKIPPING TAX AND RELATED TAX CONSIDERATIONS
Any amount payable upon a Contract Owner's death, whether before or after the
Annuity Commencement Date, is generally includable in the Contract Owner's
estate for federal estate tax purposes. Similarly, prior to the Contract Owner's
death, the payment of any amount from the Contract, or the transfer of any
interest in the Contract, to a beneficiary or other person for less than
adequate consideration may have federal gift tax consequences. In addition, any
transfer to, or designation of, a non-Spouse beneficiary who either is (1) 37
1/2 or more years younger than a Contract Owner or (2) a grandchild (or more
remote further
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descendent) of a Contract Owner may have federal generation-skipping-transfer
("GST") tax consequences under Code Section 2601. Regulations under Code Section
2662 may require us to deduct any such GST tax from your Contract, or from any
applicable payment, and pay it directly to the IRS. However, any federal estate,
gift or GST tax payment with respect to a Contract could produce an offsetting
income tax deduction for a beneficiary or transferee under Code Section 691(c)
(partially offsetting such federal estate or GST tax) or a basis increase for a
beneficiary or transferee under Code Section 691(c) or Section 1015(d). In
addition, as indicated above in "Distributions Prior to the Annuity Commencement
Date," the transfer of a Contract for less than adequate consideration during
the Contract Owner's lifetime generally is treated as producing an amount
received by such Contract Owner that is subject to both income tax and the 10%
penalty tax. To the extent that such an amount deemed received causes an amount
to be includable currently in such Contract Owner's gross income, this same
income amount could produce a corresponding increase in such Contract Owner's
tax basis for such Contract that is carried over to the transferee's tax basis
for such Contract under Code Section 72(e)(4)(C)(iii) and Section 1015.
H. TAX DISCLOSURE OBLIGATIONS
In some instances certain transactions must be disclosed to the IRS or penalties
could apply. See, for example, IRS Notice 2004-67. The Code also requires
certain "material advisers" to maintain a list of persons participating in such
"reportable transactions," which list must be furnished to the IRS upon request.
It is possible that such disclosures could be required by Hartford The Company,
the Owner(s) or other persons involved in transactions involving annuity
contracts. It is the responsibility of each party, in consultation with their
tax and legal advisers, to determine whether the particular facts and
circumstances warrant such disclosures.
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. State income tax rules applicable to tax-qualified retirement
plans often differ from federal income tax rules, and this summary does not
describe any of these differences. Because of the complexity of the tax rules,
owners, participants and beneficiaries are encouraged to consult their own tax
advisors as to specific tax consequences.
The Contracts are available to a variety of tax-qualified retirement plans and
arrangements (a "Qualified Plan" or "Plan"). Tax restrictions and consequences
for Contracts or accounts under each type of Qualified Plan differ from each
other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners, annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to terms and conditions of the Plans
themselves or limited by applicable law, regardless of the terms and conditions
of the Contract issued in connection therewith. Qualified Plans generally
provide for the tax deferral of income regardless of whether the Qualified Plan
invests in an annuity or other investment. You should consider if the Contract
is a suitable investment if you are investing through a Qualified Plan.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS MAY BE AVAILABLE. WE ARE NOT THE PLAN ADMINISTRATOR FOR ANY
QUALIFIED PLAN. THE PLAN ADMINISTRATOR OR CUSTODIAN, WHICHEVER IS APPLICABLE,
(BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT
NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN
BENEFITS, HANDLING ANY PROCESSING AND ADMINISTRATION OF QUALIFIED PLAN LOANS,
COMPLIANCE WITH REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE,
BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS.
OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY
DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT OR BENEFICIARY OF
THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO
FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE
AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND
RECORDS. IF YOU ARE PURCHASING A CONTRACT THROUGH A QUALIFIED PLAN, YOU SHOULD
CONSULT WITH YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU ALSO
SHOULD CONSULT WITH A QUALIFIED TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU
WITHDRAW ANY PORTION OF YOUR CONTRACT VALUE.
The tax rules applicable to Qualified Contracts and Qualified Plans, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of Qualified Plan, as well as the
terms and conditions of the Plan itself. Various tax penalties may apply to
contributions in excess of specified limits, plan distributions (including
loans) that do not comply with specified limits, and certain other transactions
relating to such Plans. Accordingly, this summary provides only general
information about the tax rules associated with use of a Qualified Contract in
such a Qualified Plan. In addition, some Qualified Plans are subject to
distribution and other requirements that are not incorporated into our
administrative procedures. Owners, participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable tax (and non-tax) law and any applicable
Qualified Plan terms. Because of the complexity of these rules, Owners,
participants and beneficiaries are advised to consult with a qualified tax
adviser as to specific tax consequences.
We do not currently offer the Contracts in connection with all of the types of
Qualified Plans discussed below, and may not offer the Contracts for all types
of Qualified Plans in the future.
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1. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS").
In addition to "traditional" IRAs governed by Code Sections 408(a) and (b)
("Traditional IRAs"), there are Roth IRAs governed by Code Section 408A, SEP
IRAs governed by Code Section 408(k), and SIMPLE IRAs governed by Code Section
408(p). Also, Qualified Plans under Code Section 401, 403(b) or 457(b) may elect
to provide for a separate account or annuity contract that accepts after-tax
employee contributions and is treated as a "Deemed IRA" under Code Section
408(q), which is generally subject to the same rules and limitations as
Traditional IRAs. Contributions to each of these types of IRAs are subject to
differing limitations. The following is a very general description of each type
of IRA for which a Contract is available.
a. TRADITIONAL IRAS
Traditional IRAs are subject to limits on the amounts that may be contributed
each year, the persons who may be eligible, and the time when minimum
distributions must begin. Depending upon the circumstances of the individual,
contributions to a Traditional IRA may be made on a deductible or non-deductible
basis. Failure to make required minimum distributions ("RMDs") when the Owner
reaches age 70 1/2 or dies, as described below, may result in imposition of a
50% penalty tax on any excess of the RMD amount over the amount actually
distributed. In addition, any amount received before the Owner reaches age 59
1/2 or dies is subject to a 10% penalty tax on premature distributions, unless a
special exception applies, as described below. Under Code Section 408(e), an IRA
may not be used for borrowing (or as security for any loan) or in certain
prohibited transactions, and such a transaction could lead to the complete tax
disqualification of an IRA.
You (or your surviving spouse if you die) may rollover funds tax-free from
certain existing Qualified Plans (such as proceeds from existing insurance
contracts, annuity contracts or securities) into a Traditional IRA under certain
circumstances, as indicated below. However, mandatory tax withholding of 20% may
apply to any eligible rollover distribution from certain types of Qualified
Plans if the distribution is not transferred directly to the Traditional IRA. In
addition, under Code Section 402(c)(11) a non-spouse "designated beneficiary" of
a deceased Plan participant may make a tax-free "direct rollover" (in the form
of a direct transfer between Plan fiduciaries, as described below in "Rollover
Distributions") from certain Qualified Plans to a Traditional IRA for such
beneficiary, but such Traditional IRA must be designated and treated as an
"inherited IRA" that remains subject to applicable RMD rules (as if such IRA had
been inherited from the deceased Plan participant).
IRAs generally may not invest in life insurance contracts. However, an annuity
contract that is used as an IRA may provide a death benefit that equals the
greater of the premiums paid or the contract's cash value. The Contract offers
an enhanced death benefit that may exceed the greater of the Contract Value or
total premium payments. The tax rules are unclear as to what extent an IRA can
provide a death benefit that exceeds the greater of the IRA's cash value or the
sum of the premiums paid and other contributions into the IRA. Please note that
the IRA rider for the Contract has provisions that are designed to maintain the
Contract's tax qualification as an IRA, and therefore could limit certain
benefits under the Contract (including endorsement, rider or option benefits) to
maintain the Contract's tax qualification.
b. SEP IRAS
Code Section 408(k) provides for a Traditional IRA in the form of an
employer-sponsored defined contribution plan known as a Simplified Employee
Pension ("SEP") or a SEP IRA. A SEP IRA can have employer contributions, and in
limited circumstances employee and salary reduction contributions, as well as
higher overall contribution limits than a Traditional IRA, but a SEP is also
subject to special tax-qualification requirements (e.g., on participation,
nondiscrimination and withdrawals) and sanctions. Otherwise, a SEP IRA is
generally subject to the same tax rules as for a Traditional IRA, which are
described above. Please note that the IRA rider for the Contract has provisions
that are designed to maintain the Contract's tax qualification as an IRA, and
therefore could limit certain benefits under the Contract (including
endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
c. SIMPLE IRAS
The Savings Incentive Match Plan for Employees of small employers ("SIMPLE
Plan") is a form of an employer-sponsored Qualified Plan that provides IRA
benefits for the participating employees ("SIMPLE IRAs"). Depending upon the
SIMPLE Plan, employers may make plan contributions into a SIMPLE IRA established
by each eligible participant. Like a Traditional IRA, a SIMPLE IRA is subject to
the 50% penalty tax for failure to make a full RMD, and to the 10% penalty tax
on premature distributions, as described below. In addition, the 10% penalty tax
is increased to 25% for amounts received during the 2-year period beginning on
the date you first participated in a qualified salary reduction arrangement
pursuant to a SIMPLE Plan maintained by your employer under Code Section
408(p)(2). Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions, and these are subject to different tax
limits from those for a Traditional IRA. Please note that the SIMPLE IRA rider
for the Contract has provisions that are designed to maintain the Contract's tax
qualification as an SIMPLE IRA, and therefore could limit certain benefits under
the Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
A SIMPLE Plan may designate a single financial institution (a Designated
Financial Institution) as the initial trustee, custodian or issuer (in the case
of an annuity contract) of the SIMPLE IRA set up for each eligible participant.
However, any such Plan also must allow
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each eligible participant to have the balance in his SIMPLE IRA held by the
Designated Financial Institution transferred without cost or penalty to a SIMPLE
IRA maintained by a different financial institution. Absent a Designated
Financial Institution, each eligible participant must select the financial
institution to hold his SIMPLE IRA, and notify his employer of this selection.
If we do not serve as the Designated Financial Institution for your employer's
SIMPLE Plan, for you to use one of our Contracts as a SIMPLE IRA, you need to
provide your employer with appropriate notification of such a selection under
the SIMPLE Plan. If you choose, you may arrange for a qualifying transfer of any
amounts currently held in another SIMPLE IRA for your benefit to your SIMPLE IRA
with us.
d. ROTH IRAS
Code Section 408A permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to limitations
on the amounts that may be contributed by the persons who may be eligible to
contribute, certain Traditional IRA restrictions, and certain RMD rules on the
death of the Contract Owner. Unlike a Traditional IRA, Roth IRAs are not subject
to RMD rules during the Contract Owner's lifetime. Generally, however, upon the
Owner's death the amount remaining in a Roth IRA must be distributed by the end
of the fifth year after such death or distributed over the life expectancy of a
designated beneficiary. The Owner of a Traditional IRA may convert a Traditional
IRA into a Roth IRA under certain circumstances. The conversion of a Traditional
IRA to a Roth IRA will subject the fair market value of the converted
Traditional IRA to federal income tax in the year of conversion. In addition to
the amount held in the converted Traditional IRA, the fair market value may
include the value of additional benefits provided by the annuity contract on the
date of conversion, based on reasonable actuarial assumptions. Tax-free
rollovers from a Roth IRA can be made only to another Roth IRA under limited
circumstances, as indicated below. After 2007, distributions from eligible
Qualified Plans can be "rolled over" directly (subject to tax) into a Roth IRA
under certain circumstances. Anyone considering the purchase of a Qualified
Contract as a Roth IRA or a "conversion" Roth IRA should consult with a
qualified tax adviser. Please note that the Roth IRA rider for the Contract has
provisions that are designed to maintain the Contract's tax qualification as a
Roth IRA, and therefore could limit certain benefits under the Contract
(including endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
2. QUALIFIED PENSION OR PROFIT-SHARING PLAN OR SECTION 401(k) PLAN
Provisions of the Code permit eligible employers to establish a tax-qualified
pension or profit sharing plan (described in Section 401(a), and Section 401(k)
if applicable, and exempt from taxation under Section 501(a)). Such a Plan is
subject to limitations on the amounts that may be contributed, the persons who
may be eligible to participate, the amounts of "incidental" death benefits, and
the time when RMDs must commence. In addition, a Plan's provision of incidental
benefits may result in currently taxable income to the participant for some or
all of such benefits. Amounts may be rolled over tax-free from a Qualified Plan
to another Qualified Plan under certain circumstances, as described below.
Anyone considering the use of a Qualified Contract in connection with such a
Qualified Plan should seek competent tax and other legal advice.
In particular, please note that these tax rules provide for limits on death
benefits provided by a Qualified Plan (to keep such death benefits "incidental"
to qualified retirement benefits), and a Qualified Plan (or a Qualified
Contract) often contains provisions that effectively limit such death benefits
to preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefits once RMDs begin, and Qualified Contracts are subject
to such limits. As a result, the amounts of certain benefits that can be
provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
3. TAX SHELTERED ANNUITY UNDER SECTION 403(b) ("TSA")
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations described in Code
Section 501(c)(3) to purchase a "tax-sheltered annuity" ("TSA") contract and,
subject to certain limitations, exclude employer contributions to a TSA from
such an employee's gross income. Generally, total contributions may not exceed
the lesser of an annual dollar limit (e.g., $49,000 in 2009) or 100% of the
employee's "includable compensation" for the most recent full year of service,
subject to other adjustments. There are also legal limits on annual elective
deferrals that a participant may be permitted to make under a TSA. In certain
cases, such as when the participant is age 50 or older, those limits may be
increased. A TSA participant should contact his plan administrator to determine
applicable elective contribution limits. Special provisions may allow certain
employees different overall limitations.
A TSA is subject to a prohibition against distributions from the TSA
attributable to contributions made pursuant to a salary reduction agreement,
unless such distribution is made:
a. after the employee reaches age 59 1/2;
b. upon the employee's separation from service;
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c. upon the employee's death or disability;
d. in the case of hardship (as defined in applicable law and in the case of
hardship, any income attributable to such contributions may not be
distributed); or
e. as a qualified reservist distribution upon certain calls to active
duty.
An employer sponsoring a TSA may impose additional restrictions on your TSA
through its plan document.
Please note that the TSA rider for the Contract has provisions that are designed
to maintain the Contract's tax qualification as a TSA, and therefore could limit
certain benefits under the Contract (including endorsement, rider or option
benefits) to maintain the Contract's tax qualification. In particular, please
note that tax rules provide for limits on death benefits provided by a Qualified
Plan (to keep such death benefits "incidental" to qualified retirement
benefits), and a Qualified Plan (or a Qualified Contract) often contains
provisions that effectively limit such death benefits to preserve the tax
qualification of the Qualified Plan (or Qualified Contract). In addition,
various tax-qualification rules for Qualified Plans specifically limit increases
in benefits once RMDs begin, and Qualified Contracts are subject to such limits.
As a result, the amounts of certain benefits that can be provided by any option
under a Qualified Contract may be limited by the provisions of the Qualified
Contract or governing Qualified Plan that are designed to preserve its tax
qualification. In addition, a life insurance contract issued after September 23,
2007 is generally ineligible to qualify as a TSA under Reg. Section
1.403(b)-8(c)(2).
Amounts may be rolled over tax-free from a TSA to another TSA or Qualified Plan
(or from a Qualified Plan to a TSA) under certain circumstances, as described
below. However, effective for TSA contract exchanges after September 24, 2007,
Reg. Section 1.403(b)-10(b) allows a TSA contract of a participant or
beneficiary under a TSA Plan to be exchanged tax-free for another eligible TSA
contract under that same TSA Plan, but only if all of the following conditions
are satisfied: (1) such TSA Plan allows such an exchange, (2) the participant or
beneficiary has an accumulated benefit after such exchange that is no less than
such participant's or beneficiary's accumulated benefit immediately before such
exchange (taking into account such participant's or beneficiary's accumulated
benefit under both TSA contracts immediately before such exchange), (3) the
second TSA contract is subject to distribution restrictions with respect to the
participant that are no less stringent than those imposed on the TSA contract
being exchanged, and (4) the employer for such TSA Plan enters into an agreement
with the issuer of the second TSA contract under which such issuer and employer
will provide each other from time to time with certain information necessary for
such second TSA contract (or any other TSA contract that has contributions from
such employer) to satisfy the TSA requirements under Code Section 403(b) and
other federal tax requirements (e.g., plan loan conditions under Code Section
72(p) to avoid deemed distributions). Such necessary information could include
information about the participant's employment, information about other
Qualified Plans of such employer, and whether a severance has occurred, or
hardship rules are satisfied, for purposes of the TSA distribution restrictions.
Consequently, you are advised to consult with a qualified tax advisor before
attempting any such TSA exchange, particularly because it requires an agreement
between the employer and issuer to provide each other with certain information.
In addition, the same Regulation provides corresponding rules for a transfer
from one TSA to another TSA under a different TSA Plan (e.g., for a different
eligible employer). We are no longer accepting any incoming exchange request, or
new contract application, for any individual TSA contract.
4. DEFERRED COMPENSATION PLANS UNDER SECTION 457 ("SECTION 457 PLANS")
Certain governmental employers, or tax-exempt employers other than a
governmental entity, can establish a Deferred Compensation Plan under Code
Section 457. For these purposes, a "governmental employer" is a State, a
political subdivision of a State, or an agency or an instrumentality of a State
or political subdivision of a State. A Deferred Compensation Plan that meets the
requirements of Code Section 457(b) is called an "Eligible Deferred Compensation
Plan" or "Section 457(b) Plan." Code Section 457(b) limits the amount of
contributions that can be made to an Eligible Deferred Compensation Plan on
behalf of a participant. Generally, the limitation on contributions is the
lesser of (1) 100% of a participant's includible compensation or (2) the
applicable dollar amount, equal to $15,000 for 2006 and thereafter ($16,500 for
2009). The $15,000 limit will be indexed for cost-of-living adjustments at $500
increments. The Plan may provide for additional "catch-up" contributions . In
addition, under Code Section 457(d) a Section 457(b) Plan may not make amounts
available for distribution to participants or beneficiaries before (1) the
calendar year in which the participant attains age 70 1/2, (2) the participant
has a severance from employment (including death), or (3) the participant is
faced with an unforeseeable emergency (as determined in accordance with
regulations).
Under Code Section 457(g) all of the assets and income of an Eligible Deferred
Compensation Plan for a governmental employer must be held in trust for the
exclusive benefit of participants and their beneficiaries. For this purpose,
annuity contracts and custodial accounts described in Code Section 401(f) are
treated as trusts. This trust requirement does not apply to amounts under an
Eligible Deferred Compensation Plan of a tax-exempt (non-governmental) employer.
In addition, this trust requirement does not apply to amounts held under a
Deferred Compensation Plan of a governmental employer that is not a Section
457(b) Plan. However, where the trust requirement does not apply, amounts held
under a Section 457 Plan must remain subject to the claims of the employer's
general creditors under Code Section 457(b)(6).
55
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5. TAXATION OF AMOUNTS RECEIVED FROM QUALIFIED PLANS
Except under certain circumstances in the case of Roth IRAs or Roth accounts in
certain Qualified Plans, amounts received from Qualified Contracts or Plans
generally are taxed as ordinary income under Code Section 72, to the extent that
they are not treated as a tax-free recovery of after-tax contributions or other
"investment in the contract." For annuity payments and other amounts received
after the Annuity Commencement Date from a Qualified Contract or Plan, the tax
rules for determining what portion of each amount received represents a tax-free
recovery of "investment in the contract" are generally the same as for
Non-Qualified Contracts, as described above.
For non-periodic amounts from certain Qualified Contracts or Plans, Code Section
72(e)(8) provides special rules that generally treat a portion of each amount
received as a tax-free recovery of the "investment in the contract," based on
the ratio of the "investment in the contract" over the Contract Value at the
time of distribution. However, in determining such a ratio, certain aggregation
rules may apply and may vary, depending on the type of Qualified Contract or
Plan. For instance, all Traditional IRAs owned by the same individual are
generally aggregated for these purposes, but such an aggregation does not
include any IRA inherited by such individual or any Roth IRA owned by such
individual.
In addition, penalty taxes, mandatory tax withholding or rollover rules may
apply to amounts received from a Qualified Contract or Plan, as indicated below,
and certain exclusions may apply to certain distributions (e.g., distributions
from an eligible Government Plan to pay qualified health insurance premiums of
an eligible retired public safety officer). Accordingly, you are advised to
consult with a qualified tax adviser before taking or receiving any amount
(including a loan) from a Qualified Contract or Plan.
6. PENALTY TAXES FOR QUALIFIED PLANS
Unlike Non-Qualified Contracts, Qualified Contracts are subject to federal
penalty taxes not just on premature distributions, but also on excess
contributions and failures to make required minimum distributions ("RMDs").
Penalty taxes on excess contributions can vary by type of Qualified Plan and
which person made the excess contribution (e.g., employer or an employee). The
penalty taxes on premature distributions and failures to make timely RMDs are
more uniform, and are described in more detail below.
a. PENALTY TAXES ON PREMATURE DISTRIBUTIONS
Code Section 72(t) imposes a penalty income tax equal to 10% of the taxable
portion of a distribution from certain types of Qualified Plans that is made
before the employee reaches age 59 1/2. However, this 10% penalty tax does not
apply to a distribution that is either:
(i) made to a beneficiary (or to the employee's estate) on or after the
employee's death;
(ii) attributable to the employee's becoming disabled under Code Section
72(m)(7);
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually - "SEPPs") made for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of such employee and a designated beneficiary ("SEPP
Exception"), and for certain Qualified Plans (other than IRAs) such a
series must begin after the employee separates from service;
(iv) (except for IRAs) made to an employee after separation from service
after reaching age 55 (or made after age 50 in the case of a qualified
public safety employee separated from certain government plans);
(v) (except for IRAs) made to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (a similar exception
for IRAs in Code Section 408(d)(6) covers certain transfers for the
benefit of a spouse or ex-spouse);
(vi) not greater than the amount allowable as a deduction to the employee
for eligible medical expenses during the taxable year;
(vii) certain qualified reservist distributions under Code Section
72(t)(2)(G) upon a call to active duty;
(viii) made an account of an IRS levy on the Qualified Plan under Code
Section 72(t)(2)(A)(vii); or
(ix) made as a "direct rollover" or other timely rollover to an Eligible
Retirement Plan, as described below.
In addition, the 10% penalty tax does not apply to a distribution from an IRA
that is either:
(x) made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions in Code Section
72(t)(2)(D) are met;
(xi) not in excess of the amount of certain qualifying higher education
expenses, as defined by Code Section 72(t)(7); or
(xii) for a qualified first-time home buyer and meets the requirements of
Code Section 72(t)(8).
If the taxpayer avoids this 10% penalty tax by qualifying for the SEPP Exception
and later such series of payments is modified (other than by death, disability
or a method change allowed by Rev. Rul. 2002-62), the 10% penalty tax will be
applied retroactively to all the
56
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prior periodic payments (i.e., penalty tax plus interest thereon), unless such
modification is made after both (a) the employee has reached age 59 1/2 and (b)
5 years have elapsed since the first of these periodic payments.
For any premature distribution from a SIMPLE IRA during the first 2 years that
an individual participates in a salary reduction arrangement maintained by that
individual's employer under a SIMPLE Plan, the 10% penalty tax rate is increased
to 25%.
b. RMDS AND 50% PENALTY TAX
THE RMD RULES GENERALLY DO NOT APPLY FOR THE 2009 TAX YEAR. HOWEVER, INDIVIDUALS
WHO DEFERRED 2008 RMDS UNTIL APRIL 1, 2009, MUST STILL TAKE AN RMD BY THAT DATE.
PLEASE CONSULT WITH A QUALIFIED TAX ADVISER OR YOUR QUALIFIED PLAN ADMINISTRATOR
TO DETERMINE HOW THIS CHANGE MAY AFFECT YOU.
If the amount distributed from a Qualified Contract or Plan is less than the
amount of the required minimum distribution ("RMD") for the year, the
participant is subject to a 50% penalty tax on the amount that has not been
timely distributed.
An individual's interest in a Qualified Plan generally must be distributed, or
begin to be distributed, not later than the Required Beginning Date. Generally,
the Required Beginning Date is April 1 of the calendar year following the later
of -
(i) the calendar year in which the individual attains age 70 1/2, or
(ii) (except in the case of an IRA or a 5% owner, as defined in the Code)
the calendar year in which a participant retires from service with the
employer sponsoring a Qualified Plan that allows such a later Required
Beginning Date.
The entire interest of the individual must be distributed beginning no later
than the Required Beginning Date over -
(a) the life of the individual or the lives of the individual and a
designated beneficiary (as specified in the Code), or
(b) over a period not extending beyond the life expectancy of the individual
or the joint life expectancy of the individual and a designated
beneficiary.
If an individual dies before reaching the Required Beginning Date, the
individual's entire interest generally must be distributed within 5 years after
the individual's death. However, this RMD rule will be deemed satisfied if
distributions begin before the close of the calendar year following the
individual's death to a qualifying designated beneficiary and distribution is
over the life of such designated beneficiary (or over a period not extending
beyond the life expectancy of such beneficiary). If the individual's surviving
spouse is the sole designated beneficiary, distributions may be delayed until
the deceased individual would have attained age 70 1/2.
If an individual dies after RMDs have begun for such individual, any remainder
of the individual's interest generally must be distributed at least as rapidly
as under the method of distribution in effect at the time of the individual's
death.
The RMD rules that apply while the Contract Owner is alive do not apply with
respect to Roth IRAs. The RMD rules applicable after the death of the Owner
apply to all Qualified Plans, including Roth IRAs. In addition, if the Owner of
a Traditional or Roth IRA dies and the Owner's surviving spouse is the sole
designated beneficiary, this surviving spouse may elect to treat the Traditional
or Roth IRA as his or her own.
The RMD amount for each year is determined generally by dividing the account
balance by the applicable life expectancy. This account balance is generally
based upon the account value as of the close of business on the last day of the
previous calendar year. RMD incidental benefit rules also may require a larger
annual RMD amount, particularly when distributions are made over the joint lives
of the Owner and an individual other than his or her spouse. RMDs also can be
made in the form of annuity payments that satisfy the rules set forth in
Regulations under the Code relating to RMDs.
In addition, in computing any RMD amount based on a contract's account value,
such account value must include the actuarial value of certain additional
benefits provided by the contract. As a result, electing an optional benefit
under a Qualified Contract may require the RMD amount for such Qualified
Contract to be increased each year, and expose such additional RMD amount to the
50% penalty tax for RMDs if such additional RMD amount is not timely
distributed.
7. TAX WITHHOLDING FOR QUALIFIED PLANS
Distributions from a Qualified Contract or Qualified Plan generally are subject
to federal income tax withholding requirements. These federal income tax
withholding requirements, including any "elections out" and the rate at which
withholding applies, generally are the same as for periodic and non-periodic
distributions from a Non-Qualified Contract, as described above, except where
the distribution is an "eligible rollover distribution" from a Qualified Plan
(described below in "ROLLOVER DISTRIBUTIONS"). In the latter case, tax
withholding is mandatory at a rate of 20% of the taxable portion of the
"eligible rollover distribution," to the extent it is not directly rolled over
to an IRA or other Eligible Retirement Plan (described below in "ROLLOVER
DISTRIBUTIONS"). Payees cannot elect out of this mandatory 20% withholding in
the case of such an "eligible rollover distribution."
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Also, special withholding rules apply with respect to distributions from
non-governmental Section 457(b) Plans, and to distributions made to individuals
who are neither citizens nor resident aliens of the United States.
Regardless of any "election out" (or any actual amount of tax actually withheld)
on an amount received from a Qualified Contract or Plan, the payee is generally
liable for any failure to pay the full amount of tax due on the includable
portion of such amount received. A payee also may be required to pay penalties
under estimated income tax rules, if the withholding and estimated tax payments
are insufficient to satisfy the payee's total tax liability.
8. ROLLOVER DISTRIBUTIONS
The current tax rules and limits for tax-free rollovers and transfers between
Qualified Plans vary according to (1) the type of transferor Plan and transferee
Plan, (2) whether the amount involved is transferred directly between Plan
fiduciaries (a "direct transfer" or a "direct rollover") or is distributed first
to a participant or beneficiary who then transfers that amount back into another
eligible Plan within 60 days (a "60-day rollover"), and (3) whether the
distribution is made to a participant, spouse or other beneficiary. Accordingly,
we advise you to consult with a qualified tax adviser before receiving any
amount from a Qualified Contract or Plan or attempting some form of rollover or
transfer with a Qualified Contract or Plan.
For instance, generally any amount can be transferred directly from one type of
Qualified Plan (e.g., a TSA) to the same type of Plan for the benefit of the
same individual, without limit (or federal income tax), if the transferee Plan
is subject to the same kinds of restrictions as the transferor Plan (e.g., a TSA
that is subject to the same kinds of salary reduction restrictions) and certain
other conditions to maintain the applicable tax qualification are satisfied
(e.g., as described above for TSA exchanges after September 24, 2007). Such a
"direct transfer" between the same kinds of Plan is generally not treated as any
form of "distribution" out of such a Plan for federal income tax purposes.
By contrast, an amount distributed from one type of Plan (e.g., a TSA) into a
different type of Plan (e.g., a Traditional IRA) generally is treated as a
"distribution" out of the first Plan for federal income tax purposes, and
therefore to avoid being subject to such tax, such a distribution must qualify
either as a "direct rollover" (made directly to another Plan fiduciary) or as a
"60-day rollover." The tax restrictions and other rules for a "direct rollover"
and a "60-day rollover" are similar in many ways, but if any "eligible rollover
distribution" made from certain types of Qualified Plan is not transferred
directly to another Plan fiduciary by a "direct rollover," then it is subject to
mandatory 20% withholding, even if it is later contributed to that same Plan in
a "60-day rollover" by the recipient. If any amount less than 100% of such a
distribution (e.g., the net amount after the 20% withholding) is transferred to
another Plan in a "60-day rollover", the missing amount that is not rolled over
remains subject to normal income tax plus any applicable penalty tax.
Under Code Sections 402(f)(2)(A) and 3405(c)(3) an "eligible rollover
distribution" (which is both eligible for rollover treatment and subject to 20%
mandatory withholding absent a "direct rollover") is generally any distribution
to an employee of any portion (or all) of the balance to the employee's credit
in any of the following types of "Eligible Retirement Plan": (1) a Qualified
Plan under Code Section 401(a) ("Qualified 401(a) Plan"), (2) a qualified
annuity plan under Code Section 403(a) ("Qualified Annuity Plan"), (3) a TSA
under Code Section 403(b), or (4) a governmental Section 457(b) Plan. However,
an "eligible rollover distribution" does not include any distribution that is
either -
a. an RMD amount;
b. one of a series of substantially equal periodic payments (not less
frequently than annually) made either (i) for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and a designated beneficiary, or (ii) for
a specified period of 10 years or more; or
c. any distribution made upon hardship of the employee.
Before making an "eligible rollover distribution," a Plan administrator
generally is required under Code Section 402(f) to provide the recipient with
advance written notice of the "direct rollover" and "60-day rollover" rules and
the distribution's exposure to the 20% mandatory withholding if it is not made
by "direct rollover." Generally, under Code Sections 402(c), 403(b)(8) and 457
(e)(16), a "direct rollover" or a "60-day rollover" of an "eligible rollover
distribution" can be made to a Traditional IRA or to another Eligible Retirement
Plan that agrees to accept such a rollover. However, the maximum amount of an
"eligible rollover distribution" that can qualify for a tax-free "60-day
rollover" is limited to the amount that otherwise would be includable in gross
income. By contrast, a "direct rollover" of an "eligible rollover distribution"
can include after-tax contributions as well, if the direct rollover is made
either to a Traditional IRA or to another form of Eligible Retirement Plan that
agrees to account separately for such a rollover, including accounting for such
after-tax amounts separately from the otherwise taxable portion of this
rollover. Separate accounting also is required for all amounts (taxable or not)
that are rolled into a governmental Section 457(b) Plan from either a Qualified
Section 401(a) Plan, Qualified Annuity Plan, TSA or IRA. These amounts, when
later distributed from the governmental Section 457(b) Plan, are subject to any
premature distribution penalty tax applicable to distributions from such a
"predecessor" Qualified Plan.
Rollover rules for distributions from IRAs under Code Sections 408(d)(3) and
408A(d)(3) also vary according to the type of transferor IRA and type of
transferee IRA or other Plan. For instance, generally no tax-free "direct
rollover" or "60-day rollover" can be made between a "NonRoth IRA" (Traditional,
SEP or SIMPLE IRA) and a Roth IRA, and a transfer from NonRoth IRA to a Roth
IRA, or a
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"conversion" of a NonRoth IRA to a Roth IRA, is subject to special rules. In
addition, generally no tax-free "direct rollover" or "60-day rollover" can be
made between an "inherited IRA" (NonRoth or Roth) for a beneficiary and an IRA
set up by that same individual as the original owner. Generally, any amount
other than an RMD distributed from a Traditional or SEP IRA is eligible for a
"direct rollover" or a "60-day rollover" to another Traditional IRA for the same
individual. Similarly, any amount other than an RMD distributed from a Roth IRA
is generally eligible for a "direct rollover" or a "60-day rollover" to another
Roth IRA for the same individual. However, in either case such a tax-free 60-day
rollover is limited to 1 per year (365-day period); whereas no 1-year limit
applies to any such "direct rollover." Similar rules apply to a "direct
rollover" or a "60-day rollover" of a distribution from a SIMPLE IRA to another
SIMPLE IRA or a Traditional IRA, except that any distribution of employer
contributions from a SIMPLE IRA during the initial 2-year period in which the
individual participates in the employer's SIMPLE Plan is generally disqualified
(and subject to the 25% penalty tax on premature distributions) if it is not
rolled into another SIMPLE IRA for that individual. Amounts other than RMDs
distributed from a Traditional or SEP IRA (or SIMPLE IRA after the initial
2-year period) also are eligible for a "direct rollover" or a "60-day rollover"
to an Eligible Retirement Plan (e.g., a TSA) that accepts such a rollover, but
any such rollover is limited to the amount of the distribution that otherwise
would be includable in gross income (i.e., after-tax contributions are not
eligible).
Special rollover rules also apply to (1) transfers or rollovers for the benefit
of a spouse (or ex-spouse) or a nonspouse designated beneficiary, (2) Plan
distributions of property, (3) distributions from a Roth account in certain
Plans, (4) recontributions within 3 years of "qualified hurricane distributions"
made before 2007 under Code Section 1400Q(a), (5) transfers from a Traditional
or Roth IRA to certain health savings accounts under Code Section 408(d)(9), and
(6) obtaining a waiver of the 60-day limit for a tax-free rollover from the IRS.
9. CERTAIN TAX CONSIDERATIONS WITH THE PERSONAL PENSION ACCOUNT IN QUALIFIED
PLANS
Because the IRS has published no guidance on the tax treatment of arrangements
resembling the Personal Pension Account, there is necessarily some uncertainty
as to how an annuity contract with a Personal Pension Account will be treated in
different types of Qualified Plans, and we advise you to consult with a
qualified tax adviser concerning such treatment before you deposit any amount
into a Personal Pension Account that is held in any Qualified Plan.
Among such tax issues for you to consider with a qualified tax adviser in such a
case are the following:
a. Any amounts received by you (or your payee) prior to your attaining
age 59 1/2 are generally subject to the penalty tax on premature
distributions described above, unless such an amount received can
qualify for an exception from such a penalty tax, e.g., scheduled
payments that qualify for the SEPP Exception. In addition, any
modification in payments qualifying for the SEPP Exception (e.g., by
commutation) can have adverse penalty tax consequences, as described
above.
b. The tax rules for satisfying RMD requirements vary according to both
the form of Qualified Plan (e.g., NonRoth or Roth IRA) and the form
of payment (e.g., periodic annuity payout or non-periodic
distribution from an account value). As a result, such variations
should be considered when RMD amounts need to be taken (e.g., after
age 70 1/2 or death). In addition, any modification in the form or
amount of such payments (e.g., by commutation) could have adverse tax
consequences, if such a modification does not satisfy an
IRS-recognized RMD exception (e.g., for an acceleration or other
change in periodic payments under Reg. Section 1.401(a) (9)-6, Q&A-1
and Q&A-14).
c. Any attempt to transfer an amount from the Benefit Balance to
Sub-Accounts or the Fixed Accumulation Feature (if available) that
exceeds the threshold for such a transfer will be treated by us as a
form of annuitization distribution from the Personal Pension
Account, and thus may not qualify as a tax-free direct transfer.
Instead, such an attempted excess transfer could be treated for tax
purposes as a potentially taxable distribution out of the entire
annuity contract, followed by a contribution back into the same
contract. While such a distribution from an IRA may qualify for
60-day rollover treatment (if it is not needed to satisfy RMD
requirements), only one such tax-free 60-day rollover is allowed for
any 365-day period for any individual from all of such individual's
IRAs. Failing such tax-free rollover treatment, such a distribution
could be subject to both income and penalty tax, and any deemed
contribution back into the contract may be subject to an excise tax
on excess contributions, particularly after age 70 1/2. IN ADDITION,
ANY SUCH DISTRIBUTION FROM A NON-IRA FORM OF QUALIFIED PLAN MAY BE
SUBJECT TO THE 20% MANDATORY WITHHOLDING TAX, UNLESS SUCH
DISTRIBUTION IS AN RMD OR OTHERWISE AVOIDS CLASSIFICATION AS AN
"ELIGIBLE ROLLOVER DISTRIBUTION," AS DESCRIBED ABOVE.
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
GENERAL INFORMATION
Safekeeping of Assets
Experts
Non-Participating
Misstatement of Age or Sex
Principal Underwriter
Additional Payments
PERFORMANCE RELATED INFORMATION
Total Return for all Sub-Accounts
Yield for Sub-Accounts
Money Market Sub-Accounts
Additional Materials
Performance Comparisons
ACCUMULATION UNIT VALUES
FINANCIAL STATEMENTS
APP A-1
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APPENDIX A - EXAMPLES
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
PERSONAL PENSION ACCOUNT APP A-2
RETURN OF PREMIUM DEATH BENEFIT APP A-8
REMAINING GROSS PREMIUM APP A-9
APP A-2
-------------------------------------------------------------------------------
PERSONAL PENSION ACCOUNT EXAMPLES
EXAMPLE 1: STANDARD ILLUSTRATIONS WITH A PARTIAL INCOME STREAM
Assume the initial Personal Pension Account Contribution is equal to $100,000
(no sums are invested in the Fixed Accumulation Feature or Sub-Accounts). Assume
that in Contract Year 7, the Owner requested to commence an income stream based
on $50,000 of Annuity Payout Value during the guarantee window. For the purposes
of this Example, the Contract Owner chose a Target Income Age of 64.
Hypothetical credited and payout rates are illustrated below.
A. To understand how your guaranteed payout rates are set during your guarantee
window (shaded area), see Guaranteed Payout Rates in Contract Years 1
through 7. In this Example, the guaranteed payout rate is locked in at
Contract Year 7 when Personal Pension Account Payouts commence.
B. Credited interest rates vary during the duration of your Contract as
illustrated in column 4. In this illustration, credited interest rates
change at the 10th Contract Year and again at the 20th Contract Year.
C. Please refer to the last column in Contract Year 23 for an example of how
Personal Pension Account Payouts will continue for the life of the
Annuitant, Owner or joint Owner even though Annuity Payout Value has been
exhausted.
CREDITED
CONTRACT BENEFIT INTEREST
YEAR AGE BALANCE RATE
----------------------------------------------------------------------
0 60 $ 100,000 5.00%
1 61 105,000 5.00%
2 62 110,250 5.00%
3 63 115,763 5.00%
GUARANTEE 4 64 121,551 5.00%
WINDOW 5 65 127,628 5.00%
6 66 134,010 5.00%
7 67 140,710 5.00%
8 68 142,009 5.00%
9 69 143,535 5.00%
10 70 145,299 3.00%
11 71 145,212 3.00%
12 72 145,220 3.00%
13 73 145,326 3.00%
14 74 145,532 3.00%
15 75 145,841 3.00%
16 76 146,256 3.00%
17 77 146,781 3.00%
18 78 147,419 3.00%
19 79 148,173 3.00%
20 80 149,047 1.50%
21 81 147,927 1.50%
22 82 146,839 1.50%
23 83 147,568 1.50%
PERSONAL
ANNUITY GUARANTEED PENSION
ACCUMULATION PAYOUT PAYOUT RATES ACCOUNT
BALANCE VALUE (PER 1000) PAYOUTS(2)
------------ --------------------------------------------------------------------------
$ 100,000
105,000 61.99
110,250 62.33
115,763 62.72
GUARANTEE 121,551 63.16
WINDOW 127,628 63.65
134,010 64.17
90,710 (1) 50,000 64.73 $ 3,237
95,246 46,763 $ 3,237
100,008 43,527 $ 3,237
105,008 40,290 $ 3,237
108,158 37,054 $ 3,237
111,403 33,817 $ 3,237
114,745 30,581 $ 3,237
118,188 27,344 $ 3,237
121,733 24,108 $ 3,237
125,385 20,871 $ 3,237
129,147 17,634 $ 3,237
133,021 14,398 $ 3,237
137,012 11,161 $ 3,237
141,122 7,925 $ 3,237
143,239 4,688 $ 3,237
145,388 1,452 $ 3,237
147,568 0 $ 3,237
(1) Accumulation Balance is reduced by $50,000 that is converted into the
Annuity Payout Value. CDSC's and Premium tax have not been applied in this
Example. If the $50,000 was instead commuted into a Commuted Value
(assuming a hypothetical discount rate of 6%), the Commuted Value would be
$32,294. The remaining Accumulation Balance can be converted into Annuity
Payout Value at a later date for additional Personal Pension Account
Payouts.
(2) These Personal Pension Account Payouts shall continue for the life of the
Annuitant, Owner or joint Owner pursuant to Annuity Payout Option Two.
APP A-3
-------------------------------------------------------------------------------
EXAMPLE 2
Assume a $100,000 initial Personal Pension Account Contribution was made at a
time when we declared a hypothetical credited rate of 4% and that a $15,000
subsequent Personal Pension Account Contribution was made when we declared a
hypothetical credited rate of 3.75%. Your Benefit Balance would increase as
follows:
PERSONAL PERSONAL TOTAL
PENSION ACCOUNT CREDITED PENSION ACCOUNT CREDITED BENEFIT
AGE CONTRIBUTION RATE CONTRIBUTION RATE BALANCE
--------------------------------------------------------------------------------------------------------------------
55 First $100,000 $100,000
56 Deposit 4.00% $104,000
57 4.00% $108,160
58 4.00% $112,486
59 4.00% Second $15,000 $131,986
60 4.00% Deposit 3.75% $137,228
61 4.00% 3.75% $142,678
62 4.00% 3.75% $148,345
63 4.00% 3.75% $154,237
64 4.00% 3.75% $160,362
65 4.00% 3.75% $166,732
EXAMPLE 3: BENEFIT BALANCE TRANSFER (IN-BOUND)
The following example illustrates the impact on various values associated to the
Contract when a transfer from the Sub-Accounts to the Personal Pension Account
occurs. Assume that the Owner makes a Premium Payment of $100,000 into the
Sub-Accounts and then elects to transfer $5,000 from the Sub-Accounts to the
Personal Pension Account, in which event:
TRANSFER FROM
SUB-ACCOUNTS TO THE
PERSONAL PENSION ACCOUNT
BEFORE VALUE AFTER VALUE
--------------------------------------------------------------------------------
Contract Value (assumed) $130,000 $125,000
Remaining Gross Premium $100,000 $100,000
Annual Withdrawal Amount $5,000 $0
Return of Premium Death Benefit $100,000 $95,000
Benefit Balance $0 $5,000
- The Contract Value is reduced by the amount of the transfer ($5,000).
- The Remaining Gross Premium associated to the Sub-Accounts is not reduced by
the amount of the transfer as Remaining Gross Premium is only reduced for
Surrenders or transfers in excess of the Annual Withdrawal Amount.
- The Annual Withdrawal Amount is reduced by the amount of the transfer
($5,000) as transfers (and Surrenders) reduce the Annual Withdrawal Amount.
- The Return of Premium Death Benefit is reduced dollar for dollar for the
amount of the transfer ($5,000).
- Assuming that there were no sums previously invested in the Personal Pension
Account, the Benefit Balance is increased by this amount.
APP A-4
-------------------------------------------------------------------------------
BENEFIT BALANCE TRANSFER (OUT-BOUND)
The following example illustrates the impact on various values associated to the
Contract when a transfer from the Personal Pension Account to the Sub-Accounts
occurs. Assume that the Owner makes a Personal Pension Account Contribution of
$100,000 into the Personal Pension Account and then elects to transfer the
maximum available transfer from the Personal Pension Account to the
Sub-Accounts. The out-bound transfer restriction considers the following
factors:
END OF YEAR MAXIMUM OF A, B, C A B C
-------------------------------------------------------------------
1 $4,120 $4,120 $3,000 $0
2 $4,120 $4,073 $2,966 $4,120
Where ,
- Column A equals four (4%) percent of the Accumulation Balance as of the
prior Contract Anniversary. Assume that the $100,000 Personal Pension
Account Contribution earns a credited interest rate of 3%.
- Column B equals the amount of interest credited to the Accumulation Balance
over the most recent full Contract Year.
- Column C equals the amount of Accumulation Balance transferred to Contract
Value during the most recent full Contract Year.
