-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V2r2o873amZ59podJsqmP3bTabJ5pZ9SdVGhePE5RWNoESBN0ExsQrdTGegnogIj WSzK+dN4N51TneEIv0KfVQ== 0000930413-05-000514.txt : 20050128 0000930413-05-000514.hdr.sgml : 20050128 20050128142407 ACCESSION NUMBER: 0000930413-05-000514 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20050128 DATE AS OF CHANGE: 20050128 EFFECTIVENESS DATE: 20050128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000099440 IRS NUMBER: 060566090 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 333-116781 FILM NUMBER: 05557516 BUSINESS ADDRESS: STREET 1: ONE TOWER SQ STREET 2: C/O TRAVELERS INSURANCE CO CITY: HARTFORD STATE: CT ZIP: 06183-2020 BUSINESS PHONE: 8602770111 MAIL ADDRESS: STREET 1: ONE TOWER SQUARE STREET 2: ATTN FINANCIAL SERVICES LEGAL DIVISION CITY: HARTFORD STATE: CT ZIP: 06183-2020 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19851103 497 1 c34835_497.txt SUPPLEMENT DATED JANUARY 24, 2005 TO THE UNIVERSAL SELECT ANNUITY PROSPECTUS DATED MAY 3, 2004 The following information supplements, and to the extent inconsistent therewith, replaces the information in the prospectus. Please retain this supplement and keep it with the prospectus for future reference. IN THE "SUMMARY" SECTION, UNDER THE SUBSECTION "WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT?", THE FIFTH PARAGRAPH IS DELETED AND REPLACED WITH THE FOLLOWING: If you elect a Guaranteed Minimum Withdrawal Benefit ("GMWB") rider, a charge will be deducted annually from amounts in the Variable Funding Options. There are two GMWB rider options, and the current charge for each rider is as follows: GMWB I: 0.40%; and GMWB II: 0.50%. Your current charge will not change unless you are able to reset your benefits, at which time we may modify the charge, which will never exceed 1.00%. IN THE "SUMMARY" SECTION, UNDER THE SUBSECTION "ARE THERE ANY ADDITIONAL FEATURES?", THE EIGHTH PARAGRAPH IS DELETED AND REPLACED WITH THE FOLLOWING: GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE"). For an additional charge, we will guarantee the periodic return of your investment. Under this benefit, we will pay you a percentage of your investment every year until your investment has been returned in full, regardless of market performance. Depending on when you elect to begin receiving payments and which GMWB rider you select, the maximum amount of your investment that you receive each year is 5% or 10%. When you add Purchase Payments to your Contract, we include them as part of the guarantee. In the future, however, we may discontinue including additional Purchase Payments as part of the guarantee. The guarantee is subject to restrictions on withdrawals and other restrictions. IN THE "FEE TABLE" SECTION,THE SUB-SECTION "ANNUAL SEPARATE ACCOUNT CHARGES", IS REPLACED WITH THE FOLLOWING: ANNUAL SEPARATE ACCOUNT CHARGES: (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SEPARATE ACCOUNT) We will assess a mortality and expense risk charge ("M&E"), and a GMWB charge if you elect the optional GMWB feature. Below is a summary of all charges that may apply, depending on the death benefit and optional features you select: ANNUAL STEP-UP STANDARD TO AGE 75 DEATH BENEFIT DEATH BENEFIT -------------------- ------------------- Mortality and Expense Risk Charge 1.25% 1.40% Optional GMWB I Charge 0.40%(1) 0.40%(1) Optional GMWB II Charge 0.50%(1) 0.50%(1) TOTAL ANNUAL SEPARATE ACCOUNT CHARGES WITH GMWB I ONLY SELECTED 1.65% 1.80% TOTAL ANNUAL SEPARATE ACCOUNT CHARGES WITH GMWB II ONLY SELECTED 1.75% 1.90% - ---------- (1) The maximum charge for GMWB I and GMWB II is 1.00%. 1 IN THE "EXAMPLES" SECTION, THE PARAGRAPH ENTITLED "EXAMPLE 2" IS DELETED AND REPLACED WITH THE FOLLOWING: EXAMPLE 2 -- This example assumes that you have elected the most expensive death benefit option, the E.S.P. optional death benefit, and the Guaranteed Minimum Withdrawal Benefit ("GMWB I") (assuming the current 0.40% charge applies). IN THE "EXAMPLES" SECTION, THE FOLLOWING EXAMPLE TABLES ARE ADDED: EXAMPLE 4 -- This example assumes that you have elected the most expensive death benefit option, the E.S.P. optional death benefit and the Guaranteed Minimum Withdrawal Benefit II ("GMWB II") (assuming the current 0.50% charge applies).
IF CONTRACT IS SURRENDERED IF CONTRACT IS NOT SURRENDERED OR AT THE END OF PERIOD SHOWN ANNUITIZED AT THE END OF PERIOD SHOWN ----------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - -------------- ------ ------- ------- -------- ------ ------- ------- -------- Underlying Fund with Maximum Total Annual Operating Expenses......... 734 1222 1736 2647 234 722 1236 2647 Underlying Fund with Minimum Total Annual Operating Expenses......... 1170 2475 3735 6195 670 1975 3235 6195
IN THE "CHARGES AND DEDUCTIONS" SECTION, THE SUBSECTION "GUARANTEED MINIMUM WITHDRAWAL BENEFIT CHARGE" IS DELETED AND REPLACED WITH THE FOLLOWING: If you elect to add a GMWB rider to your contract, a charge is deducted each business day from amounts held in the Variable Funding Options. The charge depends on which GWMB rider you select. The current charge for each rider is as follows: GMWB I: 0.40%; and GMWB II: 0.50%. Your current charge will not change unless you are able to reset your benefits, at which time we may modify the charge, which will never exceed 1.00%. THE SECTION ENTITLED "GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE")" IS DELETED AND REPLACED WITH THE FOLLOWING: GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE") For an additional charge, you may elect an optional rider for your contract that provides a Guaranteed Minimum Withdrawal Benefit, or "GMWB". A GMWB rider is designed to protect your investment from poor market performance, as long as you do not withdraw more than a certain amount from your contract each year. 2 AVAILABILITY AND ELIGIBILITY This prospectus describes two different GMWB riders. At this time, only GMWB I is available for purchase. We intend to offer GMWB III some time during 2005. AVAILABLE GMWB RIDERS
- ------------------------- ------------------------------ ------------------------------ NAME OF RIDER: GMWB I GMWB II - ------------------------- ------------------------------ ------------------------------ ALSO CALLED: Principal Principal Guarantee Guarantee - ------------------------- ------------------------------ ------------------------------ AVAILABILITY: Available for purchase Available on or after February 14, 2005 if approved in your state - ------------------------- ------------------------------ ------------------------------
