Pre-Effective Amendment to Registration Statement for a Separate Account (Unit Investment Trust) — Form N-4 Filing Table of Contents
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Approximate
Date of Proposed Public Offering: Upon the effective date of this Registration Statement.
Title of Securities Being Registered: Individual Flexible Premium Deferred Variable Annuity Contracts
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
SCHWAB ADVISOR CHOICE VARIABLE ANNUITY TM
An individual flexible premium variable annuity
Issued by
Great-West Life & Annuity Insurance Company of New York
This Prospectus describes the Schwab Advisor Choice Variable Annuity TM (the “Contract”) — an individual flexible premium variable annuity contract that allows you to accumulate assets on a tax-deferred
basis for retirement or other long-term purposes. Great-West Life & Annuity Insurance Company of New York (“we,”“us,” or “Great-West”) issues the Contract to eligible persons in the state of New York.
The Contract may be owned by one or two individuals. A Contract may also be owned by a grantor trust that exists for one individual grantor or two individual grantors who are each other’s spouse.
When you contribute money to the Schwab Advisor Choice Variable Annuity , you decide how to allocate your money among the various investment options available through Variable Annuity-1 Series Account (the “Series Account”). The Series Account consists of two segments: the Investment Segment (relating to the base Contract) and the Income Segment (relating to an optional Guaranteed Lifetime Withdrawal Benefit Rider).
We hold the assets for each investment option in a corresponding Sub-Account of the Series Account. Each Sub-Account, in turn, invests in a Portfolio under the Investment Segment or a Covered Fund under the Income Segment.
Investment Segment Portfolios:
Alger Large Cap Growth Portfolio – Class I-2 Shares
Alger Mid Cap Growth Portfolio – Class I-2 Shares
AllianceBernstein VPS Growth Portfolio – Class A Shares
AllianceBernstein VPS Growth & Income Portfolio – Class A Shares
AllianceBernstein VPS International Growth Portfolio – Class A Shares
AllianceBernstein VPS Real Estate Investment Portfolio – Class A Shares
AllianceBernstein
VPS Small/Mid Cap Value Portfolio – Class A Shares
American Century VP Balanced Fund – Class I Shares
American Century VP Income & Growth Fund – Class I Shares
American Century VP International Fund – Class I Shares
American Century VP Mid Cap Value Fund – Class II Shares
American Century VP Value Fund – Class I Shares
American Funds IS ® Global Growth Fund – Class 1 Shares
BlackRock Global Allocation V.I. Fund – Class I Shares
Columbia Variable Portfolio - Marsico 21st Century Fund – Class 2 Shares
Columbia
Variable Portfolio - Seligman Global Technology Fund – Class 2 Shares
Columbia Variable Portfolio - Small Cap Value Fund – Class 2 Shares
Delaware VIP Emerging Markets Series – Standard Class Shares
Delaware VIP Smid Cap Growth Series – Standard Class Shares
Delaware VIP Small Cap Value Series – Standard Class Shares
Dreyfus Variable Investment Fund Appreciation Portfolio – Initial Shares
Dreyfus Variable Investment Fund Growth and Income Portfolio – Initial Shares
The date of this Prospectus is
[May XX, 2014] .
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
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DFA VA U.S. Targeted Value Portfolio
DWS Capital Growth VIP – Class A Shares
DWS Core Equity VIP – Class A Shares
DWS Global Small Cap Growth VIP – Class A Shares
DWS
Small Mid Cap Growth VIP – Class A Shares
DWS Small Mid Cap Value VIP – Class A Shares
DWS Large Cap Value VIP – Class A Shares
DWS Small Cap Index VIP – Class A Shares
Federated Fund for U.S. Government Securities II
Franklin Small Cap Value Securities Fund – Class 2 Shares
Invesco V.I. Comstock Fund – Series I Shares
Invesco V.I. Growth and Income Fund – Series I Shares
Invesco V.I. High Yield Fund – Series I Shares
Invesco V.I. International Growth Fund – Series I Shares
Invesco V.I. Mid Cap Core Equity Fund – Series I
Shares
Invesco V.I. Small Cap Equity Fund – Series I Shares
Janus Aspen Flexible Bond Portfolio – Institutional Shares
Janus Aspen Global Research Portfolio – Institutional Shares
Janus Aspen Global Technology Portfolio – Institutional Shares
JP Morgan Insurance Trust Small Cap Core Portfolio – Class 1 Shares
Lazard Retirement Emerging Markets Equity Series Portfolio – Service Shares
LVIP Baron Growth Opportunities Fund – Service Class Shares
MFS International Value Portfolio – Service Class Shares
MFS Utilities Series – Service Class Shares
Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio – Class S Shares
NVIT Mid Cap Index Fund – Class II Shares
Oppenheimer Global Fund/VA – Non Service Shares
Oppenheimer International Growth Fund/VA – Non Service Shares
Oppenheimer Main Street Small Cap Fund ® /VA – Non Service Shares
PIMCO VIT CommodityRealReturn ® Portfolio – Administrative Class Shares
PIMCO
VIT High Yield Portfolio – Administrative Class Shares
PIMCO VIT Low Duration Portfolio – Administrative Class Shares
PIMCO VIT Real Return Portfolio – Administrative Class Shares
PIMCO VIT Total Return Portfolio – Administrative Class Shares
Pioneer Fund VCT Portfolio – Class I Shares
Pioneer Mid Cap Value VCT Portfolio – Class II Shares
Pioneer Select Mid Cap Growth VCT Portfolio – Class I Shares
The Prudential Series Fund Equity Portfolio – Class II Shares
The Prudential Series Fund Natural Resources Portfolio – Class II Shares
Putnam VT American Government Income
Fund – Class IB Shares
Putnam VT Equity Income Fund – Class IB Shares
Putnam VT Global Health Care Fund – Class IB Shares
This Prospectus does not constitute an offering in any jurisdiction in which such offering may not be lawfully made. No dealer, salesperson or other person is authorized to give any information or make any representations in connection with the Contracts other than those contained in this Prospectus, and, if given or made, such other information or representations must not be relied on.