Applying these factors, the following table shows how various Contract benefits
change:
TRANSFER FROM PERSONAL PENSION ACCOUNT TO THE
SUB-ACCOUNTS
END OF YEAR 1
BEFORE VALUE AFTER VALUE
--------------------------------------------------------------------------------
Contract Value (assumed) $130,000 $134,120
Remaining Gross Premium $100,000 $104,120
Annual Withdrawal Amount $5,000 $5,206
Return of Premium Death Benefit $100,000 $104,120
Benefit Balance $103,000 $98,880
- The Accumulation Balance is reduced by the amount of the transfer ($4,120).
- The Remaining Gross Premium associated to the Sub-Accounts is increased by
the amount of the transfer as the transfer from the Personal Pension Account
to the Sub-Accounts is considered a subsequent Premium Payment.
- The Annual Withdrawal Amount is increased by 5% of the transfer amount
($206) as the transfer from the Personal Pension Account to the Sub-Accounts
is considered a subsequent Premium Payment.
- The Return of Premium Death Benefit is increased dollar for dollar for the
amount of the transfer ($4,120).
- The Contract Value is increased by the amount of the transfer ($4,120).
APP A-5
-------------------------------------------------------------------------------
EXAMPLE 4A: FULL COMMUTATION WITH COMMUTED VALUE
Assume that the Owner desires to start taking all Personal Pension Account
Payouts and then fully commute the Personal Pension Account Payouts in year 20,
which is outside of their guarantee window. For the purposes of this Example,
the Contract Owner chose a Target Income Age of 64. The Owner does not terminate
their Contract and therefore Personal Pension Account Payouts will resume after
the Guaranteed Payout Duration (assuming that all relevant persons are alive).
Also, assume that the initial Personal Pension Account Contribution is equal to
$100,000 and no Premium Payments have been invested in the Fixed Accumulation
Feature or Sub-Accounts.
CONTRACT BENEFIT ACCUMULATION CREDITED
YEAR AGE BALANCE BALANCE RATE
-------------------------------------------------------------------------------------------------
0 60 $100,000 $ 100,000 5.00 %
1 61 105,000 105,000 5.00 %
2 62 110,250 110,250 5.00 %
3 63 115,763 115,763 5.00 %
GUARANTEE 4 64 121,551 121,551 5.00 %
WINDOW 5 65 127,628 127,628 5.00 %
6 66 134,010 134,010 5.00 %
7 67 140,710 140,710 5.00 %
8 68 147,746 147,746 5.00 %
9 69 155,133 155,133 5.00 %
10 70 162,889 162,889 3.00 %
11 71 167,776 167,776 3.00 %
12 72 172,809 172,809 3.00 %
13 73 177,994 177,994 3.00 %
14 74 183,334 183,334 3.00 %
15 75 188,834 188,834 3.00 %
16 76 194,499 194,499 3.00 %
17 77 200,333 200,333 3.00 %
18 78 206,343 206,343 3.00 %
19 79 212,534 212,534 3.00 %
20 80 218,910 $ 0 (2) 1.50 %
21 81 n/a N/A n/a (3)
22 82 n/a N/A n/a
23 83 n/a N/A n/a
24 84 n/a N/A n/a
25 85 n/a N/A n/a
26 86 n/a N/A n/a
27 87 n/a N/A n/a
28 88 n/a N/A n/a
29 89 n/a N/A n/a
30 90 n/a N/A n/a
ANNUITY
PAYOUT PAYOUT RATES COMMUTED
VALUE (PER 1000)(1) VALUE PAYOUTS
------------ -------------------------------------------------------------
$ 0 61.68
$ 0 61.99 $ 0
$ 0 62.33 $ 0
$ 0 62.72 $ 0
GUARANTEE $ 0 63.16 $ 0
WINDOW $ 0 63.65 $ 0
$ 0 64.17 $ 0
$ 0 64.73 $ 0
$ 0 65.31 $ 0
$ 0 65.91 $ 0
$ 0 66.56 $ 0
$ 0 69.14 $ 0
$ 0 71.94 $ 0
$ 0 74.99 $ 0
$ 0 78.32 $ 0
$ 0 81.96 $ 0
$ 0 85.92 $ 0
$ 0 90.11 $ 0
$ 0 94.63 $ 0
$ 0 99.55 $ 0
$ 218,910 105.02 (6) $156,367 (5) $ 0 (4)
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A $ 22,989 (7)
N/A N/A N/A $ 22,989 (7)
(1) Payout Rates are only guaranteed if Personal Pension Account Payouts begin
within the guarantee window. Payouts that begin outside the guarantee
window are generally established using rates set at our discretion, subject
to the terms of your Contract. We cannot speculate what payout rates could
be when commencing Personal Pension Account Payouts outside of the
guarantee window. These rates may be as high as, but will never be greater
than, the payout rates guaranteed for Personal Pension Account Payouts we
set at the time of your Personal Pension Account Contributions. Payout
amounts will be no lower than the non-forfeiture amount described in the
Owner's contract.
(2) The Accumulation Balance is depleted to $0 based on being converted to
Annuity Payout Value. CDSCs and Premium tax are not shown in this Example.
APP A-6
-------------------------------------------------------------------------------
(3) Interest is no longer credited under the Personal Pension Account.
(4) The Personal Pension Account Payout is derived by multiplying the Annuity
Payout Value by the payout rate applicable to the year in which commutation
is requested and dividing by 1,000. In this case, $218,910*$105.02/1,000 =
$22,989. However, in this example, Personal Pension Account Payouts are
commuted and paid to the Owner in one lump sum. Life contingent Personal
Pension Account Payouts may resume after the Guarantee Payout Duration if
the Annuitant and Owner are living and have not terminated the Contract as
illustrated in years 29 and 30.
(5) The Commuted Value depicted is based on commutation of the Annuity Payout
Value (in this Example, is the same as the Benefit Balance because this is
a full commutation) of $218,910 using a hypothetical discount rate of 6%.
The Commuted Value is equal to the present value of the Personal Pension
Account Payout(s) associated with the Annuity Payout Value over the
Guaranteed Payout Duration (i.e., $218,910/$22,989, rounded down = 9 years)
calculated using this discount rate.
(6) Hypothetical Payout Rate used because Personal Pension Accounts and
subsequent commutation occur outside of the guarantee window.
(7) Lifetime Personal Pension Account Payouts resume because in this Example
the Annuitant is still living. The Owner would give up these lifetime
Personal Pension Account Payouts if he or she terminated the Contract.
APP A-7
-------------------------------------------------------------------------------
EXAMPLE 4B: PARTIAL COMMUTATION WITH COMMUTED VALUE
Assume that the Owner desires to start taking Personal Pension Account Payouts
and commute half of the Personal Pension Account Payouts in year 20, which is
outside of their guarantee window. In this Example, the guarantee window is
represented by the shaded area in years 1 though 7. Year 20 "Before" illustrates
how the Annuity Payout Value is split in half to serve as the basis for Personal
Pension Account Payouts and the Commuted Value. Year 20 "After" illustrates the
amounts paid to the Owner in the form of Personal Pension Account Payouts and
Commuted Value. The Owner does not terminate their Contract and therefore
Personal Pension Account Payouts will resume after the Guaranteed Payout
Duration (assuming that all relevant persons are alive). The Guaranteed Payout
Duration in this Example is illustrated as the shaded rows corresponding to
Contract Years 20 through 28. Assume the initial Deposit is equal to $100,000
and no sums are invested in the Fixed Accumulation Feature or Sub-Accounts.
ANNUITY
CONTRACT BENEFIT ACCUMULATION CREDITED PAYOUT
YEAR AGE BALANCE BALANCE RATE VALUE 1
------------------------------------------------------------------------------------------
0 60 $100,000 $ 100,000 5.00% $ 0
1 61 105,000 105,000 5.00% $ 0
2 62 110,250 110,250 5.00% $ 0
3 63 115,763 115,763 5.00% $ 0
4 64 121,551 121,551 5.00% $ 0
5 65 127,628 127,628 5.00% $ 0
6 66 134,010 134,010 5.00% $ 0
7 67 140,710 140,710 5.00% $ 0
8 68 147,746 147,746 5.00% $ 0
9 69 155,133 155,133 5.00% $ 0
10 70 162,889 162,889 3.00% $ 0
11 71 167,776 167,776 3.00% $ 0
12 72 172,809 172,809 3.00% $ 0
13 73 177,994 177,994 3.00% $ 0
14 74 183,334 183,334 3.00% $ 0
15 75 188,834 188,834 3.00% $ 0
16 76 194,499 194,499 3.00% $ 0
17 77 200,333 200,333 3.00% $ 0
18 78 206,343 206,343 3.00% $ 0
19 79 212,534 212,534 3.00% $ 0
20 BEFORE 80 218,910 $ 0 (2) 1.50% $ 109,455
20 AFTER 80 $ 97,960 $ 0 (2) n/a $ 97,960
21 81 $ 86,465 N/A n/a (3) $ 86,465
22 82 $ 74,970 N/A n/a $ 74,970
23 83 $ 63,475 N/A n/a $ 63,475
24 84 $ 51,980 N/A n/a $ 51,980
25 85 $ 40,485 N/A n/a $ 40,485
26 86 $ 28,990 N/A n/a $ 28,990
27 87 $ 17,495 N/A n/a $ 17,495
28 88 $ 6,000 N/A n/a $ 6,000
29 89 $ 0 N/A n/a $ 0
30 90 $ 0 N/A n/a $ 0
31 91 $ 0 N/A n/a $ 0
ANNUITY
CONTRACT PAYOUT COMMUTED PAYOUT RATES
YEAR VALUE 2 VALUE (PER 1000)(1) PAYOUTS
------------ ---------------------------------------------------------------------------
0 $ 0 61.68
1 $ 0 61.99 $ 0
2 $ 0 62.33 $ 0
3 $ 0 62.72 $ 0
4 $ 0 63.16 $ 0
5 $ 0 63.65 $ 0
6 $ 0 64.17 $ 0
7 $ 0 64.73 $ 0
8 $ 0 65.31 $ 0
9 $ 0 65.91 $ 0
10 $ 0 66.56 $ 0
11 $ 0 69.14 $ 0
12 $ 0 71.94 $ 0
13 $ 0 74.99 $ 0
14 $ 0 78.32 $ 0
15 $ 0 81.96 $ 0
16 $ 0 85.92 $ 0
17 $ 0 90.11 $ 0
18 $ 0 94.63 $ 0
19 $ 0 99.55 $ 0
20 BEFORE (4) $ 109,455 (4)
20 AFTER (5) $ 0 $ 78,185 (7) 105.02 (8) $ 11,495 (6)
21 $ 0 N/A N/A $ 11,495
22 $ 0 N/A N/A $ 11,495
23 $ 0 N/A N/A $ 11,495
24 $ 0 N/A N/A $ 11,495
25 $ 0 N/A N/A $ 11,495
26 $ 0 N/A N/A $ 11,495
27 $ 0 N/A N/A $ 11,495
28 $ 0 N/A N/A $ 11,495
29 $ 0 N/A N/A $ 22,989 (9)
30 $ 0 N/A N/A $ 22,989
31 $ 0 N/A N/A $ 22,989
(1) Payout Rates are only guaranteed if Personal Pension Account Payouts begin
within the guarantee window. Personal Pension Account Payouts that begin
outside the guarantee window are generally established using rates set at
our discretion, subject to the terms of your Contract. We cannot speculate
what payout rates could be when commencing Personal Pension Account Payouts
outside of the guarantee window. These rates may be as high as, but will
never be greater than, the payout rates guaranteed for Personal Pension
Account Payouts we set at the time of your Personal Pension Account
Contributions. Payout amounts will be no lower than the non-forfeiture
amount described in the Owner's contract.
(2) The Accumulation Balance is depleted to $0 based on all amounts being
converted to Annuity Payout Value. CDSCs and Premium tax not shown in the
Example.
(3) Interest is no longer credited under the Personal Pension Account.
APP A-8
-------------------------------------------------------------------------------
(4) In year 20, the Owner elected to commute half of their Annuity Payout Value
and receive the remaining half in the form of Personal Pension Account
Payouts. Thus, the Accumulation Balance of $210,910 is split in half.
$109,455 is converted into Annuity Payout Value and will serve as the basis
for Personal Pension Account Payouts. The remaining $109,455 will serve as
the basis for the Commuted Value calculation.
(5) The Annuity Payout Value of $109,455 is reduced by the Personal Pension
Account Payout of $11,495, leaving an Annuity Payout Value of $97,960
remaining.
(6) The Personal Pension Account Payout is derived by multiplying the Annuity
Payout Value by the appropriate payout rate and dividing by 1,000. In this
case, $109,455*105.02/1,000 = $11,495. However, in this example, half of
the Personal Pension Account Payouts are commuted and paid to the Owner in
one lump sum. Life contingent Personal Pension Account Payouts may resume
after the Guarantee Payout Duration if the Annuitant and Owner are living
as illustrated in years 29, 30, and 31.
(7) The Commuted Value depicted is based on commutation of half of the Annuity
Payout Value, or $109,455, using a hypothetical discount rate of 6%. The
Commuted Value is equal to the present value of the Personal Pension
Account Payout(s) associated with the Annuity Payout Value over the
remaining Guaranteed Payout Duration (i.e., $109,455/$11,495, rounded down
= 9) calculated using the discount rate.
(8) A hypothetical Payout Rate is used because Personal Pension Account Payouts
and commutation occur outside of the guarantee window.
(9) In this case, the lifetime Personal Pension Account Payouts for each
Annuity Payout Value is $11,495 ($109,455*105.02/1000 = $11,495). When
combined, these lifetime Personal Pension Account Payouts equal $22,989.
Lifetime Personal Pension Account Payouts begin because in this Example the
Annuitant is still living. The Owner would give up these lifetime Personal
Pension Account Payouts if he or she terminated the Contract.
RETURN OF PREMIUM DEATH BENEFIT EXAMPLES
EXAMPLE 1: ASSUME YOUR INITIAL PREMIUM PAYMENT IS $100,000. IN CONTRACT YEAR 1
YOU APPLY A SUBSEQUENT PREMIUM PAYMENT OF $50,000. IN CONTRACT YEAR 3 YOU TAKE A
PARTIAL SURRENDER FOR $1,000 AND IN THE SAME CONTRACT YEAR YOU TAKE ANOTHER
PARTIAL SURRENDER FOR $10,000, YOUR CONTRACT VALUE IMMEDIATELY FOLLOWING IS
$173,000.
YOUR INITIAL VALUE:
$100,000
VALUE AFTER THE SUBSEQUENT PREMIUM PAYMENT OF $50,000:
$150,000, which is the prior value increased by the amount of the subsequent
Premium Payments
VALUE AFTER THE PARTIAL SURRENDER ($1,000):
$149,000, which is the prior value reduced dollar-for-dollar by the amount of
the Surrender because it is within the withdrawal limit
VALUE AFTER THE ADDITIONAL PARTIAL SURRENDER ($10,000):
$139,674.22, which is the prior value reduced first dollar-for-dollar by the
amount of the Surrender not in excess of 5% of Premium Payments ($6,500) and
then proportional for the amount in excess of 5% of Premium Payments ($3,500).
The proportionate reduction is determined by first determining the factor:
1 - (excess Surrender/(Contract Value prior to the Surrender - Death Benefit
withdrawal limit remaining)
1- ($3,500/($173,000 + $10,000 - $6,500) = .980169971
Once the factor is determined the value prior to the Surrender is first reduced
dollar-for-dollar by the amount of the Surrender not in excess of the Death
Benefit withdrawal limit:
$149,000 - $6,500 =$142,500
This value is then multiplied by the factor:
$142,500 * .980169971 = $139,674.22
The death benefit would be the Contract Value or $173,000. You will also receive
the Personal Pension Account death benefit equal to any remaining Benefit
Balance.
EXAMPLE 2: SAME FACTS AS ABOVE EXCEPT THE BENEFIT BALANCE AT THE TIME OF DEATH
WAS EQUAL TO $100,000.
The Death Benefit would be $273,000 (Return of Premium Death Benefit = $173,000
+ Personal Pension Account Death Benefit = $100,000).
APP A-9
-------------------------------------------------------------------------------
REMAINING GROSS PREMIUM EXAMPLES
EXAMPLE 1: ILLUSTRATES A PARTIAL SURRENDER THAT IS LESS THAN THE AWA IN A DOWN
MARKET. ASSUME A PARTIAL SURRENDER TAKEN IN CONTRACT YEAR 2 EQUALS $5,000.
VALUES PRIOR TO THE PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $90,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the partial Surrender is $85,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender was equal to
the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0, as the AWA was not exceeded
EXAMPLE 2: ILLUSTRATES A PARTIAL SURRENDER IN EXCESS OF THE AWA IN A DOWN
MARKET, THE NON-CUMULATIVE FEATURE OF THE AWA AND IMPACTS TO FUTURE AWA
CALCULATIONS. ASSUME TWO PARTIAL SURRENDERS ARE TAKEN IN CONTRACT YEAR 2, FOR
$5,000 EACH. ANOTHER PARTIAL SURRENDER IS TAKEN IN CONTRACT YEAR 3 FOR $15,000.
VALUES PRIOR TO THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $90,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the first partial Surrender is $85,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender was equal to
the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0 because the AWA was not exceeded
VALUES PRIOR TO THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the second partial Surrender is $75,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $0
- Your Remaining Gross Premiums are $100,000
APP A-10
-------------------------------------------------------------------------------
VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $70,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $95,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($5,000) of
the AWA
- The CDSC applied to this $5,000 partial Surrender is $350, which is the
amount of the partial Surrender in excess of the AWA ($5,000) multiplied by
7%
VALUES PRIOR TO THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the third partial Surrender is $78,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $9,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premium is $95,000
VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $68,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
has been taken (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $85,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($10,000)
of the AWA
- The CDSC applied to this $15,000 partial Surrender is $700, which is the
amount of the partial Surrender in excess of the AWA ($10,000) multiplied by
7%
EXAMPLE 3: ILLUSTRATES A PARTIAL SURRENDER IN EXCESS OF THE AWA IN AN UP MARKET,
THE NON-CUMULATIVE FEATURE OF THE AWA AND IMPACTS TO FUTURE AWA CALCULATIONS.
ASSUME BOTH PARTIAL SURRENDERS ARE TAKEN IN CONTRACT YEAR 1 FOR $10,000 EACH.
ANOTHER PARTIAL SURRENDER IS TAKEN IN CONTRACT YEAR 3 FOR $15,000
VALUES PRIOR TO THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the partial Surrender is $110,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $10,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $10,000, which are your earnings
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FIRST PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the first partial Surrender is $100,000
- Your AWA is $0 for the remainder of the Contract Year because the full AWA
was taken (unless future earnings within the same Contract Year exceed 5% of
the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $100,000. The partial Surrender did not
exceed the AWA so the Remaining Gross Premium is not reduced
- Your CDSC is $0 because the AWA was not exceeded
APP A-11
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VALUES PRIOR TO THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the second partial Surrender is $100,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $0
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE SECOND PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the second partial Surrender is $90,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $90,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($10,000)
of the AWA
- The CDSC applied to this $10,000 partial Surrender is $700, which is the
amount of the partial Surrender in excess of the AWA ($10,000) multiplied by
7%
VALUES PRIOR TO THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value prior to the third partial Surrender is $99,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $9,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $9,000, which are your earnings
- Your Remaining Gross Premiums are $90,000
VALUES AFTER THE THIRD PARTIAL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value after the third partial surrender is $84,000
- Your AWA is $0 for the remainder of the Contract Year because the AWA has
been exceeded (unless future earnings within the same Contract Year exceed
5% of the total Premium Payments subject to CDSC)
- Your Remaining Gross Premium is $84,000, which is your prior Remaining Gross
Premium reduced by the amount of the partial Surrender in excess ($6,000) of
the AWA
- The CDSC applied to this $15,000 partial Surrender is $420, which is the
amount of the partial Surrender in excess of the AWA ($6,000) multiplied by
7%
EXAMPLE 4: ILLUSTRATES A FULL SURRENDER CALCULATION WITH ONE OF TWO PREMIUM
PAYMENTS OUT OF THE APPLICABLE CDSC SCHEDULE. ASSUME TWO PREMIUM PAYMENTS WERE
MADE FOR $100,000 EACH. ONE PAYMENT WAS APPLIED IN THE BEGINNING OF CONTRACT
YEAR 1, THE SECOND IN THE BEGINNING OF CONTRACT YEAR 3. A FULL SURRENDER IS
TAKEN IN CONTRACT YEAR 8.
VALUES PRIOR TO THE FULL SURRENDER:
- Your total Premium Payments are $200,000
- Your Contract Value just prior to the full Surrender is $300,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $100,000
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $200,000, which is the premium out of CDSC schedule ($100,000) plus
your earnings
- Your Remaining Gross Premium for the second Premium Payment (still in CDSC)
is $100,000
APP A-12
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VALUES AFTER THE FULL SURRENDER:
- Your Contract Value after the full Surrender is $0
- The CDSC applied to this $300,000 full Surrender is $4,000, which is the
maximum of the full Surrender or Remaining Gross Premium, reduced by the AWA
($100,000) multiplied by 4%
EXAMPLE 5: ILLUSTRATES A FULL SURRENDER CALCULATION IN A DOWN MARKET.
VALUES PRIOR TO THE FULL SURRENDER:
- Your total Premium Payments are $100,000
- Your Contract Value just prior to the full Surrender is $50,000
- Your earnings (maximum of Contract Value - Remaining Gross Premiums, or 0)
are $0
- Your AWA (maximum of earnings, or 5% of total Premium Payments subject to
CDSC) is $5,000, which is 5% of total Premium Payments subject to CDSC
- Your Remaining Gross Premiums are $100,000
VALUES AFTER THE FULL SURRENDER:
- Your Contract Value after the full Surrender is $0
- The CDSC applied to this $50,000 full Surrender is $6,650, which is the
maximum of the full Surrender or Remaining Gross Premium reduced by the AWA
($95,000) multiplied by 7% (using the 7-year CDSC schedule applicable to the
"Core" Hartford Leaders variable annuity Contract)
APP B-1
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APPENDIX B - ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the financial
statements for the Separate Account included in the Statement of Additional
Information.
There are several classes of Accumulation Unit Values under the Contract
depending on the number of optional benefits you select. The table below shows
only the highest and lowest possible Accumulation Unit Value, assuming you
select no optional benefits or assuming you select all optional benefits. A
table showing all classes of Accumulation Unit Values corresponding to all
combinations of optional benefits is shown in the Statement of Additional
Information, which you may obtain free of charge by contacting us.
There is no information available because as of December 31, 2008, the
Sub-Accounts had not yet commenced operations.
APP C-1
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APPENDIX C - FUND DATA
I. INVESTMENT OPTIONS (STANDARD)
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. CORE EQUITY FUND - SERIES Growth of capital Invesco Aim Advisors, Inc. Equity
II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. INTERNATIONAL GROWTH FUND Long-term growth of capital Invesco Aim Advisors, Inc. Equity
- SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. MID CAP CORE EQUITY FUND Long-term capital growth Invesco Aim Advisors, Inc. Limited
- SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. POWERSHARES ETF To provide total return consistent Invesco Aim Advisors, Inc. Multi-Asset
ALLOCATION FUND - SERIES II with a moderate level of risk Sub-adviser: Advisory entities
relative to the broad stock market. affiliated with Invesco Aim Advisors,
Inc.
AIM V.I. SMALL CAP EQUITY FUND - Long-term capital growth Invesco Aim Advisors, Inc. Limited
SERIES II Sub-adviser: Advisory entities
affiliated with Invesco Aim Advisors,
Inc.
ALLIANCEBERNSTEIN VARIABLE PRODUCTS
SERIES FUND, INC.
ALLIANCEBERNSTEIN VPS BALANCED Maximize total return consistent with AllianceBernstein L.P. Multi-Asset
WEALTH STRATEGY PORTFOLIO - CLASS Advisor's determination of reasonable
B risk
ALLIANCEBERNSTEIN VPS Long-term capital growth AllianceBernstein L.P. Equity
INTERNATIONAL VALUE PORTFOLIO -
CLASS B
ALLIANCEBERNSTEIN VPS SMALL/MID Long-term capital growth AllianceBernstein L.P. Equity
CAP VALUE PORTFOLIO - CLASS B
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
FIDELITY VIP CONTRAFUND(R) Seeks long-term capital appreciation Fidelity Management & Research Equity
PORTFOLIO - SERVICE CLASS 2 Company
Sub-advised by FMR Co., Inc. and
other Fidelity affiliates
FIDELITY VIP MID CAP PORTFOLIO - Long-term capital growth Fidelity Management & Research Equity
SERVICE CLASS 2 Company
Sub-advised by FMR Co., Inc. and
other Fidelity affiliates
FIDELITY VIP STRATEGIC INCOME Limited
PORTFOLIO - SERVICE CLASS 2
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
FRANKLIN FLEX CAP GROWTH Seeks capital appreciation Franklin Advisers, Inc. Equity
SECURITIES FUND - CLASS 4
APP C-2
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
FRANKLIN INCOME SECURITIES FUND - Seeks to maximize income while Franklin Advisers, Inc. Limited
CLASS 4 maintaining prospects for capital
appreciation
FRANKLIN RISING DIVIDENDS Equity
SECURITIES FUND - CLASS 4
FRANKLIN SMALL CAP VALUE Seeks long-term total return Franklin Advisory Services, LLC Limited
SECURITIES FUND - CLASS 4
FRANKLIN SMALL-MID CAP GROWTH Seeks long-term capital growth Franklin Advisers, Inc. Limited
SECURITIES FUND - CLASS 4
FRANKLIN STRATEGIC INCOME Seeks a high level of current income, Franklin Advisers, Inc. Limited
SECURITIES FUND - CLASS 4 with capital appreciation over the
long term as a secondary goal
MUTUAL GLOBAL DISCOVERY SECURITIES Seeks capital appreciation Franklin Mutual Advisers, LLC Equity
FUND - CLASS 4 (1) Sub-advised by Franklin Templeton
Investment Management Limited
MUTUAL SHARES SECURITIES FUND - Capital appreciation, with income as Franklin Mutual Advisers, LLC Equity
CLASS 4 a secondary goal
TEMPLETON FOREIGN SECURITIES FUND Seeks long-term capital growth Templeton Investment Counsel, LLC Equity
- CLASS 4
TEMPLETON GLOBAL BOND SECURITIES Seeks high current income, consistent Franklin Advisers, Inc. Limited
FUND - CLASS 4 (2) with preservation of capital, with
capital appreciation as a secondary
consideration
TEMPLETON GROWTH SECURITIES FUND - Seeks long-term capital growth Templeton Global Advisors Limited Equity
CLASS 4 Sub-advised by Templeton Asset
Management Ltd.
HARTFORD HLS SERIES FUND II, INC.
HARTFORD GROWTH OPPORTUNITIES HLS Capital appreciation Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD U.S. GOVERNMENT Maximize total return with a high Hartford Investment Financial Fixed
SECURITIES HLS FUND - CLASS IA level of current income consistent Services, LLC.
with prudent investment risk Sub-advised by Hartford Investment
Management Company
HARTFORD SERIES FUND, INC.
AMERICAN FUNDS ASSET ALLOCATION Seeks high total return consistent Hartford Investment Financial Equity
HLS FUND - CLASS IB with preservation of capital over the Services, LLC.
long term Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS BLUE CHIP INCOME Seeks to produce income exceeding the Hartford Investment Financial Equity
AND GROWTH HLS FUND - CLASS IB average yield on U.S. stocks Services, LLC.
generally (as represented by the Sub-advised by Hartford Investment
average yield on the S&P 500 Index) Management Company
and to provide an opportunity for
growth of principal consistent with
sound common stock investing.
AMERICAN FUNDS BOND HLS FUND - Seeks to maximize current income and Hartford Investment Financial Fixed
CLASS IB preservation of capital Services, LLC.
Sub-advised by Hartford Investment
Management Company
APP C-3
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS GLOBAL BOND HLS Seeks a high level of total return Hartford Investment Financial Limited
FUND - CLASS IB over the long term Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL GROWTH AND Seeks growth of capital and current Hartford Investment Financial Equity
INCOME HLS FUND - CLASS IB income Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL GROWTH HLS Seeks growth of capital Hartford Investment Financial Equity
FUND - CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GLOBAL SMALL Seeks growth of capital Hartford Investment Financial Limited
CAPITALIZATION HLS FUND - CLASS Services, LLC.
IB Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GROWTH HLS FUND - Seeks growth of capital Hartford Investment Financial Equity
CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS GROWTH-INCOME HLS Seeks growth of capital and income Hartford Investment Financial Equity
FUND - CLASS IB over time Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS INTERNATIONAL HLS Seeks growth of capital Hartford Investment Financial Equity
FUND - CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
AMERICAN FUNDS NEW WORLD HLS FUND Seeks growth of capital Hartford Investment Financial Limited
- CLASS IB Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD CAPITAL APPRECIATION HLS Growth of capital Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD DISCIPLINED EQUITY HLS Growth of capital Hartford Investment Financial Equity
FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD DIVIDEND AND GROWTH HLS High level of current income Hartford Investment Financial Equity
FUND - CLASS IA consistent with growth of capital Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD GLOBAL EQUITY HLS FUND - Seeks long term capital appreciation Hartford Investment Financial Equity
CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD GLOBAL GROWTH HLS FUND - Growth of capital Hartford Investment Financial Equity
CLASS IA (3) Services, LLC.
Sub-advised by Wellington Management
Company, LLP
APP C-4
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH HLS FUND - CLASS Seeks long-term capital appreciation Hartford Investment Financial Equity
IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD HIGH YIELD HLS FUND - High current income with growth of Hartford Investment Financial Limited
CLASS IA capital as a secondary objective Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD INDEX HLS FUND - CLASS IB Seeks to provide investment results Hartford Investment Financial Equity
which approximate the price and yield Services, LLC.
performance of publicly traded common Sub-advised by Hartford Investment
stocks in the aggregate Management Company
HARTFORD INTERNATIONAL Long-term capital growth Hartford Investment Financial Equity
OPPORTUNITIES HLS FUND - CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP
HARTFORD MONEY MARKET HLS FUND - Maximum current income consistent Hartford Investment Financial Fixed
CLASS IA* with liquidity and preservation of Services, LLC.
capital Sub-advised by Hartford Investment
Management Company
HARTFORD SMALL COMPANY HLS FUND - Growth of capital Hartford Investment Financial Limited
CLASS IA Services, LLC.
Sub-advised by Wellington Management
Company, LLP and Hartford Investment
Management Company
HARTFORD TOTAL RETURN BOND HLS Competitive total return, with income Hartford Investment Financial Fixed
FUND - CLASS IA as a secondary objective Services, LLC.
Sub-advised by Hartford Investment
Management Company
HARTFORD VALUE HLS FUND - CLASS IA Long-term total return Hartford Investment Financial Equity
Services, LLC.
Sub-advised by Wellington Management
Company, LLP
MFS(R) VARIABLE INSURANCE TRUST
MFS(R) GROWTH SERIES - SERVICE Seeks capital appreciation MFS Investment Management Equity
CLASS
MFS(R) INVESTORS TRUST SERIES - Seeks capital appreciation MFS Investment Management Equity
SERVICE CLASS
MFS(R) RESEARCH BOND SERIES - Total return with an emphasis on high MFS Investment Management Fixed
SERVICE CLASS current income, but also considering
capital appreciation.
MFS(R) TOTAL RETURN SERIES - Seeks total return MFS Investment Management Multi-Asset
SERVICE CLASS
MFS(R) VALUE SERIES - SERVICE Seeks capital appreciation MFS Investment Management Equity
CLASS
PUTNAM VARIABLE TRUST
PUTNAM VT EQUITY INCOME FUND - Capital growth and current income Putnam Investment Management, LLC Equity
CLASS IB
PUTNAM VT INVESTORS FUND - CLASS Long-term growth of capital and any Putnam Investment Management, LLC Equity
IB increased income that results from
this growth
APP C-5
-------------------------------------------------------------------------------
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND - CLASS IB Seeks capital appreciation Putnam Investment Management, LLC Equity
FIXED ACCUMULATION FEATURE** Preservation of capital General Account N/A
NOTES
(1) Formerly Mutual Discovery Securities Fund - Class 4
(2) Formerly Templeton Global Income Securities Fund - Class 4
(3) Formerly Hartford Global Leaders HLS Fund - Class IA
* In a low interest rate environment, yields for money market funds, after
deduction of Contract charges may be negative even though the fund's yield,
before deducting for such charges, is positive. If you allocate a portion of
your Contract Value to a money market Sub-Account or participate in an Asset
Allocation Program where Contract Value is allocated to a money market
Sub-Account, that portion of your Contract Value may decrease in value.
** The Fixed Accumulation Feature is not a Sub-Account and the Company does not
provide investment advice in connection with this feature. The Fixed
Accumulation Feature is currently not available to A Share and I Share
products.
II. UNDERLYING FUNDS (PROPRIETARY)
INVESTMENT INVESTMENT
FUNDING OPTION OBJECTIVE SUMMARY ADVISER/SUB-ADVISER CLASSIFICATION
---------------------------------------------------------------------------------------------------------------------------------
HUNTINGTON FUNDS
HUNTINGTON VA DIVIDEND CAPTURE Total return with dividend income as Huntington Asset Advisors, Inc. Equity
FUND an important component of that return
HUNTINGTON VA GROWTH FUND Seeks long-term capital appreciation Huntington Asset Advisors, Inc. Equity
HUNTINGTON VA INCOME EQUITY FUND Current income and moderate Huntington Asset Advisors, Inc. Equity
appreciation of capital
HUNTINGTON VA INTERNATIONAL EQUITY Seeks total return Huntington Asset Advisors, Inc. Equity
FUND
HUNTINGTON VA MACRO 100 FUND Total return consisting of capital Huntington Asset Advisors, Inc. Equity
appreciation and income
HUNTINGTON VA MID CORP AMERICA Seeks long-term capital appreciation Huntington Asset Advisors, Inc. Equity
FUND
HUNTINGTON VA MORTGAGE SECURITIES Current income Huntington Asset Advisors, Inc. Limited
FUND
HUNTINGTON VA NEW ECONOMY FUND Seeks capital appreciation Huntington Asset Advisors, Inc. Limited
HUNTINGTON VA ROTATING MARKETS Seeks capital appreciation Huntington Asset Advisors, Inc. Equity
FUND
HUNTINGTON VA SITUS FUND Seeks long-term capital appreciation Huntington Asset Advisors, Inc. Limited
To obtain a Statement of Additional Information, please
complete the form below and mail to:
The Hartford
Attn: Individual Markets Group
P.O. Box 5085
Hartford, Connecticut 06102-5085
Please send a Statement of Additional Information to me at the
following address:
----------------------------------------------------------------
Name
----------------------------------------------------------------
Address
----------------------------------------------------------------
City/State Zip Code
Contract Name
Issue Date
PART B
HARTFORD LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
HUNTINGTON HARTFORD LEADERS SERIES III
This Statement of Additional Information is not a prospectus. The information
contained in this document should be read in conjunction with the prospectus.
To obtain a prospectus, send a written request to The Hartford, Attn: Individual
Markets Group, P.O. Box 5085, Hartford, CT 06102-5085.
Date of Prospectus: August 14, 2009
Date of Statement of Additional Information: August 14, 2009
TABLE OF CONTENTS
GENERAL INFORMATION 2
Safekeeping of Assets 2
Experts 2
Non-Participating 2
Misstatement of Age or Sex 2
Principal Underwriter 2
Additional Payments 2
PERFORMANCE RELATED INFORMATION 6
Total Return for all Sub-Accounts 6
Yield for Sub-Accounts 6
Money Market Sub-Accounts 7
Additional Materials 7
Performance Comparisons 7
ACCUMULATION UNIT VALUES 8
FINANCIAL STATEMENTS SA-2
2
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GENERAL INFORMATION
SAFEKEEPING OF ASSETS
We hold title to the assets of the Separate Account. The assets are kept
physically segregated and are held separate and apart from our general corporate
assets. Records are maintained of all purchases and redemptions of the
underlying fund shares held in each of the Sub-Accounts.
EXPERTS
The consolidated balance sheets of Hartford Life Insurance Company (the
"Company") as of December 31, 2008 and 2007, and the related consolidated
statements of income, changes in stockholder's equity and cash flows for each of
the three years in the period ended December 31, 2008 have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report dated February 11, 2009 (April 29, 2009 as to the effects
of the change in reporting entity structure and the retrospective adoption of
FASB Statement No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL
STATEMENTS described in Note 1 and Note 17) (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to the
Company's change in its method of accounting for the fair value measurement of
financial instruments in 2008) and the statements of assets and liabilities of
Hartford Life Insurance Company Separate Account Seven (the "Account") as of
December 31, 2008, and the related statements of operations and changes in net
assets for the respective stated periods then ended have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report dated February 18, 2009, which reports are both included
in this Statement of Additional Information. Such financial statements are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. The principal business address of Deloitte &
Touche LLP is City Place, 32nd Floor, 185 Asylum Street, Hartford, Connecticut
06103-3402.
With respect to the unaudited interim financial information for the periods
ended June 30, 2009 and 2008 which is incorporated by reference herein, Deloitte
& Touche LLP, an independent registered public accounting firm, have applied
limited procedures in accordance with the standards of the Public Company
Accounting Oversight Board (United States) for a review of such information.
However, as stated in their report included in the Company's Quarterly Reports
on Form 10-Q for the quarter ended June 30, 2009 and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
NON-PARTICIPATING
The Contract is non-participating and we pay no dividends.
MISSTATEMENT OF AGE OR SEX
If an Annuitant's age or sex was misstated on the Contract, any Contract
payments or benefits will be determined using the correct age and sex. If we
have overpaid Annuity Payouts, an adjustment, including interest on the amount
of the overpayment, will be made to the next Annuity Payout or Payouts. If we
have underpaid due to a misstatement of age or sex, we will credit the next
Annuity Payout with the amount we underpaid and credit interest.
PRINCIPAL UNDERWRITER
The Contracts, which are offered continuously, are distributed by Hartford
Securities Distribution Company, Inc. ("HSD"). HSD serves as Principal
Underwriter for the securities issued with respect to the Separate Account. HSD
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a Broker-Dealer and is a member of the National
Association of Securities Dealers, Inc. HSD is an affiliate of ours. Both HSD
and Hartford are ultimately controlled by The Hartford Financial Services Group,
Inc. The principal business address of HSD is the same as ours.
We currently pay HSD underwriting commissions for its role as Principal
Underwriter of all variable annuities associated with this Separate Account. For
the past three years, the aggregate dollar amount of underwriting commissions
paid to HSD in its role as Principal Underwriter has been: 2008: $53,980,236;
2007: $125,061,889; and 2006: $122,003,581.
ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
As stated in the prospectus, we (or our affiliates) pay Additional Payments to
Financial Intermediaries. In addition to the Financial Intermediaries listed in
the prospectus with whom we have an ongoing contractual arrangement to make
Additional Payments, listed
3
-------------------------------------------------------------------------------
below are all Financial Intermediaries that received Additional Payments in 2008
of items such as sponsorship of meetings, education seminars, and travel and
entertainment, whether or not an ongoing contractual relationship exists.
A.G. Edwards & Sons, Inc., Abacus Investments, Inc., ABD Financial Services,
Inc., Access Financial Group, Inc., Access Investments, Inc., Acument
Securities, Inc., Addison Avenue Federal Credit Union, ADP Broker-Dealer, Inc.,
Advanced Advisor Group, Advanced Equities, Inc., Advantage Capital Corp.,
Advisory Group Equity Services Ltd., AFA Financial Group, LLC., Affinity Bank,
AFS Brokerage, Inc., AIG Equity Sales Corp., AIG Financial Advisors, AIG
Retirement Advisors, Inc., AIM Distributors, Inc., Aim Investments, Alamo
Capital, All Nevada Insurance, Allegacy Federal Credit Union, Allegheny
Investments Ltd., Allen & Co. of Florida, Inc., Alliance Bank,
AllianceBernstein, AllianceBernstein Investment Research, AllState Financial
Services, LLC., Altura Credit Union, AMCORE Bank, NA., Amcore Investment
Services, Inc., American Bank, NA., American Classic Securities, American Funds
& Trusts, Inc., American General Securities Inc., American Heritage Federal
Credit Union, American Independent Securities Group, American Independent
Securities, Inc., American Investors Company, American Investors Group, American
Municipal Securities, Inc., American Portfolios Financial Services, American
Securities Group, Inc., American Trust & Savings Bank, Ameriprise Financial
Services, Inc., Ameritas Investment Corp., Ameritrade, Inc., Ames Community
Bank, Amsouth Bank, Amsouth Investment Services, AmTrust Bank, Amtrust
Investment Services, Inc., Anchor Bank, Anderson & Strudwick, Inc., Andrew
Garrett, Inc., Arlington Securities, Inc., Arrowhead Central Credit Union,
Arvest Asset Management, Arvest Bank, Ascend Financial Services, Inc., Askar
Corp., Asset Management Securities Corp., Associated Bank, NA., Associated
Financial Services, Inc., Associated Investment Services, Inc., Associated
Securities Corp., Astoria Federal Savings & Loan Association, Atlantic
Securities, Inc., Avisen Securities, Inc., AXA Advisors, LLC., Ayre Investments,
B.B. Graham & Co., B.C. Ziegler and Company, Banc of America Investment
Services, Inc., Bancnorth Investment Group, Inc., Bancorpsouth Investment
Services, Inc., BancWest Investment Services, Inc., Bank of Albuquerque, NA.,
Bank of America, Bank of Clarendon, Bank of Clarke County, Bank of Stockton,
Bank of Texas, Bank of the Commonwealth, Bank of the South, Bank of the West,
Bankers & Investors Co., Bankers Life and Casualty, Banknorth, BankUnited, FSB,
BankWest, Inc., Bannon, Ohanesian & Lecours, Inc., Banorte Securities, Banorte
Securities International, Bates Securities, Inc., BB&T Investment Services,
Inc., BCG Securities, Inc., Beaconsfield Financial Services., Inc., Benchmark
Investments, Inc., Beneficial Investment Services, Bernard Herold & Co., Inc.,
Berthel, Fisher & Co. Financial Services, Inc., Bethpage Federal Credit Union,
BI Investments, LLC., Bodell Overcash Anderson & Co., Boeing Employees Credit
Union, BOSC, Inc., Brecek & Young Advisors, Inc., Brighton Securities Corp.,
Britton & Koontz Bank, N.A., Broad Street Securities, Inc., Broker Dealer
Financial Services Corp., Brokersxpress LLC., Brookstone Securities, Inc.,
Brookstreet Securities Corp., Brown Advisory Securities Inc., Brown,
Lisle/Cummings, Inc., Bruce A Lefavi Securities, Inc., Busey Bank, Butler, Wick
& Co., Inc., C.R.I. Securities, Inc., Cadaret, Grant & Co., Inc., California
Bank & Trust, California Credit Union, California National Bank, Calton &
Associates, Inc., Cambridge Investment Research, Inc., Cambridge Legacy Sec.,
LLC., Cambridge State Bank, Cantella & Co., Inc., Capital Analysts, Inc.,
Capital Bank, Capital Brokerage Corporation, Capital Choice, Capital City Bank,
Capital Financial Services, Inc., Capital Growth Resources, Capital Investment
Group, Inc., Capital Investment Services, Inc., Capital One Investments
Services, LLC., Capital Securities Investment Corp., Capital Securities
Management, Capital Select Investments Corp., Capital Wealth Advisors, Inc.,
Capital West Securities, Inc., CapitalBank, Capitol Federal Savings Bank,
Capitol Securities Management, Inc., Carolina First Bank, Carolinas Investment
Consulting LLC., Cary Street Partners, LLC., Cascade Investment Group, Inc., CCF
Investments, Inc., CCO Investment Services Corp., Centaurus Financial, Inc.,
Centennial Securities Co., Inc., Central State Bank, Central Virginia Bank,
Century National Bank, Century Securities Associates, Inc., CFD Investments,
Inc., Chapin, Davis, Charles Schwab, Chase Investments Services Corp., Chemical
Bank West, Chevy Chase Financial Services, CIBC World Markets Corp., Citadel
Federal Credit Union, Citi Bank, Citicorp Investment Services, Citigroup Global
Markets, Inc., Citizens & Farmers Bank, Citizens Bank, Citizens Business Bank,
City Bank, City Securities Corporation, Coastal Federal Credit Union, Coburn &
Meredith, Inc., Colonial Bank, N.A., Colonial Brokerage, Inc., Comerica Bank,
Comerica Securities, Commerce Bank, N.A., Commerce Brokerage Services, Inc.,
Commerce Capital Markets, Inc., Commercial & Savings Bank/Mllrsbrg, Commercial
Federal Bank, Commonwealth Bank & Trust Co., Commonwealth Financial Network,
Commonwealth Investment Services, Inc., Community Bank, Community Bank & Trust,
Community Credit Union, Community Investment Services, Inc., Compass Bank,
Compass Brokerage, Inc., Comprehensive Financial Services, Conservative
Financial Services., Inc., Coordinated Capital Securities, Inc., Country Club
Financial Services., Inc., Countrywide Bank, Countrywide Investment Services,
Inc., Credit Union West, Crews & Associates, Inc., Crowell, Weedon & Co., Crown
Capital Securities, LLP, CUE, Cullum & Burks Securities, Inc., Cumberland
Brokerage Corp., Cuna Brokerage Services, Inc., Cuso Financial Services, LLP.,
CW Securities, LLC., D.A. Davidson & Company, Davenport & Company LLC., David A.