You may elect a GMWB rider only at the time of your initial purchase of the Contract. You may not elect a GMWB rider if you have also elected the GMAB rider offered under this Contract. REMAINING BENEFIT BASE ("RBB") For all GMWB riders, the amount of your investment that is guaranteed is called the "remaining benefit base" or "RBB." Your initial RBB is equal to your initial Purchase Payment if you elect GMWB when you purchase your contract. The RBB is not a lump sum guarantee, rather, it is the amount that we guarantee to return to you through a series of payments that annually do not exceed a percentage of your RBB. ANNUAL WITHDRAWAL BENEFIT ("AWB") The annual percentage of your RBB that is available for withdrawal is called the "annual withdrawal benefit" or "AWB". Each year you may take withdrawals that do not exceed your AWB until your RBB is depleted. Each year you may take your AWB monthly, annually, or on any payment schedule you request. You may take withdrawals in any dollar amount up to your AWB without affecting your guarantee. If you choose to receive only a part of, or none of, your AWB in any given year, your AWB in any subsequent year will not be increased. In that case you are choosing to deplete your RBB over a longer period of time. The AWB is a percentage of your RBB and depends on which GMWB rider you select. Your initial AWB is calculated as a percentage of the RBB immediately before your first withdrawal: - ----------------------------------- -------------- -------------- GMWB I GMWB II - ----------------------------------- -------------- -------------- If you make your first withdrawal 5% of RBB 5% of RBB BEFORE the 3rd anniversary after you purchase GMWB: - ----------------------------------- -------------- -------------- If you make your first withdrawal 10% of RBB 10% of RBB AFTER the 3rd anniversary after you purchase GMWB: - ----------------------------------- -------------- -------------- 3 ADDITIONAL PREMIUM Currently, additional Purchase Payments serve to increase your RBB and AWB. After each Purchase Payment your new RBB equals your RBB immediately prior to the Purchase Payment plus the dollar amount of the Purchase Payment. Your new AWB is equal to the AWB immediately prior to the Purchase Payment, plus a percentage of the Purchase Payment. We use the same percentage as that used to calculate your original AWB as shown above. We reserve the right not to include additional Purchase Payments into the calculation of the RBB or AWB. WITHDRAWALS When you make a withdrawal, your AWB remains the same as long as the sum of all of your withdrawals since the most recent anniversary of your purchase or reset of GMWB (or "GMWB Anniversary"), including the current withdrawal, does not exceed your AWB immediately prior to the current withdrawal. In such case your RBB is decreased to equal the RBB immediately prior to the withdrawal, less the dollar amount of the current withdrawal. However, if you make a withdrawal so that the total of all your withdrawals since your GMWB anniversary, including the current withdrawal, exceeds your AWB immediately prior to the current withdrawal, we will recalculate both your RBB and AWB. The recalculation depends on which GMWB rider you select: IF YOU SELECT GMWB II: o To recalculate your RBB, we reduce your RBB by the greater of the dollar amount of your withdrawal, or a "partial withdrawal reduction". The partial withdrawal reduction is equal to 1) the RBB in effect immediately prior to the current withdrawal, multiplied by 2) the amount of the current withdrawal divided by 3) the Contract Value immediately prior to the current withdrawal. o To recalculate your AWB, we reduce your AWB by a partial withdrawal reduction, which is equal to 1) the AWB in effect immediately prior to the current withdrawal, multiplied by 2) the RBB immediately after the withdrawal divided by 3) the RBB immediately prior to the current withdrawal. IF YOU PURCHASED GMWB I: o To recalculate your RBB, we reduce your RBB by a "partial withdrawal reduction". The partial withdrawal reduction is equal to 1) the RBB in effect immediately prior to the current withdrawal, multiplied by 2) the amount of the current withdrawal divided by 3) the Contract Value immediately prior to the current withdrawal. o To recalculate your AWB, we reduce your AWB by a partial withdrawal reduction, which is equal to 1) the AWB in effect immediately prior to the current withdrawal, multiplied by 2) the RBB immediately after the withdrawal divided by 3) the RBB immediately prior to the current withdrawal. We will waive any surrender charge on amounts that you withdraw up to your AWB, or on amounts up to the amount withdrawn under our Managed Distribution Program, even if such annual amount withdrawn is greater than your free withdrawal allowance. WITHDRAWAL EXAMPLES The following examples are intended to illustrate the effect of withdrawals on your RBB and AWB, depending on which GMWB rider you select. Assume your initial RBB is $100,000, your age is less than 70, and you take a withdrawal of $10,000 after your first GMWB Anniversary: 4 WITHDRAWAL EXAMPLE FOR GMWB II
- -------------------- ------------------------------------------------------- --------------------------------------------------- ASSUMES 15% GAIN ON INVESTMENT ASSUMES 15% LOSS ON INVESTMENT - -------------------- ------------------------------------------------------- --------------------------------------------------- CONTRACT CONTRACT VALUE RBB AWB (5%) VALUE RBB AWB (5%) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUES AS OF - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ INITIAL GMWB PURCHASE $100,000 $100,000 $5,000 $100,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ IMMEDIATELY PRIOR TO WITHDRAWAL $115,000 $100,000 $5,000 $85,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ PARTIAL WITHDRAWAL N/A (100,000 [5,000 X (1- N/A (100,000 [5,000 X REDUCTION (PWR) X 10,000/115,000)= 90,000/100,000)]= X 10,000/85,000)= (1-88,235/100,000)]= 8,696 500 $11,765 $588 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ GREATER OF PWR OR $10,000 $11,765 THE DOLLAR AMOUNT OF THE WITHDRAWAL (10,000>8,696) (11,765>10,000) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ CHANGE IN VALUE DUE TO WITHDRAWAL (PARTIAL SURRENDER REDUCTION) $10,000 $10,000 $500 $10,000 $11,765 $588 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUE IMMEDIATELY AFTER WITHDRAWAL $105,000 $90,000 $4,500 $75,000 $88,235 $4,412 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ WITHDRAWAL EXAMPLE FOR GMWB I - -------------------- ------------------------------------------------------- --------------------------------------------------- ASSUMES 15% GAIN ON INVESTMENT ASSUMES 15% LOSS ON INVESTMENT - -------------------- ------------------------------------------------------- --------------------------------------------------- CONTRACT CONTRACT VALUE RBB AWB (5%) VALUE RBB AWB (5%) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUES AS OF - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- INITIAL GMWB PURCHASE $100,000 $100,000 $5,000 $100,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- IMMEDIATELY PRIOR TO WITHDRAWAL $115,000 $100,000 $5,000 $85,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- IMMEDIATELY AFTER $105,000 91,304 $4,565 $75,000 $88,235 $4,412 WITHDRAWAL [100,000 - (100,000 [5,000 - (5,000 [100,000 - [5,000 X X 10,000/115,000)] X 91,304/100,000)] (100,000 (88,235/100,000)] X 10,000/85,000)] - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- CHANGE IN VALUE DUE TO WITHDRAWAL (PARTIAL SURRENDER REDUCTION) $10,000 $8,696 $435 $10,000 $11,265 $588 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- -------------------