This Contract is not available in all states.
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Putnam VT Investors Fund – Class IA Shares
Royce Capital Fund - Small-Cap Portfolio – Service Class Shares
Schwab Money Market Portfoli o
Schwab S&P 500 Index Portfolio
Sentinel Variable Products Bond Fund
Sentinel Variable Products Common Stock Fund
Sentinel Variable Products Small Company Fund
T. Rowe Price Health Sciences Portfolio
Templeton Foreign Securities Fund – Class 2 Shares
Templeton Global Bond Fund – Class 2 Shares
Touchstone Mid Cap Growth Fund
Van Eck VIP Global Hard Assets Fund – Class S Shares
Van Eck VIP Unconstrained Emerging Markets Bond Fund – Initial Class Shares
Vanguard VIF Capital Growth Portfolio
Vanguard VIF Diversified Value Portfolio
Vanguard VIF Mid-Cap Index Portfolio
Vanguard VIF REIT Index Portfolio
Vanguard VIF Small Company Growth Portfolio
Wells Fargo Advantage VT Discovery Fund – Class 2 Shares
Wells Fargo Advantage VT Opportunity Fund – Class 2 Shares
Income Segment Covered Fund(s) (for Contracts
with the Guaranteed Lifetime Withdrawal Benefit Rider):
Great-West SecureFoundation® Balanced Fund – Class G Shares
This Prospectus provides important information about the Series Account and investment options that you should know before purchasing the Schwab Advisor Choice Variable Annuity , including a description of the material rights and obligations under the Contract. Your Contract, riders and any amendments and endorsements are the formal contractual agreement between you and us. It is important that you read the Contract, riders, amendments and endorsements, which reflect the agreement between you and Great-West. Please read this Prospectus carefully and keep it on file for future reference. We offer other variable annuity products with different
product features, benefits and charges.
You can find more detailed information pertaining to the Series Account in the Statement of Additional Information (“SAI”) dated [May XX, 2014] (as may be amended from time to time), which has been filed with the Securities and Exchange Commission (the “SEC”). The SAI is incorporated by reference into this Prospectus as a matter of law, which means it is legally a part of this Prospectus. You can find the SAI’s table of contents on the last page of this Prospectus. You may obtain a copy of the SAI without charge by contacting the Retirement Resource Operations Center at the address or phone number listed below. Or, you can obtain it by visiting the SEC’s website at http://www.sec.gov.
This website also contains material incorporated by reference and other information about the Series Account that has been filed electronically with the SEC.
The Contract is not a deposit or obligation of, or insured, guaranteed or endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. The Contract involves certain investment risks, including possible loss of principal.
This Prospectus does not constitute an offering in any jurisdiction in which such offering may not be lawfully made. No dealer, salesperson or other person is authorized to give any information or make any representations in connection with the Contract other than those contained in this Prospectus, and, if given or made, such other information or representations must not be relied on. This Contract is not available in all states.
1035 Exchange — A tax-free exchange of certain types of insurance contracts, as allowed by a provision of the Code.
Accumulation Period — The time period between the Effective Date and the earlier of the Payout Election Date or the Annuity Commencement Date. During this period, you are contributing to the
annuity.
Accumulation Unit — An accounting measure used to determine the Annuity Account Value before the date annuity payouts commence.
Alternate Payee — Any Spouse or former Spouse of an Owner who has the right pursuant to a Decree to receive all or a portion of the benefit payable under the Contract with respect to such Owner.
Annuitant (Joint Annuitant) — The person named in the application upon whose life the payout of an annuity is based and who will receive annuity payouts. The Annuitant will be the Owner unless otherwise indicated in the application. If you select a Joint Annuitant, “Annuitant” means the older Joint Annuitant or the sole surviving Joint Annuitant, unless otherwise stated. Joint Annuitants must be one another’s Spouse as of the Effective Date.
If you name a Contingent Annuitant, the Annuitant will be considered the “Primary Annuitant.”
Annuity Account — An account we establish in your name that reflects all account activity under your Contract in both the Investment Segment and the Income Segment.
Schwab Advisor Choice Variable Annuity Structure
Your Total Annuity Account can be made up of both the Investment Segment and the Income Segment
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Annuity
Account Value — The sum of the value of each Sub-Account you have selected in both the Investment Segment and Income Segment. The Annuity Account Value is credited with a return based upon the investment experience of the Sub-Account(s) selected by you and will increase and decrease accordingly.