Noyes & Company, David Lerner Associates, Inc., DaVinci Capital Management,
Inc., Dawson James Securities, Inc., Delta Equity Services Corp., Delta Trust
Investment, Inc., Deutsche Bank Securities, Inc., DeWaay Financial Network, DFCU
Financial Federal Credit Union, Dilworth, Diversified Securities, Inc., Dominion
Investor Services., Inc., Dorsey & Company, Inc., Dougherty & Company LLC.,
Dubuque Bank & Trust Co., Dumon Financial, Duncan-Williams, Inc., Dupaco
Community Credit Union, Eagle Bank, Eagle One Financial, Eagle One Investments,
LLC., Eastern Bank, Eastern Financial Florida Credit Union, ECM Securities
Corporation, EDI Financial, Inc., Edward Jones, Effex National Security, Eisner
Securities, Inc., Emclaire Financial Corp., Emerson Equity, LLC., Empire Bank,
Empire Financial Group, Inc., Empire Securities Corporation, Emporia State Bank
& Trust Co., Ensemble Financial Services, Inc., EPlanning Securities, Inc.,
Equitable Bank, Equitas America, LLC, Equity Services, Inc., ESL Federal Credit
Union, Essex Financial Services, Inc., Essex National Securities, Inc., Essex
Securities, LLC., Evans National Bank, EVB, Evolve Securities, Inc., Excel
Securities &
4
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Assoc., Inc., Fairport Capital, Inc., Fairwinds Credit Union, Farmers National
Bank, Farmers National Bank/Canfield, Feltl & Company, Ferris/Baker Watts, FFP
Securities, Inc., Fidelity Bank, Fidelity Brokerage Services., LLC., Fidelity
Federal Bank & Trust, Fidelity Investments, Fifth Third Bank, Fifth Third
Securities, FIMCO Securities Group,Inc., Financial Center Credit Union,
Financial Network Investment Corp., Financial Partners Credit Union, Financial
Planning Consultants, Financial Security Management, Inc., Financial West Group,
Fintegra LLC., First Allied Securities, First America Bank, First American Bank,
First Bank, First Brokerage America, First Citizens Bank, First Citizens
Financial Plus, Inc., First Citizens Investor Services, First Command Financial
Planning, First Commonwealth Bank, First Commonwealth Federal Credit Union,
First Community Bank, First Community Bank, N.A., First Federal Bank, First
Federal Savings & Loan of Charlston, First Financial Bank, First Financial
Equity Corp., First Global Securities, Inc., First Harrison Bank, First
Heartland Capital Inc., First Hope Bank, First Investment Services, First
MidAmerica Investment Corp., First Midwest Bank, First Midwest Securities, First
Montauk Securities, First National Bank, First National Investments Inc, First
Niagara Bank, First Northern Bank of Dixon, First Place Bank, First Southeast
Investment Services, First St. Louis Securities, Inc., First Tennessee Bank,
First Tennessee Brokerage, Inc., First Wall Street Corporation, First Western
Securities Inc., FirstMerit Securities, Inc., FiServ Investor Services, Inc.,
Flagstar Bank, FSB, Florida Investment Advisers, Flushing Savings Bank, FSB, FMN
Capital Corporation, FNB Brokerage Services, Inc., FNIC F.I.D. Div., Folger
Nolan Fleming Douglas, Foothill Securities, Inc., Foresters Equity Services,
Inc., Fortune Financial Services, Founders Financial Securities, LLC., Fox and
Company, Franklin Bank, Franklin/Templeton Dist., Inc., Freedom Financial, Inc.,
Fremont Bank, Frontier Bank, Frost Brokerage Services Inc., Frost National Bank,
FSC Securities Corporation, FSIC, Fulcrum Securities, Inc., Gateway Bank and
Trust Company, Geneos Wealth Management, Inc., Genworth Financial Securities
Corp., GIA Financial Group, L.L.C., Girard Securities Inc., Global Brokerage
Services, Gold Coast Securities, Inc., Golden One Credit Union, Great American
Advisors, Inc., Great American Investors, Inc., Great Lakes Capital, Inc.,
Greenberg Financial Group, Gregory J Schwartz & Co., Inc., Gunnallen Financial,
Inc., GWN Securities, Inc., H&R Block Financial Advisers, Inc., H. Beck, Inc.,
H.D.Vest Investment Services, Haas Financial Products, Inc., Hancock Bank,
Hancock Investments Services, Harbor Financial Services, LLC., Harbour
Investments, Inc., Harger and Company, Inc., Harold Dance Investments, Harris
Investor Services, Inc., Harvest Capital LLC, Hawthorne Securities Corp., Hazard
& Siegel, Inc., Hazlett, Burt & Watson, Inc., HBW Securities, LLC, HCSB,
Heartland Investment Associates, Inc., Heim & Young Securities, Inc., Heim Young
& Associates, Inc., Hibernia Investments, LLC, Hibernia National Bank, High
Country Bank, High Ridge Insurance Services, Hilliard Lyons, HNB National Bank,
Home Savings & Loan Company of Youngstown, Home Savings Bank, Horizon Bank,
Hornor, Townsend & Kent, Inc., Horwitz & Associates, Inc., Howe Barnes
Investments, Inc., HRC Investment Services, Inc., HSBC Bank USA, National
Associates, HSBC International, HSBC Securities (USA) Inc., Huntingdon
Securities Corp., Huntington Investment Co., Huntington National Bank,
Huntington Valley Bank, Huntleigh Securities Corp., IBC Investments, IBN
Financial Services, Inc., ICBA Financial Services Corp., IFG Network Securities,
Inc., IFMG Securities, Inc., IMS Securities, Inc., Independent Financial
Securities Inc., Independent Financial Group, LLC., Indiana Merchant Banking &
Brokerage, Infinex Investment, Inc., Infinity Securities, Co., Inc., ING
Financial Advisors, LLC, ING Financial Partners, Innovative Solutions,
Integrated Financial Inc., Intercarolina Financial Services, Inc., Interpacific
Investor Services, InterSecurities, Inc., INTRUST Bank, NA., Intrust Brokerage
Inc., Invesmart Securities, LLC., INVEST Financial Corporation, Investacorp,
Inc., Investment Center, Inc., Investment Centers of America, Investment
Management Corp., Investment Network, Inc., Investment Planners, Inc.,
Investment Professionals, Inc., Investment Security Corp., Investors Capital
Corp., Investors Resources Group, Inc., Iowa State Bank, ISG Equity Sales
Corporation, J.B. Hanauer & Co., J.J.B Hilliard, W.L.Lyons LLC., J.P. Turner &
Co., J.W. Cole Financial, Inc., Jack V Butterfield Investment Co., Jackson
Securities, LLC., Jacksonville Savings Bank, James C. Butterfield, Inc., Janney
Montgomery Scott, Inc., Jefferson Pilot Securities Corp., Jesup & Lamont
Securities Corp., JHW Financial Services, Inc., JHW Securities, JJB Hilliard/WL
Lyons, Inc., Jones Bains Sides Investments Group, Joseph James Financial
Services, Kalos Capital, Inc., Kaplan & Co., Securities Inc., KCD Financial,
Inc., Keesler Federal Credit Union, Kern National Federal Credit Union, Kern
Schools Federal Credit Union, Key Bank, Key Investment Services, LLC., Key
Investor Services, KeyBank, NA., KeyPoint Credit Union, Kinecta Credit Union,
Kirkwood Bank & Trust Co., KleinBank, KMS Financial Services, Inc., Kovack
Securities, Inc., L.F. Financial, LLC., L.M. Kohn & Company, LaBrunerie
Financial Services, Inc., Lake Area Bank, Lake Community Bank, Landmark Credit
Union, Lara, Shull & May, LTD., LaSalle Financial Services, Inc., LaSalle Street
Securities, Inc., Lawrence Jorgenson, Legacy Asset Securities, Inc., Legacy
Financial Services, Inc., Legend Equities Corporation, Legends Bank, Legg
Mason/Citigroup Global Market, Leigh Baldwin & Co., LLC., Leonard & Company,
Lesko Securities Inc., Leumi Investment Services, Inc., Lexington Investment
Co., Inc., LFA, Liberty Group, LLC., Liberty Securities Corporation, Lifemark
Securities Corp., Lincoln Financial Advisors Corp., Lincoln Investment Planning,
Inc., Linsco/Private Ledger, LOC Federal Credit Union, Lockheed Federal Credit
Union, Lombard Securities, Inc., Long Island Financial Group, Lord, Abbett &
Co., Lowell & Company, Inc., LPL Financial, M Holdings Securities, Inc., M&I
Bank, M&I Brokerage Services, Inc., M&I Financial Advisors, Inc., M&T Bank, M&T
Securities, Inc., M. Griffith, Inc., M.L. Stern & Co. Inc., Madison Avenue
Securities, Inc., Madison Bank & Trust, Main Street Securities, LLC., Manarin
Securities Corp., Manna Financial Services Corp., Mascoma Savings Bank, Mass
Institute of Technology Credit Union, Mass Mutual, Maxim Group LLC., McGinn,
Smith & Co., Inc., McNally Financial Services Corp.; Means Investment Co., Inc.,
Medallion Equities, Inc., Medallion Investment Services Inc., Mercantile Bank,
Mercantile Brokerage Services Inc., Mercantile Trust & Savings Bank, Merrill
Lynch Inc., Merrimac Corporate Securities, Inc., Mesirow Financial, Inc.,
MetLife Securities, Inc., MFS Fund Distributors, Inc., MICG Investment
Management, Michigan Catholic Credit Union, Michigan Securities, Inc., Mid
Atlantic Capital Corp., MidAmerica Financial Services Inc., Mid-Atlantic
Securities, Inc., Midwestern Sec Trading CO, LLC., Milkie/Ferguson
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Investments, Mission Federal Credit Union, MMC Securities Corp., MML Investor
Services, Inc., Moloney Securities Co., Inc., Money Concepts Capital Corp, Money
Management Advisory Inc., Moors & Cabot, Inc., Morgan Keegan & Co., Inc., Morgan
Peabody, Inc., Morgan Stanley & Co., Inc., MSCS Financial Services, LLC., MTL
Equity Products, Inc., Multi-Financial Securities Corp., Multiple Financial
Services., Inc., Mutual Funds Assoc., Inc., Mutual Securities, Inc., Mutual
Service Corp., NatCity Investments, National Bank & Trust, National City Bank of
Midwest, National Financial Services Corp., National Investors Services,
National Pension & Group Consultant, National Planning Corporation, National
Securities Corp., Nations Financial Group, Inc., Nationwide Investment Service
Corp., Navy Federal Brokerage Services, Navy Federal Credit Union, NBC Financial
Services, NBC Securities, Inc., NBT Bank, Neidiger, Tucker, Bruner, Inc., Nelson
Securities, Inc., Networth Strategic, New England Securities Corp., New Horizon
Asset Management Group, LLC., NewAlliance Bank, NewAlliance Investments, Inc.,
Newbridge Securities Corp., Nexity Financial Services, Inc., Next Financial
Group, NFB Investment Services Corp., NFP Securities, Inc., NIA Securities,
LLC., Nodaway Valley Bank, Nollenberger Capital Partners, North Ridge Securities
Corp., Northeast Securities, Inc., Northern Trust Company, Northern Trust
Securities, Inc., Northridge Capital Corp., Northwestern Mutual Investment
Services, Inc., Nutmeg Securities, Ltd., NYLIFE Securities Inc., O.N. Equity
Sales Co., Oak Tree Securities, Inc., Oakbrook Financial Group, Inc., Oberlin
Financial Corporation, OFG Financial Services, Inc., Ogilvie Security Advisors
Corp., Ohio National Equities, Inc., O'Keefe Shaw & Company, Old National Bank,
ON Equity Sales Co., OneAmerica Securities Inc., Oppenheimer and Co., Inc.,
Orange County Teachers Federal Credit Union, P & A Financial Sec's Inc., Pacific
Cascade Federal Credit Union, Pacific Financial Assoc., Pacific West Securities,
Inc., Packerland Brokerage Services, Inc., Paragon Bank & Trust, Park Avenue
Securities, Parsonex Securities, Inc., Partnervest Securities, Inc., Patapsco
Bank, Patelco Credit Union, Paulson Investment Company Inc., Peachtree Capital
Corporation, Penn Plaza Brokerage, Pension Planners Securities Inc., Pentagon
Federal Credit Union, Peoples Bank, Peoples Community Bank, Peoples Securities,
Inc., Peoples United Bank, PFIC Securities Corp, Pillar Financial Services,
Pimco Funds, PlanMember Securities Corp., PMK Securities & Research Inc., PNC
Bank Corp., PNC Investments LLC., Premier America Credit Union, Prime Capital
Services, Inc., PrimeSolutions Securities, Inc, PrimeVest Financial Services,
Princor Financial Service Corp., ProEquities, Inc., Professional Asset
Management, Inc., Prospera Financial Services, Protected Investors of America,
Provident Bank, Provident Savings Bank, F.S.B., Pruco Securities Corp., Purshe,
Kaplin & Sterling, Putnam Investments, Putnam Savings Bank, QA3 Financial Corp.,
Quest Capital Strategies, Inc., Quest Securities, Inc., Quest Tar, Questar
Capital Corp., R.M. Stark & Co., Raymond James & Associates, Inc., Raymond James
Financial Services, Inc., RBC Capital Markets Corp., RBC Centura Bank, RBC
Centura Securities, Inc., RBC Dain Rauscher Inc., Regal Discount Securities,
Inc., Regal Securities, Inc., Regency Securities Inc., Regions Bank, Reliance
Securities, LLC., Resource Horizons Group, LLC., R-G Crown Bank, Rhodes
Securities, Inc., Rice Pontes Capital, Inc., Ridgeway & Conger, Inc., River City
Bank, RiverStone Wealth Management, Inc., RNR Securities LLC., Robert B. Ausdal
& Co., Inc., Robert W. Baird & Co. Inc., Robinson & Robinson, Inc., Rogan &
Associates, Inc., Rogan, Rosenberg & Assoc., Inc., Rothschild Investment Corp.,
Royal Alliance Associates, Inc., Royal Securities Company, Rushmore Securities
Corp., Rydex Distributors, Inc., S F Police Credit Union, S.C. Parker & Co.,
Inc., Sage, Rutty & Co., Inc., Sammons Securities Company LLC., San Mateo County
Employees Credit Union, Sanders Morris Harris Inc., Sandy Spring Bank, Sawtooth
Securities, LLC., Saxony Securities, Inc., SCF Securities, Inc., School
Employees Credit Union, Scott & Stringfellow, Inc., Seacoast Investor Services
Inc., Seacoast National Bank, Securian Financial Services, Securities America,
Inc., Securities Equity Group, Securities Service Network, Inc., Security
Service Federal Credit Union, Shields & Company, Sicor Securities Inc., Sigma
Financial Corporation, Signator Investors Inc., Signature Bank, Signature
Financial Group, Inc., Signature Securities Group, SII Investments, Silicone
Valley Securities, SMH Capital, Smith Barney, Smith Barney Bank Advisor, Smith
Hayes Financial Services Corp., Sorrento Pacific Financial LLC., Source Capital
Group, Inc., South Carolina Bank & Trust, South Valley Bank & Trust, South
Valley Wealth Management, Southeast Investments NA Inc., Southern MO Bank of
Marshfield, SouthTrust Securities, Inc., Southwest Securities, Inc., Sovereign
Bank, Space Coast Credit Union, Spectrum Capital, Inc., Spelman & Co., Inc.,
Spire Securities, LLC., Stanford Group Company, Stephen A. Kohn & Associates,
Stephens, Inc., Sterling Savings Bank, Sterne Agee & Leach, Inc., Stifel,
Nicolaus & Co., Inc., Stock Depot Inc, Stockcross, Inc., Stofan, Agazzi &
Company, Inc., Strand Atkinson Williams York, Strategic Alliance Corp.,
Strategic Financial Alliance, Summit Bank, Summit Brokerage Services Inc.,
Summit Equities, Inc., Summitalliance Securities, LLC., SunAmerica, Sunset
Financial Services, Inc., SunTrust Investment Services, Inc., Superior Bank,
Surrey Bank & Trust, Susquehanna Bank, SWBC Investment Company, SWS Financial
Services, Symetra Investment Services Inc., Synergy Investment Group, Synovus
Securities, T.J. Raney & Sons, Inc., Taylor Securities, Inc., TD Bancnorth,
National Assoc., TD Waterhouse Investor Services, Inc., Technology Credit Union,
Telesis Community Credit Union, Telhio Credit Union, TFS Securities, Inc., The
Advisors Group, Inc., The Capital Group Sec. Inc., The Concord Equity Group,
LLC., The Golden 1 Credit Union, The Huntington Investment Co., The Huntington
Investment Company, The Legend Gray, Thomasville National Bank, Thoroughbred
Financial Services, LLC., Thrasher & Company, Thrivent Investment Management,
Inc., Thurston, Springer, Miller, Her, TierOne Bank, TimeCapital Securities
Corp., Tower Square Securities, Inc., TradeStar Investments, Inc., Transamerica
Financial Advisor, TransWest Credit Union, Tri Counties Bank, Triad Advisors,
Inc., Tri-County Financial Group, Inc., Triequa Capital Corporation, Triune
Capital Advisors, Troy Bank & Trust, Trustmark National Bank, Trustmont
Financial Group Inc., U.S Bank, UBS Financial Services, Inc., UBS International;
UBS Private Banking, UMB Bank, UMB Financial Services, Inc., UMB Scout Brokerage
Services, Union Bank, Union Bank & Trust, Union Bank Company, Union Bank of
California, N.A., Union Bank of Chandler, Union Capital Company, Union Savings
Bank, UnionBanc Investment Services, United Bank, Inc., United Brokerage
Services, Inc., United Community Bank, United Financial Group, United Planners
Financial Services of America, United Securities Alliance Inc., Univest
Investments, Inc., US Alliance Credit
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Union, US Bancorp Investments, US Bank, N.A., USA Financial Securities Corp.,
USAllianz Securities, Inc., USI Securities, UVest Financial Services, V.B.C.
Securities, VALIC Financial Advisors, Inc., ValMark Securities, Van Kampen
Investments, Inc., VanDerbilt Securities, LLC., Veritrust Financial, LLC.,
VFinance Investments, Inc., Vinson Assoc., Vision Bank, Vision Invstmnt
Services, Inc., Vision Securities, Inc., Vorpahl Wing Securities, VSR Financial
Services, Inc., VYstar Credit Union, Waccamaw Bank, Wachovia Bank, Wachovia
Securities Inc. Financial Network, Wachovia Securities ISG, Wachovia Securities
LLC., Waddell & Reed, Inc., Wakulla Bank, Wald Group, Wall Street Electronica,
Inc., Wall Street Financial Group, Walnut Street Securities, Inc., WAMU, WaMu
Investments, Inc., Washington Mutual, Wasserman & Associates, Waterstone
Financial Group, Wayne Hummer Investments LLC., Wayne Savings Community Bank,
Wealth Management Services, Webster Bank, Webster Investments, Wedbush Morgan
Securities Inc., Weitzel Financial Services Inc., Wells Fargo Investments, Wells
Fargo Securities Independent, Wells Federal Bank, Wellstone Securities, LLC.,
WesBanco Bank, Inc., WesBanco Securities, Inc., Wescom Credit Union, Wescom
Financial Services, West Alabama Bank & Trust, West Coast Bank, Westamerica
Bank, Western Federal Credit Union, Western International Securities, Westfield
Bakerink Brozak LLC., Westminster Financial Investment, Westminster Financial
Securities, Inc., Westport Securities, L.L.C., WFG Securities Corp., Whitney
National Bank, Whitney Securities, LLC., Wilbank Securities, Wiley Bros.-
Aintree Capital, William C. Burnside & Company, Wilmington Brokerage Services,
Wilmington Trust Co., Windsor Securities, Inc., WM Financial Services, Inc.,
Woodbury Financial Services, Inc., Woodforest National Bank, Woodlands
Securities Corp., Woodmen Financial Services Inc., Woodstock Financial Group,
Inc., Workman Securities Corp., World Equity Group Inc., World Group Securities,
Inc., Worth Financial Group, Inc., WRP Investments, Inc., Wunderlich Securities
Inc., XCU Capital Corp., Inc., Xerox Credit Union, Zeigler Investment Services.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
TOTAL RETURN FOR ALL SUB-ACCOUNTS
When a Sub-Account advertises its standardized total return, it will be
calculated on a quarterly basis from the date the underlying fund is made
available in the Separate Account for one, five and ten year periods or some
other relevant periods if the underlying fund has not been in existence for at
least ten years. Total return is measured by comparing the value of an
investment in the Sub-Account at the beginning of the relevant period to the
value of the investment at the end of the period. To calculate standardized
total return, the Total Annual Fund Operating Expenses, applicable Sales
Charges, Distribution Charge, Separate Account Annual Expenses, and the Annual
Maintenance Fee are deducted from a hypothetical initial Premium Payment of
$1,000.00. Standardized total returns do not include charges for optional
benefit riders.
The formula we use to calculate standardized total return is P(1+T) TO THE POWER
OF n = ERV. In this calculation, "P" represents a hypothetical initial premium
payment of $1,000.00, "T" represents the average annual total return, "n"
represents the number of years and "ERV" represents the redeemable value at the
end of the period.
The Sub-Account may advertise a non-standardized total return. These figures
will be calculated on a monthly basis from the inception date of the underlying
fund for one, five and ten year periods or other relevant periods.
Non-standardized total return is measured in the same manner as the standardized
total return described above, except that non-standardized total return does not
include the Annual Maintenance Fee, Distribution Charge, or Sales Charges.
Therefore, non-standardized total return for a Sub-Account is higher than
standardized total return for a Sub-Account.
The Sub-Account may also advertise adjusted non-standardized total return. These
figures will be calculated on a monthly basis from the inception date of the
underlying fund for one, five and ten year periods or other relevant periods.
Adjusted non-standardized total return is measured in the same manner as the
standardized total return described above.
A Sub-Account may advertise non-standardized total returns for periods predating
its inception as an investment option in this variable annuity. Such
non-standardized total returns reflect the adjusted historical returns of the
underlying Fund in which the Sub-Account invests, as adjusted for certain
Separate Account annual expenses (Mortality and Expense Risk Charges and
Administrative Fees), but excludes adjustments for optional riders or deductions
for Annual Maintenance Fees, sales charges, premium taxes and federal/state
taxes (including possible penalties). To the extent that a Sub-Account invests
in a Feeder Fund (a Feeder Fund is a fund that invests all of its assets into a
corresponding Master Fund), the Feeder Fund's performance for periods pre-dating
the inception of the Feeder Fund and/or its inclusion within a Separate Account
may include the performance of the Master Fund since the inception of the Master
Fund, as adjusted for the Feeder Fund's operating expenses. In such case, the
performance of a Feeder Fund will be lower than the corresponding Master Fund
because of Feeder Fund operating expenses. Performance may include the effect of
waivers and reimbursements, in the absence of which performance may have been
lower.
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YIELD FOR SUB-ACCOUNTS
If applicable, the Sub-Accounts may advertise yield in addition to total return.
At any time in the future, yields may be higher or lower than past yields and
past performance is no indication of future performance.
The standardized yield will be computed for periods beginning with the inception
of the Sub-Account in the following manner. The net investment income per
Accumulation Unit earned during a one-month period is divided by the
Accumulation Unit Value on the last day of the period.
The formula we use to calculate yield is: YIELD = 2[(a - b/cd +1) TO THE POWER
OF 6 - 1]. In this calculation, "a" represents the net investment income earned
during the period by the underlying fund, "b" represents the expenses accrued
for the period, "c" represents the average daily number of Accumulation Units
outstanding during the period and "d" represents the maximum offering price per
Accumulation Unit on the last day of the period.
MONEY MARKET SUB-ACCOUNTS
At any time in the future, current and effective yields may be higher or lower
than past yields and past performance is no indication of future performance.
Current yield of a money market fund Sub-Account is calculated for a seven-day
period or the "base period" without taking into consideration any realized or
unrealized gains or losses on shares of the underlying fund. The first step in
determining yield is to compute the base period return. We take a hypothetical
account with a balance of one Accumulation Unit of the Sub-Account and
calculates the net change in its value from the beginning of the base period to
the end of the base period. We then subtract an amount equal to the total
deductions for the Contract and then divides that number by the value of the
account at the beginning of the base period. The result is the base period
return or "BPR." Once the base period return is calculated, we then multiply it
by 365/7 to compute the current yield. Current yield is calculated to the
nearest hundredth of one percent.
The formula for this calculation is YIELD = BPR x (365/7), where BPR = (A -
B)/C. "A" is equal to the net change in value of a hypothetical account with a
balance of one Accumulation Unit of the Sub-Account from the beginning of the
base period to the end of the base period. "B" is equal to the amount that
Hartford deducts for mortality and expense risk charge, any applicable
administrative charge and the Annual Maintenance Fee. "C" represents the value
of the Sub-Account at the beginning of the base period.
Effective yield is also calculated using the base period return. The effective
yield is calculated by adding 1 to the base period return and raising that
result to a power equal to 365 divided by 7 and subtracting 1 from the result.
The calculation we use is:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) TO THE POWER OF 365/7] - 1.
ADDITIONAL MATERIALS
We may provide information on various topics to Contract Owners and prospective
Contract Owners in advertising, sales literature or other materials. These
topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable instruments, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for any alternatives.
PERFORMANCE COMPARISONS
Each Sub-Account may from time to time include in advertisements the ranking of
its performance figures compared with performance figures of other annuity
contract's sub-accounts with the same investment objectives which are created by
Lipper Analytical Services, Morningstar, Inc. or other recognized ranking
services.
8
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ACCUMULATION UNIT VALUES
The following information should be read in conjunction with the financial
statements for the Separate Account included in this Statement of Additional
Information.
There are several classes of Accumulation Unit Values under the Contract
depending on the number of optional benefits you select. The table below shows
all possible Accumulation Unit Values corresponding to all combinations of
optional benefits. A table showing only the highest and lowest possible
Accumulation Unit Values is shown in the prospectus, which assumes you select
either no optional benefits or all optional benefits.
There are no accumulated unit values because as of December 31, 2008, the
Sub-Accounts had not commenced operations.
PART A
HARTFORD LEADERS SELECT
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 4/1/99)
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT SEVEN (EST. 12/8/86)
P.O. BOX 5085
HARTFORD, CONNECTICUT 06102 - 5085
[TELEPHONE ICON] 1-800-862-6668 (CONTRACT OWNERS)
1-800-862-7155 (REGISTERED REPRESENTATIVES)
[COMPUTER ICON] WWW.HARTFORDINVESTOR.COM
[THE HARTFORD LOGO]
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This prospectus describes information you should know before you purchase Series
III of the Hartford Leaders Select variable annuity. The prospectus describes a
contract between each Owner and joint Owner ("you") and Hartford Life and
Annuity Insurance Company or Hartford Life Insurance Company ("us," "we" or
"our"). This is an individual, deferred, flexible-premium variable annuity. This
variable annuity allows you to allocate your Deposit among the following
portfolio companies:
X AIM Variable Insurance Funds
X AllianceBernstein Variable Products Series Fund, Inc.
X Evergreen Variable Annuity Trust
X Fidelity Variable Insurance Products Funds
X Franklin Templeton Variable Insurance Products Trust
X Hartford HLS Series Fund II
X Hartford Series Fund, Inc.
X MFS(R) Variable Insurance Trust
X Putnam Variable Trust
You may also allocate your Deposit to the Personal Pension Account and/or the
Fixed Accumulation Feature. The Fixed Accumulation Feature is not available for
every Contract class.
This prospectus refers to the following Contract classes:
X B Share (Core)
X C Share (Access)
X I Share (Advisory)
The Contract class will be selected on your application and identified in your
Contract. Not every Contract class or optional rider may be available from your
Financial Intermediary. The I share class is offered through registered
investment/financial advisors. Other available Contract classes offered through
select Financial Intermediaries are not described in this Prospectus and may be
subject to different charges.
Please read this prospectus carefully before investing and keep it for your
records and for future reference. You can also contact us to get a Statement of
Additional Information free of charge. The Statement of Additional Information
contains more information about this Contract and, like this prospectus, is
filed with the Securities and Exchange Commission ("SEC" or "Commission").
Although we file this prospectus and the Statement of Additional Information
with the SEC, the SEC doesn't approve or disapprove these securities or
determine if the information in this prospectus is truthful or complete. Anyone
who represents that the SEC does these things may be guilty of a criminal
offense. This prospectus and the Statement of Additional Information can also be
obtained from us or the SEC's website (www.sec.gov).
This variable annuity may not be suitable for everyone. This variable annuity
may not be appropriate for people who do not have a long investment time horizon
and is not appropriate for people who intend to engage in market timing. You
will get NO ADDITIONAL TAX ADVANTAGE from this variable annuity if you are
investing in a variable annuity through a tax-advantaged retirement plan (such
as a 401(k) plan or Individual Retirement Account ("IRA")). This prospectus is
not intended to provide tax, accounting or legal advice.
We are not an investment adviser nor are we registered as such with the SEC or
any state securities regulatory authority. We are not acting in any fiduciary
capacity with respect to your investment. This information does not constitute
personalized investment advice or financial planning advice.
NOT INSURED BY FDIC OR ANY MAY LOSE NOT A DEPOSIT OF OR GUARANTEED BY [NOT] FDIC
FEDERAL GOVERNMENT AGENCY VALUE ANY BANK OR ANY BANK AFFILIATE [NOT] BANK
--------------------------------------------------------------------------------
PROSPECTUS DATED: AUGUST 14, 2009
STATEMENT OF ADDITIONAL INFORMATION DATED: AUGUST 14, 2009
2
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CONTENTS
PAGE
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1. INTRODUCTION 3
2. FEE SUMMARY 4
3. MANAGEMENT OF THE CONTRACT 10
The Company 10
The General Account 10
The Separate Account 10
The Funds 10
Fixed Accumulation Feature 12
Personal Pension Account 13
4. INFORMATION ON YOUR ACCOUNT 17
a. Opening an Account 17
b. Charges and Fees 24
c. Surrenders 27
d. Annuity Payouts 29
e. Standard Death Benefit 33
5. RETURN OF PREMIUM DEATH BENEFIT 34
6. FURTHER INFORMATION 38
a. Glossary 38
b. State Variations 40
c. Miscellaneous 41
d. Legal Proceedings 42
e. How Contracts Are Sold 42
7. FEDERAL TAX CONSIDERATIONS/ TAX-QUALIFIED RETIREMENT PLANS 44
TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION 59
APPENDIX A - EXAMPLES APP A-1
APPENDIX B - ACCUMULATION UNIT VALUES APP B-1
APPENDIX C - FUND DATA APP C-1
3
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1. INTRODUCTION
HOW TO BUY THIS VARIABLE ANNUITY
[Thumbs up] CHOOSE A CONTRACT CLASS
MORTALITY &
MINIMUM INITIAL EXPENSE RISK
DEPOSIT NON- AND MAXIMUM
QUALIFIED QUALIFIED ADMINISTRATIVE UP-FRONT
CONTRACT CONTRACT SALES & OTHER CHARGES CHARGES COMMISSION
-----------------------------------------------------------------------------------------------------------------------------------
B SHARE $2,000 $5,000 8 year Contingent Deferred Sales Charge and 0.50% 5%
Distribution Charge
C SHARE $2,000 $10,000 1 year Contingent Deferred Sales Charge 1.35% 1%
I SHARE $5,000 $10,000 None 0.30% 0%
This table does not show Fund expenses, Premium taxes, Distribution Charges, and
optional rider fees.
[Thumbs up] CHOOSE INVESTMENT OPTIONS
X Sub-Accounts - Funds with different investment strategies, objectives and
risk/reward profiles.
X Fixed Accumulation Feature (B share class only) - A fixed interest account.
X Personal Pension Account - A fixed interest account designed to provide
lifetime payouts.
Subject to limitations, you may move your investment among each of these
options.
[Thumbs up] CHOOSE AN OPTIONAL FEATURE (IF DESIRED)
OPTIONAL FEATURE GENERAL PURPOSE
------------------------------------------------------------------------
Return of Premium Death Benefit* Guaranteed Minimum Death Benefit
* Investment restrictions apply.
Optional features may not be available through your Financial Intermediary.
[In writing] COMPLETE OUR APPLICATION OR ORDER REQUEST AND SUBMIT IT TO YOUR
FINANCIAL INTERMEDIARY FOR APPROVAL.
$ PAY THE APPLICABLE MINIMUM INITIAL DEPOSIT.
4
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2. FEE SUMMARY
THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
BUYING, OWNING AND SURRENDERING YOUR VARIABLE ANNUITY. THE FIRST TABLE DESCRIBES
THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY OR SURRENDER
THIS VARIABLE ANNUITY. STATE PREMIUM TAXES MAY ALSO BE DEDUCTED.
CONTRACT OWNER TRANSACTION EXPENSES
B SHARE C SHARE I SHARE
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CONTINGENT DEFERRED SALES CHARGE (CDSC) (1) None
1 7% 2%
2 7%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9+ 0%
SURRENDER FEE None None None
TRANSFER FEE None None None
(1) Each Deposit has its own CDSC schedule.
CONTRACT OWNER PERIODIC EXPENSES
THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
AND ON A DAILY BASIS (EXCEPT AS NOTED) DURING THE TIME THAT YOU OWN THE VARIABLE
ANNUITY, NOT INCLUDING ANNUAL FUND FEES AND EXPENSES.
B SHARE C SHARE I SHARE
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ANNUAL MAINTENANCE FEE (2) $30 $30 $30
DISTRIBUTION CHARGE (3) 0.75% None None
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average
daily
Contract Value excluding Fixed Accumulation Feature
investments)
Mortality and Expense Risk Charge 0.30% 1.15% 0.10%
Administrative Charge 0.20% 0.20% 0.20%
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 0.50% 1.35% 0.30%
MAXIMUM OPTIONAL CHARGES
Return of Premium Death Benefit (4) 0.75% 0.75% 0.75%
(2) Fee waived if Account Balance is $50,000 or more on your Contract
Anniversary.
(3) The Distribution Charge is based on a percentage of Remaining Gross
Premium. Each Premium Payment has its own Distribution Charge schedule. The
Distribution Charge is reduced to 0% after the completion of eight years
after each respective Premium Payment.
(4) Charge based on a percentage of Premium Payments adjusted for Surrenders on
each Contract Anniversary. Current rider charge is 0.30%.
THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING
EXPENSES CHARGED BY THE FUNDS THAT YOU MAY PAY ON A DAILY BASIS DURING THE TIME
THAT YOU OWN THIS VARIABLE ANNUITY. MORE DETAIL CONCERNING EACH FUND'S FEES AND
EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH FUND.
MINIMUM MAXIMUM
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.44% 2.37%
(expenses that are deducted from Underlying Fund assets,
including management fees, distribution
and/or service fees (12b-1) fees, and other expenses.
5
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THE LAST TABLE SHOWS THE TOTAL ANNUAL FUND OPERATING EXPENSES FOR EACH
UNDERLYING FUND. ACTUAL FEES AND EXPENSES FOR THE UNDERLYING FUNDS VARY DAILY.
AS A RESULT, THE FEES AND EXPENSES FOR ANY GIVEN DAY MAY BE GREATER OR LESS THAN
THE TOTAL ANNUAL FUND OPERATING EXPENSES LISTED BELOW. MORE DETAIL CONCERNING
EACH UNDERLYING FUND'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR EACH
FUND. THESE EXPENSES MAY VARY FROM YEAR TO YEAR.
ANNUAL FUND OPERATING EXPENSES
AS OF THE FUND'S YEAR END
(As a percentage of net assets)
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 0.61% 0.25% 0.29% 0.01%
AIM V.I. International
Growth Fund - Series II 0.71% 0.25% 0.35% 0.02%
AIM V.I. Mid Cap Core Equity
Fund - Series II 0.72% 0.25% 0.32% 0.03%
AIM V.I. PowerShares ETF
Allocation Fund - Series II 0.67% 0.25% 0.89% 0.56%
AIM V.I. Small Cap Equity
Fund - Series II 0.75% 0.25% 0.34% 0.01%
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 0.55% 0.25% 0.22% N/A
AllianceBernstein VPS
International Value
Portfolio - Class B 0.74% 0.25% 0.07% N/A
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 0.75% 0.25% 0.11% N/A
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.56% 0.25% 0.10% N/A
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.56% 0.25% 0.12% N/A
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.57% 0.25% 0.16% N/A
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 0.68% 0.35% 0.31% 0.04%
Franklin Income Securities
Fund - Class 4 0.45% 0.35% 0.02% N/A
Franklin Rising Dividends
Securities Fund - Class 4 0.60% 0.35% 0.02% 0.01%
Franklin Small Cap Value
Securities Fund - Class 4 0.52% 0.35% 0.16% 0.01%
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 0.50% 0.35% 0.28% 0.02%
Franklin Strategic Income
Securities Fund - Class 4 0.37% 0.35% 0.25% 0.01%
Mutual Global Discovery
Securities Fund - Class 4 0.80% 0.35% 0.18% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Core Equity Fund -
Series II 1.16% 0.01% N/A 1.15% (1)(2)(3)(4)
AIM V.I. International
Growth Fund - Series II 1.33% 0.01% N/A 1.32% (1)(2)(3)(4)
AIM V.I. Mid Cap Core Equity
Fund - Series II 1.32% 0.03% N/A 1.29% (1)(2)(3)(4)
AIM V.I. PowerShares ETF
Allocation Fund - Series II 2.37% 1.38% N/A 0.99% (1)(2)(4)(5)
AIM V.I. Small Cap Equity
Fund - Series II 1.35% N/A N/A 1.35% (1)(4)(6)
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND, INC.
AllianceBernstein VPS
Balanced Wealth Strategy
Portfolio - Class B 1.02% 0.02% N/A 1.00% (7)
AllianceBernstein VPS
International Value
Portfolio - Class B 1.06% N/A N/A 1.06%
AllianceBernstein VPS Small/
Mid Cap Value Portfolio -
Class B 1.11% N/A N/A 1.11%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
Fidelity VIP Contrafund(R)
Portfolio - Service Class 2 0.91% N/A N/A 0.91% (8)
Fidelity VIP Mid Cap
Portfolio - Service Class 2 0.93% N/A N/A 0.93% (8)
Fidelity VIP Strategic
Income Portfolio - Service
Class 2 0.98% N/A N/A 0.98%
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
Franklin Flex Cap Growth
Securities Fund - Class 4 1.38% 0.31% N/A 1.07% (9)(12)
Franklin Income Securities
Fund - Class 4 0.82% N/A N/A 0.82% (10)
Franklin Rising Dividends
Securities Fund - Class 4 0.98% N/A N/A 0.98%
Franklin Small Cap Value
Securities Fund - Class 4 1.04% N/A N/A 1.04% (12)
Franklin Small-Mid Cap
Growth Securities Fund -
Class 4 1.15% N/A N/A 1.15% (12)
Franklin Strategic Income
Securities Fund - Class 4 0.98% N/A N/A 0.98% (12)
Mutual Global Discovery
Securities Fund - Class 4 1.33% N/A N/A 1.33% (11)
6
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DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 0.60% 0.35% 0.13% N/A
Templeton Foreign Securities
Fund - Class 4 0.64% 0.35% 0.15% 0.02%
Templeton Global Bond
Securities Fund - Class 4 0.47% 0.35% 0.11% N/A
Templeton Growth Securities
Fund - Class 4 0.74% 0.35% 0.04% N/A
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.61% N/A 0.03% N/A
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.45% N/A 0.01% N/A
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.65% 0.25% 0.09% N/A
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 0.75% 0.25% 0.17% N/A
American Funds Bond HLS Fund
- Class IB 0.50% 0.25% 0.05% N/A
American Funds Global Bond
HLS Fund - Class IB 0.75% 0.25% 0.10% N/A
American Funds Global Growth
and Income HLS Fund - Class
IB 0.80% 0.25% 0.06% N/A
American Funds Global Growth
HLS Fund - Class IB 1.00% 0.25% 0.12% N/A
American Funds Global Small
Capitalization HLS Fund -
Class IB 0.80% 0.25% 0.11% N/A
American Funds Growth HLS
Fund - Class IB 0.75% 0.25% 0.03% N/A
American Funds Growth-
Income HLS Fund - Class IB 0.70% 0.25% 0.04% N/A
American Funds International
HLS Fund - Class IB 0.85% 0.25% 0.04% N/A
American Funds New World HLS
Fund -
Class IB 1.10% 0.25% 0.09% N/A
Hartford Capital
Appreciation HLS Fund -
Class IA 0.63% N/A 0.04% N/A
Hartford Disciplined Equity
HLS Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Dividend and Growth
HLS Fund -
Class IA 0.64% N/A 0.03% N/A
Hartford Global Equity HLS
Fund - Class IA 0.95% N/A 0.07% N/A
Hartford Global Growth HLS
Fund - Class IA 0.71% N/A 0.04% N/A
Hartford Growth HLS Fund -
Class IA 0.80% N/A 0.04% N/A
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Mutual Shares Securities
Fund - Class 4 1.08% N/A N/A 1.08%
Templeton Foreign Securities
Fund - Class 4 1.16% N/A N/A 1.16% (12)
Templeton Global Bond
Securities Fund - Class 4 0.93% N/A N/A 0.93% (13)
Templeton Growth Securities
Fund - Class 4 1.13% N/A N/A 1.13% (10)
HARTFORD HLS SERIES
FUND II, INC.
Hartford Growth
Opportunities HLS Fund -
Class IA 0.64% N/A N/A 0.64%
Hartford U.S. Government
Securities HLS Fund - Class
IA 0.46% N/A N/A 0.46%
HARTFORD SERIES FUND, INC.
American Funds Asset
Allocation HLS Fund - Class
IB 0.99% 0.40% 0.32% 0.91% (14)
American Funds Blue Chip
Income and Growth HLS Fund
- Class IB 1.17% 0.50% 0.43% 1.10% (14)
American Funds Bond HLS Fund
- Class IB 0.80% 0.25% 0.40% 0.95% (14)
American Funds Global Bond
HLS Fund - Class IB 1.10% 0.50% 0.59% 1.19% (14)
American Funds Global Growth
and Income HLS Fund - Class
IB 1.11% 0.55% 0.62% 1.18% (14)
American Funds Global Growth
HLS Fund - Class IB 1.37% 0.75% 0.55% 1.17% (14)
American Funds Global Small
Capitalization HLS Fund -
Class IB 1.16% 0.55% 0.74% 1.35% (14)
American Funds Growth HLS
Fund - Class IB 1.03% 0.50% 0.33% 0.86% (14)
American Funds Growth-
Income HLS Fund - Class IB 0.99% 0.45% 0.28% 0.82% (14)
American Funds International
HLS Fund - Class IB 1.14% 0.60% 0.52% 1.06% (14)
American Funds New World HLS
Fund -
Class IB 1.44% 0.85% 0.81% 1.40% (14)
Hartford Capital
Appreciation HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Disciplined Equity
HLS Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Dividend and Growth
HLS Fund -
Class IA 0.67% N/A N/A 0.67%
Hartford Global Equity HLS
Fund - Class IA 1.02% 0.10% N/A 0.92% (15)
Hartford Global Growth HLS
Fund - Class IA 0.75% N/A N/A 0.75%
Hartford Growth HLS Fund -
Class IA 0.84% N/A N/A 0.84%
7
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DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE (12B-1) OTHER FEES AND
UNDERLYING FUND: FEE FEES* EXPENSES EXPENSES
-------------------------------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.70% N/A 0.04% N/A
Hartford Index HLS Fund -
Class IB 0.30% 0.25% 0.02% N/A
Hartford International
Opportunities HLS Fund -
Class IA 0.67% N/A 0.04% N/A
Hartford Money Market HLS
Fund - Class IA 0.40% N/A 0.04% N/A
Hartford Small Company HLS
Fund - Class IA 0.68% N/A 0.03% N/A
Hartford Total Return Bond
HLS Fund - Class IA 0.46% N/A 0.03% N/A
Hartford Value HLS Fund -
Class IA 0.81% N/A 0.03% N/A
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 0.75% 0.25% 0.08% N/A
MFS(R) Investors Trust
Series - Service Class 0.75% 0.25% 0.09% N/A
MFS(R) Research Bond Series
- Service Class 0.50% 0.25% 0.14% N/A
MFS(R) Total Return Series -
Service Class 0.74% 0.25% 0.07% N/A
MFS(R) Value Series -
Service Class 0.75% 0.25% 0.09% N/A
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 0.65% 0.25% 0.13% 0.02%
Putnam VT Investors Fund -
Class IB 0.65% 0.25% 0.12% N/A
Putnam VT Voyager Fund -
Class IB 0.64% 0.25% 0.08% 0.01%
EVERGREEN VARIABLE ANNUITY
TRUST
Evergreen VA Diversified
Capital Builder Fund -
Class 1 0.33% N/A 0.28% N/A
Evergreen VA Fundamental
Large Cap Fund - Class 1 0.61% N/A 0.19% 0.01%
Evergreen VA Growth Fund -
Class 1 0.70% N/A 0.24% 0.01%
Evergreen VA International
Equity Fund - Class 1 0.42% N/A 0.25% N/A
Evergreen VA Omega Fund -
Class 1 0.52% N/A 0.20% N/A
Evergreen VA Special Values
Fund - Class 1 0.79% N/A 0.21% 0.02%
CONTRACTUAL MASTER FUND NET TOTAL
TOTAL ANNUAL FEE WAIVER TOTAL ANNUAL ANNUAL
OPERATING AND/OR EXPENSE OPERATING OPERATING
UNDERLYING FUND: EXPENSES REIMBURSEMENT EXPENSES EXPENSES
----------------------------- -------------------------------------------------------------------------
Hartford High Yield HLS Fund
- Class IA 0.74% N/A N/A 0.74%
Hartford Index HLS Fund -
Class IB 0.57% N/A N/A 0.57%
Hartford International
Opportunities HLS Fund -
Class IA 0.71% N/A N/A 0.71%
Hartford Money Market HLS
Fund - Class IA 0.44% N/A N/A 0.44%
Hartford Small Company HLS
Fund - Class IA 0.71% N/A N/A 0.71%
Hartford Total Return Bond
HLS Fund - Class IA 0.49% N/A N/A 0.49%
Hartford Value HLS Fund -
Class IA 0.84% N/A N/A 0.84%
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series -
Service Class 1.08% N/A N/A 1.08% (16)
MFS(R) Investors Trust
Series - Service Class 1.09% N/A N/A 1.09% (16)
MFS(R) Research Bond Series
- Service Class 0.89% N/A N/A 0.89% (16)
MFS(R) Total Return Series -
Service Class 1.06% N/A N/A 1.06% (16)
MFS(R) Value Series -
Service Class 1.09% N/A N/A 1.09% (16)
PUTNAM VARIABLE TRUST
Putnam VT Equity Income Fund
- Class IB 1.05% N/A N/A 1.05% (17)
Putnam VT Investors Fund -
Class IB 1.02% N/A N/A 1.02% (18)
Putnam VT Voyager Fund -
Class IB 0.98% N/A N/A 0.98% (17)
EVERGREEN VARIABLE ANNUITY
TRUST
Evergreen VA Diversified
Capital Builder Fund -
Class 1 0.61% N/A N/A 0.61% (21)
Evergreen VA Fundamental
Large Cap Fund - Class 1 0.81% N/A N/A 0.81% (19)(21)
Evergreen VA Growth Fund -
Class 1 0.95% N/A N/A 0.95% (19)(21)
Evergreen VA International
Equity Fund - Class 1 0.67% N/A N/A 0.67% (20)(21)
Evergreen VA Omega Fund -
Class 1 0.72% N/A N/A 0.72% (21)
Evergreen VA Special Values
Fund - Class 1 1.02% N/A N/A 1.02% (19)(21)
* The 12b-1 fees deducted from these classes cover certain distribution,
shareholder support and administrative services provided by intermediaries
(the insurance company, broker dealer or other service provider).