TAX-QUALIFIED DISTRIBUTION PROGRAMS (GMWB II ONLY) If you select GMWB II or GMWB III, subject to certain limitations and restrictions, your AWB will not incur a recalculation as a result of distributions taken under certain eligible Tax-Qualified Distribution Programs ("Tax-Qualified Distribution Programs"). Instead, such distributions will reduce the RBB by the amount of the withdrawal, and will not affect the AWB. For purposes of GMWB II, the following Tax-Qualified Distribution Programs are eligible. Only certain types of distribution methods are eligible as described below. Please consult with your tax adviser to make sure you are eligible: o Distributions intended to satisfy the required minimum distribution rules under Internal Revenue Code ("Code") Section 401(a)(9) and the Treasury Regulations promulgated thereunder, as applicable, to: o a qualified retirement plan (Code Section 401), 5 o a tax-sheltered annuity (Code Section 403(b)), o an individual retirement account (Code Sections 408(a)), o an individual retirement annuity (Code Section 408(b)), or o a qualified deferred compensation plan (Code Section 457). Required minimum distribution must be calculated using the Uniform Life Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-2) and/or the Joint and Last Survivor Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-3), and for distributions where the employee (owner) dies before the entire interest is distributed as described in Code Section 401(a)(9)(B)(iii) calculated using the Single Life Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-1), as appropriate (each table as in effect as of January 1, 2004). o Distributions intended to satisfy the exception under Code Section 72(s)(2) to the required minimum distribution rules which apply after the death of the holder of a nonqualified annuity contract provided under Code Section 72(s)(1) for certain amounts payable over the life of a designated beneficiary; o Distributions intended to satisfy the exception under Code Section 72(t)(2)(A)(iv) from the 10% additional tax on early distributions from qualified retirement plans imposed by Code Section 72(t)(1) for certain amounts payable as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary, provided, however, the amount of the substantially equal periodic payments must be calculated under the required minimum distribution method set forth in the Internal Revenue Service Notice 89-25, 1989-1 C.B. 662 in Q&A-12 as amended by Revenue Ruling 2002-62, 2002-42 I.R.B. 710 (substantially equal periodic payments calculated under the fixed annuitization method or the fixed amortization method described in Q&A-12 of Notice 89-25 will not be considered a Tax-Qualified Distribution Program); or o Distributions intended to satisfy the exception under Code Section 72(q)(2)(D) from the 10% additional tax on early distributions from nonqualified annuity contracts imposed by Code Section 72(q)(1) for certain amounts payable as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the Beneficiary or the joint lives (or joint life expectancies) of such Beneficiary and his designated beneficiary, provided, however, the amount of the substantially equal periodic payment must be calculated under the required minimum distribution method set forth in Internal Revenue Service Notice 89-25, 1989-1 C.B. 662 in Q&A-12 as amended by Internal Revenue Bulletin 2004 -9, Notice 2004-15, page 526. (substantially equal periodic payments calculated under the fixed annuitization method or the fixed amortization method described in Q&A-12 of Notice 89-25 will not be considered a Tax-Qualified Distribution Program). You are subject to the following limitations if you if you are taking distributions under a Tax-Qualified Distribution Program: o YOU MUST ENROLL IN OUR MANAGED DISTRIBUTION PROGRAM. If you do not enroll or if you cancel your enrollment, you can continue to make withdrawals under your GMWB rider, however your RBB and AWB may be subject to a recalculation. Under our Managed Distribution Program, you select a frequency of payments. You may change the frequency of your payments only once every two years after your GMWB Anniversary, and you may only make the change during the 30-day period after your GMWB Anniversary. At the time you purchase GMWB, your initial frequency of payment must be annual if you did not take distributions pursuant to your Tax-Qualified Distribution Program at your previous financial institution, unless you turn age 70 1/2 before the first GMWB anniversary. 6 You are advised to take your required distributions prior to purchasing GMWB in order to have the choice of taking your distributions on a monthly, quarterly, semi-annual or annual basis. If you do not take your distribution before purchasing GMWB, you will be limited to taking annual distributions for the first two contract years after which time you can choose an alternate mode of distribution. o ANY WITHDRAWALS OUTSIDE OF THE PROGRAM MAY DECREASE YOUR BENEFIT. All withdrawals under your Contract must be made pursuant to the Tax-Qualified Distribution Program during any 12-month period after an anniversary of your purchase of GMWB (a "GMWB Year"). If during any GMWB Year you take any additional withdrawals that are not made pursuant to the Program, you can continue to make withdrawals under your GMWB rider, however for the remainder of the GMWB Year your RBB and AWB may be subject to a partial withdrawal reduction. To avoid any partial withdrawal reduction, all withdrawals under your Contract must be made pursuant to your Tax-Qualified Distribution Program. RESET (GMWB I AND GMWB II ONLY) If you select GMWB I or GMWB II, you may choose to reset your RBB at any time on or after the 5th anniversary of your GMWB purchase. Your new RBB is reset to equal your current Contract Value. You may reset your RBB again every 5 years after the most recent reset. Once you become eligible to reset your RBB, we reserve the right to allow resets only on the anniversary of your GMWB purchase. Each time you reset your RBB, your new AWB will equal a percentage of your new RBB. The percentage used is the same percentage used to calculate your AWB before the reset. If you are age 95 and are taking withdrawals under a Tax-Qualified Distribution Program, you may not reset if you purchased GMWB II or GMWB III. Depending on your Contract Value and the current fee for GMWB, it may not be beneficial to reset your RBB. Generally, it may be beneficial to reset your RBB if your Contract Value exceeds your RBB. However, the current charge in effect at the time of the reset will apply which may be higher than the current charge. Further, if you reset your RBB, your new AWB may be higher or lower than your current AWB. In addition, the length of time over which you can expect to receive your RBB will be reset. INVESTMENT RESTRICTIONS (GMWB II ONLY) We reserve the right to restrict allocations to a Variable Funding Option or limit the percentage of Contract value that may be allocated to a Variable Funding Option at any time. If we do so we would provide you with asset allocation requirements, and we reserve the right to require periodic rebalancing of Contract value allocated to Variable Funding Options according to specified percentages. We will provide no less than 30 days advanced written notice if we exercise our right to restrict or limit allocations to a Variable Funding Option and/or require periodic rebalancing between Variable Funding Options. Our ability to restrict allocations to a Variable Funding Option may be different depending on your state. If we restrict allocations to a Variable Funding Option, as of the effective date of the restriction, we will no longer allow additional Purchase Payments to be applied, or transfers of Contract value to be allocated into the restricted Variable Funding Option. Any Contract value previously allocated to a restricted Variable Funding Option will not be subject to the restriction. If we impose a limit on the percentage of Contract value allocated to a Variable Funding Option, as of the effective date of the restriction, we will impose the limit on all subsequent allocations. GMWB CHARGE The charge for your GMWB rider is different depending on which version of GMWB you choose. For all GMWB riders, the charge is deducted on an annual basis from amounts held in each Variable Funding Option. The current charge for each rider is shown below. Your current charge will not change unless you reset your benefits, at which time we may modify the charge. In such case the charge will never exceed 1.00%. 