Annuity Commencement Date — The date annuity payouts begin, which is either the Payout Election Date or the Annuitant’s 99th birthday if no Payout Election Date has been established. You may change the Annuity Commencement Date if annuity payouts have not already begun. Upon death of the Owner, the Beneficiary may change the Annuity Commencement Date only if the Beneficiary is the Owner’s surviving Spouse and elects to continue the Contract. The Annuity Commencement Date must occur prior to or on the Annuitant’s 99th
birthday.
Annuity Payout Period — The period beginning on the Annuity Commencement Date and continuing until all annuity payouts have been made under the Contract. During this period, the Annuitant receives payouts from the annuity.
Annuity Unit — An accounting measure we use to determine the amount of any variable annuity payout after the first annuity payout is made.
Attained Age — During the Guaranteed Annual Withdrawal Phase, the age of the Covered Person (or the age of the younger Joint Covered Person) on the Ratchet Date.
Automatic Bank Draft Plan—If made available by Great-West, a feature that allows you to make automatic periodic Contributions. Contributions
will be withdrawn from an account you specify and automatically credited to your Annuity Account.
Beneficiary — The person(s) designated by the Owner to receive any Death Benefit under the terms of the Contract. If the surviving Spouse of an Owner is the surviving Joint Owner, the surviving Spouse will be deemed to be the Beneficiary upon such Owner’s death and may take the death benefit or elect to continue this Contract in force.
Benefit Base — For purposes of the GLWB Rider, the amount that is multiplied by the Guaranteed Annual Withdrawal Percentage to calculate the Guaranteed Annual Withdrawal. The Benefit Base increases dollar-for-dollar upon any GLWB Rider Contribution and is reduced proportionately for any Excess Withdrawal. The Benefit Base can also increase with positive Covered Fund performance on the Ratchet Date and may also
be adjusted on the Ratchet Date. Each Covered Fund will have its own Benefit Base.
Business Day — Any day, and during the hours, on which the New York Stock Exchange is open for trading. If a date falls on a non-Business Day, the following Business Day will be used unless otherwise stated in the Prospectus.
Code — The Internal Revenue Code of 1986, as amended, and all related laws and regulations which are currently in effect.
Contingent Annuitant—The person you may name in the application who becomes the Annuitant when the Primary Annuitant dies. The Contingent Annuitant must be designated before the death of the Primary Annuitant and before annuity payouts have begun.
Contingent Beneficiary — The person
you may designate to become the Beneficiary when the primary Beneficiary dies.
Contributions — Amounts of money you invest or deposit into your Annuity Account.
Covered Fund — Interests in Sub-Account(s) designated for the Income Segment.
•
Great-West SecureFoundation® Balanced Fund – Class G Shares
•
Any other Portfolio we approve for the
GLWB
Covered Fund Value — The aggregate market value of each Covered Fund.
Covered Person(s) — For purposes of the GLWB Rider, the person(s) whose age determines the Guaranteed Annual Withdrawal Percentage and on whose life the Guaranteed Annual Withdrawal Amount will be based. If there are two Covered Persons, the Guaranteed Annual Withdrawal Percentage will be based on the age of the younger life and the Installments can continue until the death of the second life. If a natural person owns the Contract, the Owner of the Contract must be a Covered Person. If a Grantor Trust owns the Contract, the Grantor(s) must be the sole Covered Person(s). A Joint Covered Person must be the Owner’s Spouse and (i) a Joint Owner; or (ii) the 100% primary beneficiary under the Contract.
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Death
Benefit — The amount payable to the Beneficiary when the Owner or the Annuitant dies.
Decree — A divorce or separation instrument, as defined in Section 71(b)(2) of the Code, that creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to receive all or a portion of the benefits payable with respect to an Owner that Great-West accepts and approves, except as otherwise agreed.
Distributions — Amounts paid from a Covered Fund, including but not limited to partial and systematic withdrawals.
Effective Date — The date on which the first Contribution is credited to your Annuity Account.
Excess Withdrawal — An amount either distributed
or transferred from the Covered Fund(s) during the GLWB Accumulation Phase or any amount combined with all other amounts that exceed the annual GAW during the GAW Phase that reduces your Benefit Base.
Guarantee Benefit Fee — The fee associated with the Income Segment and GLWB Rider. The Guarantee Benefit Fee also is sometimes referred to as the GLWB Rider Fee.
Guaranteed Annual Withdrawal (GAW) — For purposes of the GLWB Rider, the annualized withdrawal amount that we guarantee for the lifetime of the Covered Person(s).
Guaranteed Annual Withdrawal Percentage (GAW%) — The percentage of the Benefit Base that determines the amount of the GAW.
Guaranteed Annual Withdrawal (GAW) Phase — The period of time between
the Initial Installment Date and the first day of the GLWB Settlement Phase. The GAW Phase begins when you elect to begin taking GAW payments.
Guaranteed Lifetime Withdrawal Benefit (GLWB) — A payment option offered by the GLWB Rider that pays Installments during the life of the Covered Person(s). The Covered Person(s) will receive periodic payments in either monthly, quarterly, semiannual, or annual Installments that it total over a 12-month period equal the GAW.
GLWB Accumulation Phase — The period of time between the GLWB Rider Election Date and the Initial Installment Date.
GLWB Rider — The Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider issued to the Owner which specifies the benefits, rights, privileges, and obligations of the Owner and Great-West in the Income
Segment.