NOTES
(1) Acquired Fund Fees and Expenses are not fees or expenses incurred by the
fund directly but are expenses of the investment companies in which the
fund invests. You incur these fees and expenses indirectly through the
valuation of the fund's investment in those investment companies. As a
result, the Net Annual Fund Operating Expenses listed above may exceed the
expense limit numbers. The impact of the acquired fund fees and expense are
included in the total returns of the Fund.
(2) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive the advisory fee payable by the Fund in an amount equal to
100% of the net advisory fees Invesco Aim receives from the affiliated
money market funds on investments by the Fund of uninvested cash (excluding
investments of cash collateral from securities lending) in such affiliated
money market funds. Fee Waiver reflects this agreement.
8
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(3) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.45% of average daily net assets.
(4) Except as otherwise noted, figures shown in the table are for the year
ended December 31, 2008 and are expressed as a percentage of the Fund's
average daily net assets. There is no guarantee that actual expenses will
be the same as those shown in the table.
(5) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 0.43% of average daily net assets.
(6) The Fund's advisor has contractually agreed, through at least April 30,
2010, to waive advisory fees and/or reimburse expenses of Series II shares
to the extent necessary to limit Total Annual Fund Operating Expenses of
Series II shares to 1.40% of average daily net assets.
(7) Reflects the Adviser's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Portfolio's operating expenses.
This waiver extends through April 30, 2010 and may be extended by the
Adviser for additional one-year terms.
(8) A portion of the brokerage commissions that the fund pays may be reimbursed
and used to reduce the fund's expenses. In addition, through arrangements
with the fund's custodian, credits realized as a result of un-invested cash
balances are used to reduce the fund's custodian expenses. Including these
reductions, the total class operating expenses would have been: Fidelity
VIP Contrafund Portfolio Initial Class - 0.65%; Fidelity VIP Contrafund
Portfolio Service Class 2 - 0.90%; Fidelity VIP Growth Portfolio Initial
Class - 0.67%; Fidelity VIP Growth Portfolio Service Class 2 - 0.92%;
Fidelity VIP Mid Cap Portfolio Service Class 2 - 0.92%; Fidelity Overseas
Portfolio Initial Class - 0.84%. These offsets may be discontinued at any
time.
(9) The investment manager and administrator have contractually agreed to waive
or limit their respective fees and to assume as their own expense certain
expenses otherwise payable by the Fund so that common annual Fund operating
expenses (i.e., a combination of investment management fees, fund
administration fees, and other expenses, but excluding Rule 12b-1 fees and
acquired fund fees and expenses) do not exceed 0.72% (other than certain
non-routine expenses or costs, including those relating to litigation,
indemnification, reorganizations, and liquidations) until April 30, 2010.
This waiver is separate from the waiver related to the Sweep Money Fund.
(10) The Fund administration fee is paid indirectly through the management fee.
(11) The Fund's name changed from Mutual Discovery Securities Fund effective as
of May 1, 2009.
(12) The manager has agreed in advance to reduce its fee from assets invested by
the Fund in a Franklin Templeton money market fund (the Sweep Money Fund
which is "the acquired fund" in this case) to the extent of the Fund's fees
and expenses of the acquired fund. This reduction is required by the
Trust's board of trustees and an exemptive order by the Securities and
Exchange Commission; this arrangement will continue as long as the
exemptive order is relied upon.
(13) The Fund's name changed from Templeton Global Income Securities Fund
effective as of May 1, 2009.
(14) Because the Feeder Fund invests all of its assets in the Master Fund, the
Feeder Fund will bear its own fees and expenses and its proportionate share
of the fees and expenses of the Master Fund. The amounts shown under
"Master Fund Expenses" include the advisory fee (before non-contractual fee
waiver). The Annual Fund Operating Expense table and the Examples reflect
the estimated expenses of both the Feeder Fund and the Master Fund.
The Class I shares of the Master Funds do not have a sales charge (load) or
a distribution and service (12b-1) fee.
HL Advisors has entered into a contractual agreement with Hartford Series
Fund, Inc (the Company") under which it will waive a portion of its
advisory fee for such time as the fund is operated as a feeder fund,
because during the that time it will not be providing the portfolio
management portion of the advisory and management services to be provided
under its investment management with the Company. The fee waiver will
continue as long as the fund is part of a master-feeder structure unless
the Board of Directors approves a change in or elimination of the waiver.
Currently, the fund waivers are as follows: American Funds Asset Allocation
HLS Fund - 0.40%; American Funds Blue Chip and Growth HLS Fund - 0.50%;
American Fund Bond HLS Fund - 0.25%; American Funds Global Bond HLS Fund -
0.50%; American Funds Global Growth and Income HLS Fund - 0.55%; American
Funds Global Growth HLS Fund - 0.75%; American Fund Global Small
Capitalization HLS Fund - 0.55%; American Funds Growth HLS Fund - 0.50%;
American Funds Growth-Income HLS Fund - 0.45%; American Funds International
HLS Fund - 0.60%; American Funds New World HLS Fund - 0.85%.
(15) Effective August 25, 2008 HL Advisors contractually agreed to waive a
portion of its management fees until May 1, 2010. While such waiver is in
effect, using the most recent fiscal year average net assets, the
management fee is 0.85% and the total annual operating expenses are 0.92%.
(16) The fund's Rule 12b-1 plan permits it to pay distribution and/or service
fees to support the sale and distribution of the fund's Service Class
shares and the services provided by financial intermediaries. The maximum
rates that may be charged under the plan, together with details of any fee
reduction arrangements, are set forth under "Distribution and Service
Fees."
(17) "Total Annual Fund Operating Expenses" includes the amount from "Acquired
Fund Fees and Expenses" column, which is an estimate of expenses
attributable to the fund's investments in other investment companies, based
on the total annual fund operating expenses of such companies as reported
in their most recent shareholder reports (net of any applicable expense
limitations). These indirect expenses will vary from time to time depending
on the fund's investments in other investment companies and their operating
expenses
(18) Includes estimated expenses attributable to the fund's investments in other
investment companies that the fund bears indirectly.
(19) The Total fees in the table include fees and expenses incurred indirectly
by the fund as a result of its investments in other investment companies
(each an Acquired Fund).
(20) Effective January 1, 2009, the Fund's investment advisor has agreed to
limit Total Annual Fund Operating Expenses to 0.75% through February 28,
2011.
(21) The Total ratio of expenses to net assets excludes expense reductions.
9
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EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THIS
VARIABLE ANNUITY WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITIES. LET'S
SAY, HYPOTHETICALLY, THAT YOUR ANNUAL INVESTMENT RETURN IS FIVE (5%) PERCENT AND
THAT YOUR FEES AND EXPENSES TODAY WERE AS HIGH AS POSSIBLE INCLUDING THE
ELECTION OF THE HIGHEST POSSIBLE OPTIONAL CHARGES (I.E., THE HARTFORD'S RETURN
OF PREMIUM DEATH BENEFIT). THE EXAMPLE ILLUSTRATES THE EFFECT OF FEES AND
EXPENSES THAT YOU COULD INCUR (OTHER THAN TAXES). YOUR ACTUAL FEES AND EXPENSES
MAY VARY. FOR EVERY $10,000 INVESTED (EXCLUDING PERSONAL PENSION ACCOUNT
CONTRIBUTIONS AND AMOUNTS ALLOCATED TO THE FIXED ACCUMULATION FEATURE), HERE'S
HOW MUCH YOU WOULD PAY UNDER EACH OF THE THREE SCENARIOS POSED:
(1) If you Surrender your variable annuity at the end of the applicable time
period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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B Share $1137 $2092 $2858 $4630
C Share $676 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
(2) If you annuitize at the end of the applicable time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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B Share $294 $1245 $2199 $4525
C Share $381 $1355 $2332 $4782
I Share $274 $1041 $1822 $3841
(3) If you do not Surrender your variable annuity:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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B Share $474 $1425 $2379 $4630
C Share $486 $1460 $2437 $4887
I Share $379 $1146 $1927 $3946
CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
When Premium Payments are credited to your Funds, they are converted into
Accumulation Units by dividing the amount of your Premium Payments minus any
Premium taxes, by the Accumulation Unit Value for that Valuation Day. All
classes of Accumulation Unit Values may be obtained, free of charge, by
contacting us. See Appendix B - Accumulation Unit Values for additional
information. You can find financial statements for us and the Separate Account
in the Statement of Additional Information.
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3. MANAGEMENT OF THE CONTRACT
THE COMPANY
We are a stock life insurance company engaged in the business of writing life
insurance and individual and group annuities. Hartford Life Insurance Company is
authorized to do business in all states of the United States and the District of
Columbia. Hartford Life and Annuity Insurance Company is authorized to do
business in Puerto Rico, the District of Columbia, and all states of the United
States except New York. Hartford Life Insurance Company was originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Hartford Life and Annuity Insurance Company was
originally incorporated under the laws of Wisconsin on January 9, 1956, and
subsequently redomiciled to Connecticut. Hartford Life and Annuity Insurance
Company is a subsidiary of Hartford Life Insurance Company. Our corporate
offices are located in Simsbury, Connecticut. Neither company cross guarantees
the obligations of the other. We are ultimately controlled by The Hartford
Financial Services Group, Inc.
All guarantees under the Contract are subject to each issuing company's
financial strength and claims-paying capabilities. We provide information about
our financial strength in reports filed with the SEC (Hartford Life Insurance
Company only) and/or state insurance departments. For example, Hartford Life
Insurance Company files annual reports (Form 10-K), quarterly reports (Form
10-Q) and periodic reports (Form 8-K) with the SEC. Forms 10-K and 10-Q include
information such as our financial statements, management discussion and analysis
of the previous year of operations, risk factors, and other information. Form
8-K reports are used to communicate important developments that are not
otherwise disclosed in the other forms described above. You may read or copy
these reports at the SEC's Public Reference Room at 100 F. Street N.E., Room
1580, Washington, D.C. 20549-2001. You may also obtain reports and other
information about us by contacting us using the information stated on the cover
page of this prospectus, visiting our website at www.hartfordinvestor.com or
visiting the SEC's website at www.sec.gov. You may also obtain reports and other
financial information about us by contacting your state insurance department.
THE GENERAL ACCOUNT
The Fixed Accumulation Feature and the Personal Pension Account are part of our
General Account. Any amounts that we are obligated to pay under the Fixed
Accumulation Feature and the Personal Pension Account and any other payment
obligation we undertake under the Contract are subject to our financial strength
and claims-paying ability and our long-term ability to make such payments. We
invest the assets of the General Account according to the laws governing the
investments of insurance company general accounts. The General Account is not a
bank account and is not insured by the FDIC or any other government agency. We
receive a benefit from all amounts held in our General Account. Amounts in our
General Account are available to our general creditors. We issue other types of
insurance policies and financial products and pay our obligations under these
products from our assets in the General Account.
THE SEPARATE ACCOUNT
We set aside and invest the assets of some of our annuity contracts, including
these Contracts, in a Separate Account. These Separate Accounts are registered
as unit investment trusts under the 1940 Act. This registration does not involve
supervision by the SEC of the management or the investment practices of a
Separate Account or us. Separate Accounts meet the definition of "Separate
Account" under federal securities law. The Separate Accounts referenced in this
prospectus hold only assets for variable annuity contracts. These Separate
Accounts:
- hold assets for your benefit and the benefit of other Contract Owners, and
the persons entitled to the payouts described in the Contract;
- are not subject to the liabilities arising out of any other business we may
conduct;
- are not affected by the rate of return of our General Account or by the
investment performance of any of our other Separate Accounts;
- may be subject to liabilities of other variable annuity contracts offered by
this Separate Account which are not described in this prospectus; and
- are credited with income and gains, and takes losses, whether or not
realized, from the assets they hold without regard to our other income,
gains or loss.
We do not guarantee the investment results of the Separate Account.
THE FUNDS
The Funds available for investment are not the same mutual funds that you can
buy through your Registered Representative even though they may have similar
investment strategies and the same portfolio managers. Each Fund has varying
degrees of investment risk. Funds are also subject to separate fees and expenses
such as management fees, distribution and operating expenses. "Master-feeder" or
"fund of funds" ("feeder funds") invest substantially all of their assets in
other funds and will therefore bear a pro-rata share of fees and expenses
incurred by both funds. This will reduce your investment return. Please contact
us to obtain a copy of the
11
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prospectuses for each Fund (or for any feeder funds). Read these prospectuses
carefully before investing. We do not guarantee the investment results of any
Fund. Certain Funds may not be available in all states and in all Contract
classes.
MIXED AND SHARED FUNDING - Fund shares may be sold to our other separate
accounts, our insurance company affiliates or other unaffiliated insurance
companies to serve as an underlying investment for variable annuity contracts
and variable life insurance policies, pursuant to a practice known as "mixed and
shared funding." As a result, there is a possibility that a material conflict
may arise between the interests of Owners, and other contract owners investing
these Funds. If a material conflict arose, we will consider what action may be
appropriate, including removing the Fund from the Separate Account or replacing
the Fund with another underlying fund.
VOTING RIGHTS - We are the legal owners of all Fund shares held in the Separate
Account and we have the right to vote at the Funds' shareholder meetings. To the
extent required by federal securities laws or regulations, we will:
- notify you of any Fund shareholders' meeting if the shares held for your
Contract may be voted;
- send proxy materials and a form of instructions that you can use to tell us
how to vote the Fund shares held for your Contract;
- arrange for the handling and tallying of proxies received from Owners;
- vote all Fund shares attributable to your Contract according to instructions
received from you, and
- vote all Fund shares for which no voting instructions are received in the
same proportion as shares for which instructions have been received.
If any federal securities laws or regulations, or their present interpretation,
change to permit us to vote Fund shares on our own, we may decide to do so. You
may attend any shareholder meeting at which shares held for your Contract may be
voted. After we begin to make Annuity Payouts to you, the number of votes you
have will decrease. As a result of proportional voting, a small number of Owners
could determine the outcome of a proposition subject to shareholder vote.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS - Subject to any applicable law,
we may make certain changes to the Funds offered under your Contract. We may, in
our sole discretion, establish new Funds. New Funds may be made available to
existing Owners as we deem appropriate. We may also close one or more Funds to
additional Premium Payments or transfers from existing Funds. We may liquidate
one or more Sub-Accounts if the board of directors of any Fund determines that
such actions are prudent. Unless otherwise directed, investment instructions
will be automatically updated to reflect the Fund surviving after any merger,
substitution or liquidation.
We may eliminate the shares of any of the Funds from the Contract for any reason
and we may substitute shares of another registered investment company for the
shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the 1940 Act, substitutions of
shares attributable to your interest in a Fund will not be made until we have
the approval of the SEC and we have notified you of the change.
In the event of any substitution or change, we may, by appropriate endorsement,
make any changes in the Contract necessary or appropriate to reflect the
substitution or change. If we decide that it is in the best interest of the
Owners, the Separate Account may be operated as a management company under the
1940 Act or any other form permitted by law, may be de-registered under the 1940
Act in the event such registration is no longer required, or may be combined
with one or more other Separate Accounts.
FEES WE RECEIVE FROM FUNDS AND RELATED PARTIES - We receive substantial and
varying administrative service payments (referred to as "revenue sharing
payments") and Rule 12b-1 fees from certain Funds or related parties. We
consider revenue sharing payments and Rule 12b-1 fees among a number of factors
when deciding to add or keep a Fund that we offer through the Contract. We
collect these payments and fees under agreements between us and a Fund's
principal underwriter, transfer agent, investment adviser and/or other entities
related to the Fund. We expect to make a profit on these fees.
The availability of these types of arrangements creates an incentive for us to
seek and offer Funds (and classes of shares of such Funds) that pay us revenue
sharing. Other funds (or available classes of shares) may have lower fees and
better overall investment performance. As of December 31, 2008, we have entered
into arrangements to receive administrative service payments and/or Rule 12b-1
fees from each of the following Fund complexes (or affiliated entities): AIM
Advisors, Inc., AllianceBernstein Variable Products Series Funds & Alliance
Bernstein Investments, American Variable Insurance Series & Capital Research and
Management Company, Branch Banking & Trust Company, Evergreen Investment
Services Inc., Fidelity Distributors Corporation, Fidelity Investments
Institutional Operations Company, Franklin Templeton Services, LLC, The
Huntington Funds, Lord Abbett Series Fund & Lord Abbett Distributor, LLC, MFS
Fund Distributors, Inc. & Massachusetts Financial Services Company, Merrill
Lynch Asset Management & Princeton Funds Distributor, Morgan Stanley
Distribution, Inc. & Morgan Stanley Investment Management & The Universal
Institutional Funds, MTB Investment Advisors, Inc., Banc of America Advisors,
LLC, JPMorgan Investment Advisors, Inc., Oppenheimer Variable Account Funds &
Oppenheimer Funds Distributor, Inc., Pioneer Variable Contracts Trust & Pioneer
Investment Management, Inc. & Pioneer Funds Distributor, Inc., Prudential
Investment Management Services, LLC, Putnam Retail
12
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Management Limited Partnership, SunTrust Securities, Inc. & Trusco Capital
Management, Inc., UBS Financial Services, Inc., Van Kampen Life Investment Trust
& Van Kampen Asset Management, Van Kampen Funds, The Victory Variable Insurance
Funds & Victory Capital Management, Inc. & Victory Capital Advisers, Inc. and
Wells Fargo Variable Trust & Wells Fargo Fund Management, LLC.
We are affiliated with Hartford Series Fund, Inc. and Hartford HLS Series Fund
II, Inc. (collectively, the "HLS Funds") based on our affiliation with their
investment advisers HL Investment Advisors, LLC and Hartford Investment
Management Company. In addition to investment advisory fees, we, or our other
insurance company affiliates, receive fees to provide, among other things,
administrative, processing, accounting and shareholder services for the HLS
Funds.
Not all Fund complexes pay the same amounts of revenue sharing payments and/or
Rule 12b-1 fees. Therefore, the amount of fees we collect may be greater or
smaller based on the Funds you select. Revenue sharing payments and Rule 12b-1
fees did not exceed 0.50% and 0.35%, respectively, in 2008, and are not expected
to exceed 0.50% and 0.35%, respectively, in 2009, of the annual percentage of
the average daily net assets (for instance, in 2008, assuming that you invested
in a Fund that paid us the maximum fees and you maintained a hypothetical
average balance of $10,000, we would collect a total of $85 from that Fund). For
the fiscal year ended December 31, 2008, revenue sharing payments and Rule 12b-1
fees did not collectively exceed approximately $145.6 million. These fees do not
take into consideration indirect benefits received by offering HLS Funds as
investment options.
FIXED ACCUMULATION FEATURE
INTERESTS IN THE FIXED ACCUMULATION FEATURE ARE NOT REGISTERED UNDER THE 1933
ACT AND THE FIXED ACCUMULATION FEATURE IS NOT REGISTERED AS AN INVESTMENT
COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE FIXED ACCUMULATION FEATURE
NOR ANY OF ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE
1933 ACT OR THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE
DISCLOSURE REGARDING THE FIXED ACCUMULATION FEATURE. THE FOLLOWING DISCLOSURE
ABOUT THE FIXED ACCUMULATION FEATURE IS SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND
COMPLETENESS OF DISCLOSURES. THE FIXED ACCUMULATION FEATURE IS NOT OFFERED IN
ALL CONTRACT CLASSES AND IS NOT AVAILABLE IN ALL STATES.
We guarantee that we will credit interest to amounts you allocate to the Fixed
Accumulation Feature at a minimum rate that meets your State's minimum
non-forfeiture requirements. Non-forfeiture rates vary from state-to-state. We
may credit a rate higher than the minimum rate. We reserve the right to declare
different rates of interest depending on when amounts are allocated or
transferred to the Fixed Accumulation Feature. This means that amounts at any
designated time may be credited with a different rate of interest than the rate
previously credited to such amounts and to amounts allocated or transferred at
any other designated time. We will periodically publish the Fixed Accumulation
Feature interest rates currently in effect. There is no specific formula for
determining interest rates and, except as specifically stated above, no
assurances are offered as to future rates in excess of non-forfeiture rates.
Some of the factors that we may consider in determining whether to credit
interest are: general economic trends, rates of return currently available for
the types of investments and durations that match our liabilities and
anticipated yields on our investments; regulatory and tax requirements; and
competitive factors. Fixed Accumulation Feature interest rates may vary by
State.
We will account for any deductions, Surrenders or transfers from the Fixed
Accumulation Feature on a "first-in, first-out" basis (i.e., oldest investments
will be liquidated first).
ANY INTEREST CREDITED TO AMOUNTS YOU ALLOCATE TO THE FIXED ACCUMULATION FEATURE
IN EXCESS OF THE MINIMUM GUARANTEED INTEREST RATE WILL BE DETERMINED AT OUR SOLE
DISCRETION. YOU ASSUME THE RISK THAT INTEREST CREDITED TO THE FIXED ACCUMULATION
FEATURE MAY NOT EXCEED THE MINIMUM GUARANTEED INTEREST RATE FOR ANY GIVEN YEAR.
From time to time, we may credit increased interest rates in our sole
discretion.
We may restrict your ability to allocate Contract Value, Benefit Balance or
Premium Payments to the Fixed Accumulation Feature (and vice versa) at any time
in our sole discretion. We may close the Fixed Accumulation Feature to new
Premium Payments or transfers of existing Contract Value and/or Benefit Balance.
Except as otherwise provided, during each Contract Year, you may make transfers
out of the Fixed Accumulation Feature to Sub-Accounts or the Personal Pension
Account, subject to the transfer restrictions discussed below. All transfer
allocations must be in whole numbers (e.g., 1%). Each Contract Year you may
transfer the greater of:
- thirty (30%) percent of the Contract Value in the Fixed Accumulation Feature
as of the last Contract Anniversary. When we calculate the 30%, we add
Premium Payments allocated to the Fixed Accumulation Feature, transfers from
Sub-Accounts and transfers from the Personal Pension Account made after that
date but before the next Contract Anniversary. These restrictions also apply
to systematic transfers. The 30% does not include Contract Value in any DCA
Plus Program; or
- an amount equal to your largest previous transfer from the Fixed
Accumulation Feature in any one Contract Year.
We apply these restrictions to all transfers from the Fixed Accumulation
Feature, including all systematic transfers and Dollar Cost Averaging Programs,
except for transfers under our DCA Plus Program.
If your interest rate renews at a rate at least 1% lower than your prior
interest rate, you may transfer any amount up to 100% of the amount to be
invested at the renewal rate. You must make this transfer request within 60 days
of being notified of the renewal rate.
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We may defer transfers and partial Surrenders from the Fixed Accumulation
Feature for up to six months from the date of your request.
You must wait six months after your most recent transfer from the Fixed
Accumulation Feature before moving Sub-Account Values or Benefit Balance back to
the Fixed Accumulation Feature. If you make systematic transfers from the Fixed
Accumulation Feature under a Dollar Cost Averaging Program or DCA Plus Program,
you must wait six months after your last systematic transfer before moving
Contract Value or Benefit Balance back to the Fixed Accumulation Feature.
As a result of these limitations, it may take a significant amount of time
(i.e., several years) to move Contract Value in the Fixed Accumulation Feature
to Sub-Accounts and/or Personal Pension Account and therefore this may not
provide an effective short term defensive strategy.
PERSONAL PENSION ACCOUNT
INTERESTS IN THE PERSONAL PENSION ACCOUNT ARE NOT REGISTERED UNDER THE 1933 ACT
AND THE PERSONAL PENSION ACCOUNT IS NOT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE PERSONAL PENSION ACCOUNT NOR ANY OF
ITS INTERESTS ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR
THE 1940 ACT, AND THE STAFF OF THE SEC HAS NOT REVIEWED THE DISCLOSURES
REGARDING THE PERSONAL PENSION ACCOUNT. THE FOLLOWING DISCLOSURE ABOUT THE
PERSONAL PENSION ACCOUNT IS SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS
OF THE FEDERAL SECURITIES LAWS REGARDING THE ACCURACY AND COMPLETENESS OF
DISCLOSURES. THE PERSONAL PENSION ACCOUNT MAY NOT BE AVAILABLE TO ALL TYPES OF
QUALIFIED PLANS, OWNERSHIP ARRANGEMENTS, OR IN ALL STATES.
WHAT IS THE PERSONAL PENSION ACCOUNT?
THE FOLLOWING IS A BRIEF SUMMARY OF THE PERSONAL PENSION ACCOUNT. You should
read this entire section of the prospectus to make sure that you understand the
important limitations and restrictions applicable to the Personal Pension
Account.
The Personal Pension Account is like the Fixed Accumulation Feature because you
receive a fixed interest rate investment return. So, like the Fixed Accumulation
Feature, you can invest in the Personal Pension Account if you want a steadier
return than you would receive from the Sub-Accounts, where your return depends
on the investment performance of the Funds you select.
While the Personal Pension Account and Fixed Accumulation Feature both offer a
fixed interest rate return, the Personal Pension Account is designed to serve a
different purpose than the Fixed Accumulation Feature. The Fixed Accumulation
Feature is designed to serve as a conventional accumulation-oriented investment
-you put money in to build up your investment, and you can then withdraw money
to meet financial needs as they arise. You can also transfer some or all of your
investment to the Sub-Accounts or the Personal Pension Account, and your
beneficiaries receive a death benefit if you die. The Personal Pension Account
is designed to serve a different purpose - it has features and guarantees you
can use to design your own personal pension plan to provide you with life-long
income payments without having to use the Sub-Accounts or Fixed Accumulation
Feature for that purpose. These guarantees let you know in advance how much your
income payments will be in the future. While you can take income payments from
the Fixed Accumulation Feature too, the amount of those income payments is not
guaranteed in advance.
Why would you invest in the Fixed Accumulation Feature if the Personal Pension
Account gives you income guarantees and more flexibility structuring income
payments? The reason is that to give you the guarantees and income payment
flexibility, we had to place significant restrictions on how much you can
transfer out of the Personal Pension Account in any year as well as on your
ability to receive lump sum payments - instead of SURRENDERING part or all of
the amounts you have built up in the Personal Pension Account, you can get a
lump sum payment only by specifying some or all of the payments you are
receiving, and then COMMUTING them into one lump sum. When you invest in the
Personal Pension Account, you may end up getting less than you would have if you
invested in the Fixed Accumulation Feature. This is the tradeoff you have to
accept in return for getting the additional flexibility and guarantees that let
you design your own personal pension plan.
THERE ARE CERTAIN CONDITIONS THAT MUST BE SATISFIED FOR YOU TO RECEIVE
GUARANTEED INCOME PAYMENTS FROM YOUR PERSONAL PENSION ACCOUNT INVESTMENT,
INCLUDING STARTING TO TAKE PAYMENTS BEFORE THE END OF A SPECIFIED PERIOD.
YOU SHOULD READ THE REST OF THIS PROSPECTUS AND YOUR CONTRACT CAREFULLY
TO MAKE SURE YOU UNDERSTAND ALL OF THESE CONDITIONS.
AS YOU READ THE REMAINDER OF THIS SECTION OF THE PROSPECTUS, WHICH PROVIDES YOU
WITH MORE DETAILED INFORMATION ABOUT HOW THE PERSONAL PENSION ACCOUNT WORKS, YOU
SHOULD KEEP IN MIND THESE IMPORTANT POINTS:
- YOUR ABILITY TO MAKE TRANSFERS FROM THE PERSONAL PENSION ACCOUNT IS
SIGNIFICANTLY LIMITED BECAUSE THE PERSONAL PENSION ACCOUNT RESTRICTS
LIQUIDITY DUE TO TRANSFER LIMITATIONS AND THE POTENTIAL LOSS OF VALUE AS A
RESULT OF COMMUTATION. ACCORDINGLY, YOU SHOULD ENSURE THAT YOUR INVESTMENTS
IN THE FIXED ACCUMULATION FEATURE AND THE SUB-ACCOUNTS WILL BE ADEQUATE TO
MEET YOUR LIQUIDITY NEEDS.
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- BECAUSE THE PERSONAL PENSION ACCOUNT IS DESIGNED AS A LONG-TERM RETIREMENT
FUNDING VEHICLE, IT HAS GUARANTEED PAYOUT RATES APPLICABLE ONLY FOR PERSONAL
PENSION ACCOUNT PAYMENTS COMMENCED BEFORE THE EXPIRATION OF YOUR SPECIFIED
"GUARANTEE WINDOW" (AS DESCRIBED BELOW).
- THE PERSONAL PENSION ACCOUNT PROVIDES CERTAIN ADDITIONAL FLEXIBILITY WITH
RESPECT TO STRUCTURING INCOME PAYMENTS - YOU CAN CONVERT PART OF YOUR
INVESTMENT IN THE PERSONAL PENSION ACCOUNT INTO INCOME PAYMENTS AT A
PARTICULAR TIME RATHER THAN YOUR ENTIRE INVESTMENT, AND YOU MAY ESTABLISH
DIFFERENT INCOME STREAMS.
- AT ANY GIVEN TIME, CREDITED RATES AVAILABLE UNDER THE PERSONAL PENSION
ACCOUNT MAY BE HIGHER OR LOWER THAN INTEREST RATES OFFERED UNDER THE FIXED
ACCUMULATION FEATURE.
- YOU MAY USE THE PERSONAL PENSION ACCOUNT TO ESTABLISH STREAMS OF INCOME
PAYMENTS THAT WILL CONTINUE FOR AS LONG AS YOU, THE ANNUITANT OR A JOINT
OWNER ARE ALIVE.
- IF YOU REQUEST A LUMP SUM PAYMENT, WE COMMUTE THE AMOUNT OF THE PAYMENTS
THAT WOULD HAVE BEEN MADE DURING THE "GUARANTEED PAYOUT DURATION" (AS
DESCRIBED BELOW). PAYMENTS WILL COMMENCE AGAIN IF YOU THE ANNUITANT OR A
JOINT OWNER LIVE PAST THE GUARANTEED PAYOUT DURATION.
- IF YOU TERMINATE THIS CONTRACT, YOU GIVE UP YOUR RIGHT TO FUTURE "PERSONAL
PENSION ACCOUNT PAYOUTS" (AS DESCRIBED BELOW).
HOW DOES THE PERSONAL PENSION ACCOUNT WORK?
CONTRIBUTIONS. You invest in the Personal Pension Account through Personal
Pension Account Contributions. The first Personal Pension Account Contribution
becomes your initial investment called your "Benefit Balance." The Benefit
Balance will be increased by the amount of each subsequent Personal Pension
Account Contribution, transfers into the Personal Pension Account from the Fixed
Accumulation Feature and Sub-Accounts and accrued interest. Unlike the Fixed
Accumulation Feature, the Benefit Balance is not indicative of what you would
receive as a lump sum.
Once you start taking Personal Pension Account Payouts, as described below, your
Benefit Balance is divided into an "Accumulation Balance" and "Annuity Payout
Value." Annuity Payout Value refers to the sums used to fund your Personal
Pension Account Payouts and anything remaining is referred to as your
Accumulation Balance. Because you may convert all or any portion of your
Accumulation Balance into Personal Pension Account Payouts at different times,
you may have more than one Annuity Payout Value.
The minimum initial Personal Pension Account Contribution is $10,000. Our prior
approval may be required for any single or cumulative Personal Pension Account
Contribution of $1 million or more. Each subsequent Personal Pension Account
Contribution must be at least $1,000. If made through an approved investment
Program, subsequent Personal Pension Account Contributions minimums must be met
over the course of the Contract Year or the duration of the investment Program,
if less. FAILURE TO MAINTAIN A MINIMUM ACCUMULATION BALANCE OF $5,000 WILL
RESULT IN PREMATURE COMMENCEMENT OF PENSION ACCOUNT PAYOUTS. You may not make
any Personal Pension Account Contributions after the Annuity Commencement Date.
INTEREST CREDITING - We guarantee that we will credit interest to amounts that
you allocate to the Personal Pension Account at a minimum rate of 1.5% (called a
"credited rate(s)"). We may credit a rate higher than the minimum credited rate.
We expect to make a profit in setting credited rates. Different credited rates
may apply during the course of your investment in the Personal Pension Account.
Credited rates will continue to apply to your Accumulation Balance until the
earliest of when you commence taking Personal Pension Account Payouts, the
Annuity Commencement Date or when we pay the Death Benefit. Credited rates will
not apply to your Annuity Payout Value(s).
We reserve the right to periodically establish new credited rates that will be
applied to new Personal Pension Account Contributions. This means that all or
portions of your Accumulation Balance may earn interest at different credited
rates. See Examples 1, 2 and 4 under the Personal Pension Account Examples in
Appendix A for an illustration of how different credited rates may apply during
the term of your Contract. There is no specific formula for determining credited
rates and no assurances are offered as to future credited rates and their
applicability. Some of the factors that we may consider in determining credited
rates include, but are not limited to, general economic trends, rates of return
currently available for the types of investments and durations that match these
or our general liabilities and anticipated yields on our investments; regulatory
and tax requirements; and competitive factors.
PERSONAL PENSION ACCOUNT PAYOUTS - You may tell us to start paying you income
payments called "Personal Pension Account Payouts" at any time or at different
times until your Annuity Commencement Date. Subsequent Premium Payments can be
made into Sub-Accounts and/or the Fixed Accumulation Feature after Personal
Pension Account Payouts have begun (if received before your Annuity Commencement
Date).
15
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As noted above, your ability to receive lump sum payments from the Personal
Pension Account is limited. You do not withdraw any part of your Benefit Balance
in the same way that you can surrender your Contract Value from Sub-Accounts or
the Fixed Accumulation Feature. Rather, you must convert Accumulation Balance
into an Annuity Payout Value that is then used to set your Personal Pension
Account Payouts. You may surrender any or all of your Contract Value without
affecting your Annuity Payout Value, or you may commute any or all of your
Annuity Payout Value without affecting your Contract Value. However, you may
terminate your Contract by (a) fully surrendering all of your Contract Value in
the Sub-Accounts and Fixed Accumulation Feature; (b) commuting your Annuity
Payout Value in your Personal Pension Account (as discussed in more detail
below); and (c) giving up your right to Personal Pension Account Payouts.
You will automatically start receiving Personal Pension Account Payouts on your
Annuity Commencement Date. Personal Pension Account Payouts will be paid in the
manner described in Annuity Payout Option Two or Eight under the heading "When
do your Annuity Payouts begin?" under the Annuity Payouts section below. We
reserve the right to require that you own your Contract for at least six months
before you start receiving Personal Pension Account Payouts. For Qualified
Contracts, we reserve the right to require that you start taking Personal
Pension Account Payouts no later than when the Annuitant turns age 70 1/2. An
annual benefit increase option may also be elected to adjust Personal Pension
Account Payouts, subject to availability.
We calculate the amount of your Personal Pension Account Payouts by applying the
applicable payout rate to your Accumulation Balance. We will provide you with a
guaranteed payout rate each time that you make a new Personal Pension Amount
Contribution. Payout rates are set at our sole discretion. There is no specific
formula for determining payout rates and, except as specifically provided below,
there is no assurance as to future payout rates. Payout rates may vary based on
Contract class and distribution channel. Some of the factors that we may
consider in determining payout rates include, but are not limited to, general
economic trends, rates of return currently available for the types of
investments and durations that match our liabilities and anticipated yields on
our investments; regulatory and tax requirements; competitive factors and
mortality tables (including age and gender factors). When you first make a
Personal Pension Account Contribution, you will be required to choose a Target
Income Age at which you are likely to begin taking Personal Pension Account
Payouts. The Target Income Age cannot exceed twenty (20) years from the oldest
Annuitant's age at the time of investment or age 80. Except as provided below,
the Target Income Age cannot be changed.
We will use the guaranteed payout rate(s) to calculate Personal Pension Account
Payouts if you commence taking Personal Pension Account Payouts during the
timeframe that begins three (3) years prior to the Target Income Age and ends
three (3) years after the Target Income Age (this seven year period is referred
to as the "guarantee window"). If you commence taking Personal Pension Account
Payouts at any time outside of the guarantee window, then we will calculate your
Personal Pension Account Payouts using payout rate(s) that we then determine at
our sole discretion. This payout rate will not exceed the guaranteed payout rate
nor will the corresponding Personal Pension Account Payout be less than any
guaranteed minimum provided in your Contract. The existence of guaranteed payout
rates, among other things, distinguishes the Personal Pension Account from the
way we treat annuitization of your Contract Value and investments in the Fixed
Accumulation Feature at the end of the accumulation phase of your Contract. See
Examples 1 and 4 under the Personal Pension Account Examples in Appendix A for
an illustration of Personal Pension Account Payouts during the guarantee window.
LUMP SUM PAYMENTS. You may commute any or all of your Annuity Payout Value to
get a lump sum payment from the Personal Pension Account. The way we do this is
to calculate the number of Personal Pension Account Payouts (corresponding to
the Annuity Payout Value that you seek to commute) that when added together will
equal the amount of your commutation request, and then the time period over
which these Personal Pension Account Payouts would have otherwise been made is
called the "Guaranteed Payout Duration." Personal Pension Account Payouts will
resume after the Guaranteed Payout Duration for so long as you, the Annuitant or
a joint Owner are alive.
You should understand that if you commute you will receive less than your
Annuity Payout Value. The amount you receive over time depends on a number of
factors, including the difference between interest rates currently being
credited and the discount rate used upon commutation, how long you have invested
in the Personal Pension Account and whether you (or the Annuitant) live long
enough so that Personal Pension Account Payouts start up again after the
Guaranteed Payout Duration. Please refer to "What kinds of Surrenders are
available" and "What is the Commuted Value" in the Surrenders section as well as
Example 4 under the Personal Pension Account Examples in Appendix A for more
information about how commutation works.
TRANSFERS - Each Contract Year, you may transfer a portion of your Accumulation
Balance to the Fixed Accumulation Feature or Sub-Accounts without having to
comply with the annuitization and commutation requirements discussed above. All
transfer allocations must be in whole numbers (e.g., 1%). The maximum amount of
Accumulation Balance that may be transferred is the highest of:
- four (4%) percent of your Accumulation Balance as of your prior
Contract Anniversary;
- the amount of interest credited to your Accumulation Balance over the
most recent full Contract Year; or
- the amount of Accumulation Balance transferred to Contract Value
during the most recent full Contract Year.
We reserve the right to: (a) limit the number of transfers from the Personal
Pension Account; (b) make you wait six months after your most recent transfer
from the Personal Pension Account before moving Contract Value back into the
Personal Pension Account; or
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(c) revoke this transfer privilege at any time. Amounts transferred out of the
Personal Pension Account will reduce the Accumulation Balance by the amount
transferred. Amounts transferred from the Personal Pension Account to the Fixed
Accumulation Feature or the Sub-Accounts will be treated as a subsequent Premium
Payment and become part of your Contract Value. You may also transfer Contract
Value from your Sub-Accounts or Fixed Accumulation Feature, to the Accumulation
Balance (such transfers will reduce the amount of your optional Death Benefit,
Annual Withdrawal Amount (AWA) and Remaining Gross Premiums). If applicable, no
CDSC will be applied to Accumulation Balance transferred to Sub-Accounts or the
Fixed Accumulation Feature, or vice versa. No transfers may be made to or from
the Personal Pension Account after the Annuity Commencement Date. See Example 3
under the Personal Pension Account Examples in Appendix A for an illustration of
transfers into your Personal Pension Account.
AS A RESULT OF THESE OUT-BOUND TRANSFER RESTRICTIONS, IT MAY TAKE A SIGNIFICANT
AMOUNT OF TIME (I.E., SEVERAL YEARS) TO MOVE ACCUMULATION BALANCE TO
SUB-ACCOUNTS OR THE FIXED ACCUMULATION FEATURE AND THEREFORE THIS MAY NOT
PROVIDE AN EFFECTIVE SHORT TERM DEFENSIVE STRATEGY. PLEASE REFER TO EXAMPLE 3
UNDER THE PERSONAL PENSION ACCOUNT EXAMPLES IN APPENDIX A FOR AN ILLUSTRATION OF
TRANSFER RESTRICTIONS.
DEATH BENEFIT - The Personal Pension Account includes a Death Benefit equal to
your Benefit Balance. This Death Benefit is considered to be part of the
standard Death Benefit or any optional Death Benefit that you elect. Your
Personal Pension Account Death Benefit increases as a result of additional
Personal Pension Account Contributions and transfers into the Personal Pension
Account. YOUR PERSONAL PENSION ACCOUNT DEATH BENEFIT DECREASES AS YOU TAKE
PERSONAL PENSION ACCOUNT PAYOUTS AND MAY BE ELIMINATED OVER TIME. Benefit
Balance transfers to Sub-Accounts and/or the Fixed Accumulation Feature also
decrease your Personal Pension Account Death Benefit but because these amounts
are converted into Contract Value, they become part of the standard Death
Benefit and/or optional Death Benefit. YOUR BENEFIT BALANCE IS NOT GUARANTEED AS
PART OF ANY OPTIONAL DEATH BENEFIT RIDER.
Personal Pension Account Payouts will generally terminate upon notification to
us of the death of the Owner, joint Owner or Annuitant, if prior to the Annuity
Commencement Date; or upon notification to us of the Annuitant's death, if after
the Annuity Commencement Date. The method of payment of the Death Benefit will
be subject to the restrictions contained in the "Standard Death Benefit" section
of this Prospectus.
Your Benefit Balance will be converted into Contract Value and transferred to
the Money Market Sub-Account without annuitization and commutation. Unless
otherwise stated below, Contract Value may not be reallocated back into the
Personal Pension Account. The Contingent Annuitant may reinvest Contract Value
back into the Personal Pension Account and establish a new guarantee window,
target income age and receive then applicable credited rates. If Spousal
Contract continuation is elected, your Spouse can either continue to maintain
the Personal Pension Account and resume Personal Pension Account Payouts, if
applicable, or instruct us to transfer Benefit Balance to the Money Market
Sub-Account. Your Spouse may then reinvest Contract Value back into the Personal
Pension Account by establishing a new guarantee window and target income age.
New crediting rates will apply.
OTHER INFORMATION - We will account for any Personal Pension Account
Contributions, Personal Pension Account Payouts, interest, and deductions
separately and on a first-in, first-out basis for the purposes of determining
which credited rates are associated with each Personal Pension Account
Contribution. Personal Pension Account Payouts are not cumulative and may not be
advanced, commuted or accelerated, except as explicitly stated in this
prospectus. Subject to applicable state insurance law, the Personal Pension
Account does not establish a cash surrender benefit. We may close the Personal
Pension Account to new Personal Pension Account Contributions at any time
without notice. We may also make the Personal Pension Account available only
through enrollment in one or more investment Programs that we establish.
Special consideration should be given by Personal Pension Account investors who
are under age 40 to the twenty-year limitation on setting your Target Income Age
and the absence of guaranteed payout rates applied if Personal Pension Account
Payouts commence outside of your guarantee window.
The Personal Pension Account should not be confused with a pension plan under
The Employee Retirement Income Security Act of 1974, as amended (ERISA). Neither
we nor any of our affiliates assume any fiduciary duties with regard to this
Contract, as such terms are defined under ERISA laws and regulations. The
Personal Pension Account is not a defined benefit plan guaranteed by the Pension
Benefit Guaranty Corporation (PBGC) or any federal or state government agency.
This feature is not a corporate pension plan issued by us or our affiliates.