7 - -------------------------------------- ------------ ------------- GMWB I GMWB II - -------------------------------------- ------------ ------------- Current Annual Charge 0.40% 0.50% - -------------------------------------- ------------ ------------- Maximum Annual Charge After a Reset 1.00% 1.00% - -------------------------------------- ------------ ------------- MAXIMUM RBB Although we have no current plans to do so, in the future we may impose a maximum RBB. If we do, we would stop including additional Purchase Payments into the calculation of your RBB. If we impose a maximum RBB for Purchase Payments or reset, the maximum RBB will never be less than the cumulative Purchase Payments to which we have previously consented. Currently you must obtain our consent to purchase any RBB over $1 million. Purchase Payments under $1 million are not subject to a maximum RBB. TERMINATION Once you purchase GMWB I, you cannot cancel it. If you select GMWB II, you may terminate your rider at any time after the 5th anniversary of your purchase of GMWB. You must request your termination in writing. All GMWB riders terminate automatically when you reach the maturity date of your Contract, if your Contract is assigned, or if the rider is exchanged for a similar rider offered by us. OTHER INFORMATION ABOUT GMWB If your Contract Value reaches zero, and you have purchased this benefit, the following will occur: o The AWB will continue to be paid to you until the RBB is depleted, not more frequently than monthly. Upon your death, your beneficiary will receive these payments. No other death benefit or optional benefit, if any, will be paid. o The total annual payment amount will equal the AWB and will never exceed your RBB, and o We will no longer accept subsequent Purchase Payments into the Contract. If a spouse or beneficiary continues this Contract upon your death, and you had elected GMWB, all terms and conditions of this benefit would apply to the new owner. Please refer to the Death Benefit section for information on how GMWB may impact your death benefit. COMPARISON OF IMPORTANT DIFFERENCES BETWEEN GMWB I AND II The following chart may help you decide which version of GMWB is best for you.
- ------------------------- ----------------------------- ------------------------------ GMWB I GMWB II - ------------------------- ----------------------------- ------------------------------ AWB 5% of RBB if first 5% of RBB if first withdrawal before 3rd withdrawal before 3rd anniversary anniversary 10% of RBB if first 10% of RBB if first withdrawal after 3rd withdrawal after 3rd anniversary anniversary - ------------------------- ----------------------------- ------------------------------ ANNUAL CHARGE 0.40% 0.50% - ------------------------- ----------------------------- ------------------------------ RESET Yes Yes - ------------------------- ----------------------------- ------------------------------ CAN I CANCEL MY GMWB? No Yes, after the 5th anniversary of GMWB purchase - ------------------------- ----------------------------- ------------------------------ INVESTMENT RESTRICTIONS No Yes - ------------------------- ----------------------------- ------------------------------ WAIVER OF RECALCULATION No Yes OF AWB FOR DISTRIBUTIONS FROM TAX-QUALIFIED PLANS - ------------------------- ----------------------------- ------------------------------
8 In the "Transfers" section, the subsection entitled "Market Timing/Excessive Trading" is deleted and replaced with the following: MARKET TIMING/EXCESSIVE TRADING THE CONTRACT IS INTENDED FOR USE AS A LONG-TERM INVESTMENT VEHICLE AND IS NOT DESIGNED TO SERVE AS A VEHICLE FOR EXCESSIVE TRADING OR MARKET TIMING IN AN ATTEMPT TO TAKE ADVANTAGE OF SHORT-TERM FLUCTUATIONS IN THE STOCK MARKET. EXCESSIVE TRADING IS DISRUPTIVE TO THE MANAGEMENT OF AN UNDERLYING FUND AND INCREASES OVERALL COSTS TO ALL INVESTORS IN THE UNDERLYING FUND. If, in our sole discretion, we determine you are engaging in excessive trading activity, trading activity that we believe is indicative of market timing, or any similar trading activity which will potentially hurt the rights or interests of other Contract Owners, we will exercise our contractual right to restrict your number of transfers to one every six months. We will notify you in writing if we choose to exercise our contractual right to restrict your transfers. In determining whether we believe you are engaged in excessive trading or market timing activity, we will consider, among other things, the following factors: o the dollar amount you request to transfer; o the number of transfers you made within the previous three months; o whether your transfers follow a pattern designed to take advantage of short term market fluctuations; and o whether your transfers are part of a group of transfers made by a third party on behalf of several individual Contract Owners. Transfers made under a Dollar Cost Averaging Program, a rebalancing program, or, if applicable, any asset allocation program described in this prospectus are not treated as a transfer when we evaluate trading patterns for market timing or excessive trading. In addition to the above, we also reserve the right to further restrict the right to request transfers by any market timing firm or any other third party who has been authorized to initiate transfers on behalf of multiple Contract Owners. We may, among other things: o reject the transfer instructions of any agent acting under a power of attorney on behalf of more than one owner, or o reject the transfer or exchange instructions of individual owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one owner. We will notify you in writing before we restrict your right to request transfers through such market timing firm or other third party. The policy of the Company is to seek to apply its anti-market timing and excessive trading procedures uniformly. These procedures, however, may not be able to prevent all excessive trading and market timing activity from occurring. For example: 9 o Some of the Underlying Funds are available as investments for variable insurance contracts offered by other insurance companies. These other insurance companies may have different procedures to prevent excessive trading and market timing activity or may not have any such procedures because of contractual limitations. o The Company issues Contracts to qualified retirement plans that request financial transactions with the Company on an omnibus basis on behalf of all plan participants. These plans generally employ a record-keeper to maintain records of participant financial activity. Because the Company does not have the records to monitor the trading activity of the individual participants, the Company may not be able to identify plan participants who may be engaging in excessive trading or market timing activity and/or may not be able to apply its contractual trade restrictions to such participants. o There may be other circumstances where the Company does not identify trading activity as market timing or excessive trading or take action to restrict trading activity that does not qualify as excessive trading or market timing activity under our current anti-market timing procedures. Excessive trading and market timing activity increases the overall transaction costs of an Underlying Fund, which may serve to decrease the Underlying Fund's performance. Further, excessive trading and market timing activity may disrupt the management of a Underlying Fund because of the portfolio's advisor must react to frequent requests to purchase and redeem investments. FUTURE MODIFICATIONS. We will continue to monitor the transfer activity occurring among the Variable Funding Options, and