GLWB Rider Contributions — Owner directed amounts received and allocated to the Owner’s Covered Fund(s) in the Income Segment, including but not limited to Transfers from other assets in the Contract. If this Contract is a Qualified Annuity Contract, GLWB Rider Contributions may also include rollovers as defined under Section 402(c), 403(b)(8), 408(d)(3) and 457(e)(16) of the Code. Reinvested dividends, capital gains, and settlements arising from the Covered Fund(s) will not be considered GLWB Rider Contributions for the purpose of calculating the Benefit Base but will affect the Covered Fund Value. We reserve the right to stop accepting GLWB Rider Contributions at any time and will provide the Owner with a 30 day notice.
GLWB Rider Election Date — The Business Day on which the Owner or Beneficiary elects the GLWB option in the
GLWB Rider by allocating GLWB Rider Contributions to the Covered Fund(s). The GLWB Rider Election Date shall be the date upon which the Initial Benefit Base is calculated and before the Owner attains the age of 85 years old.
GLWB Settlement Phase — The period when the Covered Fund Value has reduced to zero, but the Benefit Base is still positive during which Installments will continue to be paid.
Grantor — The natural person who is treated under Sections 671 through 679 of the Code as owning the assets of a Grantor Trust. All Grantors must be individuals.
Grantor Trust — A trust, the assets of which are treated under Sections 671 through 679 of the Code as being owned by the grantor. We allow a Grantor Trust to be an Owner
only if it either has a single Grantor who is a natural person, or has two Grantors who are one another’s Spouse as of the Effective Date.
Income Segment — Assets allocated to the Sub-Account associated with the optional GLWB Rider attached to the Contract.
Income Segment Account Value — The sum of the values of the Sub-Accounts in the Income Segment credited to the Owner under the Annuity Account. The Income Segment Account Value is credited with a return based upon the investment experience of the Investment option(s) selected by the Owner and will increase or
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decrease accordingly.
Investment
Segment — Assets allocated to the Sub-Accounts not associated with the optional GLWB Rider attached to the Contract.
Investment Segment Account Value — The sum of the values of the Sub-Accounts in the Investment Segment credited to the Owner under the Annuity Account. The Investment Segment Account Value is credited with a return based upon the investment experience of the Investment option(s) selected by the Owner and will increase or decrease accordingly.
Initial Installment Date — The date of the first Installment under the GLWB, which must be a Business Day.
Installments — Periodic payments of the GAW.
Joint Withdrawal Adjustment — The GAW% adjusted by -0.50%, if there are two
Covered Persons.
Non-Qualified Annuity Contract — An annuity Contract which is not intended to satisfy the requirements of Sections 408(b) (IRAs) or 408A (Roth IRAs) of the Code. We may issue this Contract as a Non-Qualified Annuity Contract.
Owner (Joint Owner) or You — The person(s) named in the application who is entitled to exercise all rights and privileges under the Contract, while the Annuitant is living. Joint Owners must be one another’s Spouse as of the Effective Date and must both be natural persons. The Annuitant will be the Owner unless otherwise indicated in the application. If the Contract is intended to be held as a Qualified Annuity Contract, the Owner must be the Annuitant and a Joint Owner is not permitted. The Owner must be either a natural person or a Grantor Trust. In
the event that the Owner is a Grantor Trust, all references to the life, age or death of the Owner shall pertain to the life, age or death of the Grantor(s).
Qualified Annuity Contract — An annuity contract that is intended to qualify under Sections 408(b) (IRAs) or 408A (Roth IRAs) of the Code. We may issue this Contract as a Qualified Annuity Contract.
Payout Election Date — The date on which annuity payouts or periodic withdrawals begin from the Investment Segment. The Payout Election Date must occur before the Annuitant’s 99th birthday.
Portfolio — A registered management investment company, or portfolio or series thereof, in which the assets of the Series Account may be invested.
Premium
Tax — A tax that a state or other governmental authority charges might be assessed at the time you make a Contribution, make withdrawals, or when annuity payments begin. Premium Tax rate in New York for annuities is 0% given the total mix of Great-West’s business in New York.
Ratchet — For purposes of the GLWB Rider, an increase in the Benefit Base if the Covered Fund Value exceeds the current Benefit Base on the Ratchet Date.
Ratchet Date — During the GLWB Accumulation Phase, the Ratchet Date is the anniversary of the Owner’s GLWB Rider Election Date and each anniversary thereafter. During the GAW Phase, the Ratchet Date is the Initial Installment Date and each anniversary thereafter. A Reset may also occur on the Ratchet Date during the GAW Phase. If any anniversary is a non-Business Day, the Ratchet Date shall
be the preceding Business Day for that year.
Request — Any written, telephoned, electronic or computerized instruction in a form satisfactory to Great-West that the Retirement Resource Operations Center receives from you, your designee (as specified in a form acceptable to Great-West) or the Beneficiary (as applicable) as required by any provision of the Contract. The Request is subject to any action taken or payment made by Great-West before it is processed. A written Request shall be deemed to include electronic mail transmissions only if such transmissions include PDF or other facsimile transmissions clearly reproducing the manual signature.
Reset — An election made by the Covered Person during the GAW Phase in which the current GAW% and Benefit Base may be changed to the Covered Person’s Attained Age GAW% and Covered Fund Value on
the Ratchet Date.
Series Account — Variable Annuity-1 Series Account, the segregated asset account established by Great-West under New York law and registered as a unit investment trust under the Investment Company Act of 1940, as amended (the “1940 Act”). The Series Account is also referred to as the separate account.