In summary, the Personal Pension Account is designed for the long-term investor
who is willing to forego some degree of liquidity in exchange for, among other
things, deferred lifetime income in the form of Personal Pension Account
Payouts. This feature restricts liquidity through transfer and commutation
restrictions. The amount ultimately received as a consequence of your investment
in the Personal Pension Account is not predictable because of the uncertainty of
factors such as how long you have invested in the Personal Pension Account,
interest rates in effect at the time of investment and commutation, and how long
you receive lifetime Personal Pension Account Payouts. If you partially commute
your Personal Pension Account Payouts, you will retain the right to collect life
contingent Personal Pension Account Payouts that resume after the applicable
Guaranteed Payout Duration. HOWEVER, IF YOU ELECT TO TERMINATE YOUR CONTRACT,
YOU WILL GIVE UP YOUR RIGHT TO THESE FUTURE LIFE CONTINGENT PERSONAL PENSION
ACCOUNT
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PAYOUTS. YOU SHOULD THEREFORE CONSULT WITH YOUR REGISTERED REPRESENTATIVE OR A
TRUSTED ADVISER BEFORE TERMINATING YOUR CONTRACT TO BE SURE THAT YOU UNDERSTAND
THESE IMPORTANT IMPLICATIONS. Please refer to "What kinds of Surrenders are
available" and "What is the Commuted Value" in the Surrenders section as well as
Example 4 under the Personal Pension Account Examples in Appendix A for more
information.
4. INFORMATION ON YOUR ACCOUNT
A. OPENING AN ACCOUNT
WHO CAN BUY THIS CONTRACT?
The Contract is an individual or group tax-deferred variable annuity Contract.
It is designed for retirement planning purposes and may be purchased by any
individual, group or trust, including:
- any trustee or custodian for a retirement plan qualified under Section
401(a) of the Code;
- individual Retirement Annuities adopted according to Section 408 of the
Code;
- employee pension plans established for employees by a state, a political
subdivision of a state, or an agency of either a state or a political
subdivision of a state; and
- certain eligible deferred compensation plans as defined in Section 457 of
the Code.
The examples above represent Qualified Contracts, as defined by the Code. In
addition, individuals and trusts can also purchase Contracts that are not part
of a tax qualified retirement plan. These are known as Non-Qualified Contracts.
If you are purchasing the Contract for use in an IRA or other qualified
retirement plan, you should consider other features of the Contract besides tax
deferral, since any investment vehicle used within an IRA or other Qualified
Plan receives tax-deferred treatment under the Code.
We no longer accept any incoming 403(b) exchanges, transfers or applications for
403(b) individual annuity contracts or additional investments into any
individual annuity contract funded through a 403(b) plan.
The Personal Pension Account may not be available to all types of Qualified
Plans.
HOW DO YOU PURCHASE A CONTRACT?
You may only purchase a Contract through a Financial Intermediary. A Registered
Representative will work with you to complete and submit an application or an
order request form. Part of this process will include an assessment as to
whether this variable annuity may be suitable for you. Prior to recommending the
purchase or exchange of a deferred variable annuity, your Registered
Representative shall make reasonable efforts to obtain certain information about
you and your investment needs. This recommendation will be independently
reviewed by a principal within your Financial Intermediary. Your initial Deposit
will not be invested in any Account and/or the Personal Pension Account during
this period.
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account. When
you open an account, your Financial Intermediary will ask for your name,
address, date of birth and other information that will allow us to identify you.
They may also ask to see your driver's license or other identifying documents.
Non-Resident Alien (NRA) application submissions require our prior approval.
The minimum initial Deposit required to buy this Contract varies based on the
type of investment, Contract class and whether you enroll in a systematic
investment Program such as the InvestEase(R) Program. Financial Intermediaries
may impose requirements regarding the form of payment they will accept. Deposits
not actually received by us within the time period provided below will result in
the rejection of your application or order request.
Deposits sent to us must be made in U.S. dollars and checks must be drawn on
U.S. banks. We do not accept cash, third party checks or double endorsed checks.
We reserve the right to limit the number of checks processed at one time. If
your check does not clear, your purchase will be cancelled and you could be
liable for any losses or fees incurred. A check must clear our account through
our Administrative Office to be considered to be in good order.
We reserve the right to impose special conditions on anyone who seeks our prior
approval to purchase a Contract with Deposits of $1 million or more. In order to
request prior approval, you must submit a completed enhanced due diligence form
prior to the submission of your application:
- if you are seeking to purchase a Contract with an initial Deposit of $1
million or more;
- if total Deposits, aggregated by social security number or taxpayer
identification number, equal $1 million or more; and
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- for all applications where the Owner or joint Owner are non-resident aliens.
You and your Annuitant must not be older than age 80 on the date that your
Contract is issued. You must be of minimum legal age in the state where the
Contract is being purchased or a guardian must act on your behalf. Optional
riders are subject to additional maximum issue age restrictions.
We urge you to discuss with your Registered Representative which share class is
suitable for your needs. Share class availability and/or mortality and expense
risk charge arrangements may vary based on the Financial Intermediary selling
this variable annuity to you. Charges affect your overall rate of return on your
Contract Value. In determining whether to invest in a share class that imposes a
contingent deferred sales charge, you might consider whether higher mortality
and expense risk and distribution charges out weigh the benefits of contingent
deferred sales charges that reduce, or are eliminated, over time. For instance,
those investing over $100,000 may find a front-end sales charge class share to
be more economically advantageous than a contingent deferred sales charge share
class. Finally, in determining whether to invest in a share class offered
through a financial advisor, you might consider how the fee charged by your
advisor bears in relation to the costs associated with investing in other share
classes that impose higher fees.
CAN YOU CANCEL YOUR CONTRACT AFTER YOU PURCHASE IT?
Yes. If for any reason you are not satisfied with your Contract, simply return
it within ten days after you receive it with a written request for cancellation
that indicates your tax-withholding instructions. In some states, you may be
allowed more time to cancel your Contract. We may require additional
information, including a signature guarantee, before we can cancel your
Contract.
Unless otherwise required by state law, we will pay you your Account Balance
(minus applicable expenses) as of the Valuation Day we receive your properly
completed request to cancel and will refund any sales or Contract charges
incurred during the period you owned the Contract. The Account Balance may be
more or less than your Deposits depending upon the investment performance of
your Contract. This means that you bear the risk of any decline in your Account
Balance until we receive your notice of cancellation. In certain states,
however, we are required to return your Deposit without deduction for any fees
or charges.
HOW ARE DEPOSITS APPLIED TO YOUR CONTRACT?
Your initial Deposit will usually be invested within two Valuation Days of our
actual receipt in-hand at our Administrative Office of both a properly completed
application or order request and the Deposit; both being in good order. If we
receive a subsequent Deposit before the end of a Valuation Day, it will be
invested on the same Valuation Day. If we receive your subsequent Deposit after
the end of a Valuation Day, it will be invested on the next Valuation Day. If we
receive a subsequent Deposit on a non-Valuation Day, the amount will be invested
on the next Valuation Day. Unless we receive new instructions, we will invest
all Deposits based on your last instructions on record. We will send you a
confirmation when we invest your Deposit.
If the request or other information accompanying the initial Deposit is
incomplete or not in good order when received, we will hold the money in a
non-interest bearing account for up to five Valuation Days (from the Valuation
Day that we actually receive your initial Deposit at our Administrative Office)
while we try to obtain complete information. If we cannot obtain the information
within five Valuation Days, we will either return the Deposit and explain why it
could not be processed or keep the Deposit if you authorize us to keep it until
you provide the necessary information.
Generally, we will receive your application or order request (whether for an
initial purchase or a subsequent investment) after your Financial Intermediary
has completed a suitability review. We will then consider if your investment is
in good order. While the suitability and good order process is underway,
Deposits will not be applied to your Contract. You will not earn any interest on
Deposits even if they have been sent to us or deposited into our bank account.
We are not responsible for gains or lost investment opportunities incurred
during this review period or if your Financial Intermediary asks us to unwind a
transaction based on their review of your Registered Representative's
recommendations. Your Financial Institution, and we, may directly or indirectly
earn income on your Deposits. For more information, contact your Registered
Representative.
HOW IS CONTRACT VALUE CALCULATED BEFORE THE ANNUITY COMMENCEMENT DATE?
The Contract Value is the sum of the value of the Fixed Accumulation Feature, if
applicable, and all Funds, and does not include Benefit Balance. There are two
things that affect the value of your Sub-Accounts: (1) the number of
Accumulation Units, and (2) the Accumulation Unit Value. Contract Value is
determined by multiplying the number of Accumulation Units by the Accumulation
Unit Value. On any Valuation Day the investment performance of the Sub-Accounts
will fluctuate with the performance of the Funds.
When Premium Payments are credited to Sub-Accounts within your Account, they are
converted into Accumulation Units by dividing the amount of your Premium
Payments, minus any Premium taxes, by the Accumulation Unit Value for that day.
The more Premium Payments you make to your Account, the more Accumulation Units
you will own. You decrease the number of Accumulation Units you have by
requesting partial or full Surrenders, settling a Death Benefit claim or by
annuitizing your Contract or as a result of the application of certain Contract
charges.
To determine the current Accumulation Unit Value, we take the prior Valuation
Day's Accumulation Unit Value and multiply it by the Net Investment Factor for
the current Valuation Day.
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The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Net Investment Factor for
each Sub-Account equals:
- the net asset value per share plus applicable distributions per share of
each Fund at the end of the current Valuation Day; reduced by
- the net asset value per share of each Fund at the end of the prior Valuation
Day; reduced by
- contract charges including the deductions for the mortality and expense risk
charge and any other periodic expenses and administrative charges, divided
by the number of days in the year multiplied by the number of days in the
valuation period.
We will send you a statement at least annually.
WHAT OTHER WAYS CAN YOU INVEST?
You may enroll in the following features (sometimes called a "Program") for no
additional fee. Not all Programs are available with all Contract variations.
- INVESTEASE
This electronic funds transfer feature allows you to have money automatically
transferred from your checking or savings account and deposited into your
Contract on a monthly or quarterly basis. It can be changed or discontinued at
any time. The minimum amount for each transfer is $50. You can elect to have
transfers made into any available Fund, the Fixed Accumulation Feature, or the
Personal Pension Account. You cannot use this Program to invest in the DCA Plus
Programs.
- STATIC ASSET ALLOCATION MODELS
This feature allows you to select an asset allocation model based on several
potential factors including your risk tolerance, time horizon, investment
objectives, or your preference to invest in certain Funds or Fund families.
Based on these factors, you can select one of several asset allocation models,
with each specifying percentage allocations among various Funds available under
your Contract. Some asset allocation models are based on generally accepted
investment theories that take into account the historic returns of different
asset classes (e.g., equities, bonds or cash) over different time periods. Other
asset allocation models focus on certain potential investment strategies that
could possibly be achieved by investing in particular Funds or Fund families and
are not based on such investment theories. Static asset allocation models
offered from time to time are reflected in your application and marketing
materials. You may obtain a copy of the current models by contacting your
Financial Intermediary.
You may invest in an asset allocation model through the Dollar Cost Averaging
Program where the Fixed Accumulation Feature, Personal Pension Account, or a DCA
Plus Program is the source of the assets to be invested in the asset allocation
model you have chosen. You can also participate in these asset allocation models
while enrolled in the InvestEase or Automatic Income Program.
You can switch asset allocation models up to twelve times per year. Your ability
to elect or switch into and between asset allocation models may be restricted
based on Fund abusive trading restrictions.
Your investments in an asset allocation model will be rebalanced quarterly to
reflect the model's original percentages and you may cancel your model at any
time subject to investment restrictions for maintaining certain optional riders.
We have no discretionary authority or control over your investment decisions.
These asset allocation models are based on then available Funds and do not
include the Fixed Accumulation Feature or the Personal Pension Account. We make
available educational information and materials (e.g., risk tolerance
questionnaire, pie charts, graphs, or case studies) that can help you select an
asset allocation model, but we do not recommend asset allocation models or
otherwise provide advice as to what asset allocation model may be appropriate
for you.
While we will not alter allocation percentages used in any asset allocation
model, allocation weightings could be affected by mergers, liquidations, fund
substitutions or closures. Availability of these models is subject to Fund
company restrictions. Please refer to "What Restrictions Are There on your
Ability to Make a Sub-Account Transfer?" for more information.
You will not be provided with information regarding periodic updates to the
Funds and allocation percentages in the asset allocation models, and we will not
reallocate your Contract Value based on those updates. Information on updated
asset allocation models may be obtained by contacting your Registered
Representative. If you wish to update your asset allocation model, you may do so
by terminating your existing model and re-enrolling into a new one. Investment
alternatives other than these asset allocation models are available that may
enable you to invest your Contract Value with similar risk and return
characteristics. When considering an asset allocation model for your individual
situation, you should consider your other assets, income and investments in
addition to this annuity.
Asset allocation does not guarantee that your Contract Value will increase nor
will it protect against a decline if market prices fall. If you choose to
participate in an asset allocation program, you are responsible for determining
which asset allocation model is best for
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you. Tools used to assess your risk tolerance may not be accurate and could be
useless if your circumstances change over time. Although each asset allocation
model is intended to maximize returns given various levels of risk tolerance, an
asset allocation model may not perform as intended. Market, asset class or
allocation option class performance may differ in the future from historical
performance and from the assumptions upon which the asset allocation model is
based, which could cause an asset allocation model to be ineffective or less
effective in reducing volatility. An asset allocation model may perform better
or worse than any single Fund, allocation option or any other combination of
Funds or allocation options. In addition, the timing of your investment and
automatic rebalancing may affect performance. Quarterly rebalancing and periodic
updating of asset allocation models can cause their component Funds to incur
transactional expenses to raise cash for money flowing out of Funds or to buy
securities with money flowing into the Funds. Moreover, large outflows of money
from the Funds may increase the expenses attributable to the assets remaining in
the Funds. These expenses can adversely affect the performance of the relevant
Funds and of the asset allocation models. In addition, these inflows and
outflows may cause a Fund to hold a large portion of its assets in cash, which
could detract from the achievement of the Fund's investment objective,
particularly in periods of rising market prices. For additional information
regarding the risks of investing in a particular Fund, see that Fund's
prospectus.
Additional considerations apply for qualified Contracts with respect to Static
Asset Allocation Model Programs. Neither we, nor any third party service
provider, nor any of their respective affiliates, is acting as a fiduciary under
The Employee Retirement Income Security Act of 1974, as amended (ERISA) or the
Code, in providing any information or other communication contemplated by any
Program, including, without limitation, any asset allocation models. That
information and communications are not intended, and may not serve as a primary
basis for your investment decisions with respect to your participation in a
Program. Before choosing to participate in a Program, you must determine that
you are capable of exercising control and management of the assets of the plan
and of making an independent and informed decision concerning your participation
in the Program. Also, you are solely responsible for determining whether and to
what extent the Program is appropriate for you and the assets contained in the
qualified Contract. Qualified Contracts are subject to additional rules
regarding participation in these Programs. It is your responsibility to ensure
compliance of any recommendation in connection with any asset allocation model
with governing plan documents.
- ASSET REBALANCING
In asset rebalancing, you select a portfolio of Funds, and we will rebalance
your assets at the specified frequency to reflect the original allocation
percentages you selected (choice of frequency may be limited when certain
optional riders are elected). You can also combine this Program with others such
as the Automatic Income Program, InvestEase and DCA Programs (subject to
restrictions). You may designate only one set of asset allocation instructions
at a time.
- DOLLAR COST AVERAGING PROGRAMS
We offer three Dollar Cost Averaging Programs:
- DCA Plus
- Fixed Amount DCA
- Earnings/Interest DCA
DCA Plus - These programs allow you to earn a fixed rate of interest on
investments. These Programs are different from the Fixed Accumulation Feature or
the Personal Pension Account. We determine, in our sole discretion, the interest
rates to be credited. These interest rates may vary depending on the Contract
class you purchased and the date the request for the Program is received. Please
consult your Registered Representative to determine the interest rate for your
Program.
You may elect either the "12-Month Transfer Program" or the "6-Month Transfer
Program".
- Under the 12-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 12 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 12 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 7 but no more than 12 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Under the 6-Month Transfer Program, new Premium Payments will be credited
with an interest rate that will not change for 6 months. You must transfer
these investments into available Funds or the Personal Pension Account (and
not the Fixed Accumulation Feature) during this 6 month period. Unless
otherwise depleted, all then remaining Program investments are transferred
to the designated destination Funds or other instructions will be sought
from you. You must make at least 3 but no more than 6 consecutive, monthly
transfers to fully deplete sums invested in this Program. Transfers out will
occur monthly.
- Each time you make a subsequent Premium Payment, you can invest in a
different rate lock program. Any subsequent investments made considered a
separate rate lock Program investment. You can invest in up to 5 different
rate lock Programs at one time.
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- You must invest at least $5,000 in each rate lock program ($2,000 for
qualified plan transfers or rollovers, including IRAs). We will
pre-authorize transfers from our Fixed Accumulation Feature subject to
restrictions.
- Pre-authorized transfers will begin within 15 days of receipt of the Program
payment provided we receive complete enrollment instructions in good order.
- If a DCA Plus payment is received without enrollment instructions and a DCA
Plus Program is active on the Contract, we will set up the new Program to
mirror the existing one. If a DCA Plus payment is received without
enrollment instructions and a DCA Plus Program is not active on the
Contract, but is the future investment allocation and a static asset
allocation model is active on the Contract, we will set up the new Program
to move Funds to the Static Asset Allocation Model. Otherwise, we will
contact your investment professional to obtain complete instructions. If we
do not receive in good order enrollment instructions within the 15 day
timeframe noted above, we will refund the Program payment for further
instruction.
- If your Program payment is less than the required minimum amount, we will
invest into the destination Funds or the Personal Pension Account indicated
on the Program instructions accompanying the payment. If Program
instructions were not provided and a DCA Plus Program is active on the
Contract, we will apply the payment to the destination Funds or the Personal
Pension Account of the current DCA Plus Program. Otherwise, we will contact
your investment professional to obtain further investment instructions.
- The credited interest rate used under the DCA Plus Programs is not earned on
the full amount of your Premium Payment for the entire length of the Program
because Program transfers to Sub-Accounts or the Personal Pension Account
decrease the amount of your Premium Payment remaining in the Program.
- You may elect to terminate your involvement in this Program at any time.
Upon cancellation, all the amounts remaining in the Program will be
immediately transferred to the Funds or the Personal Pension Account you
designated.
Fixed Amount DCA - This feature allows you to regularly transfer (monthly or
quarterly) a fixed amount from the Fixed Accumulation Feature (if available
based on the form of Contract selected) or any Fund(s) into different Fund(s) or
the Personal Pension Account. This program begins in 15 days unless you instruct
us otherwise. You must make at least three transfers in order to remain in this
Program.
Earnings/Interest DCA - This feature allows you to regularly transfer (monthly
or quarterly) the earnings (i.e., any gains over the previous month's or
quarter's value) from your investment in the Fixed Accumulation Feature (if
available based on the form of Contract selected) or any Fund(s) into other
Fund(s) or the Personal Pension Account. This program begins two business days
plus the frequency selected unless you instruct us otherwise. You must make at
least three transfers in order to remain in this Program.
- AUTOMATIC INCOME PROGRAM
This systematic withdrawal feature allows you to make partial Surrenders up to
5% of your total Premium Payments each Contract Year. You can designate the
Funds to be surrendered from and also choose the frequency of partial Surrenders
(monthly, quarterly, semiannual, or annually). The Personal Pension Account is
not an eligible source Fund for partial Surrenders facilitated through the
Automatic Income Program. The minimum amount of each Surrender is $100. Amounts
taken under this program will count towards the AWA and may be subject to a
CDSC. If received prior to age 59 1/2, may have adverse tax consequences,
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment. You may satisfy Code Section 72(t)/(q) requirements by
enrolling in this program. Please see the "Federal Tax Considerations" section
and consult your tax adviser for information about the tax consequences
associated with your Contract. Your level of participation in this program may
result in your exceeding permissible withdrawal limits under certain optional
riders.
- OTHER PROGRAM CONSIDERATIONS
- You may terminate your enrollment in any Program at any time.
- We may discontinue, modify or amend any of these Programs at any time. We
will automatically and unilaterally amend your enrollment instructions if:
- any Fund is merged or substituted into another Fund - then your
allocations will be directed to the surviving Fund; or
- any Fund is liquidated - then your allocations to that Fund will be
directed to any available money market Fund following prior
notifications prior to reallocation.
You may always provide us with updated instructions following any of these
events.
- Continuous or periodic investment neither insures a profit nor protects
against a loss in declining markets. Because these Programs involve
continuous investing regardless of fluctuating price levels, you should
carefully consider your ability to continue investing through periods of
fluctuating prices.
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- These Programs may be modified, terminated or adversely impacted by the
imposition of Fund trading policies.
CAN YOU TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
Yes. During those phases of your Contract when transfers are permissible, you
may make transfers between Funds and/or Benefit Balance according to the
following policies and procedures, as they may be amended from time to time.
- WHAT IS A SUB-ACCOUNT TRANSFER?
A Sub-Account transfer is a transaction requested by you that involves
reallocating part or all of your Contract Value among the Funds available in
your Contract. Your transfer request will be processed as of the end of the
Valuation Day that it is received in good order. Otherwise, your request will be
processed on the following Valuation Day. We will send you a confirmation when
we process your transfer. You are responsible for verifying transfer
confirmations and promptly advising us of any errors within 30 days of receiving
the confirmation.
- WHAT HAPPENS WHEN YOU REQUEST A SUB-ACCOUNT TRANSFER?
Many Owners request Sub-Account transfers. Some request transfers into
(purchases) a particular Sub-Account, and others request transfers out of
(redemptions) a particular Sub-Account. In addition, some Owners allocate new
Premium Payments to Sub-Accounts, and others request Surrenders. We combine all
the daily requests to transfer out of a Sub-Account along with all Surrenders
from that Sub-Account and determine how many shares of that Fund we would need
to sell to satisfy all Owners' "transfer-out" requests. At the same time, we
also combine all the daily requests to transfer into a particular Sub-Account or
new Premium Payments allocated to that Sub-Account and determine how many shares
of that Fund we would need to buy to satisfy all contract owners' "transfer-in"
requests.
In addition, many of the Funds that are available as investment options in our
variable annuity products are also available as investment options in variable
life insurance policies, retirement plans, funding agreements and other products
offered by us or our affiliates. Each day, investors and participants in these
other products engage in similar transfer transactions.
We take advantage of our size and available technology to combine sales of a
particular Fund for many of the variable annuities, variable life insurance
policies, retirement plans, funding agreements or other products offered by us
or our affiliates. We also combine transfer-out requests and transfer-in
requests. We then "net" these trades by offsetting purchases against
redemptions. Netting trades has no impact on the net asset value of the Fund
shares that you purchase or sell. This means that we sometimes reallocate shares
of a Fund rather than buy new shares or sell shares of the Fund.
For example, if we combine all transfer-out requests of a stock Fund with all
other transfer-out requests of that Fund from all our other products, we may
have to sell $1 million dollars of that Fund on any particular day. However, if
other Owners and the owners of other products offered by us, want to transfer-in
an amount equal to $300,000 of that same Fund, then we would send a sell order
to the Fund for $700,000 (a $1 million sell order minus the purchase order of
$300,000) rather than making two or more transactions.
- WHAT RESTRICTIONS ARE THERE ON YOUR ABILITY TO MAKE A SUB-ACCOUNT TRANSFER?
FIRST, YOU MAY MAKE ONLY ONE SUB-ACCOUNT TRANSFER REQUEST EACH DAY. We count all
Sub-Account transfer activity that occurs on any one Valuation Day as one
"Sub-Account transfer", however, you cannot transfer the same Contract Value
more than once a Valuation Day.
EXAMPLES
TRANSFER REQUEST PER VALUATION DAY PERMISSIBLE?
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Transfer $10,000 from a money market Sub-Account to a growth Sub-Account Yes
Transfer $10,000 from a money market Sub-Account to any number of other Sub-Accounts Yes
(dividing the $10,000 among the other Sub-Accounts however you chose)
Transfer $10,000 from any number of different Sub-Accounts to any number of other Yes
Sub-Accounts
Transfer $10,000 from a money market Sub-Account to a growth Sub-Account and then, before No
the end of that same Valuation Day, transfer the same $10,000 from the growth Sub-Account
to an international Sub-Account
SECOND, YOU ARE ALLOWED TO SUBMIT A TOTAL OF 20 SUB-ACCOUNT TRANSFERS EACH
CONTRACT YEAR (the "Transfer Rule") by U.S. Mail, Voice Response Unit, Internet
or telephone. Once you have reached the maximum number of Sub-Account transfers,
you may only submit any additional Sub-Account transfer requests and any trade
cancellation requests in writing through U.S. Mail or overnight delivery
service. In other words, Voice Response Unit, Internet or telephone transfer
requests will not be honored. We may, but are not obligated to, notify you when
you are in jeopardy of approaching these limits. For example, we will send you a
letter after your 10th Sub-Account transfer to remind you about the Transfer
Rule. After your 20th transfer request, our computer system will not allow you
to
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do another Sub-Account transfer by telephone, Voice Response Unit or via the
Internet. You will then be instructed to send your Sub-Account transfer request
by U.S. Mail or overnight delivery service.
We reserve the right to aggregate your Contracts (whether currently existing or
those recently surrendered) for the purposes of enforcing these restrictions.
The Transfer Rule does not apply to Sub-Account transfers that occur
automatically as part of a Company sponsored asset allocation or Dollar Cost
Averaging Program. Reallocations made based on a Fund merger or liquidation also
do not count toward this transfer limit. Restrictions may vary based on state
law.
We make no assurances that the Transfer Rule is or will be effective in
detecting or preventing market timing.
THIRD, POLICIES HAVE BEEN DESIGNED TO RESTRICT EXCESSIVE SUB-ACCOUNT
TRANSFERS. You should not purchase this Contract if you want to make frequent
Sub-Account transfers for any reason. In particular, don't purchase this
Contract if you plan to engage in "market timing," which includes frequent
transfer activity into and out of the same Fund, or frequent Sub-Account
transfers in order to exploit any inefficiencies in the pricing of a Fund. Even
if you do not engage in market timing, certain restrictions may be imposed.
Generally, you are subject to Fund trading policies, if any. We are obligated to
provide, at the Fund's request, tax identification numbers and other shareholder
identifying information contained in our records to assist Funds in identifying
any pattern or frequency of Sub-Account transfers that may violate their trading
policy. In certain instances, we have agreed to serve as a Fund's agent to help
monitor compliance with that Fund's trading policy.
We are obligated to follow each Fund's instructions regarding enforcement of
their trading policy. Penalties for violating these policies may include, among
other things, temporarily or permanently limiting or banning you from making
Sub-Account transfers into a Fund or other funds within that fund complex. We
are not authorized to grant an exception to a Fund's trading policy. Please
refer to each Fund's prospectus for more information. Transactions that cannot
be processed because of Fund trading policies will be considered not in good
order.
In certain circumstances, Fund trading policies do not apply or may be limited.
For instance:
- Certain types of Financial Intermediaries may not be required to provide us
with shareholder information.
- "Excepted funds" such money market funds and any Fund that affirmatively
permits short-term trading of its securities may opt not to adopt this type
of policy. This type of policy may not apply to any Financial Intermediary
that a Fund treats as a single investor.
- A Fund can decide to exempt categories of Contract holders whose Contracts
are subject to inconsistent trading restrictions or none at all.
- Non-shareholder initiated purchases or redemptions may not always be
monitored. These include Sub-Account transfers that are executed: (i)
automatically pursuant to a company-sponsored contractual or systematic
program such as transfers of assets as a result of "dollar cost averaging"
programs, asset allocation programs, automatic rebalancing programs, annuity
payouts, or systematic withdrawal programs; (ii) as a result of the payment
of a Death Benefit; (iii) as a result of any deduction of charges or fees
under a Contract; or (iv) as a result of payments such as scheduled
contributions, scheduled withdrawals or Surrenders, retirement plan salary
reduction contributions, or planned Premium Payments.
POSSIBILITY OF UNDETECTED ABUSIVE TRADING OR MARKET TIMING. We may not be able
to detect or prevent all abusive trading or market timing activities. For
instance:
- Since we net all the purchases and redemptions for a particular Fund for
this and many of our other products, transfers by any specific market timer
could be inadvertently overlooked.
- Certain forms of variable annuities and types of Funds may be attractive to
market timers. We cannot provide assurances that we will be capable of
addressing possible abuses in a timely manner.
- These policies apply only to individuals and entities that own this Contract
or have the right to make transfers (regardless of whether requests are made
by you or anyone else acting on your behalf). However, the Funds that make
up the Sub-Accounts of this Contract are also available for use with many
different variable life insurance policies, variable annuity products and
funding agreements, and are offered directly to certain qualified retirement
plans. Some of these products and plans may have less restrictive transfer
rules or no transfer restrictions at all.
- In some cases, we are unable to count the number of Sub-Account transfers
requested by group annuity participants co-investing in the same Funds
("Participants") or enforce the Transfer Rule because we do not keep
Participants' account records for a Contract. In those cases, the
Participant account records and Participant Sub-Account transfer information
are kept by such owners or its third party service provider. These owners
and third party service providers may provide us with limited information or
no information at all regarding Participant Sub-Account transfers.
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HOW ARE YOU AFFECTED BY FREQUENT SUB-ACCOUNT TRANSFERS?
We are not responsible for losses or lost investment opportunities associated
with the effectuation of these policies. Frequent Sub-Account transfers may
result in the dilution of the value of the outstanding securities issued by a
Fund as a result of increased transaction costs and lost investment
opportunities typically associated with maintaining greater cash positions. This
can adversely impact Fund performance and, as a result, the performance of your
Contract Value. This may also lower the Death Benefit paid to your Beneficiary
or lower Annuity Payouts for your Payee as well as reduce the value of other
optional benefits available under your Contract.
Separate Account investors could be prevented from purchasing Fund shares if we
reach an impasse on the execution of a Fund's trading instructions. In other
words, a Fund complex could refuse to allow new purchases of shares by all our
variable product investors if the Fund and we cannot reach a mutually acceptable
agreement on how to treat an investor who, in a Fund's opinion, has violated the
Fund's trading policy.
In some cases, we do not have the tax identification number or other identifying
information requested by a Fund in our records. In those cases, we rely on the
Contract Owner to provide the information. If the Contract Owner does not
provide the information, we may be directed by the Fund to restrict the Owner
from further purchases of Fund shares. In those cases, all participants under a
plan funded by the Contract will also be precluded from further purchases of
Fund shares.
MAIL, TELEPHONE AND INTERNET TRANSFERS
You may make transfers through the mail or your Financial Intermediary. You may
also make transfers by calling us or through our website. Transfer instructions
received by telephone before the end of any Valuation Day will be carried out at
the end of that day. Otherwise, the instructions will be carried out at the end
of the next Valuation Day.
Transfer instructions you send electronically are considered to be received by
us at the time and date stated on the electronic acknowledgement we return to
you. If the time and date indicated on the acknowledgement is before the end of
any Valuation Day, the instructions will be carried out at the end of that
Valuation Day. Otherwise, the instructions will be carried out at the end of the
next Valuation Day. If you do not receive an electronic acknowledgement, you
should contact us as soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly reporting any
inaccuracy or discrepancy to us and your Registered Representative. Any verbal
communication should be re-confirmed in writing.
Telephone or Internet transfer requests may currently only be cancelled by
calling us before the end of the Valuation Day you made the transfer request.
We, our agents or our affiliates are NOT responsible for losses resulting from
telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that Contract Owners
provide certain identification information, including a personal identification
number. We record all telephone transfer instructions. We may suspend, modify,
or terminate telephone or electronic transfer privileges at any time.
POWER OF ATTORNEY
You may authorize another person to conduct financial and other transactions on
your behalf by submitting a completed power of attorney form that meets the
power of attorney requirements of your resident state law. Once we have the
completed form on file, we will accept transaction requests, including transfer
instructions, subject to our transfer restrictions, from your designated third
party until we receive new instructions in writing from you.
B. CHARGES AND FEES
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge for assuming mortality and expense risks under the
Contract. This charge is deducted from your Sub-Account Value.
The mortality and expense risk charge is broken into charges for mortality risks
and for an expense risk:
- Mortality Risk - There are two types of mortality risks that we assume,
those made while your Premium Payments are accumulating and those made once
Annuity Payouts have begun.
During the accumulation phase of your Contract, we are required to cover any
difference between the Death Benefit paid and the Surrender Value. These
differences may occur in periods of declining value or in periods where any
CDSCs would have been applicable. The risk that we bear during this period is
that actual mortality rates, in aggregate, may exceed expected mortality rates.
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Once Annuity Payouts have begun, we may be required to make Annuity Payouts as
long as the Annuitant is living, regardless of how long the Annuitant lives. The
risk that we bear during this period is that the actual mortality rates, in
aggregate, may be lower than the expected mortality rates.
- Expense Risk - We also bear an expense risk that the sales charges (if
applicable), Distribution Charge (if applicable) and the Annual Maintenance
Fee collected before the Annuity Commencement Date may not be enough to
cover the actual cost of selling, distributing and administering the
Contract.
Although variable Annuity Payouts will fluctuate with the performance of the
Fund selected, your Annuity Payouts will NOT be affected by (a) the actual
mortality experience of our annuitants, or (b) our actual expenses if they are
greater than the deductions stated in the Contract. Because we cannot be certain
how long our Annuitants will live, we charge this percentage fee based on the
mortality tables currently in use. The mortality and expense risk charge enables
us to keep our commitments and to pay you as planned. If the mortality and
expense risk charge under a Contract is insufficient to cover our actual costs,
we will bear the loss. If the mortality and expense risk charge exceeds these
costs, we keep the excess as profit. We may use these profits, as well as
revenue sharing and Rule 12b-1 fees received from certain Funds, for any proper
corporate purpose including, among other things, payment of sales expenses,
including the fees paid to distributors. We expect to make a profit from the
mortality and expense risk charge.
ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is a flat fee that is deducted from your Contract
Value to reimburse us for expenses relating to the administrative maintenance of
the Contract and your Account. The annual charge is deducted on a Contract
Anniversary or when the Contract is fully Surrendered if the Account Balance at
either of those times is less than $50,000. The charge is deducted
proportionately from each Sub-Account in which you are invested.
We will waive the Annual Maintenance Fee if your Account Balance is $50,000 or
more on your Contract Anniversary or when you fully Surrender your Contract. In
addition, we will waive one Annual Maintenance Fee for Owners who own more than
one Contract with a combined Account Balance between $50,000 and $100,000. If
you have multiple Contracts with a combined Account Balance of $100,000 or
greater, we will waive the Annual Maintenance Fee on all Contracts. However, we
may limit the number of waivers to a total of six Contracts. We also may waive
the Annual Maintenance Fee under certain other conditions. We do not include
Contracts from our Putnam Hartford line of variable annuity Contracts with the
Contracts when we combine Account Balance for purposes of this waiver.
ADMINISTRATIVE CHARGE
We apply a daily administration charge against all Contract Values held in the
Separate Account during both the accumulation and annuity phases of the
Contract. This charge compensates us for administrative expenses that exceed
revenues from the Annual Maintenance Fee described above. There is not
necessarily a relationship between the amount of administrative charge imposed
on a given Contract and the amount of expenses that may be attributable to that
Contract; expenses may be more or less than the charge.
DISTRIBUTION CHARGE
We apply an annual distribution charge against all Remaining Gross Premiums
invested in B share class Contracts (the "Distribution Charge"). The
Distribution Charge will apply to each Premium Payment that has been invested
for eight years or less and will be deducted on each Contract Anniversary. Each
Premium Payment has its own Distribution Charge schedule. The Distribution
Charge will also apply to any partial Surrender in excess of the AWA. The
Distribution Charge is intended to compensate us for a portion of our
acquisition expenses, including promotion and distribution of the Contract. A
proportional Distribution Charge will be deducted upon:
- partial Surrenders in excess of the AWA (partial Surrenders are taken on a
first-in, first-out basis);
- full Surrender;
- full or partial Annuitization, and/or
- the date we receive due proof of death of the Owner, joint Owner, or the
Annuitant and upon a corresponding full Surrender and/or annuitization. Upon
such death, a proportional Distribution Charge will be applied on receipt of
due proof of death and upon a Death Benefit distribution if elected at a
later date.
If a Beneficiary elects to continue under any of the available options described
under the "Standard Death Benefits" section below, we will continue to deduct
the Distribution Charge based on the portion of Remaining Gross Premium
applicable for that Beneficiary. The Distribution Charge is taken proportionally
out of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by
your state (in which event we will deduct the Distribution Charge from other
Sub-Accounts).
PREMIUM TAXES
We deduct Premium taxes, if required, by a state or other government agency.
Some states collect these taxes when Deposits are made; others collect at
annuitization. Since we pay Premium taxes when they are required by applicable
law, we may deduct them
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from your Contract when we pay the taxes, upon Surrender, or on the Annuity
Commencement Date. The premium tax rate varies by state or municipality and
currently ranges from 0 - 3.5%.
SALES CHARGES
CONTINGENT DEFERRED SALES CHARGES (CDSC) - B AND C SHARE CONTRACTS ONLY
We may deduct a CDSC when you make Surrenders from your Contract. We may also
deduct a CDSC in connection with certain Annuity Payout Options. This charge is
designed to recover the expense of distributing the Contracts that are
surrendered before distribution expenses have been recouped from revenue
generated by these Contracts. Each Deposit has its own CDSC schedule. Only
amounts invested for less than the requisite holding period are subject to a
CDSC.
In computing the CDSC, Surrenders will be taken:
1st - from the AWA;
2nd - from Contract Value subject to a CDSC on a first-in, first-out basis; and
3rd - from remaining Contract Value.
CDSC is charged based on the type of transaction:
- Partial Surrenders: To calculate the CDSC when you make a partial Surrender,
we apply the applicable CDSC percentage to the amount of the Surrender in
excess of the AWA that is eligible for CDSC.
- Full Surrenders: If you fully Surrender your Contract, we apply the
applicable CDSC percentage to the greater of Contract Value or Remaining
Gross Premiums minus the AWA.
- Annuity Payouts: To calculate the CDSC when you take an Annuity Payout
pursuant to certain Annuity Payout Options, we apply the applicable CDSC to
Commuted Value.
Please refer to Examples 1 through 5 under the Remaining Gross Premium Examples
in Appendix A for an illustration of these computations.
The following are NOT subject to a CDSC:
- Annual Withdrawal Amount (AWA) - During each Contract Year when a CDSC
applies, you may take partial Surrenders up to the greater of:
1. 5% of the total Premium Payments that are otherwise subject to CDSC, or
2. Contract Value minus Remaining Gross Premiums.
We compute the AWA as of the end of the Valuation Day when a partial
Surrender request is received by us in good order. The AWA is calculated
by comparing two values. First, total Premium Payments subject to a CDSC
is multiplied by 5%. Next, the total Remaining Gross Premiums is
subtracted from the Contract Value. The greater of the two calculations
is the applicable AWA at the end of that particular Valuation Day. This
method for calculating CDSCs is used for the current and all future
partial Surrenders. All reductions from your Premium Payments will be
made on a first-in, first-out basis. The financial impact of the CDSC
will be greater during declining market conditions. These amounts are
different for Contracts issued to a Charitable Remainder Trust.
The AWA may vary on a daily basis because of fluctuations in Contract
Value. If you do not take maximum AWA one Contract Year, you may not take
more than the maximum AWA in a subsequent Contract Year. The AWA does not
apply to Personal Pension Account Payouts.
- Transfers from Sub-Accounts or the Fixed Accumulation Feature to the
Personal Pension Account.
- If you are a patient in a certified long-term care facility or other
eligible facility - CDSC will be waived for a partial or full Surrender if
you, the joint Owner or the Annuitant, are confined for at least 180
calendar days to a:
- facility recognized as a general hospital by the proper authority of
the state in which it is located or the Joint Commission on the
Accreditation of Hospitals;
- facility certified as a hospital or long-term care facility; or
- nursing home licensed by the state in which it is located and offers
the services of a registered nurse 24 hours a day.
For this waiver to apply, you must:
- have owned the Contract continuously since it was issued,
- provide written proof of your eligibility satisfactory to us, and
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- request the Surrender within 91 calendar days after the last day that
you are an eligible patient in a recognized facility or nursing home.
This waiver is not available if the Owner, the joint Owner or the Annuitant
is in a facility or nursing home when you purchase the Contract. We will
not waive any CDSC applicable to any Premium Payments made while you are in
an eligible facility or nursing home. This waiver can be used any time
after the first 180 days in a certified long-term care facility or other
eligible facility up until ninety days after exiting such a facility. This
waiver may not be available in all states.
- Upon death of the Annuitant or any Contract Owner(s) - CDSC will be waived
if the Annuitant or any Contract Owner(s) dies.
- Upon Annuitization - CDSC will be waived when you annuitize the Contract.
However, we will charge a CDSC if the Contract is Surrendered during the
CDSC period under an Annuity Payout Option which allows commutation.
- For Required Minimum Distributions - CDSC will be waived for any Annuitant
age 70 1/2 or older with a Contract held under an IRA who Surrenders an
amount equal to the Required Minimum Distribution for one year's required
minimum distribution for that Contract Year. All requests for Required
Minimum Distributions must be in writing.
- For substantially equal periodic payments - CDSC will be waived if you take
partial Surrenders under the Automatic Income Program where you receive a
scheduled series of substantially equal periodic payments for the greater of
five years or to age 59 1/2.
- Upon cancellation during the Right to Cancel Period - CDSC will be waived if
you cancel your Contract during the Right to Cancel Period.
- Exchanges - As an accommodation, we may, in our sole discretion, time-credit
CDSC for the time that you held an annuity previously issued by us.
- Settlements - We may, in our sole discretion, waive or time-credit CDSCs in
connection with the settlement of disputes or if required by regulatory
authorities.
CHARGES AGAINST THE FUNDS
Annual Fund Operating Expenses - The Separate Account purchases shares of the
Funds at net asset value. The net asset value of the Fund reflects investment
advisory fees, distribution fees, operating expenses and administrative expenses
already deducted from the assets of the Funds. These charges are described in
the Funds' prospectuses and the Fee Summary.
REDUCED FEES AND CHARGES
We may offer, in our discretion, reduced fees and charges for certain Contracts
(including employer sponsored savings plans) which may result in decreased costs
and expenses.
C. SURRENDERS
WHAT KINDS OF SURRENDERS ARE AVAILABLE?
BEFORE THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - When you Surrender or terminate your
Contract before the Annuity Commencement Date, the Surrender Value of the
Contract will be made in a lump sum payment. The Surrender Value is the Contract
Value minus any applicable Premium taxes, CDSCs, a pro-rated portion of optional
benefit charges, if applicable, distribution charges and the Annual Maintenance
Fee. The Surrender Value may be more or less than the amount of the Premium
Payments made to a Contract.
For information on how termination of the Contract impacts the Personal Pension
Account, see "Personal Pension Account" section above.
Partial Surrenders - You may request a partial Surrender of Contract Value at
any time before the Annuity Commencement Date. We will deduct any applicable
CDSC and Distribution Charge. You can ask us to deduct the CDSC and Distribution
Charge from the amount you are Surrendering or from your remaining Contract
Value. If we deduct the CDSC from your remaining Contract Value, that amount
will also be subject to CDSC. This is our default option.
Both full and partial Surrenders of Contract Value are taken proportionally out
of the Sub-Accounts and the Fixed Accumulation Feature unless prohibited by your
state.
There are several restrictions on partial Surrenders of Contract Value before
the Annuity Commencement Date:
- the partial Surrender of Contract Value must be at least equal to
$500, and
- your Account Balance must be equal to or greater than our then
current Minimum Amount Rule that we establish according to our then
current policies and procedures. The "Minimum Amount Rule" refers to
the minimum Contract Value that you must maintain within this
Contract. If you fail to comply with the Minimum Amount Rule, we
reserve the right to fully terminate your Contract. The Minimum
Amount Rule varies by share class. Currently the Minimum Amount Rule
for class I share
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Contracts is $500 and is $2,000 for Class B and C Shares. We may increase
the Minimum Amount Rule from time to time but in no event shall the
Minimum Amount Rule exceed $2,000 (Class I Shares) or $10,000 (Class B
and C Shares).
You may only commute all or a portion of Personal Pension Account Payouts by
following the procedures described below in the "After the Annuity Commencement
Date" section below.
Withdrawals will reduce your standard Death Benefit on a dollar-for-dollar
basis. Please consult with your Registered Representative to be sure that you
fully understand the ways such a decision will affect your Contract.
AFTER THE ANNUITY COMMENCEMENT DATE:
Full Surrenders/Contract Termination - You may Surrender and thus terminate your
Contract on or after the Annuity Commencement Date only if you selected Annuity
Payout Options Two, Three, Five, Six and Eight. IN THE EVENT YOU TAKE A FULL
SURRENDER AND THEREBY TERMINATE YOUR CONTRACT AFTER ELECTING ANNUITY PAYOUT
OPTIONS TWO, THREE, FIVE, OR EIGHT, YOU WILL FORFEIT THE LIFE CONTINGENT
PAYMENTS OF THESE OPTIONS. Upon Contract termination, we pay you the Commuted
Value, minus any applicable CDSCs and Premium tax.