may modify these transfer restrictions at any time if we deem it necessary to protect the interest of all Contract Owners. These modifications may include curtailing or eliminating, without notice, the ability to use the Internet, facsimile or telephone in making transfers. L- 24472 10 SUPPLEMENT DATED JANUARY 24, 2005 TO THE UNIVERSAL ANNUITY ADVANTAGE PROSPECTUS DATED MAY 3, 2004 The following information supplements, and to the extent inconsistent therewith, replaces the information in the prospectus. Please retain this supplement and keep it with the prospectus for future reference. IN THE "SUMMARY" SECTION, UNDER THE SUBSECTION "WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT?", THE FIFTH PARAGRAPH IS DELETED AND REPLACED WITH THE FOLLOWING: If you elect a Guaranteed Minimum Withdrawal Benefit ("GMWB") rider, a charge will be deducted annually from amounts in the Variable Funding Options. There are two GMWB rider options, and the current charge for each rider is as follows: GMWB I: 0.40%; and GMWB II: 0.50%. Your current charge will not change unless you are able to reset your benefits, at which time we may modify the charge, which will never exceed 1.00%. IN THE "SUMMARY" SECTION, UNDER THE SUBSECTION "ARE THERE ANY ADDITIONAL FEATURES?", THE EIGHTH PARAGRAPH IS DELETED AND REPLACED WITH THE FOLLOWING: GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE"). For an additional charge, we will guarantee the periodic return of your investment. Under this benefit, we will pay you a percentage of your investment every year until your investment has been returned in full, regardless of market performance. Depending on when you elect to begin receiving payments and which GMWB rider you select, the maximum amount of your investment that you receive each year is 5% or 10%. When you add Purchase Payments to your Contract, we include them as part of the guarantee. In the future, however, we may discontinue including additional Purchase Payments as part of the guarantee. The guarantee is subject to restrictions on withdrawals and other restrictions. IN THE "FEE TABLE" SECTION,THE SUB-SECTION "ANNUAL SEPARATE ACCOUNT CHARGES", IS REPLACED WITH THE FOLLOWING: ANNUAL SEPARATE ACCOUNT CHARGES: (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SEPARATE ACCOUNT) We will assess a mortality and expense risk charge ("M&E"), and a GMWB charge if you elect the optional GMWB feature. Below is a summary of all charges that may apply, depending on the death benefit and optional features you select: ANNUAL STEP-UP STANDARD TO AGE 75 DEATH BENEFIT DEATH BENEFIT -------------------- ------------------- Mortality and Expense Risk Charge 1.25% 1.40% Optional GMWB I Charge 0.40%(1) 0.40%(1) Optional GMWB II Charge 0.50%(1) 0.50%(1) TOTAL ANNUAL SEPARATE ACCOUNT CHARGES WITH GMWB I ONLY SELECTED 1.65% 1.80% TOTAL ANNUAL SEPARATE ACCOUNT CHARGES WITH GMWB II ONLY SELECTED 1.75% 1.90% - ---------- (1) The maximum charge for GMWB I and GMWB II is 1.00%. 11 IN THE "EXAMPLES" SECTION, THE PARAGRAPH ENTITLED "EXAMPLE 2" IS DELETED AND REPLACED WITH THE FOLLOWING: EXAMPLE 2 -- This example assumes that you have elected the most expensive death benefit option, the E.S.P. optional death benefit, and the Guaranteed Minimum Withdrawal Benefit ("GMWB I") (assuming the current 0.40% charge applies). IN THE "EXAMPLES" SECTION, THE FOLLOWING EXAMPLE TABLES ARE ADDED: EXAMPLE 4 -- This example assumes that you have elected the most expensive death benefit option, the E.S.P. optional death benefit and the Guaranteed Minimum Withdrawal Benefit II ("GMWB II") (assuming the current 0.50% charge applies).
IF CONTRACT IS SURRENDERED IF CONTRACT IS NOT SURRENDERED OR AT THE END OF PERIOD SHOWN ANNUITIZED AT THE END OF PERIOD SHOWN ----------------------------------- ------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - -------------- ------ ------- ------- -------- ------ ------- ------- -------- Underlying Fund with Maximum Total Annual Operating Expenses......... 734 1222 1736 2647 234 722 1236 2647 Underlying Fund with Minimum Total Annual Operating Expenses......... 1170 2475 3735 6195 670 1975 3235 6195
IN THE "CHARGES AND DEDUCTIONS" SECTION, THE SUBSECTION "GUARANTEED MINIMUM WITHDRAWAL BENEFIT CHARGE" IS DELETED AND REPLACED WITH THE FOLLOWING: If you elect to add a GMWB rider to your contract, a charge is deducted each business day from amounts held in the Variable Funding Options. The charge depends on which GWMB rider you select. The current charge for each rider is as follows: GMWB I: 0.40%; and GMWB II: 0.50%. Your current charge will not change unless you are able to reset your benefits, at which time we may modify the charge, which will never exceed 1.00%. THE SECTION ENTITLED "GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE")" IS DELETED AND REPLACED WITH THE FOLLOWING: GUARANTEED MINIMUM WITHDRAWAL BENEFIT ("GMWB" OR "PRINCIPAL GUARANTEE") For an additional charge, you may elect an optional rider for your contract that provides a Guaranteed Minimum Withdrawal Benefit, or "GMWB". A GMWB rider is designed to protect your investment from poor market performance, as long as you do not withdraw more than a certain amount from your contract each year. 12 AVAILABILITY AND ELIGIBILITY This prospectus describes two different GMWB riders. At this time, only GMWB I is available for purchase. We intend to offer GMWB III some time during 2005. AVAILABLE GMWB RIDERS
- ------------------------- ------------------------------ ------------------------------ NAME OF RIDER: GMWB I GMWB II - ------------------------- ------------------------------ ------------------------------ ALSO CALLED: Principal Principal Guarantee Guarantee - ------------------------- ------------------------------ ------------------------------ AVAILABILITY: Available for purchase Available on or after February 14, 2005 if approved in your state - ------------------------- ------------------------------ ------------------------------
You may elect a GMWB rider only at the time of your initial purchase of the Contract. You may not elect a GMWB rider if you have also elected the GMAB rider offered under this Contract. REMAINING BENEFIT BASE ("RBB") For all GMWB riders, the amount of your investment that is guaranteed is called the "remaining benefit base" or "RBB." Your initial RBB is equal to your initial Purchase Payment if you elect GMWB when you purchase your contract. The RBB is not a lump sum guarantee, rather, it is the amount that we guarantee to return to you through a series of payments that annually do not exceed a percentage of your RBB. ANNUAL WITHDRAWAL BENEFIT ("AWB") The annual percentage of your RBB that is available for withdrawal is called the "annual withdrawal benefit" or "AWB". Each year you may take withdrawals that do not exceed your AWB until your RBB is depleted. Each year you may take your AWB monthly, annually, or on any payment schedule you request. You may take withdrawals in any dollar amount up to your AWB without affecting your guarantee. If you choose to receive only a part of, or none of, your AWB in any given year, your AWB in any subsequent year will not be increased. In that case you are choosing to deplete your RBB over a longer period of time. The AWB is a percentage of your RBB and depends on which GMWB rider you select. Your initial AWB is calculated as a percentage of the RBB immediately before your first withdrawal: - ------------------------------------ -------------- -------------- GMWB I GMWB II - ------------------------------------ -------------- -------------- If you make your first withdrawal 5% of RBB 5% of RBB BEFORE the 3rd anniversary