Spouse — A person recognized as a “spouse” in the state where the couple was legally married. The term does not include a party to a registered domestic partnership, civil union, or similar formal relationship
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recognized under state law that is not denominated
a marriage under that state’s law.
Sub-Account — A division of the Series Account containing the shares of a Portfolio in the Investment Segment, the Income Segment, or both. There is a Sub-Account for each Portfolio. We may also refer to a Sub-Account as an “investment option” in the Prospectus, SAI, or Series Account financial statements.
Surrender Value — Your Annuity Account Value on the Transaction Date of the surrender, less Premium Tax, if any.
Transaction Date — The date on which any Contribution or Request from you will be processed. Contributions and Requests received after the close of regular trading on the New York Stock Exchange (generally 4:00 p.m. ET) will be deemed to have been received on the next Business Day. Requests will be processed and the
Annuity Account Value will be determined on each day that the New York Stock Exchange is open for trading.
Transfer — Moving amounts from and among the Sub-Account(s).
Fee Tables
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. The first table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender the Contract, or transfer cash value between investment options. State Premium Taxes may also be deducted.
Owner
Transaction Expenses
None
Sales Load Imposed on Purchases
None
Deferred Sales Load
None
Surrender Fees
None
Maximum Transfer Charge
$25*
* Currently, there is no charge for Transfers. We reserve the right, however, to impose a transfer charge
after we notify you. See "Transfers."
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Portfolio fees and expenses.
Annual Contract Fee
None
Series Account Annual Expenses (as a percentage of average
account value)
Mortality and Expense Risk Charges
(based on Death Benefit Option selected)
Option 1: Return of Annuity Account Value
0.49%
Option 2: Guaranteed Minimum Death Benefit
0.69%
Maximum Total Series Account Annual Expenses (with the most expensive death benefit option and no optional
GLWB Rider selected) as a percentage of average account value
0.69%
Optional GLWB Rider Fees
Optional Guaranteed Lifetime Withdrawal Benefit Rider (with charges assessed quarterly, as a percentage of the current Covered Fund Value)
Guarantee Benefit Fee (maximum)
1.50%
Guarantee Benefit Fee (current)
0.95%
Maximum
Total Series Account Annual Expenses (with the most expensive Death Benefit and GLWB Rider selected) as a percentage of average account value.
2.19%
Current Total Series Account Annual Expenses (with the most expensive Death Benefit and GLWB Rider Selected) as a percentage of average account value.
1.64%
The next item shows the minimum and maximum total operating expenses charged by the Portfolios that you may pay periodically during the time that you own the Contract. More detail concerning each Portfolio’s fees and expenses is contained in the prospectus for each Portfolio.
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Total Annual Portfolio Operating
Expenses
Minimum
Maximum
(Expenses that are deducted from Portfolio assets, including management fees, distribution [and/or service] (12b-1) fees, and other expenses)1
0.26%
1.46%2
THE ABOVE EXPENSES FOR THE PORTFOLIOS WERE PROVIDED BY THE PORTFOLIOS. WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
1 One Covered Fund (the Great-West SecureFoundation Balanced Fund – Class G) is a “funds of funds” that invests substantially all of its assets in shares of other series of Great-West Funds, Inc. (the “Underlying Portfolios”). Because of this, the Great-West SecureFoundation Balanced Fund – Class G also bears its pro rata share of the operating expenses of the Underlying Portfolios. The above minimum and maximum expenses include fees and expenses incurred indirectly by the Great-West SecureFoundation Balanced Fund – Class G as a result of its investment in shares of one or more Underlying Portfolios.
2 The
expenses shown are based, in part, on estimated amounts for the current fiscal year, and do not reflect any fee waiver or expense reimbursement. The advisers and/or other service providers of certain Portfolios have agreed to reduce their fees and/or reimburse the Portfolios’ expenses in order to keep the Portfolios’ expenses below specified limits. The expenses of certain Portfolios are reduced by contractual fee reduction and expense reimbursement arrangements. Other Portfolios have voluntary fee reduction and/or expense reimbursement arrangements that may be terminated at any time. Each fee reduction and/or expense reimbursement arrangement is not reflected above, but is described in the relevant Portfolio’s prospectus.
Examples
These Examples are intended to help you
compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include Owner transaction expenses, contract fees, Series Account annual expenses, and Portfolio fees and expenses.
Income Segment Example – Maximum Guarantee Benefit Fee . The Example below assumes that you invest $10,000 in the Income Segment of the Contract (and nothing in the Investment Segment) for the time periods indicated. The Example also assumes that your investment has a 5% return each year and assumes the maximum Mortality and Expense Risk Charge, maximum Guarantee Benefit Fee and the maximum fees and expenses of any of the Portfolios in the Income Segment. In addition, this Example assumes no premium taxes were deducted. If these arrangements were considered, the expenses shown would be higher. This Example also does not
take into consideration any fee waiver or expense reimbursement arrangements of the Portfolios. If these arrangements were taken into consideration, the expenses shown would be lower.
Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
If you retain your Contract, surrender your Contract, or annuitize your Contract at the end of the applicable time period:
1 year
3 years
5
years
10 years
$284.00
$914.15
$1,635.14
$3,906.43
Income Segment Example – Current Guarantee Benefit Fee . The Example below assumes that you invest $10,000 in the Income Segment of the Contract (and nothing in the Investment Segment) for the time periods indicated. The Example also assumes that your investment has a 5% return each year and assumes the maximum Mortality and Expense Risk Charge, current Guarantee Benefit Fee and the maximum fees and expenses of any of the Portfolios in the Income Segment. In addition, this Example assumes no premium taxes were deducted. If these arrangements were considered, the expenses shown would be higher. This Example also does not take into consideration any fee waiver or expense reimbursement arrangements of the Portfolios. If these arrangements
were taken into consideration, the expenses shown would be lower.
Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
If you retain your Contract, surrender your Contract, or annuitize your Contract at the end of the applicable time period:
10
1 year
3 years
5
years
10 years
$229.00
$741.02
$1,332.36
$3,223.41
Investment Segment Example . The Example below assumes that you invest $10,000 in the Investment Segment of the Contract (and nothing in the Income Segment) for the time periods indicated. The Example also assumes that your investment has a 5% return each year and assumes the maximum Mortality and Expense Risk Charge and the maximum fees and expenses of any of the Portfolios in the Investment Segment. In addition, this Example assumes no premium taxes were deducted. If these arrangements were considered, the expenses shown would be higher. This Example also does not take into consideration any fee waiver or expense reimbursement arrangements of the Portfolios. If these arrangements were taken into consideration, the expenses shown would be lower.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If you retain your Contract, surrender your Contract, or annuitize your Contract at the end of the applicable time period:
1 year
3 years
5 years
10 years
$215.00
$696.65
$1,254.24
$3,044.22
These Examples do not show the effect of premium taxes. Premium taxes, if any, are deducted from Contract Value upon full surrender, death, or annuitization. This Example also does not include any of the taxes or penalties you may be required to pay if you surrender your Contract.
The fee tables and example should not be considered a representation of past or future expenses and charges of the Sub-Accounts. Your actual expenses may be greater or less than those shown. Similarly, the 5% annual rate of return assumed in the example is not an estimate or a guarantee of future investment performance. See Charges and Deductions on page 30 in this Prospectus.
Condensed
Financial Information
Because the Contract is new, we have no condensed Sub-Account financial information to report. In the future we will provide a table that shows selected information concerning accumulation units for each Sub-Account. An Accumulation Unit is the unit that we use to calculate the value of your interest in a Sub-Account and is determined on the basis of changes in the per share value of a Portfolio and Series Account charges.
Summary
The Schwab Advisor Choice Variable Annuity allows you to accumulate assets on a tax-deferred basis by investing in a variety of variable investment
options (the Sub-Accounts). The performance of your Annuity Account Value will vary with the investment performance of the Portfolios corresponding to the Sub-Accounts you select. You bear the entire investment risk for all amounts invested in them. Depending on the performance of the Sub-Accounts you select, your Annuity Account Value could be less than the total amount of your Contributions.
When you purchase the Contract, you have the option of allocating Contributions to the Sub-Accounts available in the Investment Segment (relating to the base Contract), to the Covered Fund(s) in the Income Segment (relating to the GLWB Rider), or both. If you exercise the Income Segment option, the GLWB Rider will provide you with a guaranteed lifetime withdrawal benefit, provided all conditions, described below, are met.
How
to contact the Retirement Resource Operations Center
We refer to amounts you invest in the Contract as “Contributions.” The minimum initial Contribution is $5,000. Additional Contributions to the Investment Segment can be made at any time before you begin receiving annuity payments.
The minimum subsequent Contribution is $500 (or $100 if investing via an Automatic Bank Draft Plan, if available). However, total Contributions may not exceed $1,000,000 without prior approval from Great-West. We reserve the right to lower the minimum Contribution or accept larger maximum total Contributions. We also reserve the right to cease accepting Contributions at any time for any reason.
You may purchase the Schwab Advisor Choice Variable Annuity through a 1035 Exchange of another insurance contract.
Sales
and Surrender Charges.
There are no sales, redemption, surrender, or withdrawal charges under the Schwab Advisor Choice Variable Annuity.
Right of Cancellation Period
After you receive your Contract, you may examine it for 10 days during which time you may cancel your Contract as described in more detail in this Prospectus. The money you contribute to the Contract will be invested at your direction, except that in some states during your right of cancellation period your payment will be allocated to the Schwab Money Market Sub-Account. If you purchase the Contract as a replacement of an existing life insurance or annuity contract, your right of cancellation period will be extended to 60 days.
Payout
Options
The Schwab Advisor Choice Variable Annuity offers three payout options - (1) periodic withdrawals, (2) variable annuity payouts; or (3) a single, lump-sum payment.
Prior to the Annuity Commencement Date, you can withdraw all or a part of your Annuity Account Value. There are no surrender or withdrawal charges. Certain withdrawals will normally be subject to federal income tax and may also be subject to a federal penalty tax. You may also pay a Premium Tax upon a withdrawal.
If the Owner dies before the Annuity Commencement Date, we will pay the Death Benefit to your Beneficiary. If the Owner dies before the entire value of the Contract is distributed, we will distribute the remaining value will be distributed according to the rules outlined in the “Death Benefit” section on page
27.