Partial Surrenders/Commutation - Partial Surrenders and/or Commutation are
permitted after the Annuity Commencement Date if you select the Annuity Payout
Option Two, Three, Five, or Six, or Eight. You may withdraw amounts equal to the
Commuted Value of the payments that we would have made during the Guaranteed
Payout Duration. See Example 4 and footnote 3 under the Personal Pension Account
Examples in Appendix A for an illustration of Personal Pension Account Commuted
Value and the computation of Guaranteed Payout Duration. If you select the
Annuity Payout Options Two or Eight, the Guaranteed Payout Duration will be
equivilant to the Annuity Payout Value divided by the Annuity Payout amount,
rounded down. To qualify under these Annuity Payout Options you must make the
request before the Guaranteed Payout Duration expires. Both full and partial
Surrenders of Contract Value are taken proportionally out of the Sub-Accounts
and the Fixed Accumulation Feature unless prohibited by your state. We will
deduct any applicable CDSCs.
If you elect to withdraw the entire Commuted Value of the Annuity Payouts we
would have made during the Guaranteed Payout Duration, we will not make any
Annuity Payouts during the remaining Guaranteed Payout Duration. If you elect to
withdraw only some of the Commuted Value of the Annuity Payouts we would have
made during the Guaranteed Payout Duration, we will reduce the remaining Annuity
Payouts during the remaining Guaranteed Payout Duration on a first-in, first-out
basis. ONCE THE GUARANTEED PAYOUT DURATION HAS EXPIRED, YOU MAY RESUME RECEIVING
ANNUITY PAYOUTS PROVIDED THAT YOU, A JOINT OWNER OR THE ANNUITANT IS ALIVE AND
YOU HAVE NOT TERMINATED YOUR CONTRACT.
Annuity Payout Options may not be available if the Contract is issued to qualify
under Code Sections 401, 408, or 457.
WHAT IS THE COMMUTED VALUE?
You may choose to accelerate Annuity Payouts under certain Annuity Payout
Options to be received in one lump sum. This is referred to as "commuting" your
Annuity Payout.
The amount that you request to commute must be at least equal to $500. There
will be a waiting period of at least thirty days for payment of any lump sum
commutation.
Upon commutation, the Annuity Payout Value or the remaining Guaranteed Payout
Duration payments, as applicable, will be discounted based on an interest rate
that we determine at our sole discretion (the "discount rate"). The discount
rate may be different than the interest rate used to establish payout rates. We
determine the discount rate based on a number of factors including then current
interest rate(s), investment assumptions and the additional anti-selection and
mortality risk we incur by permitting commutation. The higher the discount rate
and CDSC, the lower the amount that you will receive.
COMMUTED VALUE OF YOUR PERSONAL PENSION ACCOUNT WILL BE LESS THAN YOUR ANNUITY
PAYOUT VALUE. Commutation does not affect resumption of life contingent Personal
Pension Account Payouts at the conclusion of the applicable Guaranteed Payout
Duration.
Commuted Value is determined on the day we receive your written request.
HOW DO YOU REQUEST A SURRENDER?
Requests for full Surrenders terminating your Contract must be in writing.
Requests for partial Surrenders can be made in writing, by telephone or on the
Internet. We will send your money within seven days of receiving complete
instructions. However, we may postpone payment whenever: (a) the New York Stock
Exchange is closed, (b) trading on the New York Stock Exchange is restricted by
the SEC, (c) the SEC permits and orders postponement or (d) the SEC determines
that an emergency exists to restrict valuation.
Written Requests - Complete a Surrender Form or send us a letter, signed by you,
stating:
- the dollar amount that you want to receive, either before or after we
withhold taxes and deduct for any applicable charges,
- your tax withholding amount or percentage, if any, and
- your mailing address.
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You must complete a Commutation Form to commute any portion of your Personal
Pension Account Annuity Payout Value or receive Commuted Value under applicable
Annuity Payout Options.
If there are joint Owners, both must authorize these transactions. For a partial
Surrender, specify the Sub-Accounts that you want your Surrender to come from
(this may be limited to pro-rata surrenders if optional benefits are elected);
otherwise, the Surrender will be taken in proportion to the value in each
Sub-Account.
Telephone Requests - To request a partial Surrender by telephone, we must have
received your completed Telephone Redemption Program Enrollment Form. If there
are joint Owners, both must sign this form. By signing the form, you authorize
us to accept telephone instructions for partial Surrenders from either Owner.
Telephone authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on telephone Surrenders.
Internet Requests - To request a partial Surrender by internet; we must have
received your completed Internet Partial Withdrawal Program Enrollment Form. If
there are joint Owners, both must sign this form. By signing the form, you
authorize us to accept internet instructions for partial Surrenders from either
Owner. Internet authorization will remain in effect until we receive a written
cancellation notice from you or your joint Owner, we discontinue the program, or
you are no longer the Owner of the Contract. Please call us with any questions
regarding restrictions on Internet Surrenders.
We may record telephone calls and use other procedures to verify information and
confirm that instructions are genuine. We will not be liable for losses or
expenses arising from telephone instructions reasonably believed to be genuine.
WE MAY MODIFY THE REQUIREMENTS FOR TELEPHONE REDEMPTIONS AT ANY TIME.
Telephone and Internet Surrender instructions received before the end of a
Valuation Day will be processed at the end of that Valuation Day. Otherwise,
your request will be processed at the end of the next Valuation Day.
Completing a Power of Attorney form for another person to act on your behalf may
prevent you from making Surrenders via telephone and Internet.
WHAT SHOULD BE CONSIDERED ABOUT TAXES?
There are certain tax consequences associated with Surrenders and Personal
Pension Account Payouts. If you make a Surrender or take a Personal Pension
Account Payout prior to age 59 1/2, there may be adverse tax consequences
including a 10% federal income tax penalty on the taxable portion of the
Surrender payment or a Personal Pension Account Payout. Taking these actions
before age 59 1/2 may also affect the continuing tax-qualified status of some
Contracts.
WE DO NOT MONITOR SURRENDER REQUESTS. CONSULT YOUR PERSONAL TAX ADVISER TO
DETERMINE WHETHER A SURRENDER OR A PERSONAL PENSION ACCOUNT PAYOUT IS
PERMISSIBLE, WITH OR WITHOUT FEDERAL INCOME TAX PENALTY.
More than one Contract owned in the same calendar year - If you own more than
one Contract issued by us or our affiliates in the same calendar year, then
these Contracts may be treated as one Contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date.
Please see "Federal Tax Considerations" and "Information Regarding Tax-Qualified
Retirement Plans" for more information.
D. ANNUITY PAYOUTS
Generally speaking, when you annuitize your Contract, you begin the process of
converting Accumulation Units in what is known as the "payout phase." The payout
phase starts when you annuitize your Contract or with your Annuity Commencement
Date and ends when we make the last payment required under your Contract. You
may take Personal Pension Account Payouts without annuitizing Contract Value.
Once you annuitize your Contract, you may no longer make Personal Pension
Account Contributions. You must commence taking Annuity Payouts no later than
when you reach your Annuity Commencement Date. Funds allocated to the Personal
Pension Account will be paid to you under Annuity Payout Options Two and Eight.
Contract Value can only be annuitized under Annuity Payout Options One, Three,
Four, Five and Six. Please check with your Registered Representative to select
the Annuity Payout Option that best meets your income needs.
WHEN DO YOUR ANNUITY PAYOUTS BEGIN?
Personal Pension Account Payouts may begin at any time but we reserve the right
to require that you own your Contract for at least six months before you start
taking these payments. Contract Value may only be annuitized on the Annuity
Commencement Date.
Your Annuity Commencement Date cannot be earlier than your second Contract
Anniversary if choosing a fixed dollar Annuity Payout. The Annuity Commencement
Date may be immediate if electing a variable dollar amount Annuity Payout. In no
event; however, may the Annuity Commencement Date be later than:
- Annuitant's 90th birthday (or if the Owner is a Charitable Remainder Trust,
the Annuitant's 100th birthday);
- 10th Contract Anniversary (subject to state variation);
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- The Annuity Commencement Date stated in an extension request (subject to
your Financial Intermediary's rules for granting extension requests)
received by us not less than 30 days prior to a scheduled Annuity
Commencement Date; or
- The date that you fully annuitize Accumulation Balance (assuming that no
Contract Value exists as of such date). Unless otherwise requested,
commencement of receipt of Personal Pension Account Payouts do not
constitute an Annuity Commencement Date.
We reserve the right, in our sole discretion, to refuse to extend your Annuity
Commencement Date regardless of whether we may have granted extensions in the
past to you or other similarly situated investors. Your Financial Intermediary
may ask us to prohibit Annuity Commencement Date extensions beyond when the
Annuitant turns age 95. Please ask your Registered Representative whether you
are affected by any such prohibition and make sure that you fully understand the
implications this might have in regard to your Death Benefits.
Except as otherwise provided, the Annuity Calculation Date is when the amount of
your Annuity Payout is determined. This occurs within five Valuation Days before
your selected Annuity Commencement Date.
All Annuity Payouts, regardless of frequency, will occur on the same day of the
month as the Annuity Commencement Date. After the initial payout, if an Annuity
Payout date falls on a non-Valuation Day, the Annuity Payout is computed on the
prior Valuation Day. If the Annuity Payout date does not occur in a given month
due to a leap year or months with only 28 days (i.e. the 31st), the Annuity
Payout will be computed on the last Valuation Day of the month.
WHICH ANNUITY PAYOUT OPTION DO YOU WANT TO USE?
Your Contract contains the Annuity Payout Options described below. We may at
times offer other Annuity Payout Options. We may change these Annuity Payout
Options at any time. Once we begin to make Annuity Payouts, the Annuity Payout
Option with respect to that portion of your Contract cannot be changed.
- OPTION ONE - LIFE ANNUITY
We make Annuity Payouts as long as the Annuitant is living. When the Annuitant
dies, we stop making Annuity Payouts. A Payee would receive only one Annuity
Payout if the Annuitant dies after the first payout, two Annuity Payouts if the
Annuitant dies after the second payout, and so forth.
- OPTION TWO - LIFE ANNUITY WITH A CASH REFUND
In general, we will make Annuity Payouts as long as the Annuitant is living.
However, when the Owner or joint Owner dies before the Annuity Commencement Date
(and the Annuitant is living or deceased), the Death Benefit will be paid
according to the standard Death Benefit rules. When the Annuitant dies after the
Annuity Commencement Date (and the Owner is living or deceased), then the
Beneficiary will receive the Death Benefit according to the standard Death
Benefit rules and Annuity Payouts cease.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
- OPTION THREE - LIFE ANNUITY WITH PAYMENTS FOR A PERIOD CERTAIN
We will make Annuity Payouts as long as the Annuitant is living, but we at least
guarantee to make Annuity Payouts for a time period you select, between 5 years
and 100 years minus the Annuitant's age. If the Annuitant dies before the
guaranteed number of years has passed, then the Beneficiary may elect to
continue Annuity Payouts for the remainder of the guaranteed number of years or
receive the Commuted Value in one sum.
- OPTION FOUR - JOINT AND LAST SURVIVOR LIFE ANNUITY
We will make Annuity Payouts as long as the Annuitant and Joint Annuitant are
living. When one Annuitant dies, we continue to make Annuity Payouts until that
second Annuitant dies. When choosing this option, you must decide what will
happen to the Annuity Payouts after the first Annuitant dies. You must select
Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable Annuity Payouts, these percentages represent Annuity Units; for
fixed Annuity Payouts, they represent actual dollar amounts. The percentage will
also impact the Annuity Payout amount we pay while both Annuitants are living.
If you pick a lower percentage, your original Annuity Payouts will be higher
while both Annuitants are alive.
- OPTION FIVE - JOINT AND LAST SURVIVOR LIFE ANNUITY WITH PAYMENTS FOR A
PERIOD CERTAIN
We will make Annuity Payouts as long as either the Annuitant or Joint Annuitant
are living, but we at least guarantee to make Annuity Payouts for a time period
you select, between 5 years and 100 years minus your younger Annuitant's age. If
the Annuitant and the Joint Annuitant both die before the guaranteed number of
years have passed, then the Beneficiary may continue Annuity Payouts for the
remainder of the guaranteed number of years or receive the Commuted Value in one
sum.
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When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 66.67%, or
- Decrease to 50%.
For variable dollar amount Annuity Payouts, these percentages represent Annuity
Units. For fixed dollar amount Annuity Payouts, these percentages represent
actual dollar amounts. The percentage will also impact the Annuity Payout amount
we pay while both Annuitants are living. If you pick a lower percentage, your
original Annuity Payouts will be higher while both Annuitants are alive.
- OPTION SIX - PAYMENTS FOR A PERIOD CERTAIN
We agree to make payments for a specified time. The minimum period that you can
select is 10 years during the first two Contract Years and 5 years after the
second Contract Anniversary. The maximum period that you can select is 100 years
minus your Annuitant's age. If, at the death of the Annuitant, Annuity Payouts
have been made for less than the time period selected, then the Beneficiary may
elect to continue the remaining Annuity Payouts or receive the Commuted Value in
one sum. You may not choose a fixed dollar amount Annuity Payout during the
first two Contract Years.
- OPTION SEVEN - RESERVED
- OPTION EIGHT - JOINT AND LAST SURVIVOR LIFE WITH CASH REFUND (NOT CURRENTLY
AVAILABLE)
In general, we will make Annuity Payouts as long as the Owner, and either
Annuitant or Joint Annuitant are living. When the Owner dies before the Annuity
Commencement Date (and the Annuitant or Joint Annuitant is living or deceased),
then the Death Benefit is paid according to the standard Death Benefit rules.
If death occurs after the Annuity Commencement Date, we will make Annuity
Payouts as long as either the Annuitant or the Joint Annuitant is living. When
one Annuitant dies, we continue to make Annuity Payouts at the elected
percentage until the second Annuitant dies. When the last Annuitant dies, then
the Death Benefit is paid according to the standard Death Benefit rules.
When choosing this option, you must decide what will happen to the Annuity
Payouts after the first Annuitant dies. You must select Annuity Payouts that:
- Remain the same at 100%, or
- Decrease to 75%, or
- Decrease to 50%.
This option is only available for Personal Pension Account Payouts (fixed dollar
amount Annuity Payout).
YOU CANNOT TERMINATE YOUR CONTRACT ONCE ANNUITY PAYOUTS BEGIN, UNLESS YOU HAVE
SELECTED ANNUITY PAYOUT OPTIONS TWO, THREE, FOUR, FIVE, SIX OR EIGHT. A CDSC, IF
APPLICABLE, MAY BE DEDUCTED.
Annuity Payout Option Two is only available for Personal Pension Account Payouts
from the Personal Pension Account. Annuity Payout Options One, Three, Four, Five
and Six are only available for Annuity Payouts from the Fixed Accumulation
Feature or Sub-Accounts. Annuity Payout Option Eight is only available for
Personal Pension Account Payouts from the Personal Pension Account and is not
currently available.
For certain qualified Contracts, if you elect an Annuity Payout Option with a
Period Certain, the guaranteed number of years must be less than the life
expectancy of the Annuitant at the time the Annuity Payouts begin. We compute
life expectancy using the IRS mortality tables.
AUTOMATIC ANNUITY PAYOUTS
If you do not elect an Annuity Payout Option, monthly Annuity Payouts will
automatically begin on the Annuity Commencement Date under Annuity Payout Option
Three. Automatic Annuity Payouts will be fixed dollar amount Annuity Payouts,
variable dollar amount Annuity Payouts, or a combination of fixed or variable
dollar amount Annuity Payouts, depending on the investment allocation of your
Account in effect on the Annuity Commencement Date. Automatic variable Annuity
Payouts will be based on an Assumed Investment Return equal to five (5%)
percent.
HOW OFTEN DO YOU WANT THE PAYEE TO RECEIVE ANNUITY PAYOUTS?
In addition to selecting an Annuity Commencement Date and an Annuity Payout
Option, you must also decide how often you want the Payee to receive Annuity
Payouts. You may choose to receive Annuity Payouts:
- monthly,
- quarterly,
- semi-annually, or
- annually.
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Once you select a frequency, it cannot be changed. If you do not make a
selection, the Payee will receive monthly Annuity Payouts. You must select a
frequency that results in an Annuity Payout of at least $50. If the amount falls
below $50, we have the right to change the frequency to bring the Annuity Payout
up to at least $50.
DO YOU WANT ANNUITY PAYOUTS TO BE FIXED DOLLAR AMOUNT OR VARIABLE DOLLAR AMOUNT?
You may choose an Annuity Payout Option with fixed dollar amounts or variable
dollar amounts, depending on your income needs. You may not choose a fixed
dollar amount Annuity Payout during the first two Contract Years. If you elect
the Personal Pension Account, your Annuity Payout Option may only be a fixed
dollar amount.
- FIXED DOLLAR AMOUNT ANNUITY PAYOUTS
Once a fixed dollar amount Annuity Payout begins, you cannot change your
selection to receive variable dollar amount Annuity Payouts. You will receive
equal fixed dollar amount Annuity Payouts throughout the Annuity Payout period.
Fixed dollar amount Annuity Payout amounts are determined by multiplying the
Contract Value, minus any applicable Premium taxes, by an annuity rate set by
us. Annuity purchase rates may vary based on the aspect of the Contract
annuitized.
- VARIABLE DOLLAR AMOUNT ANNUITY PAYOUTS
Once a variable dollar amount Annuity Payout begins, you cannot change your
selection to receive a fixed dollar amount Annuity Payout. A variable dollar
amount Annuity Payout is based on the investment performance of the
Sub-Accounts. The variable dollar amount Annuity Payouts may fluctuate with the
performance of the Funds. To begin making variable dollar amount Annuity
Payouts, we convert the first Annuity Payout amount to a set number of Annuity
Units and then price those units to determine the Annuity Payout amount. The
number of Annuity Units that determines the Annuity Payout amount remains fixed
unless you transfer units between Sub-Accounts.
The dollar amount of the first variable Annuity Payout depends on:
- the Annuity Payout Option chosen,
- the Annuitant's attained age and gender (if applicable),
- the applicable annuity purchase rates based on the 1983a Individual Annuity
Mortality table adjusted for projections based on accepted actuarial
principles; and
- the Assumed Investment Return ("AIR").
The total amount of the first variable dollar amount Annuity Payout is
determined by dividing the Contract Value minus any applicable Premium taxes, by
$1,000 and multiplying the result by the payment factor defined in the Contract
for the selected Annuity Payout Option.
The dollar amount of each subsequent variable dollar amount Annuity Payout is
equal to the total of Annuity Units for each Sub-Account multiplied by the
Annuity Unit Value of each Sub-Account.
The Annuity Unit Value of each Sub-Account for any Valuation Period is equal to
the Accumulation Unit Value Net Investment Factor for the current Valuation
Period multiplied by the Annuity Unit Factor, multiplied by the Annuity Unit
Value for the preceding Valuation Period. The Annuity Unit Factor offsets the
AIR used to calculate your first variable dollar amount Annuity Payout.
The first Annuity Payout will be based upon the AIR. The remaining Annuity
Payouts will fluctuate based on the performance of the Funds in relation to the
AIR. The degree of the fluctuation will depend on the AIR you select.
You can select one of the following AIRs offered, subject to state variations:
ANNUITY ANNUITY ANNUITY
AIR UNIT FACTOR AIR UNIT FACTOR AIR UNIT FACTOR
-------------------------------------------------------------------
3% 0.999919% 5% 0.999866% 6% 0.999840%
The greater the AIR, the greater the initial Annuity Payout. But a higher AIR
may result in a smaller potential growth in future Annuity Payouts when the
Sub-Accounts earn more than the AIR. On the other hand, a lower AIR results in a
lower initial Annuity Payout, but future Annuity Payouts have the potential to
be greater when the Sub-Accounts earn more than the AIR.
For example, if the Sub-Accounts earned exactly the same as the AIR, then the
second monthly Annuity Payout is the same as the first. If the Sub-Accounts
earned more than the AIR, then the second monthly Annuity Payout is higher than
the first. If the Sub-Accounts earned less than the AIR, then the second monthly
Annuity Payout is lower than the first.
Level variable dollar amount Annuity Payouts would be produced if the investment
returns remained constant and equal to the AIR. In fact, Annuity Payouts will
vary up or down as the investment rate varies up or down from the AIR. The
degree of variation depends on the AIR you select.
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After the Annuity Calculation Date, you may transfer dollar amounts of Annuity
Units from one Sub-Account to another. On the day you make a transfer, the
dollar amounts are equal for both Sub-Accounts and the number of Annuity Units
will be different. We will transfer the dollar amount of your Annuity Units the
day we receive your written request if received before the close of the New York
Stock Exchange. Otherwise, the transfer will be made on the next Valuation Day.
All Sub-Account transfers must comply with applicable transfer restriction
policies.
- COMBINATION ANNUITY PAYOUT
You may choose to receive a combination of fixed dollar amount and variable
dollar amount Annuity Payouts as long as they total 100% of your Annuity Payout.
For example, you may choose to use forty (40%) percent fixed dollar amount and
sixty (60%) percent variable dollar amount to meet your income needs.
Combination Annuity Payouts are not available during the first two Contract
Years.
E. STANDARD DEATH BENEFIT
WHAT IS THE DEATH BENEFIT AND HOW IS IT CALCULATED?
The Death Benefit is the amount we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The standard Death
Benefit is equal to your Account Balance (less Distribution Charge) calculated
as of the Valuation Day when we receive a certified death certificate or other
legal document acceptable to us. The calculated Death Benefit will remain
invested according to the Owner's last instructions until we receive complete
written settlement instructions from the Beneficiary. This means the Death
Benefit amount will fluctuate with the performance of the Account. When there is
more than one Beneficiary, we will calculate the Accumulation Units for each
Sub-Account and the dollar amount for the Fixed Accumulation Feature and
Personal Pension Account for each Beneficiary's portion of the proceeds.
We reserve the right to treat all deferred variable annuities that you buy from
us or our affiliates as a single contract for the purposes of determining your
total Death Benefits. These limits will be applied if you have $5 million or
more in total aggregate Account Balance. If applicable, the aggregate limit on
total Death Benefits payable by us or our affiliates will never exceed a maximum
of:
- $5 million of aggregate Deposits, as adjusted for partial Surrenders (for
e.g., dollar-for-dollar or proportional) and Personal Pension Account
Payouts under all applicable contracts and associated riders; or
- Account Balance plus $1 million.
Please see the heading entitled "What kinds of Surrenders are available? -
Before the Annuity Commencement Date" under the Surrenders section and "What
effect does partial or full Surrenders have on your benefits under the rider?"
in the Return of Premium Death Benefit section for a discussion regarding when
partial Surrenders reduce your Death Benefit on either a dollar-for-dollar or
proportionate basis. Taking excess partial Surrenders may significantly
negatively affect your Death Benefit. Please consult with your Registered
Representative before making excess partial Surrenders to be sure that you fully
understand the ways such a decision will affect your Contract.
HOW IS THE DEATH BENEFIT PAID?
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Death Benefit payment is $5,000 or more, the Beneficiary may elect to
have their Death Benefit paid through our "Safe Haven Program." Under this
program, the proceeds remain in our General Account and the Beneficiary will
receive a draft book. The Beneficiary can write one draft for total payment of
the Death Benefit, or keep the money in the General Account and write drafts as
needed. We will credit interest at a rate determined periodically in our sole
discretion. For federal income tax purposes, the Beneficiary will be deemed to
have received the lump sum payment on transfer of the Death Benefit amount to
the General Account. The interest will be taxable to the Beneficiary in the tax
year that it is credited. We may not offer the Safe Haven Program in all states
and we reserve the right to discontinue offering it at any time. Although there
are no direct charges for this program, we earn investment income from the
proceeds. The investment income we earn is likely more than the amount of
interest we credit; therefore, we make a profit from the difference.
The Beneficiary may elect to leave proceeds from the Death Benefit invested with
us for up to five years from the date of death of the Annuitant or Owner if
death occurred before the Annuity Commencement Date. Once we receive a certified
death certificate or other legal documents acceptable to us, the Beneficiary
can: (a) make Sub-Account transfers (subject to applicable restrictions) and (b)
take Surrenders without paying CDSCs, if any. The Beneficiary may not make
Personal Pension Account Contributions. We shall endeavor to fully discharge the
last instructions from the Owner wherever possible or practical.
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The Beneficiary of a non-qualified Contract or IRA (prior to the required
distribution date) may also elect an annuity option that allows the Beneficiary
to take the Death Benefit in a series of payments spread over a period equal to
the Beneficiary's remaining life expectancy. Distributions are calculated based
on IRS life expectancy tables. This option is subject to different limitations
and conditions depending on whether the Contract is non-qualified or an IRA.
If the Owner dies before the Annuity Commencement Date, the Death Benefit must
be distributed within five years after death or be distributed under a
distribution option or Annuity Payout Option that satisfies the Alternatives to
the Required Distributions described below.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining value must be distributed at least
as rapidly as under the payment method being used as of the Owner's death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
WHO WILL RECEIVE THE DEATH BENEFIT?
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date.
If death occurs on or after the Annuity Commencement Date, there may be no
payout at death unless the Owner has elected an Annuity Payout Option that
permits the Beneficiary to elect to continue Annuity Payouts or receive the
Commuted Value.
IF DEATH OCCURS BEFORE THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . AND . . . THEN THE . . .
Owner There is a surviving joint The Annuitant is living or Joint Owner receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Beneficiary receives the Death
Owner deceased Benefit.
Owner There is no surviving joint The Annuitant is living or Owner's estate receives the
Owner and the Beneficiary deceased Death Benefit.
predeceases the Owner
Annuitant The Owner is living There is no named Contingent The Owner becomes the
Annuitant Contingent Annuitant and the
Contract continues. The Owner
may waive this presumption and
receive the Death Benefit.
Annuitant The Owner is living The Contingent Annuitant is Contingent Annuitant becomes
living the Annuitant, and the Contract
continues.
IF DEATH OCCURS ON OR AFTER THE ANNUITY COMMENCEMENT DATE:
IF THE DECEASED IS THE . . . AND . . . THEN THE . . .
Owner The Annuitant is living Beneficiary becomes the Owner.
Annuitant The Owner is living Owner receives the payout at death.
Annuitant The Annuitant is also the Owner Beneficiary receives the payout at
death.
THESE ARE THE MOST COMMON SCENARIOS. SOME OF THE ANNUITY PAYOUT OPTIONS MAY NOT
RESULT IN A PAYOUT AT DEATH.
5. RETURN OF PREMIUM DEATH BENEFIT
OBJECTIVE
To provide a Death Benefit that we will pay if the Owner, joint Owner, or the
Annuitant dies before we begin to make Annuity Payouts. The Death Benefit that
we will pay under this rider is in addition to your Personal Pension Account
Death Benefit.
WHEN CAN YOU BUY THE RIDER?
You can currently elect this benefit (called a "rider") only at the time that
you buy this Contract. This rider may not be available through all Registered
Representatives and may be subject to additional restrictions set by your
Registered Representative or us. We reserve the right to withdraw this rider at
any time. The maximum age of any Owner or Annuitant when electing this rider is
80.
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DOES ELECTING THIS RIDER FORFEIT YOUR ABILITY TO BUY OTHER RIDERS?
No.
HOW IS THE CHARGE FOR THIS RIDER CALCULATED?
The fee for the rider is based on Premium Payments, as adjusted for Surrenders
(as well as Benefit Balance transferred to Contract Value), as of each Contract
Anniversary. In the event of a change in ownership or upon Spousal Contract
continuation, the fee for the rider will be based on the Contract Value on the
date of any such change plus Premium Payments received after such date, as
adjusted for Surrenders. This charge will automatically be deducted from your
Contract Value on your Contract Anniversary prior to all other financial
transactions. A prorated charge will be deducted in the event of a full
Surrender of this Contract or this rider. The charge for the rider will be
withdrawn from each Sub-Account and the Fixed Accumulation Feature in the same
proportion that the value of each Sub-Account bears to the total Contract Value.
Except as otherwise provided below, we will continue to deduct this charge until
we begin to make Annuity Payouts or the rider is terminated. The rider charge
may limit access to the Fixed Accumulation Feature in certain states.
We reserve the right to change the rider charge up to the maximum fee described
in the Fee Summary at any time without notice. The rider charge may increase for
new investors. The rider charge may also prospectively increase upon certain
ownership changes or upon Spousal Contract continuation. We reserve the right to
charge a different rider charge based on your participation in approved
investment options.
IS THIS RIDER DESIGNED TO PAY YOU DEATH BENEFITS?
Yes. This Death Benefit is equal to the higher of Contract Value (minus
Distribution Charges) or Premium Payments, as adjusted for Surrenders. See
Example 1 under The Hartford's Return of Premium Death Benefit Examples in
Appendix A. In addition to this Death Benefit, you may also be entitled to
receive the Personal Pension Account Death Benefit which is equal to your
Benefit Balance. EVEN THOUGH YOUR BENEFIT BALANCE IS NOT SUBJECT TO PRINCIPAL
PROTECTION UNDER THIS RIDER, ANY PORTIONS OF YOUR BENEFIT BALANCE TRANSFERRED TO
SUB-ACCOUNTS AND/OR THE FIXED ACCUMULATION FEATURE ARE ALSO CONSIDERED TO BE
PART OF THE CONTRACT VALUE USED TO COMPUTE THIS DEATH BENEFIT. See Example 2
under The Hartford's Return of Premium Death Benefit Examples in Appendix A.
We calculate the Death Benefit when, and as of the Valuation Day, we receive a
certified death certificate or other legal document acceptable to us. The
calculated Death Benefit will remain invested according to the Owner's last
instructions until we receive complete written settlement instructions from the
Beneficiary. This means the Death Benefit amount will fluctuate with the
performance of the Account. When there is more than one Beneficiary, we will
calculate the Accumulation Units for each Sub-Account and the dollar amount for
the Fixed Accumulation Feature for each Beneficiary's portion of the proceeds.
Termination of this rider will result in the rescission of this Death Benefit
and result in your Beneficiary receiving the standard Death Benefit.
The Death Benefit may be taken in one lump sum or under any of the Annuity
Payout Options then being offered by us, unless the Owner has designated the
manner in which the Beneficiary will receive the Death Benefit. On the date we
receive complete instructions from the Beneficiary, we will compute the Death
Benefit amount to be paid out or applied to a selected Annuity Payout Option.
When there is more than one Beneficiary, we will calculate the Death Benefit
amount for each Beneficiary's portion of the proceeds and then pay it out or
apply it to a selected Annuity Payout Option according to each Beneficiary's
instructions. If we receive the complete instructions on a non-Valuation Day,
computations will take place on the next Valuation Day.
If the Owner dies on or after the Annuity Commencement Date under an Annuity
Payout Option that permits the Beneficiary to elect to continue Annuity Payouts
or receive the Commuted Value, any remaining Contract Value must be distributed
at least as rapidly as under the payment method being used as of the Owner's
death.
If the Owner is not an individual (e.g. a trust), then the original Annuitant
will be treated as the Owner in the situations described above and any change in
the original Annuitant will be treated as the death of the Owner.
The distribution of the Death Benefit applies only when death is before the
Annuity Commencement Date. Please refer to the discussion under the caption "Who
will receive the Death Benefit" under Standard Death Benefits for more
information.
DOES THIS RIDER REPLACE THE STANDARD DEATH BENEFIT?
Yes.
CAN YOU TERMINATE THIS RIDER?
Yes. At anytime following the earliest of the fifth anniversary of the rider
effective date or Spousal Contract continuation, the Contract Owner may elect to
terminate this rider. If this rider is terminated, then a pro-rated rider charge
will be assessed on the termination date, and will no longer be assessed
thereafter. The Death Benefit will be reset to the standard Death Benefit. No
other optional benefit may be elected following the termination. A
Company-sponsored exchange of this rider will not be considered to be a
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termination by you of the rider. This rider will also terminate upon election of
a Death Benefit option (described in the "Standard Death Benefit" section) by
the Beneficiary (excluding Spousal Contract continuation).
WHAT EFFECT DOES PARTIAL OR FULL SURRENDERS HAVE ON YOUR BENEFITS UNDER THE
RIDER?
We calculate the adjustment to your aggregate Premium Payments for any Surrender
by reducing your aggregate Premium Payments on a dollar-for-dollar basis for any
Surrender within a Contract Year up to the Death Benefit withdrawal limit. The
"Death Benefit withdrawal limit" is five (5%) percent of aggregate Premium
Payments. If a change of ownership occurs or if Spousal Contract continuation is
elected, the Death Benefit withdrawal limit will be five (5%) percent of
Contract Value as of the date of such change plus Premium Payments made after
such date. For purposes of this rider, a Surrender also includes a transfer of
Contract Value to Benefit Balance. Any partial Surrender that causes cumulative
Surrenders during the Contract Year to exceed the Death Benefit withdrawal
limit, even if less than your permissible AWA (provided that such Surrender was
not made in accordance with our Automatic Income program for the purposes of
meeting Required Minimum Distribution requirements), will cause a proportionate
reduction in your Death Benefit. Partial Surrenders up to, but not in excess of
the Death Benefit withdrawal limit (assuming no ownership changes) will reduce
your Death Benefit on a dollar-for-dollar basis. Any and all partial Surrenders
in excess of your Death Benefit withdrawal limit, whether individually or in the
aggregate, will reduce your Death Benefit on a proportionate basis based on a
factor equal to 1 minus the excessive partial Surrender (which is the amount of
the Surrender in excess of the Death Benefit withdrawal limit) divided by the
sum of (i) Contract Value prior to such partial Surrender minus (ii) any
remaining Death Benefit withdrawal limit. Taking excess partial Surrenders may
significantly negatively affect your Death Benefit. Please consult with your
Registered Representative before making excess partial Surrenders to be sure
that you fully understand the ways such a decision will affect your Contract.
See Example 1 under the Return of Premium Examples in Appendix A for an
illustration of this calculation.
WHAT HAPPENS IF YOU CHANGE OWNERSHIP?
We reserve the right to approve all ownership changes. Certain approved changes
in ownership before the Annuity Commencement Date may cause a re-calculation of
the Death Benefit.
Any ownership change made within the first six months from the Contract issue
date (if prior to the Annuity Commencement Date) will have no impact on the
rider values as long as each succeeding Owner is less than the maximum rider age
limitation at the time of the change. We reserve the right to require you to
reallocate investments according to then applicable investment restrictions in
the event of an ownership change after six months from the rider's effective
date.
An ownership change made after the first six months of the Contract issue date
(if prior to the Annuity Commencement Date) will cause a reset of these
benefits. If the rider is not available for sale at the time of the ownership
change, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
If the rider is currently available for sale on the date of the ownership
change, we will continue the existing rider with respect to all benefits at the
rider charge currently being assessed on new sales (or the last declared maximum
rider fee).The Death Benefit will be recalculated to the lesser of the Contract
Value or the Death Benefit on the effective date of the ownership change.
If the oldest Owner after the change is greater than the age limitation of the
rider as of the trade date of the change, then we will terminate this rider
whereupon the Death Benefit will be reset to the standard Death Benefit. A final
pro-rated rider charge will be assessed on the termination date, and then will
no longer be assessed.
CAN YOUR SPOUSE CONTINUE YOUR DEATH BENEFIT?
Yes. If the Owner dies and the sole Beneficiary is the deceased Owner's Spouse
at the time of death, that Spouse may continue the Contract and this rider, if
then available. This right may be exercised only once during the term of the
Contract.
If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is not available
for sale, we will terminate this rider whereupon the Death Benefit will be reset
to the standard Death Benefit. A final pro-rated rider charge will be assessed
on the termination date, and then will no longer be assessed.
If the Owner is less than or equal to age 80 at the time of the Spousal Contract
continuation and such rider (or similar rider, as we determine) is still
available for sale, the Death Benefit will be increased to the Contract Value if
higher than the Death Benefit as of the date of due proof of death and will
serve as the new basis for the benefit. The rider charge will be reset to the
rider charge then being assessed for new sales of the rider.
If the new Owner is age 81 or older at the time of the Spousal Contract
continuation, we will terminate this rider whereupon the Death Benefit will be
reset to the standard Death Benefit. A final pro-rated rider charge will be
assessed on the termination date and then will no longer be assessed.
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WHAT HAPPENS IF YOU ANNUITIZE YOUR CONTRACT?
Except as otherwise provided, if you elect to annuitize your Contract prior to
reaching the Annuity Commencement Date, you may only annuitize your Contract
Value. If your Contract reaches the Annuity Commencement Date, the Contract must
be annuitized unless we agree to extend the Annuity Commencement Date, in our
sole discretion. In this circumstance, the Contract may be annuitized under our
standard annuitization rules. This rider terminates once an Annuity Payout
Option is elected.
ARE THERE RESTRICTIONS ON HOW YOU MUST INVEST?
Yes. You may allocate your Contract Value to any Sub-Accounts(s), asset
allocation models, investment programs, fund of funds Sub-Accounts(s) or other
investment option(s) or you may design your own portfolio, provided that your
Fund selections comply with the investment restrictions in the following table:
CLASSIFICATION ALLOCATION
--------------------------------------------------------------------------------
Fixed investments Funds Minimum of 30% - to a maximum of 100%
Equity Investments - Maximum of 70%
- No more than 20% may be invested in
any one Fund in this category
Limited Investments Maximum of 20%
Multi-Asset Investments - Minimum of 0% - to a maximum of 100%
- May not be combined with Funds in the
above classifications
Please refer to Appendix C for the classification associated with each currently
offered Fund. Investing in the Personal Pension Account and Fixed Accumulation
Feature do not constitute a violation of these investment restrictions.
Not all asset allocation models, Funds or programs are available through all
Financial Intermediaries. The Personal Pension Account and Fixed Accumulation
Feature are not included within any classification.
We may, in our sole discretion, add, replace or delete Funds, programs,
classifications, allocations and asset allocation models from time to time. Not
all asset allocation models, Funds or programs are available through all
Financial Intermediaries. You will be provided with advance notification of any
investment restriction changes and you must invest any subsequent Premium
Payments in accordance with such updated investment restrictions.
You must participate in an asset rebalancing program. If on any Valuation Day,
your Contract Value is no longer invested within the permissible allocations in
the table above as a result of market fluctuations, we will not terminate the
rider. Instead, your Contract Value will be rebalanced quarterly in accordance
with your last compliant allocation instructions. All subsequent Premium
Payments must also be invested according to the classifications described in
this section.
YOU MAY PROVIDE INVESTMENT INSTRUCTIONS TO INVEST CONTRACT VALUE IN A MANNER
THAT VIOLATES THESE INVESTMENT RESTRICTIONS. ANY SUCH ACTION WILL, HOWEVER,
RESULT IN THE TERMINATION OF THIS RIDER. WE WILL NOT ACCEPT INSTRUCTIONS TO
VIOLATE THE INVESTMENT RESTRICTIONS FROM YOUR REGISTERED REPRESENTATIVE.
VIOLATING THESE INVESTMENT RESTRICTIONS SHALL RESULT IN THE TERMINATION OF YOUR
DEATH BENEFIT UNDER THIS RIDER.
If this rider is terminated due to failure to comply with the investment
restrictions, you will have a one time opportunity to reinstate the Death
Benefit. You will be notified in your confirmation statement that you have
violated these investment restrictions. The thirty calendar day reinstatement
period will begin from the date this rider is terminated. Your opportunity to
reinstate will be terminated if during the reinstatement period you make a
subsequent Premium Payment, take a partial Surrender, or make an ownership
change.
UPON REINSTATEMENT OF YOUR RIDER, YOUR PREMIUM PAYMENT WILL BE RESET AT THE
LOWER OF THE DEATH BENEFIT PRIOR TO THE REVOCATION OR CONTRACT VALUE AS OF THE
DATE OF THE REINSTATEMENT. WE WILL DEDUCT A PRORATED RIDER CHARGE ON YOUR
CONTRACT ANNIVERSARY FOLLOWING THE REINSTATEMENT FOR THE TIME PERIOD BETWEEN THE
REINSTATEMENT DATE AND YOUR FIRST CONTRACT ANNIVERSARY FOLLOWING THE
REINSTATEMENT. VIOLATION OF THESE INVESTMENT RESTRICTIONS COULD RESULT IN A
SERIOUS EROSION OF THE VALUE IN THIS RIDER.
We are not responsible for lost investment opportunities associated with the
implementation of these investment restrictions.
ARE THERE RESTRICTIONS ON THE AMOUNT OF SUBSEQUENT PREMIUM PAYMENTS?
Yes. We reserve the right to require our approval on all subsequent Premium
Payments received after the first twelve months. We may not accept any
subsequent Premium Payment which brings the total of such cumulative subsequent
Premium Payments in excess of $100,000 without prior approval. Following your
Annuity Commencement Date, we will no longer accept subsequent Premium Payments.
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CAN WE AGGREGATE CONTRACTS?
Yes. We reserve the right to treat all deferred variable annuities that you buy
from us or our affiliates where you have elected any optional death benefit
rider as a single contract for the purposes of determining your total Death
Benefits. These limits will be applied if you make $5 million or more in total
aggregate Deposits. If applicable, the aggregate limit on total Death Benefits
payable by us or our affiliates will never exceed a maximum of:
- $5 million of Deposits (as reduced by an adjustment for Surrenders), or
- Account Balance plus $1 million.
Any reduction in Death Benefits will be in proportion to the Contract Value of
each deferred variable annuity at the time of reduction.
OTHER INFORMATION
The rider may not be appropriate for all investors. Several factors, among
others, should be considered:
- The benefits under the rider cannot be directly or indirectly assigned,
collateralized, pledged or securitized in any way. Any such actions will
invalidate the rider and allow us to terminate the rider.
- We may terminate this rider based upon the following conditions: Spousal
Contract continuation, ownership changes, assignment and/or violation of the
investment restrictions. If we terminate the rider, it cannot be re-elected
by you.
- The selection of an Annuity Payout Option and the timing of the selection
may have an impact on the tax treatment of the Death Benefit. To receive
favorable tax treatment, the Annuity Payout Option selected: (a) cannot
extend beyond the Beneficiary's life or life expectancy, and (b) must begin
within one year of the date of death. If these conditions are not met, the
Death Benefit will be treated as a lump sum payment for tax purposes. This
sum will be taxable in the year in which it is considered received.
- Upon Spousal Contract continuation or ownership change, the Death Benefit
withdrawal limit upon which we reduce the Death Benefit will be adjusted to
equal five (5%) percent of the Contract Value as of the date of such change
plus Premium Payments received after such date.
- If the Owner dies and the sole Beneficiary is the Owner's Spouse, then the
Contract may continue with the Spouse as Owner through a Spousal Contract
continuation election, unless the Spouse elects to receive the Death Benefit
as a lump sum payment or as an Annuity Payout Option. If the Contract
continues with the Spouse as Owner, we will adjust the Contract Value to the
amount that we would have paid as the Death Benefit payment, had the Spouse
elected to receive the Death Benefit as a lump sum payment. Spousal Contract
continuation will only apply one time for each Contract. If you do not name
another Beneficiary at the time of continuation, the Beneficiary will
default to your estate.
- Participation in an automatic investment or income program may result in a
transaction during the reinstatement period causing you to lose your right
to reinstate the Death Benefit.
6. FURTHER INFORMATION
A. GLOSSARY
Except as provided elsewhere in this prospectus, the following capitalized terms
shall have the meaning ascribed below:
ACCOUNT: Any of the Sub-Accounts or the Fixed Accumulation Feature.
ACCOUNT BALANCE: The sum of your Contract Value and Benefit Balance (this term
is also referred to as the "Total Balance" in your Contract and marketing
materials).
ACCUMULATION BALANCE - The sum of all Personal Pension Account Contributions
increased by credited interest; minus any transfers into any other Account(s)
and any conversion into Annuity Payout Value.
ACCUMULATION UNITS: If you allocate your Premium Payment to any of the
Sub-Accounts, we will convert Premium Payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate Contract Value prior to Annuitization.
ACCUMULATION UNIT VALUE: The daily price of Accumulation Units on any Valuation
Day.
ADMINISTRATIVE OFFICE: Our overnight mailing address is: 1 Griffin Road North,
Windsor, CT 06095-1512. Our standard mailing address is: P.O. Box 5085,
Hartford, Connecticut 06102-5085.
ANNUAL MAINTENANCE FEE: An annual charge deducted on a Contract Anniversary or
upon full Surrender.
ANNUAL WITHDRAWAL AMOUNT (AWA): The amount you may Surrender each Contract Year
without incurring a CDSC.
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ANNUITANT: The person on whose life the Contract is issued. Except as otherwise
provided, the Annuitant may not be changed after your Contract is issued.
ANNUITY CALCULATION DATE: The date we calculate the first Annuity Payout.
ANNUITY COMMENCEMENT DATE: The first day of the first period for which a
distribution is received as an Annuity Payout under the Contract.
ANNUITY PAYOUT: The money we pay out after the Annuity Commencement Date for the
duration and frequency you select. Annuity Payout also refers to Personal
Pension Account Payouts.
ANNUITY PAYOUT OPTION: Any of the options available for payout after the Annuity
Commencement Date, the death of the Contract Owner or Annuitant; or
annuitization(s) of Benefit Balance.
ANNUITY PAYOUT VALUE: The portion of your Benefit Balance annuitized converted
into Personal Pension Account Payouts, as reduced by future Personal Pension
Account Payouts.
ANNUITY UNIT: The unit of measure we use to calculate the value of your Annuity
Payouts under a variable dollar amount Annuity Payout Option.
ANNUITY UNIT VALUE: The daily price of Annuity Units on any Valuation Day.
BENEFICIARY: The person(s) entitled to receive benefits pursuant to the terms of
the Contract upon the death of any Contract Owner or Annuitant, as the case may
be.
BENEFIT BALANCE: Personal Pension Account Contributions, as adjusted for
transfers to or from Contract Value, credited interest and/or annuitization.
Benefit Balance includes Annuity Payout Value, if any.
CODE: The Internal Revenue Code of 1986, as amended.