after you purchase GMWB: - ------------------------------------ -------------- -------------- If you make your first withdrawal 10% of RBB 10% of RBB AFTER the 3rd anniversary after you purchase GMWB: - ------------------------------------ -------------- -------------- 13 ADDITIONAL PREMIUM Currently, additional Purchase Payments serve to increase your RBB and AWB. After each Purchase Payment your new RBB equals your RBB immediately prior to the Purchase Payment plus the dollar amount of the Purchase Payment. Your new AWB is equal to the AWB immediately prior to the Purchase Payment, plus a percentage of the Purchase Payment. We use the same percentage as that used to calculate your original AWB as shown above. We reserve the right not to include additional Purchase Payments into the calculation of the RBB or AWB. WITHDRAWALS When you make a withdrawal, your AWB remains the same as long as the sum of all of your withdrawals since the most recent anniversary of your purchase or reset of GMWB (or "GMWB Anniversary"), including the current withdrawal, does not exceed your AWB immediately prior to the current withdrawal. In such case your RBB is decreased to equal the RBB immediately prior to the withdrawal, less the dollar amount of the current withdrawal. However, if you make a withdrawal so that the total of all your withdrawals since your GMWB anniversary, including the current withdrawal, exceeds your AWB immediately prior to the current withdrawal, we will recalculate both your RBB and AWB. The recalculation depends on which GMWB rider you select: IF YOU SELECT GMWB II: o To recalculate your RBB, we reduce your RBB by the greater of the dollar amount of your withdrawal, or a "partial withdrawal reduction". The partial withdrawal reduction is equal to 1) the RBB in effect immediately prior to the current withdrawal, multiplied by 2) the amount of the current withdrawal divided by 3) the Contract Value immediately prior to the current withdrawal. o To recalculate your AWB, we reduce your AWB by a partial withdrawal reduction, which is equal to 1) the AWB in effect immediately prior to the current withdrawal, multiplied by 2) the RBB immediately after the withdrawal divided by 3) the RBB immediately prior to the current withdrawal. IF YOU PURCHASED GMWB I: o To recalculate your RBB, we reduce your RBB by a "partial withdrawal reduction". The partial withdrawal reduction is equal to 1) the RBB in effect immediately prior to the current withdrawal, multiplied by 2) the amount of the current withdrawal divided by 3) the Contract Value immediately prior to the current withdrawal. o To recalculate your AWB, we reduce your AWB by a partial withdrawal reduction, which is equal to 1) the AWB in effect immediately prior to the current withdrawal, multiplied by 2) the RBB immediately after the withdrawal divided by 3) the RBB immediately prior to the current withdrawal. We will waive any surrender charge on amounts that you withdraw up to your AWB, or on amounts up to the amount withdrawn under our Managed Distribution Program, even if such annual amount withdrawn is greater than your free withdrawal allowance. WITHDRAWAL EXAMPLES The following examples are intended to illustrate the effect of withdrawals on your RBB and AWB, depending on which GMWB rider you select. Assume your initial RBB is $100,000, your age is less than 70, and you take a withdrawal of $10,000 after your first GMWB Anniversary: 14 WITHDRAWAL EXAMPLE FOR GMWB II
- -------------------- ------------------------------------------------------- --------------------------------------------------- ASSUMES 15% GAIN ON INVESTMENT ASSUMES 15% LOSS ON INVESTMENT - -------------------- ------------------------------------------------------- --------------------------------------------------- CONTRACT CONTRACT VALUE RBB AWB (5%) VALUE RBB AWB (5%) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUES AS OF - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ INITIAL GMWB PURCHASE $100,000 $100,000 $5,000 $100,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ IMMEDIATELY PRIOR TO WITHDRAWAL $115,000 $100,000 $5,000 $85,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ PARTIAL WITHDRAWAL N/A (100,000 [5,000 X (1- N/A (100,000 [5,000 X REDUCTION (PWR) X 10,000/115,000)= 90,000/100,000)]= X 10,000/85,000)= (1-88,235/100,000)]= 8,696 500 $11,765 $588 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ GREATER OF PWR OR $10,000 $11,765 THE DOLLAR AMOUNT OF THE WITHDRAWAL (10,000>8,696) (11,765>10,000) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ CHANGE IN VALUE DUE TO WITHDRAWAL (PARTIAL SURRENDER REDUCTION) $10,000 $10,000 $500 $10,000 $11,765 $588 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUE IMMEDIATELY AFTER WITHDRAWAL $105,000 $90,000 $4,500 $75,000 $88,235 $4,412 - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ WITHDRAWAL EXAMPLE FOR GMWB I - -------------------- ------------------------------------------------------- --------------------------------------------------- ASSUMES 15% GAIN ON INVESTMENT ASSUMES 15% LOSS ON INVESTMENT - -------------------- ------------------------------------------------------- --------------------------------------------------- CONTRACT CONTRACT VALUE RBB AWB (5%) VALUE RBB AWB (5%) - -------------------- ------------ --------------------- -------------------- ----------- -------------------- ------------------ VALUES AS OF - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- INITIAL GMWB PURCHASE $100,000 $100,000 $5,000 $100,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- IMMEDIATELY PRIOR TO WITHDRAWAL $115,000 $100,000 $5,000 $85,000 $100,000 $5,000 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- IMMEDIATELY AFTER $105,000 91,304 $4,565 $75,000 $88,235 $4,412 WITHDRAWAL [100,000 - (100,000 [5,000 - (5,000 [100,000 - [5,000 X X 10,000/115,000)] X 91,304/100,000)] (100,000 (88,235/100,000)] X 10,000/85,000)] - -------------------- ------------ --------------------- -------------------- ----------- ------------------- ------------------- CHANGE IN VALUE DUE TO WITHDRAWAL (PARTIAL SURRENDER REDUCTION) $10,000 $8,696 $435 $10,000 $11,265 $588 - -------------------- ------------ --------------------- -------------------- ----------- ------------------- -------------------
TAX-QUALIFIED DISTRIBUTION PROGRAMS (GMWB II ONLY) If you select GMWB II or GMWB III, subject to certain limitations and restrictions, your AWB will not incur a recalculation as a result of distributions taken under certain eligible Tax-Qualified Distribution Programs ("Tax-Qualified Distribution Programs"). Instead, such distributions will reduce the RBB by the amount of the withdrawal, and will not affect the AWB. For purposes of GMWB II, the following Tax-Qualified Distribution Programs are eligible. Only certain types of distribution methods are eligible as described below. Please consult with your tax adviser to make sure you are eligible: o Distributions intended to satisfy the required minimum distribution rules under Internal Revenue Code ("Code") Section 401(a)(9) and the Treasury Regulations promulgated thereunder, as applicable, to: o a qualified retirement plan (Code Section 401), 15 o a tax-sheltered annuity (Code Section 403(b)), o an individual retirement account (Code Sections 408(a)), o an individual retirement annuity (Code Section 408(b)), or o a qualified deferred compensation plan (Code Section 457). Required minimum distribution must be calculated using the Uniform Life Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-2) and/or the Joint and Last Survivor Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-3), and