The amount distributed to your Beneficiary will depend on the Death Benefit option you select. We offer two Death Benefit options. For Option 1, the Owner, Annuitant, and Contingent Annuitant each must be age 85 or younger at the time the Contract is issued. Option 1 provides for the payment of your Annuity Account Value minus any Premium Tax. For Option 2, the Owner, Annuitant, and Contingent Annuitant each must be age 80 or younger at the time the Contract is issued. Option 2 provides for the payment of the greater of (1) your Annuity Account Value, minus any Premium Tax or (2) the sum of all Contributions, minus any Proportional Withdrawals you have made and minus any Premium Tax. If you select Death Benefit Option 1, your Mortality and Expense Risk Charge will be 0.49%. If you choose Death Benefit Option 2, this charge will be 0.69%.
This summary highlights some of the more
significant aspects of the Schwab Advisor Choice Variable Annuity . You’ll find more detailed information about these topics throughout the Prospectus and in your Contract. Please keep them both for future reference.
Great-West Life & Annuity Insurance Company of New York
Great-West (formerly known as First Great-West Life & Annuity Insurance Company, and prior to that as Canada Life Insurance Company of New York (“CLNY”)) is a stock life insurance company incorporated under the laws of the State of New York on June 7, 1971. We operate in two business segments: (1) employee
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benefits
(life, health, and 401(k) products for group clients); and (2) financial services (savings products for both public and non-profit employers and individuals, and life insurance products for individuals and businesses). We are licensed to do business in New York and our Home Office is located at 50 Main Street, White Plains, New York10606.
We are a wholly-owned subsidiary of Great-West Life & Annuity Insurance Company (“GWL&A”), a life insurance company domiciled in Colorado. GWL&A is a wholly-owned subsidiary of GWL&A Financial Inc. (“GWL&A Financial”), a Delaware holding company. GWL&A Financial is an indirect
wholly-owned subsidiary of Great-West Lifeco, Inc. (“Lifeco”), a Canadian holding company. Lifeco is a subsidiary of Power Financial Corporation (“Power Financial”), a Canadian holding company with substantial interests in the financial services industry. Power Financial is a subsidiary of Power Corporation of Canada (“Power Corporation”), a Canadian holding and management company. Through a group of private holding companies, The Desmarais Family Residuary Trust, which was created on October 8, 2013 under the Last Will and Testament of Paul G. Desmarais, has voting control of Power Corporation of Canada.
Effective December 31, 2005, First Great-West Life & Annuity Insurance Company (“First Great-West”), a stock life insurance company incorporated under the laws of the State
of New York on April 9, 1996, was merged with and into CLNY. Upon the merger, CLNY became the surviving entity under New York corporate law and was renamed to First Great-West Life & Annuity Insurance Company. As the surviving corporation in the merger, CLNY assumed legal ownership of all of the assets of First Great-West, including the Series Account, and it became directly liable for First Great-West’s liabilities and obligations, including those with respect to other variable annuity contracts supported by the Series Account. Effective September 24, 2012, First Great-West Life & Annuity Insurance Company was then renamed to Great-West Life & Annuity Insurance Company of New York.
Any payments we are required to make to you under the GLWB Rider will depend on our long-term ability to make such payments. We will
make all payments under the GLWB Rider in the GLWB Settlement Phase from our general account, which is not insulated from the claims of our third party creditors. Therefore, your receipt of payments from us is subject to our financial strength and claims paying ability. The Covered Fund(s) do not make payments under the GLWB Rider.
The Series Account
The Series Account is registered with the SEC under the 1940 Act, as a unit investment trust. Registration under the 1940 Act does not involve supervision by the SEC of the management or investment practices or policies of the Series Account.
The Series Account was established in accordance with New York laws on January 15, 1997.
We own the assets of the Series Account. The income, gains or losses, realized or unrealized, from assets allocated to the Series Account are credited to or charged against the Series Account without regard to our other income gains or losses.
We will at all times maintain assets in the Series Account with a total market value at least equal to the reserves and other liabilities relating to the variable benefits under all Contracts participating in the Series Account. Those assets may not be charged with our liabilities from our other business. Our obligations under the Contracts are, however, our general corporate obligations.
In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including Series Account assets that are treated as company assets
under applicable income tax law. These benefits, which reduce our overall corporate income tax liability may include dividends received deductions and foreign tax credits which can be material. We do not pass these benefits through to the Series Account or our other separate accounts, principally because: (i) the great bulk of the benefits results from the dividends received deduction, which involves no reduction in the dollar amount of dividends that the Series Account receives; and (ii) under applicable income tax law, Owners are not the owners of the assets generating the benefits.
The Series Account is divided into several Sub-Accounts. Each Sub-Account invests exclusively in shares of a corresponding investment Portfolio of a registered investment company (commonly known as a mutual fund). We may in the future add new Sub-Accounts or delete existing Sub-Accounts. The income, gains or losses,
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realized
or unrealized, from assets allocated to each Sub-Account are credited to, or charged against, that Sub-Account without regard to the other income, gains or losses of the other Sub-Accounts. All amounts allocated to a Sub-Account will be fully invested in Portfolio shares.
We hold the assets of the Series Account. We keep those assets physically segregated and held separate and apart from our general account assets. We maintain records of all purchases and redemptions of shares of the Portfolios.