COMMUTED VALUE: The present value of any Annuity Payout due and payable during
the Guaranteed Payout Duration. This amount is calculated using the Assumed
Investment Return for variable dollar amount Annuity Payouts and the applicable
discount rate determined by us for applicable fixed dollar amount Annuity
Payouts.
CONTINGENT ANNUITANT: The person you may designate to become the Annuitant if
the original Annuitant dies before the Annuity Commencement Date. You must name
a Contingent Annuitant before the original Annuitant's death.
CONTINGENT DEFERRED SALES CHARGE (CDSC): The deferred sales charge, if
applicable, that may apply when you make a full or partial Surrender.
CONTRACT: The individual Annuity Contract and any endorsements or riders. Group
participants and some individuals may receive a certificate rather than a
Contract.
CONTRACT ANNIVERSARY: The anniversary of the date we issued your Contract. If
the Contract Anniversary falls on a Non-Valuation Day, then the Contract
Anniversary will be the next Valuation Day.
CONTRACT OWNER, OWNER OR YOU: The owner or holder of the Contract described in
this prospectus including any joint Owner(s). We do not capitalize "you" in the
prospectus.
CONTRACT VALUE: The total value of the Account on any Valuation Day.
CONTRACT YEAR: Any 12 month period between Contract Anniversaries, beginning
with the date the Contract was issued.
DEATH BENEFIT: Except as otherwise provided, the amount payable if the Contract
Owner, joint Contract Owner or the Annuitant dies before the Annuity
Commencement Date.
DEPOSIT: The sum of allPremium Payments and Personal Pension Account
Contributions.
FIXED ACCUMULATION FEATURE: Part of our General Account, where you may allocate
all or a portion of your Contract Value. In your Contract, the Fixed
Accumulation Feature may be called the Fixed Account. Not all classes of
Contracts we offer contain a Fixed Accumulation Feature.
FUND: A registered investment company or a series thereof in which assets of a
Sub-Account may be invested. We sometimes call the Funds you select a
"Sub-Account".
GUARANTEED PAYOUT DURATION: The time period (sometimes referred to as a "Period
Certain") specified in Annuity Payout Options Three, Five and Six; and with
respect to Annuity Payout Options Two and Eight, the time period equal to the
applicable Annuity Payout Value divided by the corresponding Personal Pension
Account Payout, rounded down.
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JOINT ANNUITANT: The person on whose life Annuity Payouts are based if the
Annuitant dies after Annuitization. You may name a Joint Annuitant only if your
Annuity Payout Option provides for a survivor. The Joint Annuitant may not be
changed.
NET INVESTMENT FACTOR: This is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next, and is also used to calculate
your Annuity Payout amount.
1933 ACT: The Securities Act of 1933, as amended.
1934 ACT: The Securities Exchange Act of 1934, as amended.
1940 ACT: The Investment Company Act of 1940, as amended.
NON-VALUATION DAY: Any day the New York Stock Exchange is not open for trading.
PAYEE: The person or party you designate to receive Annuity Payouts.
PERSONAL PENSION ACCOUNT CONTRIBUTIONS: Sums allocated to the Personal Pension
Account (after deduction of front-end sales charges, if applicable). Personal
Pension Account Contributions may take the form of Deposits or transfers of
Contract Value from Sub-Accounts or the Fixed Accumulation Feature (if
applicable).
PERSONAL PENSION ACCOUNT PAYOUTS: Regularly scheduled periodic payments of
Annuity Payout Value.
PREMIUM OR PREMIUM PAYMENT: Money sent to us to be invested in your Contract
(not taking into consideration any applicable sales charges). Unless otherwise
specified, a Premium Payment does not include Personal Pension Account
Contributions. Portions of your Benefit Balance transferred to Sub-Accounts
and/or the Fixed Accumulation Feature are initially considered to be Premium
Payments that become part of your Contract Value.
REMAINING GROSS PREMIUM: Premium Payments minus prior partial Surrenders in
excess of the AWA at the time of such partial Surrender.
SPOUSE: A person related to a Contract Owner by marriage pursuant to the Code.
SUB-ACCOUNT: A division of the Separate Account containing shares of a Fund.
There is a Sub-Account for each Fund. We sometimes call the Funds you select
your "Sub-Account".
SUB-ACCOUNT VALUE: The value of each Sub-Account on or before the Annuity
Calculation Date, which is determined on any day by multiplying the number of
Accumulation Units by the Accumulation Unit Value for each Sub-Account.
SURRENDER: A complete or partial withdrawal from your Contract. For the purposes
of optional riders only, a Surrender may also include a transfer of Contract
Value to Benefit Balance.
SURRENDER VALUE: The amount we pay you if you terminate your Contract before the
Annuity Commencement Date. The Surrender Value is equal to the Contract Value
minus any applicable charges (subject to rounding). Surrender Value does not
include the Commuted Value of your Personal Pension Account.
TARGET INCOME AGE - The year when Personal Pension Account Payouts are likely to
commence. Target Income Age establishes a 7-year guarantee window (three years
before and after) during which a guaranteed payout rate will be applied to your
Accumulation Balance.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange. The Exchange generally closes at 4:00 p.m. Eastern Time but may close
earlier on certain days and as conditions warrant.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
WE, US OR OUR: Hartford Life and Annuity Insurance Company or Hartford Life
Insurance Company, as the case may be.
YOU: The Owner including any joint Owner(s). We do not capitalize "you" or
"your" in this prospectus.
B. STATE VARIATIONS
The following section describes modifications to this prospectus required by one
or more state insurance departments as of the date of this prospectus. Unless
otherwise noted, variations apply to all forms of Contracts we issue. References
to certain state's variations do not imply that we actually offer Contracts in
each such state. These variations are subject to change without notice and
additional variations may be imposed as specific states approve new riders.
ALABAMA - The Fixed Accumulation Feature is not available. The DCA Plus Fixed
Accumulation Feature is available.
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CALIFORNIA - If you are 60 years old or older you must either elect the Senior
Protection Program, or elect to immediately allocate the initial Premium
Payments to the other investment options. Under the Senior Protection Program,
we will allocate your initial Premium Payment to a money market Fund for the
first 35 days your initial Premium Payment is invested. After the 35th day we
will automatically allocate your Contract Value according to your most current
investment instructions. If you elect the Senior Protection Program you will not
be able to participate in any InvestEase (if otherwise available) or Dollar Cost
Averaging Program until after the Program has terminated. The Dollar Cost
Averaging Plus, the Static Asset Allocation Models and certain Automatic Income
Programs are not available if you elect the Senior Protection Program. Under the
Senior Protection Program any subsequent Premium Payment received during the 35
days after the initial Premium Payment is invested will also be invested in a
money market Fund unless you direct otherwise. You may voluntarily terminate
your participation in the Senior Protection Program by contacting us in writing
or by telephone. You will automatically terminate your participation in the
Senior Protection Program if you allocate a subsequent Premium Payment to any
other investment option or transfer Contract Value from a money market Fund to
another investment option. When you terminate your participation in the Senior
Protection Program you may reallocate your Contract Value in the Program to
other investment options; or we will automatically reallocate your Contract
Value in the Program according to your original instructions 35 days after your
initial Premium Payment was invested.
CONNECTICUT, NEW HAMPSHIRE AND NEW JERSEY - A state recognized civil union
partner who is the designated beneficiary may exercise contract continuation
privileges if and when the Code is amended to recognize such "spouses" as
meeting federal tax distribution requirements (under current tax law, a "spouse"
is limited to married people of the opposite sex).
FLORIDA - The limit on Death Benefits imposed when aggregate Premium Payments
total $5 million or more does not apply.
MASSACHUSETTS - We will accept subsequent Premium Payments only until the
Annuitant's 63rd birthday or the third Contract Anniversary, whichever is later
(B Share Contracts). The Nursing Home Waiver is not available.
NEW JERSEY - The only AIRs available are 3% and 5%. The Nursing Home Waiver is
not available. Letters of Intent are not available as a basis to reduce sales
charges.
NEW YORK - A Contract issued by Hartford Life and Annuity Insurance Company is
not available in New York. The only AIRs available are 3% and 5%. The Nursing
Home Waiver is not available. Letters of Intent are not available as a basis to
reduce sales charges.
OKLAHOMA - The only AIRs available are 3% and 5%.
OREGON - We will accept subsequent Premium Payments during the first three
Contract Years (B Share Contracts). Owners may only sign up for DCA Plus
Programs that are 6 months or longer. You may not choose a fixed dollar amount
Annuity Payout. Annuity Payout Option Two is not available. The only AIRs
available are 3% and 5%.
PENNSYLVANIA - The Nursing Home Waiver minimum confinement period is changed
from 180 days to 90 days. You may not choose a fixed dollar amount Annuity
Payout. Annuity Payout Option Two is not available.
TEXAS - Letters of Intent are not available as a basis to reduce sales charges.
VERMONT - Eligible Investments owned by you, your Spouse or any immediate family
member may be included under the Rights of Accumulation Program.
WASHINGTON - In any year when no Premium Payment is paid into the Fixed
Accumulation Feature, any pro-rata portion of the fee taken from the Fixed
Accumulation Feature will be limited to interest earned in excess of the 3% for
that year.
C. MISCELLANEOUS
OWNERSHIP CHANGES - We reserve the right to approve all ownership changes,
including any assignment of your Contract (or any benefits) to others or the
pledging of your Contract as collateral. Certain approved changes in ownership
may cause a re-calculation of the benefits subject to applicable state law.
Generally, we will not re-calculate the benefits under your Contract so long as
the change in ownership does not affect the Owner and does not result in a
change in the tax identification number under the Contract. You may not change
the named Annuitant. However, if the Annuitant is still living, the Contingent
Annuitant may be changed at any time prior to the Annuity Commencement Date by
sending us written notice.
ASSIGNMENT - A non-qualified Contract may be assigned subject to the ownership
change restrictions above. We must be properly notified in writing of an
assignment. Any Annuity Payouts or Surrenders requested or scheduled before we
record an assignment will be made according to the instructions we have on
record. We are not responsible for determining the validity of an assignment.
Assigning a non-qualified Contract may require the payment of income taxes and
certain penalty taxes. A qualified Contract may not be transferred or otherwise
assigned (whether directly or used as collateral for a loan), unless allowed by
applicable law and approved by us in writing. We can withhold our consent for
any reason. We are not obligated to process any request for approval within any
particular time frame. Please consult a qualified tax adviser before assigning
your Contract.
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SPECULATIVE INVESTING - Do not purchase this contract if you plan to use it, or
any of its riders, for speculation, arbitrage, viatication or any other type of
collective investment scheme. Your Contract may not be traded on any stock
exchange or secondary market. By purchasing this contract you represent and
warrant that you are not using this Contract, or any of its riders, for
speculation, arbitrage, viatication or any other type of collective investment
scheme.
CONTRACT MODIFICATION - We may unilaterally modify the Contract to reflect,
among other things, changes in applicable tax law or interpretations of tax law,
but no modification will affect the amount or term of any Contract unless a
modification is required to conform the Contract to applicable federal or state
law. No modification will affect the method by which Contract Values are
determined. Any modifications to the Contract will be filed with each state in
which the Contract is for sale. Contract changes will be communicated to Owners
through regular mail as an endorsement to their Contract.
MEDICAID BENEFITS - Medicaid estate planning may be important to people who are
concerned about long term care costs. Benefits associated with this variable
annuity may have an impact on your Medicaid eligibility and the assets
considered for Medicaid benefits. Ownership interests or beneficiary status
under this variable annuity could render you or your loved ones ineligible for
Medicaid. This may be particularly troubling if your Spouse or Beneficiary is
already receiving Medicaid benefits at the time of transfer or receipt of Death
Benefits. As certain ownership changes are either impermissible or are subject
to benefit resetting rules, you may want to carefully consider how you structure
the ownership and beneficiary status of your Contract. This discussion is
intended to provide a very general overview and does not constitute legal advice
or in any way suggest that you circumvent these rules. You should seek advice
from a competent elder law attorney to make informed decisions about how this
variable annuity may affect your plans.
D. LEGAL PROCEEDINGS
There continues to be significant federal and state regulatory activity relating
to financial services companies. Like other insurance companies, we are involved
in lawsuits, arbitrations, and regulatory/legal proceedings. Certain of the
lawsuits and legal actions the Company is involved in assert claims for
substantial amounts. While it is not possible to predict with certainty the
ultimate outcome of any pending or future case, legal proceeding or regulatory
action, we do not expect the ultimate result of any of these actions to result
in a material adverse effect on the Company or its Separate Accounts.
Nonetheless, given the large or indeterminate amounts sought in certain of these
actions, and the inherent unpredictability of litigation, an adverse outcome in
certain matters could, from time to time, have a material adverse effect on the
Company's results of operations or cash flows in particular quarterly or annual
periods.
E. HOW CONTRACTS ARE SOLD
We have entered into a distribution agreement with our affiliate Hartford
Securities Distribution Company, Inc. ("HSD") under which HSD serves as the
principal underwriter for the Contracts, which are offered on a continuous
basis. HSD is registered with the Securities and Exchange Commission under the
1934 Act as a broker-dealer and is a member of the Financial Industry Regulatory
Authority (FINRA). The principal business address of HSD is the same as ours.
PLANCO Financial Services, LLC, a subsidiary of Hartford Life Insurance Company,
provides marketing support for us. Woodbury Financial Services, Inc. is another
affiliated broker-dealer that sells this Contract.
HSD has entered into selling agreements with affiliated and unaffiliated
broker-dealers, and financial institutions ("Financial Intermediaries") for the
sale of the Contracts. We pay compensation to HSD for sales of the Contracts by
Financial Intermediaries. HSD, in its role as principal underwriter, did not
retain any underwriting commissions for the fiscal year ended December 31, 2008.
Contracts will be sold by individuals who have been appointed by us as insurance
agents and who are registered representatives of Financial Intermediaries
("Registered Representatives").
B and I share Contracts may be sold directly to the following individuals free
of any commission: 1) our current or retired officers, directors, trustees and
employees (and their families) and our corporate parent, affiliates and
subsidiaries; and 2) employees and Registered Representatives of Financial
Intermediaries. If applicable, we will credit the B share Contract with a credit
of 5.0% of the initial Deposit and each subsequent Deposit, if any. This
additional percentage of Deposit in no way affects current or future charges,
rights, benefits or account values of other Owners.
The financial advisory arrangement otherwise required in order to purchase I
share Contracts shall not be applicable to Hartford Leaders Series V individual
variable annuities bought by any of our current or retired officers, directors,
trustees and employees or those of our corporate parent, affiliates and
subsidiaries.
This prospectus does not constitute personalized investment or financial
planning advice or a recommendation to purchase this or any other variable
annuity. We reserve the right to modify, suspend, or terminate these privileges
at any time.
We list below types of arrangements that help to incentivize sales people to
sell our suite of variable annuities. Not all arrangements necessarily affect
each variable annuity. These types of arrangements could be viewed as creating
conflicts of interest.
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Financial Intermediaries receive commissions (described below under
"Commissions"). Certain selected Financial Intermediaries also receive
additional compensation (described below under "Additional Payments"). All or a
portion of the payments we make to Financial Intermediaries may be passed on to
Registered Representatives according to a Financial Intermediaries' internal
compensation practices.
Affiliated broker-dealers also employ individuals called "wholesalers" in the
sales process. Wholesalers typically receive commissions based on the type of
Contract or optional benefits sold. Commissions are based on a specified amount
of Deposits or Account Balance.
- COMMISSIONS
Up front commissions paid to Financial Intermediaries generally range from 0% to
up to 5% of each Deposit. Trail commissions (fees paid for customers that
maintain their Contracts generally for more than 1 year) range up to 1% of your
Account Balance. We pay no additional commissions with respect to assets moved
from the Personal Pension Account to Sub-Accounts or the Fixed Accumulation
Feature. We pay different commissions based on the Contract variation that you
buy. We may pay a lower commission for sales to Owners over age 80.
Commission arrangements vary from one Financial Intermediary to another. We are
not involved in determining your Registered Representative's compensation. Under
certain circumstances, your Registered Representative may be required to return
all or a portion of the commissions paid.
Check with your Registered Representative to verify whether your account is a
brokerage or an advisory account. Your interests may differ from ours and your
Registered Representative (or the Financial Intermediary with which they are
associated). Please ask questions to make sure you understand your rights and
any potential conflicts of interest. If you are an advisory client, your
Registered Representative (or the Financial Intermediary with which they are
associated) can be paid both by you and by us based on what you buy. Therefore,
profits, and your Registered Representative's (or their Financial
Intermediary's) compensation, may vary by product and over time. Contact an
appropriate person at your Financial Intermediary with whom you can discuss
these differences.
- ADDITIONAL PAYMENTS
Subject to FINRA and Financial Intermediary rules, we (or our affiliates) also
pay the following types of fees to among other things encourage the sale of this
Contract. These additional payments could create an incentive for your
Registered Representative, and the Financial Intermediary with which they are
associated, to recommend products that pay them more than others, which may not
necessarily be to your benefit.
ADDITIONAL
PAYMENT TYPE WHAT IT'S USED FOR
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Access Access to Registered Representatives and/or Financial Intermediaries such as one-on-one wholesaler
visits or attendance at national sales meetings or similar events.
Gifts & Entertainment Occasional meals and entertainment, tickets to sporting events and other gifts.
Marketing Joint marketing campaigns and/or Financial Intermediary event advertising/participation; sponsorship
of Financial Intermediary sales contests and/or promotions in which participants (including
Registered Representatives) receive prizes such as travel awards, merchandise and recognition;
client generation expenses.
Marketing Expense Pay Fund related parties for wholesaler support, training and marketing activities for certain
Allowances Funds.
Support Sales support through such things as providing hardware and software, operational and systems
integration, links to our website from a Financial Intermediary's websites; shareholder services
(including sub-accounting sponsorship of Financial Intermediary due diligence meetings; and/or
expense allowances and reimbursements).
Training Educational (due diligence), sales or training seminars, conferences and programs, sales and service
desk training, and/or client or prospect seminar sponsorships.
Visibility Inclusion of our products on a Financial Intermediary's "preferred list"; participation in, or
visibility at, national and regional conferences; and/or articles in Financial Intermediary
publications highlighting our products and services.
Volume Pay for the overall volume of their sales or the amount of money investing in our products.
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As of December 31, 2008, we have entered into ongoing contractual arrangements
to make Additional Payments to the following Financial Intermediaries for our
entire suite of variable annuities: AIG Advisors Group, Inc., (Advantage
Capital, AIG Financial Advisors, American General, FSC Securities Corporation,
Royal Alliance Assoc., Inc.), Allen & Company, AMTrust Investment Svcs Inc.,
Associated Securities, Banc of America Investment Services Inc., Bancwest
Investment Services, Inc., Cadaret, Grant & Co., Inc., Cambridge Investment
Research Inc., Capital Analyst Inc., Centaurus Financial, Inc., CCO Investment
Services Corp., Citigroup, Inc. (various divisions and affiliates), Comerica
Securities, Commonwealth Financial Network, Compass Brokerage, Inc., Crown
Capital Securities, L.P., Cuna Brokerage Services, Inc., Cuso Financial
Services, L.P., Edward D. Jones & Co., L.P., FFP Securities, Inc., First Allied
Securities, Inc., First Citizens Investor Services, First Montauk Securities
Corp., First Tennessee Brokerage Inc., Frost Brokerage Services, Inc., Great
American Advisors, Inc., H. Beck, Inc., H.D. Vest Investment Services
(subsidiary of Wells Fargo & Company), Harbour Investments, Inc., Heim & Young
Securities, Huntington Investment Company, Independent Financial Group LLC,
Infinex Financial Group, ING Advisors Network, (Financial Network Services (or
Investment) Corp., ING Financial Partners, Multi-Financial Securities, Primevest
Financial Services, Inc.,), Inter-Securities Inc., Investacorp, Inc., Investment
Professionals, Inc., Investors Capital Corp., J.J.B. Hilliard, James T. Borello
& Co., Janney Montgomery Scott, Inc., Jefferson Pilot Securities Corporation,
Key Investment Services, LaSalle Financial Services, Inc., Lincoln Financial
Advisors Corp. (marketing name for Lincoln National Corp.), Lincoln Financial
Securities Corp., Lincoln Investment Planning, LPL Financial Corporation, M&T
Securities, Inc., Merrill Lynch Pierce Fenner & Smith, MML Investor Services
Inc., Morgan Keegan & Company, Inc., Morgan Stanley & Co., Inc. (various
divisions and affiliates), Mutual Service Corporation, NatCity Investments,
National Planning Holdings (Invest Financial Corp., Investment Centers of
America, Inc., National Planning Corp., SII Investments, Inc.), Newbridge
Securities Corp., NEXT Financial Group, Inc., NFP Securities, Inc., Pension
Planners Securities, Inc., Prime Capital Services, Inc., Prospera Financial
Services, Inc., Raymond James & Associates, Inc., Raymond James Financial
Services, RBC Capital Markets., Robert W. Baird & Co. Inc., Rogan & Associates,
Securities America, Inc., Sigma Financial Corporation, Sorrento Pacific, Stifel
Nicolaus & Company, Incorporated, Summit Brokerage Services Inc., Sun Trust
Bank, TFS Securities, Inc., The Investment Center, Inc., Thurston, Springer,
Miller, Herd & Titak, Inc., Triad Advisors, Inc., U.S. Bancorp Investments,
Inc., UBOC Investment Services, Inc. (Union Bank of California, N.A.), UBS
Financial Services, Inc., Uvest Financial Services Group Inc., Vanderbilt
Securities, LLC, Wachovia Securities, LLC (various divisions), Walnut Street
Securities, Inc., Waterstone Financial Group, Wells Fargo Brokerage Services,
L.L.C., WaMu Investments, Inc., Woodbury Financial Services, Inc. (an affiliate
of ours).
Inclusion on this list does not imply that these sums necessarily constitute
"special cash compensation" as defined by FINRA Conduct Rule 2830(l)(4). We will
endeavor to update this listing annually and interim arrangements may not be
reflected. We assume no duty to notify any investor whether their Registered
Representative is or should be included in any such listing.
As of December 31, 2008, we have entered into arrangements to pay Marketing
Expense Allowances to the following Fund Companies (or affiliated parties) for
our entire suite of variable annuities: AIM Advisors, Inc., AllianceBernstein
Variable Products Series Funds & Alliance Bernstein Investment Research and
Management, Inc., American Variable Insurance Series & Capital Research and
Management Company, Franklin Templeton Services, LLC, Oppenheimer Variable
Account Funds & Oppenheimer Funds Distributor, Inc., Putnam Retail Management
Limited Partnership. Marketing Expense Allowances may vary based on the form of
Contract sold and the age of the purchaser. We will endeavor to update this
listing annually and interim arrangements may not be reflected. We assume no
duty to notify you whether any Financial Intermediary is or should be included
in any such listing. You are encouraged to review the prospectus for each Fund
for any other compensation arrangements pertaining to the distribution of Fund
shares.
For the fiscal year ended December 31, 2008, Additional Payments did not in the
aggregate exceed approximately $55.8 million (excluding corporate-sponsorship
related perquisites and Marketing Expense Allowances) or approximately 0.06% of
average total individual variable annuity assets. Marketing Expense Allowances
for this period did not exceed $7.9 million or approximately 0.25% of the
Premium Payments invested in a particular Fund during this period. Financial
Intermediaries that received Additional Payments in 2008, but do not have an
ongoing contractual relationship, are listed in the Statement of Additional
Information.
Financial Intermediaries that received Additional Payments in 2008, but do not
have an ongoing contractual relationship, are listed in the Statement of
Additional Information.
7. FEDERAL TAX CONSIDERATIONS
A. INTRODUCTION
The following summary of tax rules does not provide or constitute any tax
advice. It provides only a general discussion of certain of the expected federal
income tax consequences with respect to amounts contributed to, invested in or
received from a Contract, based on our understanding of the existing provisions
of the Internal Revenue Code ("Code"), Treasury Regulations thereunder, and
public interpretations thereof by the IRS (e.g., Revenue Rulings, Revenue
Procedures or Notices) or by published court decisions. This summary discusses
only certain federal income tax consequences to United States Persons, and does
not discuss state, local or foreign
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tax consequences. The term United States Persons means citizens or residents of
the United States, domestic corporations, domestic partnerships, trust or
estates that are subject to United States federal income tax, regardless of the
source of their income. See "Annuity Purchases by Nonresident Aliens and Foreign
Corporations," regarding annuity purchases by non-U.S. Persons or residents.
This summary has been prepared by us after consultation with tax counsel, but no
opinion of tax counsel has been obtained. We do not make any guarantee or
representation regarding any tax status (e.g., federal, state, local or foreign)
of any Contract or any transaction involving a Contract. In addition, there is
always a possibility that the tax treatment of an annuity contract could change
by legislation or other means (such as regulations, rulings or judicial
decisions). Moreover, it is always possible that any such change in tax
treatment could be made retroactive (that is, made effective prior to the date
of the change). Accordingly, you should consult a qualified tax adviser for
complete information and advice before purchasing a Contract.
In addition, although this discussion addresses certain tax consequences if you
use the Contract in various arrangements, including Charitable Remainder Trusts,
tax-qualified retirement arrangements, deferred compensation plans, split-dollar
insurance arrangements, or other employee benefit arrangements, this discussion
is not exhaustive. The tax consequences of any such arrangement may vary
depending on the particular facts and circumstances of each individual
arrangement and whether the arrangement satisfies certain tax qualification or
classification requirements. In addition, the tax rules affecting such an
arrangement may have changed recently, e.g., by legislation or regulations that
affect compensatory or employee benefit arrangements. Therefore, if you are
contemplating the use of a Contract in any arrangement the value of which to you
depends in part on its tax consequences, you should consult a qualified tax
adviser regarding the tax treatment of the proposed arrangement and of any
Contract used in it.
THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL PURPOSES ONLY. SPECIAL
TAX RULES MAY APPLY WITH RESPECT TO CERTAIN SITUATIONS THAT ARE NOT DISCUSSED
HEREIN. EACH POTENTIAL PURCHASER OF A CONTRACT IS ADVISED TO CONSULT WITH A
QUALIFIED TAX ADVISER AS TO THE CONSEQUENCES OF ANY AMOUNTS INVESTED IN A
CONTRACT UNDER APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN TAX LAW.
B. TAXATION OF THE COMPANY AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of the Company which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. Accordingly, the
Separate Account will not be taxed as a "regulated investment company" under
Subchapter M of Chapter 1 of the Code. Investment income and any realized
capital gains on assets of the Separate Account are reinvested and taken into
account in determining the value of the Accumulation and Annuity Units. As a
result, such investment income and realized capital gains are automatically
applied to increase reserves under the Contract.
Currently, no taxes are due on interest, dividends and short-term or long-term
capital gain earned by the Separate Account with respect to the Contracts. The
Company is entitled to certain tax benefits related to the investment of company
assets, including assets of the Separate Account. These tax benefits, which may
include the foreign tax credit and the corporate dividends received deduction,
are not passed back to you since the Company is the owner of the assets from
which the tax benefits are derived.
C. TAXATION OF ANNUITIES - GENERAL PROVISIONS AFFECTING CONTRACTS NOT HELD IN
TAX-QUALIFIED RETIREMENT PLANS
Section 72 of the Code governs the taxation of annuities in general.
1. NON-NATURAL PERSONS AS OWNERS
Pursuant to Code Section 72(u), an annuity contract held by a taxpayer other
than a natural person generally is not treated as an annuity contract under the
Code. Instead, such a non-natural Contract Owner generally could be required to
include in gross income currently for each taxable year the excess of (a) the
sum of the Contract Value as of the close of the taxable year and all previous
distributions under the Contract over (b) the sum of net premiums paid for the
taxable year and any prior taxable year and the amount includable in gross
income for any prior taxable year with respect to the Contract under Section
72(u). However, Section 72(u) does not apply to:
- A contract the nominal owner of which is a non-natural person but the
beneficial owner of which is a natural person (e.g., where the non-natural
owner holds the contract as an agent for the natural person),
- A contract acquired by the estate of a decedent by reason of such decedent's
death,
- Certain contracts acquired with respect to tax-qualified retirement
arrangements,
- Certain contracts held in structured settlement arrangements that may
qualify under Code Section 130, or
- A single premium immediate annuity contract under Code Section 72(u)(4),
which provides for substantially equal periodic payments and an annuity
starting date that is no later than 1 year from the date of the contract's
purchase.
A non-natural Contract Owner that is a tax-exempt entity for federal tax
purposes (e.g., a tax-qualified retirement trust or a Charitable Remainder
Trust) generally would not be subject to federal income tax as a result of such
current gross income under Code
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Section 72(u). However, such a tax-exempt entity, or any annuity contract that
it holds, may need to satisfy certain tax requirements in order to maintain its
qualification for such favorable tax treatment. See, e.g., IRS Tech. Adv. Memo.
9825001 for certain Charitable Remainder Trusts.
Pursuant to Code Section 72(s), if the Contract Owner is a non-natural person,
the primary annuitant is treated as the "holder" in applying the required
distribution rules described below. These rules require that certain
distributions be made upon the death of a "holder." In addition, for a
non-natural owner, a change in the primary annuitant is treated as the death of
the "holder." However, the provisions of Code Section 72(s) do not apply to
certain contracts held in tax-qualified retirement arrangements or structured
settlement arrangements.
2. OTHER CONTRACT OWNERS (NATURAL PERSONS).
A Contract Owner is not taxed on increases in the value of the Contract until an
amount is received or deemed received, e.g., in the form of a lump sum payment
(full or partial value of a Contract) or as Annuity payments under the
settlement option elected.
The provisions of Section 72 of the Code concerning distributions are summarized
briefly below. Also summarized are special rules affecting distributions from
Contracts obtained in a tax-free exchange for other annuity contracts or life
insurance contracts which were purchased prior to August 14, 1982.
a. DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE.
i. Total premium payments less amounts received which were not includable in
gross income equal the "investment in the contract" under Section 72 of the
Code.
ii. To the extent that the value of the Contract (ignoring any surrender
charges except on a full surrender) exceeds the "investment in the
contract," such excess constitutes the "income on the contract." It is
unclear what value should be used in determining the "income on the
contract." We believe that the current Contract Value (determined without
regard to surrender charges) generally is an appropriate measure. However,
in some instances the IRS could take the position that the value should be
the current Contract Value (determined without regard to surrender charges)
increased by some measure of the value of certain future cash-value type
benefits.
iii. Any amount received or deemed received prior to the Annuity Commencement
Date (e.g., upon a withdrawal or partial surrender) is deemed to come
first from any such "income on the contract" and then from "investment in
the contract," and for these purposes such "income on the contract" shall
be computed by reference to any aggregation rule in subparagraph 2.c.
below. As a result, any such amount received or deemed received (1) shall
be includable in gross income to the extent that such amount does not
exceed any such "income on the contract," and (2) shall not be includable
in gross income to the extent that such amount does exceed any such
"income on the contract." If at the time that any amount is received or
deemed received there is no "income on the contract" (e.g., because the
gross value of the Contract does not exceed the "investment in the
contract" and no aggregation rule applies), then such amount received or
deemed received will not be includable in gross income, and will simply
reduce the "investment in the contract."
iv. The receipt of any amount as a loan under the Contract or the assignment or
pledge of any portion of the value of the Contract shall be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
v. In general, the transfer of the Contract, without full and adequate
consideration, will be treated as an amount received for purposes of this
subparagraph a. and the next subparagraph b. This transfer rule does not
apply, however, to certain transfers of property between Spouses or
incident to divorce.
vi. In general, any amount actually received under the Contract as a Death
Benefit, including an optional Death Benefit, if any, will be treated as an
amount received for purposes of this subparagraph a. and the next
subparagraph b.
b. DISTRIBUTIONS AFTER ANNUITY COMMENCEMENT DATE.
Annuity payments made periodically after the Annuity Commencement Date are
includable in gross income to the extent the payments exceed the amount
determined by the application of the ratio of the "investment in the contract"
to the total amount of the payments to be made after the Annuity Commencement
Date (the "exclusion ratio").
i. When the total of amounts excluded from income by application of the
exclusion ratio is equal to the investment in the contract as of the
Annuity Commencement Date, any additional payments (including surrenders)
will be entirely includable in gross income.
ii. If the annuity payments cease by reason of the death of the Annuitant and,
as of the date of death, the amount of annuity payments excluded from gross
income by the exclusion ratio does not exceed the investment in the
contract as of the Annuity Commencement Date, then the remaining portion of
unrecovered investment shall be allowed as a deduction for the last taxable
year of the Annuitant.
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iii. Generally, non-periodic amounts received or deemed received after the
Annuity Commencement Date are not entitled to any exclusion ratio and
shall be fully includable in gross income. However, upon a full surrender
after such date, only the excess of the amount received (after any
surrender charge) over the remaining "investment in the contract" shall be
includable in gross income (except to the extent that the aggregation rule
referred to in the next subparagraph c. may apply).
iv. When annuitization of the Personal Pension Account has occurred, your
Benefit Balance will be calculated by using an actuarial present value
formula.
c. AGGREGATION OF TWO OR MORE ANNUITY CONTRACTS.
Contracts issued after October 21, 1988 by the same insurer (or affiliated
insurer) to the same owner within the same calendar year (other than certain
contracts held in connection with tax-qualified retirement arrangements) will be
aggregated and treated as one annuity contract for the purpose of determining
the taxation of distributions prior to the Annuity Commencement Date. An annuity
contract received in a tax-free exchange for another annuity contract or life
insurance contract may be treated as a new contract for this purpose. We believe
that for any Contracts subject to such aggregation, the values under the
Contracts and the investment in the contracts will be added together to
determine the taxation under subparagraph 2.a., above, of amounts received or
deemed received prior to the Annuity Commencement Date. Withdrawals will first
be treated first as withdrawals of income until all of the income from all such
Contracts is withdrawn. In addition, the Treasury Department has specific
authority under the aggregation rules in Code Section 72(e)(12) to issue
regulations to prevent the avoidance of the income-out-first rules for
non-periodic distributions through the serial purchase of annuity contracts or
otherwise. As of the date of this prospectus, there are no regulations
interpreting these aggregation provisions.
d. 10% PENALTY TAX - APPLICABLE TO CERTAIN WITHDRAWALS AND ANNUITY
PAYMENTS.
i. If any amount is received or deemed received on the Contract (before or
after the Annuity Commencement Date), the Code applies a penalty tax equal
to ten percent of the portion of the amount includable in gross income,
unless an exception applies.
ii. The 10% penalty tax will not apply to the following distributions:
1. Distributions made on or after the date the recipient has attained
the age of 59 1/2.
2. Distributions made on or after the death of the holder or where the
holder is not an individual, the death of the primary annuitant.
3. Distributions attributable to a recipient becoming disabled.
4. A distribution that is part of a scheduled series of substantially
equal periodic payments (not less frequently than annually) for the
life (or life expectancy) of the recipient (or the joint lives or
life expectancies of the recipient and the recipient's designated
Beneficiary).
5. Distributions made under certain annuities issued in connection with
structured settlement agreements.
6. Distributions of amounts which are allocable to the "investment in
the contract" prior to August 14, 1982 (see next subparagraph e.).
7. Distributions purchased by an employer upon termination of certain
qualified plans and held by the employer until the employee
separates from service.
If the taxpayer avoids this 10% penalty tax by qualifying for the substantially
equal periodic payments exception and later such series of payments is modified
(other than by death or disability), the 10% penalty tax will be applied
retroactively to all the prior periodic payments (i.e., penalty tax plus
interest thereon), unless such modification is made after both (a) the taxpayer
has reached age 59 1/2 and (b) 5 years have elapsed since the first of these
periodic payments.
e. SPECIAL PROVISIONS AFFECTING CONTRACTS OBTAINED THROUGH A TAX-FREE
EXCHANGE OF OTHER ANNUITY OR LIFE INSURANCE CONTRACTS PURCHASED
PRIOR TO AUGUST 14, 1982.
If the Contract was obtained by a tax-free exchange of a life insurance or
annuity Contract purchased prior to August 14, 1982, then any amount received or
deemed received prior to the Annuity Commencement Date shall be deemed to come
(1) first from the amount of the "investment in the contract" prior to August
14, 1982 ("pre-8/14/82 investment") carried over from the prior Contract, (2)
then from the portion of the "income on the contract" (carried over to, as well
as accumulating in, the successor Contract) that is attributable to such
pre-8/14/82 investment, (3) then from the remaining "income on the contract" and
(4) last from the remaining "investment in the contract." As a result, to the
extent that such amount received or deemed received does not exceed such
pre-8/14/82 investment, such amount is not includable in gross income. In
addition, to the extent that such amount received or deemed received does not
exceed the sum of (a) such pre-8/14/82 investment and (b) the "income on the
contract" attributable thereto, such amount is not subject to the 10% penalty
tax. In all other respects, amounts received or deemed received from such
post-exchange Contracts are generally subject to the rules described in this
subparagraph e.
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f. REQUIRED DISTRIBUTIONS
i. Death of Contract Owner or Primary Annuitant
Subject to the alternative election or Spouse beneficiary provisions in ii
or iii below:
1. If any Contract Owner dies on or after the Annuity Commencement Date
and before the entire interest in the Contract has been distributed,
the remaining portion of such interest shall be distributed at least
as rapidly as under the method of distribution being used as of the
date of such death;
2. If any Contract Owner dies before the Annuity Commencement Date, the
entire interest in the Contract shall be distributed within 5 years
after such death; and
3. If the Contract Owner is not an individual, then for purposes of 1.
or 2. above, the primary annuitant under the Contract shall be
treated as the Contract Owner, and any change in the primary
annuitant shall be treated as the death of the Contract Owner. The
primary annuitant is the individual, the events in the life of whom
are of primary importance in affecting the timing or amount of the
payout under the Contract.
ii. Alternative Election to Satisfy Distribution Requirements
If any portion of the interest of a Contract Owner described in i. above
is payable to or for the benefit of a designated beneficiary, such
beneficiary may elect to have the portion distributed over a period that
does not extend beyond the life or life expectancy of the beneficiary.
Such distributions must begin within a year of the Contract Owner's death.
iii. Spouse Beneficiary
If any portion of the interest of a Contract Owner is payable to or for
the benefit of his or her Spouse, and the Annuitant or Contingent
Annuitant is living, such Spouse shall be treated as the Contract Owner of
such portion for purposes of section i. above. This Spousal Contract
continuation shall apply only once for this Contract.
iv. Civil Union or Domestic Partner
Upon the death of the Contract Owner prior to the Annuity Commencement
Date, if the designated beneficiary is the surviving civil union or
domestic partner of the Contract Owner pursuant to a civil union or
domestic partnership recognized under state law, then such designated
beneficiary's right to continue the Contract as the succeeding Contract
Owner will be contingent, among other things, upon the treatment of such
designated beneficiary as the spouse of the Contract Owner under Code
Section 72(s) (or any successor provision). Currently, Federal tax law
only recognizes spouses if they are married individuals of the opposite
sex. Consequently, such designated beneficiary who is not recognized as a
"spouse" under Federal tax law will not be able to continue the Contract
and the entire interest in the Contract must be distributed within five
years of the Contract Owner's death or under the Alternative Election.
g. ADDITION OF RIDER OR MATERIAL CHANGE.
The addition of a rider to the Contract, or a material change in the Contract's
provisions, could cause it to be considered newly issued or entered into for tax
purposes, and thus could cause the Contract to lose certain grandfathered tax
status. Please contact your tax adviser for more information.
h. PARTIAL EXCHANGES.
The IRS in Rev. Rul. 2003-76 confirmed that the owner of an annuity contract can
direct its insurer to transfer a portion of the contract's cash value directly
to another annuity contract (issued by the same insurer or by a different
insurer), and such a direct transfer can qualify for tax-free exchange treatment
under Code Section 1035 (a "partial exchange"). However, Rev. Rul. 2003-76 also
refers to caveats and additional guidance in the companion Notice 2003-51, which
discusses cases in which a partial exchange is followed by a surrender,
withdrawal or other distribution from either the old contract or the new
contract. Notice 2003-51 specifically indicates that the IRS is considering (1)
under what circumstances it should treat a partial exchange followed by such a
distribution within 24 months as presumptively for "tax avoidance" purposes
(e.g., to avoid the income-out-first rules on amounts received under Code
Section 72) and (2) what circumstances it should treat as rebutting such a
presumption (e.g., death, disability, reaching age 59 1/2, divorce or loss of
employment). Notice 2003-51 was superseded by Revenue Procedure 2008-24,
effective for partial exchanges completed on or after June 30, 2008. Partial
exchanges completed on or after this date will qualify for tax free treatment
if: (1) no amounts are withdrawn from, or received in surrender of, either of
the contracts involved in the exchange during the 12 months beginning on the
date on which amounts are treated as received as premiums or other consideration
paid for the contract received in the exchange (the date of transfer); or (2)
the taxpayer demonstrates that certain conditions (e.g., death, disability,
reaching age 59 1/2, divorce, loss of employment) occurred between the date of
transfer and the date of the withdrawal or surrender. A transfer within the
scope of the revenue procedure, but not treated as a tax-free exchange, will be
treated as a taxable distribution, followed by a payment for a second contract.
Two annuity contracts that are the subject of a tax-free exchange pursuant
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to the revenue procedure will not be aggregated, even if issued by the same
insurance company. We advise you to consult with a qualified tax adviser as to
potential tax consequences before attempting any partial exchange.
The applicability of the IRS's partial exchange guidance to the splitting of an
annuity contract is not clear. You should consult with a tax adviser if you plan
to split an annuity contract as part of an exchange of annuity contracts.
3. DIVERSIFICATION REQUIREMENTS.
The Code requires that investments supporting your Contract be adequately
diversified. Code Section 817(h) provides that a variable annuity contract will
not be treated as an annuity contract for any period during which the
investments made by the separate account or Fund are not adequately diversified.
If a contract is not treated as an annuity contract, the contract owner will be
subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations under Code Section 817(h)
require, among other things, that:
- no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- no more than 70% is represented by any two investments,
- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the insurer
or the contract owner must agree to make adjustments or pay such amounts as may
be required by the IRS for the period during which the diversification
requirements were not met.
Fund shares may also be sold to tax-qualified plans pursuant to an exemptive
order and applicable tax laws. If Fund shares are sold to non-qualified plans,
or to tax-qualified plans that later lose their tax-qualified status, the
affected Funds may fail the diversification requirements of Code Section 817(h),
which could have adverse tax consequences for Contract Owners with premiums
allocated to affected Funds. In order to prevent a Fund diversification failure
from such an occurrence, the Company obtained a private letter ruling ("PLR")
from the IRS. As long as the Funds comply with certain terms and conditions
contained in the PLR, Fund diversification will not be prevented if purported
tax-qualified plans invest in the Funds. The Company and the Funds will monitor
the Funds' compliance with the terms and conditions contained in the PLR.
4. TAX OWNERSHIP OF THE ASSETS IN THE SEPARATE ACCOUNT.
In order for a variable annuity contract to qualify for tax income deferral,
assets in the separate account supporting the contract must be considered to be
owned by the insurance company, and not by the contract owner, for tax purposes.
The IRS has stated in published rulings that a variable contract owner will be
considered the "owner" of separate account assets for income tax purposes if the
contract owner possesses sufficient incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. In circumstances
where the variable contract owner is treated as the "tax owner" of certain
separate account assets, income and gain from such assets would be includable in
the variable contract owner's gross income. The Treasury Department indicated in
1986 that it would provide guidance on the extent to which contract owners may
direct their investments to particular Sub-Accounts without being treated as tax
owners of the underlying shares. Although no such regulations have been issued
to date, the IRS has issued a number of rulings that indicate that this issue
remains subject to a facts and circumstances test for both variable annuity and
life insurance contracts.
Rev. Rul. 2003-92, amplified by Rev. Rul. 2007-7, indicates that, where
interests in a partnership offered in an insurer's separate account are not
available exclusively through the purchase of a variable insurance contract
(e.g., where such interests can be purchased directly by the general public or
others without going through such a variable contract), such "public
availability" means that such interests should be treated as owned directly by
the contract owner (and not by the insurer) for tax purposes, as if such
contract owner had chosen instead to purchase such interests directly (without
going through the variable contract). None of the shares or other interests in
the fund choices offered in our Separate Account for your Contract are available
for purchase except through an insurer's variable contracts or by other
permitted entities.
Rev. Rul. 2003-91 indicates that an insurer could provide as many as 20 fund
choices for its variable contract owners (each with a general investment
strategy, e.g., a small company stock fund or a special industry fund) under
certain circumstances, without causing such a contract owner to be treated as
the tax owner of any of the Fund assets. The ruling does not specify the number
of fund
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options, if any, that might prevent a variable contract owner from receiving
favorable tax treatment. As a result, although the owner of a Contract has more
than 20 fund choices, we believe that any owner of a Contract also should
receive the same favorable tax treatment. However, there is necessarily some
uncertainty here as long as the IRS continues to use a facts and circumstances
test for investor control and other tax ownership issues. Therefore, we reserve
the right to modify the Contract as necessary to prevent you from being treated
as the tax owner of any underlying assets.
5. CERTAIN TAX CONSIDERATIONS FOR FULL OR PARTIAL SETTLEMENT PAYMENTS FROM
THE PERSONAL PENSION ACCOUNT BEFORE AND AFTER THE ANNUITY COMMENCEMENT
DATE.