for distributions where the employee (owner) dies before the entire interest is distributed as described in Code Section 401(a)(9)(B)(iii) calculated using the Single Life Table (described in Treasury Regulation Section 1.401(a)(9)-9, Q&A-1), as appropriate (each table as in effect as of January 1, 2004). o Distributions intended to satisfy the exception under Code Section 72(s)(2) to the required minimum distribution rules which apply after the death of the holder of a nonqualified annuity contract provided under Code Section 72(s)(1) for certain amounts payable over the life of a designated beneficiary; o Distributions intended to satisfy the exception under Code Section 72(t)(2)(A)(iv) from the 10% additional tax on early distributions from qualified retirement plans imposed by Code Section 72(t)(1) for certain amounts payable as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary, provided, however, the amount of the substantially equal periodic payments must be calculated under the required minimum distribution method set forth in the Internal Revenue Service Notice 89-25, 1989-1 C.B. 662 in Q&A-12 as amended by Revenue Ruling 2002-62, 2002-42 I.R.B. 710 (substantially equal periodic payments calculated under the fixed annuitization method or the fixed amortization method described in Q&A-12 of Notice 89-25 will not be considered a Tax-Qualified Distribution Program); or o Distributions intended to satisfy the exception under Code Section 72(q)(2)(D) from the 10% additional tax on early distributions from nonqualified annuity contracts imposed by Code Section 72(q)(1) for certain amounts payable as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the Beneficiary or the joint lives (or joint life expectancies) of such Beneficiary and his designated beneficiary, provided, however, the amount of the substantially equal periodic payment must be calculated under the required minimum distribution method set forth in Internal Revenue Service Notice 89-25, 1989-1 C.B. 662 in Q&A-12 as amended by Internal Revenue Bulletin 2004 -9, Notice 2004-15, page 526. (substantially equal periodic payments calculated under the fixed annuitization method or the fixed amortization method described in Q&A-12 of Notice 89-25 will not be considered a Tax-Qualified Distribution Program). You are subject to the following limitations if you if you are taking distributions under a Tax-Qualified Distribution Program: o YOU MUST ENROLL IN OUR MANAGED DISTRIBUTION PROGRAM. If you do not enroll or if you cancel your enrollment, you can continue to make withdrawals under your GMWB rider, however your RBB and AWB may be subject to a recalculation. Under our Managed Distribution Program, you select a frequency of payments. You may change the frequency of your payments only once every two years after your GMWB Anniversary, and you may only make the change during the 30-day period after your GMWB Anniversary. At the time you purchase GMWB, your initial frequency of payment must be annual if you did not take distributions pursuant to your Tax-Qualified Distribution Program at your previous financial institution, unless you turn age 70 1/2 before the first GMWB anniversary. 16 You are advised to take your required distributions prior to purchasing GMWB in order to have the choice of taking your distributions on a monthly, quarterly, semi-annual or annual basis. If you do not take your distribution before purchasing GMWB, you will be limited to taking annual distributions for the first two contract years after which time you can choose an alternate mode of distribution. o ANY WITHDRAWALS OUTSIDE OF THE PROGRAM MAY DECREASE YOUR BENEFIT. All withdrawals under your Contract must be made pursuant to the Tax-Qualified Distribution Program during any 12-month period after an anniversary of your purchase of GMWB (a "GMWB Year"). If during any GMWB Year you take any additional withdrawals that are not made pursuant to the Program, you can continue to make withdrawals under your GMWB rider, however for the remainder of the GMWB Year your RBB and AWB may be subject to a partial withdrawal reduction. To avoid any partial withdrawal reduction, all withdrawals under your Contract must be made pursuant to your Tax-Qualified Distribution Program. RESET (GMWB I AND GMWB II ONLY) If you select GMWB I or GMWB II, you may choose to reset your RBB at any time on or after the 5th anniversary of your GMWB purchase. Your new RBB is reset to equal your current Contract Value. You may reset your RBB again every 5 years after the most recent reset. Once you become eligible to reset your RBB, we reserve the right to allow resets only on the anniversary of your GMWB purchase. Each time you reset your RBB, your new AWB will equal a percentage of your new RBB. The percentage used is the same percentage used to calculate your AWB before the reset. If you are age 95 and are taking withdrawals under a Tax-Qualified Distribution Program, you may not reset if you purchased GMWB II or GMWB III. Depending on your Contract Value and the current fee for GMWB, it may not be beneficial to reset your RBB. Generally, it may be beneficial to reset your RBB if your Contract Value exceeds your RBB. However, the current charge in effect at the time of the reset will apply which may be higher than the current charge. Further, if you reset your RBB, your new AWB may be higher or lower than your current AWB. In addition, the length of time over which you can expect to receive your RBB will be reset. INVESTMENT RESTRICTIONS (GMWB II ONLY) We reserve the right to restrict allocations to a Variable Funding Option or limit the percentage of Contract value that may be allocated to a Variable Funding Option at any time. If we do so we would provide you with asset allocation requirements, and we reserve the right to require periodic rebalancing of Contract value allocated to Variable Funding Options according to specified percentages. We will provide no less than 30 days advanced written notice if we exercise our right to restrict or limit allocations to a Variable Funding Option and/or require periodic rebalancing between Variable Funding Options. Our ability to restrict allocations to a Variable Funding Option may be different depending on your state. If we restrict allocations to a Variable Funding Option, as of the effective date of the restriction, we will no longer allow additional Purchase Payments to be applied, or transfers of Contract value to be allocated into the restricted Variable Funding Option. Any Contract value previously allocated to a restricted Variable Funding Option will not be subject to the restriction. If we impose a limit on the percentage of Contract value allocated to a Variable Funding Option, as of the effective date of the restriction, we will impose the limit on all subsequent allocations. GMWB CHARGE The charge for your GMWB rider is different depending on which version of GMWB you choose. For all GMWB riders, the charge is deducted on an annual basis from amounts held in each Variable Funding Option. The current charge for each rider is shown below. Your current charge will not change unless you reset your benefits, at which time we may modify the charge. In such case the charge will never exceed 1.00%. 17 - -------------------------------------- ------------ ------------- GMWB I GMWB II - -------------------------------------- ------------ ------------- Current Annual Charge 0.40% 0.50% - -------------------------------------- ------------ ------------- Maximum Annual Charge After a Reset 1.00% 1.00% - -------------------------------------- ------------ ------------- MAXIMUM RBB Although we have no current plans to do so, in the future we may impose a maximum RBB. If we do, we would stop including additional Purchase Payments into the calculation of your RBB. If we impose a maximum RBB for Purchase Payments or reset, the maximum RBB will never be less than the cumulative Purchase Payments to which we have previously consented. Currently you must obtain our consent to purchase any RBB over $1 million. Purchase Payments under $1 million are not subject to a maximum RBB. TERMINATION Once you purchase GMWB I, you cannot cancel it. If you select GMWB II, you may terminate your rider at any time after the 5th anniversary of your purchase of GMWB. You must request your termination in writing. All GMWB riders terminate automatically when you reach the maturity date of your Contract, if your Contract is assigned, or if the rider is exchanged for a similar rider offered by us. OTHER INFORMATION ABOUT GMWB If your Contract Value reaches zero, and you have purchased this benefit, the following will occur: o The AWB will continue to be paid to you until the RBB is depleted, not more frequently than monthly. Upon your death, your beneficiary will receive these payments. No other death benefit or optional benefit, if any, will be paid. o The total annual payment amount will equal the AWB and will never exceed your RBB, and o We will no longer accept subsequent Purchase Payments into the Contract. If a spouse or beneficiary continues this Contract upon your death, and you had elected GMWB, all terms and conditions of this benefit would apply to the new owner. Please refer to the Death Benefit section for information on how GMWB may impact your death benefit. COMPARISON OF IMPORTANT DIFFERENCES BETWEEN GMWB I AND II The following chart may help you decide which version of GMWB is best for you.
- ------------------------- ----------------------------- ------------------------------ GMWB I GMWB II - ------------------------- ----------------------------- ------------------------------ AWB 5% of RBB if first 5% of RBB if first withdrawal before 3rd withdrawal before 3rd anniversary anniversary 10% of RBB if first 10% of RBB if first withdrawal after 3rd withdrawal after 3rd anniversary anniversary - ------------------------- ----------------------------- ------------------------------ ANNUAL CHARGE 0.40% 0.50% - ------------------------- ----------------------------- ------------------------------ RESET Yes Yes - ------------------------- ----------------------------- ------------------------------ CAN I CANCEL MY GMWB? No Yes, after the 5th anniversary of GMWB purchase - ------------------------- ----------------------------- ------------------------------ INVESTMENT RESTRICTIONS No Yes - ------------------------- ----------------------------- ------------------------------ WAIVER OF RECALCULATION No Yes OF AWB FOR DISTRIBUTIONS FROM TAX-QUALIFIED PLANS - ------------------------- ----------------------------- ------------------------------
18 In the "Transfers" section, the subsection entitled "Market Timing/Excessive Trading" is deleted and replaced with the following: MARKET TIMING/EXCESSIVE TRADING THE CONTRACT IS INTENDED FOR USE AS A LONG-TERM INVESTMENT VEHICLE AND IS NOT DESIGNED TO SERVE AS A VEHICLE FOR EXCESSIVE TRADING OR MARKET TIMING IN AN ATTEMPT TO TAKE ADVANTAGE OF SHORT-TERM FLUCTUATIONS IN THE STOCK MARKET. EXCESSIVE TRADING IS DISRUPTIVE TO THE MANAGEMENT OF AN UNDERLYING FUND AND INCREASES OVERALL COSTS TO ALL INVESTORS IN THE UNDERLYING FUND. If, in our sole discretion, we determine you are engaging in excessive trading activity, trading activity that we believe is indicative of market timing, or any similar trading activity which will potentially hurt the rights or interests of other Contract Owners, we will exercise our contractual right to restrict your number of transfers to one every six months. We will notify you in writing if we choose to exercise our contractual right to restrict your transfers. In determining whether we believe you are engaged in excessive trading or market timing activity, we will consider, among other things, the following factors: o the dollar amount you request to transfer; o the number of transfers you made within the previous three months; o whether your transfers follow a pattern designed to take advantage of short term market fluctuations; and o whether your transfers are part of a group of transfers made by a third party on behalf of several individual Contract Owners. Transfers made under a Dollar Cost Averaging Program, a rebalancing program, or, if applicable, any asset allocation program described in this prospectus are not treated as a transfer when we evaluate trading patterns for market timing or excessive trading. In addition to the above, we also reserve the right to further restrict the right to request transfers by any market timing firm or any other third party who has been authorized to initiate transfers on behalf of multiple Contract Owners. We may, among other things: o reject the transfer instructions of any agent acting under a power of attorney on behalf of more than one owner, or o reject the transfer or exchange instructions of individual owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one owner. We will notify you in writing before we restrict your right to request transfers through such market timing firm or other third party. The policy of the Company is to seek to apply its anti-market timing and excessive trading procedures uniformly. These procedures, however, may not be able to prevent all excessive trading and market timing activity from occurring. For example: 19 o Some of the Underlying Funds are available as investments for variable insurance contracts offered by other insurance companies. These other insurance companies may have different procedures to prevent excessive trading and market timing activity or may not have any such procedures because of contractual limitations. o The Company issues Contracts to qualified retirement plans that request financial transactions with the Company on an omnibus basis on behalf of all plan participants. These plans generally employ a record-keeper to maintain records of participant financial activity. Because the Company does not have the records to monitor the trading activity of the individual participants, the Company may not be able to identify plan participants who may be engaging in excessive trading or market timing activity and/or may not be able to apply its contractual trade restrictions to such participants. o There may be other circumstances where the Company does not identify trading activity as market timing or excessive trading or take action to restrict trading activity that does not qualify as excessive trading or market timing activity under our current anti-market timing procedures. Excessive trading and market timing activity increases the overall transaction costs of an Underlying Fund, which may serve to decrease the Underlying Fund's performance. Further, excessive trading and market timing activity may disrupt the management of a Underlying Fund because of the portfolio's advisor must react to frequent requests to purchase and redeem investments. FUTURE MODIFICATIONS. We will continue to monitor the transfer activity occurring among the Variable Funding Options, and may modify these transfer restrictions at any time if we deem it necessary to protect the interest of all Contract Owners. These modifications may include curtailing or eliminating, without notice, the ability to use the Internet, facsimile or telephone in making transfers. L- 24473 20 -----END PRIVACY-ENHANCED MESSAGE-----