Because the IRS has published no guidance on the tax treatment of contracts with
features resembling the Personal Pension Account arrangement, there is
necessarily some uncertainty as to how an annuity contract with a Personal
Pension Account will be treated for tax purposes and we advise you to consult
with a qualified tax adviser concerning such tax treatment before you deposit
amounts into the Personal Pension Account. With respect to the Personal Pension
Account, the Company plans to report any payments under a settlement of the
Personal Pension Account before the Annuity Commencement Date as amounts not
received as an annuity coming first from "income on the contract" (previously
described in subparagraph 2.a) based on a computation of "income on the
contract" for the entire Contract. After the Annuity Commencement Date, the
Company plans to report any continuing periodic settlement payments as amounts
received as an annuity to which a portion of the "investment in the contract"
(discussed in subparagraph 2.b) has been allocated consistent with Treas. Reg.
Section 1.72-6(b).
D. FEDERAL INCOME TAX WITHHOLDING
The portion of an amount received under a Contract that is taxable gross income
to the Payee is also subject to federal income tax withholding, pursuant to Code
Section 3405, which requires the following:
1. Non-Periodic Distributions. The portion of a non-periodic distribution
that is includable in gross income is subject to federal income tax
withholding unless an individual elects not to have such tax withheld
("election out"). We will provide such an "election out" form at the
time such a distribution is requested. If the necessary "election out"
form is not submitted to us in a timely manner, generally we are
required to withhold 10 percent of the includable amount of
distribution and remit it to the IRS.
2. Periodic Distributions (payable over a period greater than one year).
The portion of a periodic distribution that is includable in gross
income is generally subject to federal income tax withholding as if the
Payee were a married individual claiming 3 exemptions, unless the
individual elects otherwise. An individual generally may elect out of
such withholding, or elect to have income tax withheld at a different
rate, by providing a completed election form. We will provide such an
election form at the time such a distribution is requested. If the
necessary "election out" forms are not submitted to us in a timely
manner, we are required to withhold tax as if the recipient were
married claiming 3 exemptions, and remit this amount to the IRS.
Generally no "election out" is permitted if the distribution is delivered
outside the United States and any possession of the United States. Regardless of
any "election out" (or any amount of tax actually withheld) on an amount
received from a Contract, the Payee is generally liable for any failure to pay
the full amount of tax due on the includable portion of such amount received. A
Payee also may be required to pay penalties under estimated income tax rules, if
the withholding and estimated tax payments are insufficient to satisfy the
Payee's total tax liability.
E. GENERAL PROVISIONS AFFECTING QUALIFIED RETIREMENT PLANS
The Contract may be used for a number of qualified retirement plans. If the
Contract is being purchased with respect to some form of qualified retirement
plan, please refer to the section entitled "Information Regarding Tax-Qualified
Retirement Plans" for information relative to the types of plans for which it
may be used and the general explanation of the tax features of such plans.
F. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
U.S. federal income tax and mandatory withholding on U.S. source taxable annuity
distributions at a 30% rate, unless a lower treaty rate applies and any required
tax forms are submitted to us. If withholding applies, we are required to
withhold tax at the 30% rate, or a lower treaty rate if applicable, and remit it
to the IRS. In addition, purchasers may be subject to state premium tax, other
state and/or municipal taxes, and taxes that may be imposed by the purchaser's
country of citizenship or residence.
G. ESTATE, GIFT AND GENERATION-SKIPPING TAX AND RELATED TAX CONSIDERATIONS
Any amount payable upon a Contract Owner's death, whether before or after the
Annuity Commencement Date, is generally includable in the Contract Owner's
estate for federal estate tax purposes. Similarly, prior to the Contract Owner's
death, the payment of any amount from the Contract, or the transfer of any
interest in the Contract, to a beneficiary or other person for less than
adequate consideration may have federal gift tax consequences. In addition, any
transfer to, or designation of, a non-Spouse beneficiary who either is (1) 37
1/2 or more years younger than a Contract Owner or (2) a grandchild (or more
remote further
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descendent) of a Contract Owner may have federal generation-skipping-transfer
("GST") tax consequences under Code Section 2601. Regulations under Code Section
2662 may require us to deduct any such GST tax from your Contract, or from any
applicable payment, and pay it directly to the IRS. However, any federal estate,
gift or GST tax payment with respect to a Contract could produce an offsetting
income tax deduction for a beneficiary or transferee under Code Section 691(c)
(partially offsetting such federal estate or GST tax) or a basis increase for a
beneficiary or transferee under Code Section 691(c) or Section 1015(d). In
addition, as indicated above in "Distributions Prior to the Annuity Commencement
Date," the transfer of a Contract for less than adequate consideration during
the Contract Owner's lifetime generally is treated as producing an amount
received by such Contract Owner that is subject to both income tax and the 10%
penalty tax. To the extent that such an amount deemed received causes an amount
to be includable currently in such Contract Owner's gross income, this same
income amount could produce a corresponding increase in such Contract Owner's
tax basis for such Contract that is carried over to the transferee's tax basis
for such Contract under Code Section 72(e)(4)(C)(iii) and Section 1015.
H. TAX DISCLOSURE OBLIGATIONS
In some instances certain transactions must be disclosed to the IRS or penalties
could apply. See, for example, IRS Notice 2004-67. The Code also requires
certain "material advisers" to maintain a list of persons participating in such
"reportable transactions," which list must be furnished to the IRS upon request.
It is possible that such disclosures could be required by Hartford The Company,
the Owner(s) or other persons involved in transactions involving annuity
contracts. It is the responsibility of each party, in consultation with their
tax and legal advisers, to determine whether the particular facts and
circumstances warrant such disclosures.
INFORMATION REGARDING TAX-QUALIFIED RETIREMENT PLANS
This summary does not attempt to provide more than general information about the
federal income tax rules associated with use of a Contract by a tax-qualified
retirement plan. State income tax rules applicable to tax-qualified retirement
plans often differ from federal income tax rules, and this summary does not
describe any of these differences. Because of the complexity of the tax rules,
owners, participants and beneficiaries are encouraged to consult their own tax
advisors as to specific tax consequences.
The Contracts are available to a variety of tax-qualified retirement plans and
arrangements (a "Qualified Plan" or "Plan"). Tax restrictions and consequences
for Contracts or accounts under each type of Qualified Plan differ from each
other and from those for Non-Qualified Contracts. In addition, individual
Qualified Plans may have terms and conditions that impose additional rules.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contract with the various types of Qualified Plans.
Participants under such Qualified Plans, as well as Contract Owners, annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to terms and conditions of the Plans
themselves or limited by applicable law, regardless of the terms and conditions
of the Contract issued in connection therewith. Qualified Plans generally
provide for the tax deferral of income regardless of whether the Qualified Plan
invests in an annuity or other investment. You should consider if the Contract
is a suitable investment if you are investing through a Qualified Plan.
THE FOLLOWING IS ONLY A GENERAL DISCUSSION ABOUT TYPES OF QUALIFIED PLANS FOR
WHICH THE CONTRACTS MAY BE AVAILABLE. WE ARE NOT THE PLAN ADMINISTRATOR FOR ANY
QUALIFIED PLAN. THE PLAN ADMINISTRATOR OR CUSTODIAN, WHICHEVER IS APPLICABLE,
(BUT NOT US) IS RESPONSIBLE FOR ALL PLAN ADMINISTRATIVE DUTIES INCLUDING, BUT
NOT LIMITED TO, NOTIFICATION OF DISTRIBUTION OPTIONS, DISBURSEMENT OF PLAN
BENEFITS, HANDLING ANY PROCESSING AND ADMINISTRATION OF QUALIFIED PLAN LOANS,
COMPLIANCE WITH REGULATORY REQUIREMENTS AND FEDERAL AND STATE TAX REPORTING OF
INCOME/DISTRIBUTIONS FROM THE PLAN TO PLAN PARTICIPANTS AND, IF APPLICABLE,
BENEFICIARIES OF PLAN PARTICIPANTS AND IRA CONTRIBUTIONS FROM PLAN PARTICIPANTS.
OUR ADMINISTRATIVE DUTIES ARE LIMITED TO ADMINISTRATION OF THE CONTRACT AND ANY
DISBURSEMENTS OF ANY CONTRACT BENEFITS TO THE OWNER, ANNUITANT OR BENEFICIARY OF
THE CONTRACT, AS APPLICABLE. OUR TAX REPORTING RESPONSIBILITY IS LIMITED TO
FEDERAL AND STATE TAX REPORTING OF INCOME/DISTRIBUTIONS TO THE APPLICABLE PAYEE
AND IRA CONTRIBUTIONS FROM THE OWNER OF A CONTRACT, AS RECORDED ON OUR BOOKS AND
RECORDS. IF YOU ARE PURCHASING A CONTRACT THROUGH A QUALIFIED PLAN, YOU SHOULD
CONSULT WITH YOUR PLAN ADMINISTRATOR AND/OR A QUALIFIED TAX ADVISER. YOU ALSO
SHOULD CONSULT WITH A QUALIFIED TAX ADVISER AND/OR PLAN ADMINISTRATOR BEFORE YOU
WITHDRAW ANY PORTION OF YOUR CONTRACT VALUE.
The tax rules applicable to Qualified Contracts and Qualified Plans, including
restrictions on contributions and distributions, taxation of distributions and
tax penalties, vary according to the type of Qualified Plan, as well as the
terms and conditions of the Plan itself. Various tax penalties may apply to
contributions in excess of specified limits, plan distributions (including
loans) that do not comply with specified limits, and certain other transactions
relating to such Plans. Accordingly, this summary provides only general
information about the tax rules associated with use of a Qualified Contract in
such a Qualified Plan. In addition, some Qualified Plans are subject to
distribution and other requirements that are not incorporated into our
administrative procedures. Owners, participants, and beneficiaries are
responsible for determining that contributions, distributions and other
transactions comply with applicable tax (and non-tax) law and any applicable
Qualified Plan terms. Because of the complexity of these rules, Owners,
participants and beneficiaries are advised to consult with a qualified tax
adviser as to specific tax consequences.
We do not currently offer the Contracts in connection with all of the types of
Qualified Plans discussed below, and may not offer the Contracts for all types
of Qualified Plans in the future.
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1. INDIVIDUAL RETIREMENT ANNUITIES ("IRAS").
In addition to "traditional" IRAs governed by Code Sections 408(a) and (b)
("Traditional IRAs"), there are Roth IRAs governed by Code Section 408A, SEP
IRAs governed by Code Section 408(k), and SIMPLE IRAs governed by Code Section
408(p). Also, Qualified Plans under Code Section 401, 403(b) or 457(b) may elect
to provide for a separate account or annuity contract that accepts after-tax
employee contributions and is treated as a "Deemed IRA" under Code Section
408(q), which is generally subject to the same rules and limitations as
Traditional IRAs. Contributions to each of these types of IRAs are subject to
differing limitations. The following is a very general description of each type
of IRA for which a Contract is available.
a. TRADITIONAL IRAS
Traditional IRAs are subject to limits on the amounts that may be contributed
each year, the persons who may be eligible, and the time when minimum
distributions must begin. Depending upon the circumstances of the individual,
contributions to a Traditional IRA may be made on a deductible or non-deductible
basis. Failure to make required minimum distributions ("RMDs") when the Owner
reaches age 70 1/2 or dies, as described below, may result in imposition of a
50% penalty tax on any excess of the RMD amount over the amount actually
distributed. In addition, any amount received before the Owner reaches age 59
1/2 or dies is subject to a 10% penalty tax on premature distributions, unless a
special exception applies, as described below. Under Code Section 408(e), an IRA
may not be used for borrowing (or as security for any loan) or in certain
prohibited transactions, and such a transaction could lead to the complete tax
disqualification of an IRA.
You (or your surviving spouse if you die) may rollover funds tax-free from
certain existing Qualified Plans (such as proceeds from existing insurance
contracts, annuity contracts or securities) into a Traditional IRA under certain
circumstances, as indicated below. However, mandatory tax withholding of 20% may
apply to any eligible rollover distribution from certain types of Qualified
Plans if the distribution is not transferred directly to the Traditional IRA. In
addition, under Code Section 402(c)(11) a non-spouse "designated beneficiary" of
a deceased Plan participant may make a tax-free "direct rollover" (in the form
of a direct transfer between Plan fiduciaries, as described below in "Rollover
Distributions") from certain Qualified Plans to a Traditional IRA for such
beneficiary, but such Traditional IRA must be designated and treated as an
"inherited IRA" that remains subject to applicable RMD rules (as if such IRA had
been inherited from the deceased Plan participant).
IRAs generally may not invest in life insurance contracts. However, an annuity
contract that is used as an IRA may provide a death benefit that equals the
greater of the premiums paid or the contract's cash value. The Contract offers
an enhanced death benefit that may exceed the greater of the Contract Value or
total premium payments. The tax rules are unclear as to what extent an IRA can
provide a death benefit that exceeds the greater of the IRA's cash value or the
sum of the premiums paid and other contributions into the IRA. Please note that
the IRA rider for the Contract has provisions that are designed to maintain the
Contract's tax qualification as an IRA, and therefore could limit certain
benefits under the Contract (including endorsement, rider or option benefits) to
maintain the Contract's tax qualification.
b. SEP IRAS
Code Section 408(k) provides for a Traditional IRA in the form of an
employer-sponsored defined contribution plan known as a Simplified Employee
Pension ("SEP") or a SEP IRA. A SEP IRA can have employer contributions, and in
limited circumstances employee and salary reduction contributions, as well as
higher overall contribution limits than a Traditional IRA, but a SEP is also
subject to special tax-qualification requirements (e.g., on participation,
nondiscrimination and withdrawals) and sanctions. Otherwise, a SEP IRA is
generally subject to the same tax rules as for a Traditional IRA, which are
described above. Please note that the IRA rider for the Contract has provisions
that are designed to maintain the Contract's tax qualification as an IRA, and
therefore could limit certain benefits under the Contract (including
endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
c. SIMPLE IRAS
The Savings Incentive Match Plan for Employees of small employers ("SIMPLE
Plan") is a form of an employer-sponsored Qualified Plan that provides IRA
benefits for the participating employees ("SIMPLE IRAs"). Depending upon the
SIMPLE Plan, employers may make plan contributions into a SIMPLE IRA established
by each eligible participant. Like a Traditional IRA, a SIMPLE IRA is subject to
the 50% penalty tax for failure to make a full RMD, and to the 10% penalty tax
on premature distributions, as described below. In addition, the 10% penalty tax
is increased to 25% for amounts received during the 2-year period beginning on
the date you first participated in a qualified salary reduction arrangement
pursuant to a SIMPLE Plan maintained by your employer under Code Section
408(p)(2). Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions, and these are subject to different tax
limits from those for a Traditional IRA. Please note that the SIMPLE IRA rider
for the Contract has provisions that are designed to maintain the Contract's tax
qualification as an SIMPLE IRA, and therefore could limit certain benefits under
the Contract (including endorsement, rider or option benefits) to maintain the
Contract's tax qualification.
A SIMPLE Plan may designate a single financial institution (a Designated
Financial Institution) as the initial trustee, custodian or issuer (in the case
of an annuity contract) of the SIMPLE IRA set up for each eligible participant.
However, any such Plan also must allow
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each eligible participant to have the balance in his SIMPLE IRA held by the
Designated Financial Institution transferred without cost or penalty to a SIMPLE
IRA maintained by a different financial institution. Absent a Designated
Financial Institution, each eligible participant must select the financial
institution to hold his SIMPLE IRA, and notify his employer of this selection.
If we do not serve as the Designated Financial Institution for your employer's
SIMPLE Plan, for you to use one of our Contracts as a SIMPLE IRA, you need to
provide your employer with appropriate notification of such a selection under
the SIMPLE Plan. If you choose, you may arrange for a qualifying transfer of any
amounts currently held in another SIMPLE IRA for your benefit to your SIMPLE IRA
with us.
d. ROTH IRAS
Code Section 408A permits eligible individuals to establish a Roth IRA.
Contributions to a Roth IRA are not deductible, but withdrawals of amounts
contributed and the earnings thereon that meet certain requirements are not
subject to federal income tax. In general, Roth IRAs are subject to limitations
on the amounts that may be contributed by the persons who may be eligible to
contribute, certain Traditional IRA restrictions, and certain RMD rules on the
death of the Contract Owner. Unlike a Traditional IRA, Roth IRAs are not subject
to RMD rules during the Contract Owner's lifetime. Generally, however, upon the
Owner's death the amount remaining in a Roth IRA must be distributed by the end
of the fifth year after such death or distributed over the life expectancy of a
designated beneficiary. The Owner of a Traditional IRA may convert a Traditional
IRA into a Roth IRA under certain circumstances. The conversion of a Traditional
IRA to a Roth IRA will subject the fair market value of the converted
Traditional IRA to federal income tax in the year of conversion. In addition to
the amount held in the converted Traditional IRA, the fair market value may
include the value of additional benefits provided by the annuity contract on the
date of conversion, based on reasonable actuarial assumptions. Tax-free
rollovers from a Roth IRA can be made only to another Roth IRA under limited
circumstances, as indicated below. After 2007, distributions from eligible
Qualified Plans can be "rolled over" directly (subject to tax) into a Roth IRA
under certain circumstances. Anyone considering the purchase of a Qualified
Contract as a Roth IRA or a "conversion" Roth IRA should consult with a
qualified tax adviser. Please note that the Roth IRA rider for the Contract has
provisions that are designed to maintain the Contract's tax qualification as a
Roth IRA, and therefore could limit certain benefits under the Contract
(including endorsement, rider or option benefits) to maintain the Contract's tax
qualification.
2. QUALIFIED PENSION OR PROFIT-SHARING PLAN OR SECTION 401(k) PLAN
Provisions of the Code permit eligible employers to establish a tax-qualified
pension or profit sharing plan (described in Section 401(a), and Section 401(k)
if applicable, and exempt from taxation under Section 501(a)). Such a Plan is
subject to limitations on the amounts that may be contributed, the persons who
may be eligible to participate, the amounts of "incidental" death benefits, and
the time when RMDs must commence. In addition, a Plan's provision of incidental
benefits may result in currently taxable income to the participant for some or
all of such benefits. Amounts may be rolled over tax-free from a Qualified Plan
to another Qualified Plan under certain circumstances, as described below.
Anyone considering the use of a Qualified Contract in connection with such a
Qualified Plan should seek competent tax and other legal advice.
In particular, please note that these tax rules provide for limits on death
benefits provided by a Qualified Plan (to keep such death benefits "incidental"
to qualified retirement benefits), and a Qualified Plan (or a Qualified
Contract) often contains provisions that effectively limit such death benefits
to preserve the tax qualification of the Qualified Plan (or Qualified Contract).
In addition, various tax-qualification rules for Qualified Plans specifically
limit increases in benefits once RMDs begin, and Qualified Contracts are subject
to such limits. As a result, the amounts of certain benefits that can be
provided by any option under a Qualified Contract may be limited by the
provisions of the Qualified Contract or governing Qualified Plan that are
designed to preserve its tax qualification.
3. TAX SHELTERED ANNUITY UNDER SECTION 403(b) ("TSA")
Code Section 403(b) permits public school employees and employees of certain
types of charitable, educational and scientific organizations described in Code
Section 501(c)(3) to purchase a "tax-sheltered annuity" ("TSA") contract and,
subject to certain limitations, exclude employer contributions to a TSA from
such an employee's gross income. Generally, total contributions may not exceed
the lesser of an annual dollar limit (e.g., $49,000 in 2009) or 100% of the
employee's "includable compensation" for the most recent full year of service,
subject to other adjustments. There are also legal limits on annual elective
deferrals that a participant may be permitted to make under a TSA. In certain
cases, such as when the participant is age 50 or older, those limits may be
increased. A TSA participant should contact his plan administrator to determine
applicable elective contribution limits. Special provisions may allow certain
employees different overall limitations.
A TSA is subject to a prohibition against distributions from the TSA
attributable to contributions made pursuant to a salary reduction agreement,
unless such distribution is made:
a. after the employee reaches age 59 1/2;
b. upon the employee's separation from service;
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c. upon the employee's death or disability;
d. in the case of hardship (as defined in applicable law and in the case of
hardship, any income attributable to such contributions may not be
distributed); or
e. as a qualified reservist distribution upon certain calls to active
duty.
An employer sponsoring a TSA may impose additional restrictions on your TSA
through its plan document.
Please note that the TSA rider for the Contract has provisions that are designed
to maintain the Contract's tax qualification as a TSA, and therefore could limit
certain benefits under the Contract (including endorsement, rider or option
benefits) to maintain the Contract's tax qualification. In particular, please
note that tax rules provide for limits on death benefits provided by a Qualified
Plan (to keep such death benefits "incidental" to qualified retirement
benefits), and a Qualified Plan (or a Qualified Contract) often contains
provisions that effectively limit such death benefits to preserve the tax
qualification of the Qualified Plan (or Qualified Contract). In addition,
various tax-qualification rules for Qualified Plans specifically limit increases
in benefits once RMDs begin, and Qualified Contracts are subject to such limits.
As a result, the amounts of certain benefits that can be provided by any option
under a Qualified Contract may be limited by the provisions of the Qualified
Contract or governing Qualified Plan that are designed to preserve its tax
qualification. In addition, a life insurance contract issued after September 23,
2007 is generally ineligible to qualify as a TSA under Reg. Section
1.403(b)-8(c)(2).
Amounts may be rolled over tax-free from a TSA to another TSA or Qualified Plan
(or from a Qualified Plan to a TSA) under certain circumstances, as described
below. However, effective for TSA contract exchanges after September 24, 2007,
Reg. Section 1.403(b)-10(b) allows a TSA contract of a participant or
beneficiary under a TSA Plan to be exchanged tax-free for another eligible TSA
contract under that same TSA Plan, but only if all of the following conditions
are satisfied: (1) such TSA Plan allows such an exchange, (2) the participant or
beneficiary has an accumulated benefit after such exchange that is no less than
such participant's or beneficiary's accumulated benefit immediately before such
exchange (taking into account such participant's or beneficiary's accumulated
benefit under both TSA contracts immediately before such exchange), (3) the
second TSA contract is subject to distribution restrictions with respect to the
participant that are no less stringent than those imposed on the TSA contract
being exchanged, and (4) the employer for such TSA Plan enters into an agreement
with the issuer of the second TSA contract under which such issuer and employer
will provide each other from time to time with certain information necessary for
such second TSA contract (or any other TSA contract that has contributions from
such employer) to satisfy the TSA requirements under Code Section 403(b) and
other federal tax requirements (e.g., plan loan conditions under Code Section
72(p) to avoid deemed distributions). Such necessary information could include
information about the participant's employment, information about other
Qualified Plans of such employer, and whether a severance has occurred, or
hardship rules are satisfied, for purposes of the TSA distribution restrictions.
Consequently, you are advised to consult with a qualified tax advisor before
attempting any such TSA exchange, particularly because it requires an agreement
between the employer and issuer to provide each other with certain information.
In addition, the same Regulation provides corresponding rules for a transfer
from one TSA to another TSA under a different TSA Plan (e.g., for a different
eligible employer). We are no longer accepting any incoming exchange request, or
new contract application, for any individual TSA contract.
4. DEFERRED COMPENSATION PLANS UNDER SECTION 457 ("SECTION 457 PLANS")
Certain governmental employers, or tax-exempt employers other than a
governmental entity, can establish a Deferred Compensation Plan under Code
Section 457. For these purposes, a "governmental employer" is a State, a
political subdivision of a State, or an agency or an instrumentality of a State
or political subdivision of a State. A Deferred Compensation Plan that meets the
requirements of Code Section 457(b) is called an "Eligible Deferred Compensation
Plan" or "Section 457(b) Plan." Code Section 457(b) limits the amount of
contributions that can be made to an Eligible Deferred Compensation Plan on
behalf of a participant. Generally, the limitation on contributions is the
lesser of (1) 100% of a participant's includible compensation or (2) the
applicable dollar amount, equal to $15,000 for 2006 and thereafter ($16,500 for
2009). The $15,000 limit will be indexed for cost-of-living adjustments at $500
increments. The Plan may provide for additional "catch-up" contributions . In
addition, under Code Section 457(d) a Section 457(b) Plan may not make amounts
available for distribution to participants or beneficiaries before (1) the
calendar year in which the participant attains age 70 1/2, (2) the participant
has a severance from employment (including death), or (3) the participant is
faced with an unforeseeable emergency (as determined in accordance with
regulations).
Under Code Section 457(g) all of the assets and income of an Eligible Deferred
Compensation Plan for a governmental employer must be held in trust for the
exclusive benefit of participants and their beneficiaries. For this purpose,
annuity contracts and custodial accounts described in Code Section 401(f) are
treated as trusts. This trust requirement does not apply to amounts under an
Eligible Deferred Compensation Plan of a tax-exempt (non-governmental) employer.
In addition, this trust requirement does not apply to amounts held under a
Deferred Compensation Plan of a governmental employer that is not a Section
457(b) Plan. However, where the trust requirement does not apply, amounts held
under a Section 457 Plan must remain subject to the claims of the employer's
general creditors under Code Section 457(b)(6).
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5. TAXATION OF AMOUNTS RECEIVED FROM QUALIFIED PLANS
Except under certain circumstances in the case of Roth IRAs or Roth accounts in
certain Qualified Plans, amounts received from Qualified Contracts or Plans
generally are taxed as ordinary income under Code Section 72, to the extent that
they are not treated as a tax-free recovery of after-tax contributions or other
"investment in the contract." For annuity payments and other amounts received
after the Annuity Commencement Date from a Qualified Contract or Plan, the tax
rules for determining what portion of each amount received represents a tax-free
recovery of "investment in the contract" are generally the same as for
Non-Qualified Contracts, as described above.
For non-periodic amounts from certain Qualified Contracts or Plans, Code Section
72(e)(8) provides special rules that generally treat a portion of each amount
received as a tax-free recovery of the "investment in the contract," based on
the ratio of the "investment in the contract" over the Contract Value at the
time of distribution. However, in determining such a ratio, certain aggregation
rules may apply and may vary, depending on the type of Qualified Contract or
Plan. For instance, all Traditional IRAs owned by the same individual are
generally aggregated for these purposes, but such an aggregation does not
include any IRA inherited by such individual or any Roth IRA owned by such
individual.
In addition, penalty taxes, mandatory tax withholding or rollover rules may
apply to amounts received from a Qualified Contract or Plan, as indicated below,
and certain exclusions may apply to certain distributions (e.g., distributions
from an eligible Government Plan to pay qualified health insurance premiums of
an eligible retired public safety officer). Accordingly, you are advised to
consult with a qualified tax adviser before taking or receiving any amount
(including a loan) from a Qualified Contract or Plan.
6. PENALTY TAXES FOR QUALIFIED PLANS
Unlike Non-Qualified Contracts, Qualified Contracts are subject to federal
penalty taxes not just on premature distributions, but also on excess
contributions and failures to make required minimum distributions ("RMDs").
Penalty taxes on excess contributions can vary by type of Qualified Plan and
which person made the excess contribution (e.g., employer or an employee). The
penalty taxes on premature distributions and failures to make timely RMDs are
more uniform, and are described in more detail below.
a. PENALTY TAXES ON PREMATURE DISTRIBUTIONS
Code Section 72(t) imposes a penalty income tax equal to 10% of the taxable
portion of a distribution from certain types of Qualified Plans that is made
before the employee reaches age 59 1/2. However, this 10% penalty tax does not
apply to a distribution that is either:
(i) made to a beneficiary (or to the employee's estate) on or after the
employee's death;
(ii) attributable to the employee's becoming disabled under Code Section
72(m)(7);
(iii) part of a series of substantially equal periodic payments (not less
frequently than annually - "SEPPs") made for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of such employee and a designated beneficiary ("SEPP
Exception"), and for certain Qualified Plans (other than IRAs) such a
series must begin after the employee separates from service;
(iv) (except for IRAs) made to an employee after separation from service
after reaching age 55 (or made after age 50 in the case of a qualified
public safety employee separated from certain government plans);
(v) (except for IRAs) made to an alternate payee pursuant to a qualified
domestic relations order under Code Section 414(p) (a similar exception
for IRAs in Code Section 408(d)(6) covers certain transfers for the
benefit of a spouse or ex-spouse);
(vi) not greater than the amount allowable as a deduction to the employee
for eligible medical expenses during the taxable year;
(vii) certain qualified reservist distributions under Code Section
72(t)(2)(G) upon a call to active duty;
(viii) made an account of an IRS levy on the Qualified Plan under Code
Section 72(t)(2)(A)(vii); or
(ix) made as a "direct rollover" or other timely rollover to an Eligible
Retirement Plan, as described below.
In addition, the 10% penalty tax does not apply to a distribution from an IRA
that is either:
(x) made after separation from employment to an unemployed IRA owner for
health insurance premiums, if certain conditions in Code Section
72(t)(2)(D) are met;
(xi) not in excess of the amount of certain qualifying higher education
expenses, as defined by Code Section 72(t)(7); or
(xii) for a qualified first-time home buyer and meets the requirements of
Code Section 72(t)(8).
If the taxpayer avoids this 10% penalty tax by qualifying for the SEPP Exception
and later such series of payments is modified (other than by death, disability
or a method change allowed by Rev. Rul. 2002-62), the 10% penalty tax will be
applied retroactively to all the
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prior periodic payments (i.e., penalty tax plus interest thereon), unless such
modification is made after both (a) the employee has reached age 59 1/2 and (b)
5 years have elapsed since the first of these periodic payments.
For any premature distribution from a SIMPLE IRA during the first 2 years that
an individual participates in a salary reduction arrangement maintained by that
individual's employer under a SIMPLE Plan, the 10% penalty tax rate is increased
to 25%.
b. RMDS AND 50% PENALTY TAX
THE RMD RULES GENERALLY DO NOT APPLY FOR THE 2009 TAX YEAR. HOWEVER, INDIVIDUALS
WHO DEFERRED 2008 RMDS UNTIL APRIL 1, 2009, MUST STILL TAKE AN RMD BY THAT DATE.
PLEASE CONSULT WITH A QUALIFIED TAX ADVISER OR YOUR QUALIFIED PLAN ADMINISTRATOR
TO DETERMINE HOW THIS CHANGE MAY AFFECT YOU.
If the amount distributed from a Qualified Contract or Plan is less than the
amount of the required minimum distribution ("RMD") for the year, the
participant is subject to a 50% penalty tax on the amount that has not been
timely distributed.
An individual's interest in a Qualified Plan generally must be distributed, or
begin to be distributed, not later than the Required Beginning Date. Generally,
the Required Beginning Date is April 1 of the calendar year following the later
of -
(i) the calendar year in which the individual attains age 70 1/2, or
(ii) (except in the case of an IRA or a 5% owner, as defined in the Code)
the calendar year in which a participant retires from service with the
employer sponsoring a Qualified Plan that allows such a later Required
Beginning Date.
The entire interest of the individual must be distributed beginning no later
than the Required Beginning Date over -
(a) the life of the individual or the lives of the individual and a
designated beneficiary (as specified in the Code), or
(b) over a period not extending beyond the life expectancy of the individual
or the joint life expectancy of the individual and a designated
beneficiary.
If an individual dies before reaching the Required Beginning Date, the
individual's entire interest generally must be distributed within 5 years after
the individual's death. However, this RMD rule will be deemed satisfied if
distributions begin before the close of the calendar year following the
individual's death to a qualifying designated beneficiary and distribution is
over the life of such designated beneficiary (or over a period not extending
beyond the life expectancy of such beneficiary). If the individual's surviving
spouse is the sole designated beneficiary, distributions may be delayed until
the deceased individual would have attained age 70 1/2.
If an individual dies after RMDs have begun for such individual, any remainder
of the individual's interest generally must be distributed at least as rapidly
as under the method of distribution in effect at the time of the individual's
death.
The RMD rules that apply while the Contract Owner is alive do not apply with
respect to Roth IRAs. The RMD rules applicable after the death of the Owner
apply to all Qualified Plans, including Roth IRAs. In addition, if the Owner of
a Traditional or Roth IRA dies and the Owner's surviving spouse is the sole
designated beneficiary, this surviving spouse may elect to treat the Traditional
or Roth IRA as his or her own.
The RMD amount for each year is determined generally by dividing the account
balance by the applicable life expectancy. This account balance is generally
based upon the account value as of the close of business on the last day of the
previous calendar year. RMD incidental benefit rules also may require a larger
annual RMD amount, particularly when distributions are made over the joint lives
of the Owner and an individual other than his or her spouse. RMDs also can be
made in the form of annuity payments that satisfy the rules set forth in
Regulations under the Code relating to RMDs.
In addition, in computing any RMD amount based on a contract's account value,
such account value must include the actuarial value of certain additional
benefits provided by the contract. As a result, electing an optional benefit
under a Qualified Contract may require the RMD amount for such Qualified
Contract to be increased each year, and expose such additional RMD amount to the
50% penalty tax for RMDs if such additional RMD amount is not timely
distributed.
7. TAX WITHHOLDING FOR QUALIFIED PLANS
Distributions from a Qualified Contract or Qualified Plan generally are subject
to federal income tax withholding requirements. These federal income tax
withholding requirements, including any "elections out" and the rate at which
withholding applies, generally are the same as for periodic and non-periodic
distributions from a Non-Qualified Contract, as described above, except where
the distribution is an "eligible rollover distribution" from a Qualified Plan
(described below in "ROLLOVER DISTRIBUTIONS"). In the latter case, tax
withholding is mandatory at a rate of 20% of the taxable portion of the
"eligible rollover distribution," to the extent it is not directly rolled over
to an IRA or other Eligible Retirement Plan (described below in "ROLLOVER
DISTRIBUTIONS"). Payees cannot elect out of this mandatory 20% withholding in
the case of such an "eligible rollover distribution."
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Also, special withholding rules apply with respect to distributions from
non-governmental Section 457(b) Plans, and to distributions made to individuals
who are neither citizens nor resident aliens of the United States.
Regardless of any "election out" (or any actual amount of tax actually withheld)
on an amount received from a Qualified Contract or Plan, the payee is generally
liable for any failure to pay the full amount of tax due on the includable
portion of such amount received. A payee also may be required to pay penalties
under estimated income tax rules, if the withholding and estimated tax payments
are insufficient to satisfy the payee's total tax liability.
8. ROLLOVER DISTRIBUTIONS
The current tax rules and limits for tax-free rollovers and transfers between
Qualified Plans vary according to (1) the type of transferor Plan and transferee
Plan, (2) whether the amount involved is transferred directly between Plan
fiduciaries (a "direct transfer" or a "direct rollover") or is distributed first
to a participant or beneficiary who then transfers that amount back into another
eligible Plan within 60 days (a "60-day rollover"), and (3) whether the
distribution is made to a participant, spouse or other beneficiary. Accordingly,
we advise you to consult with a qualified tax adviser before receiving any
amount from a Qualified Contract or Plan or attempting some form of rollover or
transfer with a Qualified Contract or Plan.
For instance, generally any amount can be transferred directly from one type of
Qualified Plan (e.g., a TSA) to the same type of Plan for the benefit of the
same individual, without limit (or federal income tax), if the transferee Plan
is subject to the same kinds of restrictions as the transferor Plan (e.g., a TSA
that is subject to the same kinds of salary reduction restrictions) and certain
other conditions to maintain the applicable tax qualification are satisfied
(e.g., as described above for TSA exchanges after September 24, 2007). Such a
"direct transfer" between the same kinds of Plan is generally not treated as any
form of "distribution" out of such a Plan for federal income tax purposes.
By contrast, an amount distributed from one type of Plan (e.g., a TSA) into a
different type of Plan (e.g., a Traditional IRA) generally is treated as a
"distribution" out of the first Plan for federal income tax purposes, and
therefore to avoid being subject to such tax, such a distribution must qualify
either as a "direct rollover" (made directly to another Plan fiduciary) or as a
"60-day rollover." The tax restrictions and other rules for a "direct rollover"
and a "60-day rollover" are similar in many ways, but if any "eligible rollover
distribution" made from certain types of Qualified Plan is not transferred
directly to another Plan fiduciary by a "direct rollover," then it is subject to
mandatory 20% withholding, even if it is later contributed to that same Plan in
a "60-day rollover" by the recipient. If any amount less than 100% of such a
distribution (e.g., the net amount after the 20% withholding) is transferred to
another Plan in a "60-day rollover", the missing amount that is not rolled over
remains subject to normal income tax plus any applicable penalty tax.
Under Code Sections 402(f)(2)(A) and 3405(c)(3) an "eligible rollover
distribution" (which is both eligible for rollover treatment and subject to 20%
mandatory withholding absent a "direct rollover") is generally any distribution
to an employee of any portion (or all) of the balance to the employee's credit
in any of the following types of "Eligible Retirement Plan": (1) a Qualified
Plan under Code Section 401(a) ("Qualified 401(a) Plan"), (2) a qualified
annuity plan under Code Section 403(a) ("Qualified Annuity Plan"), (3) a TSA
under Code Section 403(b), or (4) a governmental Section 457(b) Plan. However,
an "eligible rollover distribution" does not include any distribution that is
either -
a. an RMD amount;
b. one of a series of substantially equal periodic payments (not less
frequently than annually) made either (i) for the life (or life
expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and a designated beneficiary, or (ii) for
a specified period of 10 years or more; or
c. any distribution made upon hardship of the employee.
Before making an "eligible rollover distribution," a Plan administrator
generally is required under Code Section 402(f) to provide the recipient with
advance written notice of the "direct rollover" and "60-day rollover" rules and
the distribution's exposure to the 20% mandatory withholding if it is not made
by "direct rollover." Generally, under Code Sections 402(c), 403(b)(8) and 457
(e)(16), a "direct rollover" or a "60-day rollover" of an "eligible rollover
distribution" can be made to a Traditional IRA or to another Eligible Retirement
Plan that agrees to accept such a rollover. However, the maximum amount of an
"eligible rollover distribution" that can qualify for a tax-free "60-day
rollover" is limited to the amount that otherwise would be includable in gross
income. By contrast, a "direct rollover" of an "eligible rollover distribution"
can include after-tax contributions as well, if the direct rollover is made
either to a Traditional IRA or to another form of Eligible Retirement Plan that
agrees to account separately for such a rollover, including accounting for such
after-tax amounts separately from the otherwise taxable portion of this
rollover. Separate accounting also is required for all amounts (taxable or not)
that are rolled into a governmental Section 457(b) Plan from either a Qualified
Section 401(a) Plan, Qualified Annuity Plan, TSA or IRA. These amounts, when
later distributed from the governmental Section 457(b) Plan, are subject to any
premature distribution penalty tax applicable to distributions from such a
"predecessor" Qualified Plan.
Rollover rules for distributions from IRAs under Code Sections 408(d)(3) and
408A(d)(3) also vary according to the type of transferor IRA and type of
transferee IRA or other Plan. For instance, generally no tax-free "direct
rollover" or "60-day rollover" can be made between a "NonRoth IRA" (Traditional,
SEP or SIMPLE IRA) and a Roth IRA, and a transfer from NonRoth IRA to a Roth
IRA, or a
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"conversion" of a NonRoth IRA to a Roth IRA, is subject to special rules. In
addition, generally no tax-free "direct rollover" or "60-day rollover" can be
made between an "inherited IRA" (NonRoth or Roth) for a beneficiary and an IRA
set up by that same individual as the original owner. Generally, any amount
other than an RMD distributed from a Traditional or SEP IRA is eligible for a
"direct rollover" or a "60-day rollover" to another Traditional IRA for the same
individual. Similarly, any amount other than an RMD distributed from a Roth IRA
is generally eligible for a "direct rollover" or a "60-day rollover" to another
Roth IRA for the same individual. However, in either case such a tax-free 60-day
rollover is limited to 1 per year (365-day period); whereas no 1-year limit
applies to any such "direct rollover." Similar rules apply to a "direct
rollover" or a "60-day rollover" of a distribution from a SIMPLE IRA to another
SIMPLE IRA or a Traditional IRA, except that any distribution of employer
contributions from a SIMPLE IRA during the initial 2-year period in which the
individual participates in the employer's SIMPLE Plan is generally disqualified
(and subject to the 25% penalty tax on premature distributions) if it is not
rolled into another SIMPLE IRA for that individual. Amounts other than RMDs
distributed from a Traditional or SEP IRA (or SIMPLE IRA after the initial
2-year period) also are eligible for a "direct rollover" or a "60-day rollover"
to an Eligible Retirement Plan (e.g., a TSA) that accepts such a rollover, but
any such rollover is limited to the amount of the distribution that otherwise
would be includable in gross income (i.e., after-tax contributions are not
eligible).
Special rollover rules also apply to (1) transfers or rollovers for the benefit
of a spouse (or ex-spouse) or a nonspouse designated beneficiary, (2) Plan
distributions of property, (3) distributions from a Roth account in certain
Plans, (4) recontributions within 3 years of "qualified hurricane distributions"
made before 2007 under Code Section 1400Q(a), (5) transfers from a Traditional
or Roth IRA to certain health savings accounts under Code Section 408(d)(9), and
(6) obtaining a waiver of the 60-day limit for a tax-free rollover from the IRS.
9. CERTAIN TAX CONSIDERATIONS WITH THE PERSONAL PENSION ACCOUNT IN QUALIFIED
PLANS
Because the IRS has published no guidance on the tax treatment of arrangements
resembling the Personal Pension Account, there is necessarily some uncertainty
as to how an annuity contract with a Personal Pension Account will be treated in
different types of Qualified Plans, and we advise you to consult with a
qualified tax adviser concerning such treatment before you deposit any amount
into a Personal Pension Account that is held in any Qualified Plan.
Among such tax issues for you to consider with a qualified tax adviser in such a
case are the following:
a. Any amounts received by you (or your payee) prior to your attaining
age 59 1/2 are generally subject to the penalty tax on premature
distributions described above, unless such an amount received can
qualify for an exception from such a penalty tax, e.g., scheduled
payments that qualify for the SEPP Exception. In addition, any
modification in payments qualifying for the SEPP Exception (e.g., by
commutation) can have adverse penalty tax consequences, as described
above.
b. The tax rules for satisfying RMD requirements vary according to both
the form of Qualified Plan (e.g., NonRoth or Roth IRA) and the form
of payment (e.g., periodic annuity payout or non-periodic
distribution from an account value). As a result, such variations
should be considered when RMD amounts need to be taken (e.g., after
age 70 1/2 or death). In addition, any modification in the form or
amount of such payments (e.g., by commutation) could have adverse tax
consequences, if such a modification does not satisfy an
IRS-recognized RMD exception (e.g., for an acceleration or other
change in periodic payments under Reg. Section 1.401(a) (9)-6, Q&A-1
and Q&A-14).
c. Any attempt to transfer an amount from the Benefit Balance to
Sub-Accounts or the Fixed Accumulation Feature (if available) that
exceeds the threshold for such a transfer will be treated by us as a
form of annuitization distribution from the Personal Pension
Account, and thus may not qualify as a tax-free direct transfer.
Instead, such an attempted excess transfer could be treated for tax
purposes as a potentially taxable distribution out of the entire
annuity contract, followed by a contribution back into the same
contract. While such a distribution from an IRA may qualify for
60-day rollover treatment (if it is not needed to satisfy RMD
requirements), only one such tax-free 60-day rollover is allowed for
any 365-day period for any individual from all of such individual's
IRAs. Failing such tax-free rollover treatment, such a distribution
could be subject to both income and penalty tax, and any deemed
contribution back into the contract may be subject to an excise tax
on excess contributions, particularly after age 70 1/2. IN ADDITION,
ANY SUCH DISTRIBUTION FROM A NON-IRA FORM OF QUALIFIED PLAN MAY BE
SUBJECT TO THE 20% MANDATORY WITHHOLDING TAX, UNLESS SUCH
DISTRIBUTION IS AN RMD OR OTHERWISE AVOIDS CLASSIFICATION AS AN
"ELIGIBLE ROLLOVER DISTRIBUTION," AS DESCRIBED ABOVE.
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TABLE OF CONTENTS TO STATEMENT OF ADDITIONAL INFORMATION
GENERAL INFORMATION
Safekeeping of Assets
Experts
Non-Participating
Misstatement of Age or Sex
Principal Underwriter
Additional Payments
PERFORMANCE RELATED INFORMATION
Total Return for all Sub-Accounts
Yield for Sub-Accounts
Money Market Sub-Accounts
Additional Materials
Performance Comparisons
ACCUMULATION UNIT VALUES
FINANCIAL STATEMENTS
APP A-1
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APPENDIX A - EXAMPLES
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
PERSONAL PENSION ACCOUNT APP A-2
RETURN OF PREMIUM DEATH BENEFIT APP A-8
REMAINING GROSS PREMIUM APP A-9
APP A-2
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PERSONAL PENSION ACCOUNT EXAMPLES
EXAMPLE 1: STANDARD ILLUSTRATIONS WITH A PARTIAL INCOME STREAM
Assume the initial Personal Pension Account Contribution is equal to $100,000
(no sums are invested in the Fixed Accumulation Feature or Sub-Accounts). Assume
that in Contract Year 7, the Owner requested to commence an income stream based
on $50,000 of Annuity Payout Value during the guarantee window. For the purposes
of this Example, the Contract Owner chose a Target Income Age of 64.
Hypothetical credited and payout rates are illustrated below.
A. To understand how your guaranteed payout rates are set during your guarantee
window (shaded area), see Guaranteed Payout Rates in Contract Years 1
through 7. In this Example, the guaranteed payout rate is locked in at
Contract Year 7 when Personal Pension Account Payouts commence.
B. Credited interest rates vary during the duration of your Contract as
illustrated in column 4. In this illustration, credited interest rates
change at the 10th Contract Year and again at the 20th Contract Year.
C. Please refer to the last column in Contract Year 23 for an example of how
Personal Pension Account Payouts will continue for the life of the
Annuitant, Owner or joint Owner even though Annuity Payout Value has been
exhausted.
CREDITED
CONTRACT BENEFIT INTEREST
YEAR AGE BALANCE RATE