The Portfolios
The Contract offers a number of investment options, corresponding to the Sub-Accounts. Each Sub-Account invests in a single Portfolio. Each Portfolio is a separate mutual fund registered under the 1940 Act. More comprehensive
information, including a discussion of potential risks, is found in the current prospectuses for the Portfolios. You should read the Portfolios’ Prospectuses in connection with this Prospectus. You may obtain a copy of the Portfolio Prospectuses without charge by Request. If you received a summary prospectus for a Portfolio, please follow the directions on the first page of the summary prospectus to obtain a copy of that Portfolio’s prospectus.
Each Portfolio:
•
holds its assets separately from the assets of the other Portfolios,
•
has
its own distinct investment objectives and policies, and
•
operates as a separate investment fund.
The income, gains and losses of one Portfolio generally have no effect on the investment performance of any other Portfolio.
The Portfolios are not available to the general public directly. The Portfolios are only available as investment options in variable annuity contracts or variable life insurance policies issued by life insurance companies or, in some cases, through participation in certain qualified pension or retirement plans.
Some of the Portfolios have been established by investment advisers
that manage publicly available mutual funds having similar names and investment objectives. While some of the Portfolios may be similar to, and may in fact be modeled after publicly available mutual funds, you should understand that the Portfolios are not otherwise directly related to any publicly available mutual fund. Consequently, the investment performance of publicly available mutual funds and any corresponding Portfolios may differ. The investment objectives of the Portfolios available under the Investment Segment are briefly described below followed by the investment objective of the Covered Fund available under the Income Segment:
The Alger Portfolios —advised by Fred Alger Management, Inc. of New York, New York.
Alger Large Cap Growth Portfolio–Class I-2 Shares seeks long-term capital appreciation.
Alger Mid Cap Growth Portfolio–Class I-2 Shares seeks long-term capital appreciation.
AllianceBernstein Variable Products Series Fund, Inc. —advised by AllianceBernstein, L.P., New York, New York.
AllianceBernstein VPS Growth Portfolio–Class A Shares seeks to provide long-term growth of capital.
AllianceBernstein VPS Growth & Income Portfolio–Class A Shares seeks to provide long-term growth of capital.
AllianceBernstein VPS International Growth Portfolio–Class A Shares seeks long-term growth of capital.
AllianceBernstein VPS Real Estate Investment Portfolio–Class A Shares seeks
total return from long-term growth of capital and income.
AllianceBernstein VPS Small/Mid Cap Value Portfolio–Class A Shares seeks long-term growth of capital.
American Century Variable Portfolios, Inc. —advised by American Century ࣨ Investment Management, Inc. of Kansas City, Missouri, advisers to the American Century family of mutual funds.
American Century VP Balanced Fund–Class I Shares seeks long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities.
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American Century VP Income & Growth Fund–Class I Shares seeks capital growth by investing in common stocks.
American Century VP International Fund–Class I Shares seeks capital growth.
American Century VP Mid Cap Value Fund–Class II Shares seeks long-term capital growth. Income is a secondary objective.
American Century VP Value Fund–Class I Shares seeks long-term capital growth. Income is a secondary objective.
BlackRock Variable Series Funds, Inc. —advised by BlackRock Advisors, LLC of Wilmington, Delaware.
BlackRock Global Allocation V.I. Fund–Class I Shares seeks high
total investment return.
Columbia Funds —advised by Columbia Management Investment Advisors, LLC of Boston, Massachusetts.
Columbia Variable Portfolio - Marsico 21st Century Fund–Class 2 Shares seeks long term growth of capital.
Columbia Variable Portfolio - Seligman Global Technology Fund–Class 2 Shares seeks long-term capital appreciation.
Columbia Variable Portfolio - Small Cap Value Fund–Class 2 Shares seeks long term capital appreciation.
Delaware VIP Trust —The Series is managed by Delaware Management Company, a series of Delaware Management Business
Trust, which is an indirect wholly owned subsidiary of Delaware Management Holdings, Inc. (“DMHI”). DMHI is a wholly owned subsidiary of the Macquarie Group, Ltd.
Delaware VIP Emerging Market Series–Standard Class Shares seeks long-term capital appreciation.
Delaware VIP Small Cap Value Series–Standard Class Shares seeks capital appreciation.
Delaware VIP Smid Cap Growth Series–Standard Class Shares seeks long-term capital appreciation.
DFA Investment Dimensions Group Inc. -advised by Dimensional Fund Advisors LP of Austin, Texas.
DFA VA U.S. Targeted Value Portfolio seeks
to achieve long-term capital appreciation.
Dreyfus Variable Investment Fund —advised by The Dreyfus Corporation of New York, New York.
Dreyfus Investment Portfolios -advised by The Dreyfus Corporation of New York, New York.
Dreyfus Investment Portfolios MidCap Stock Portfolio–initial Shares seeks investment returns that are greater than the total return performance of publicly traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor's MidCap 400 ® Index.
Dreyfus Variable Investment Fund Appreciation Portfolio–Initial Shares seeks long-term capital growth consistent with
the preservation of capital. Its secondary goal is current income. Sub-advised by Fayez Sarofim & Co.
Dreyfus Variable Investment Fund Growth and Income Portfolio–Initial Shares seeks long-term capital growth, current income and growth of income consistent with reasonable investment risk.
DWS Variable Series I —advised by Deutsche Investment Management Americas, Inc. of New York, New York.
DWS Capital Growth VIP–Class A Shares seeks to provide long-term growth of capital.
DWS Core Equity VIP –Class A Shares seeks growth of capital and income.
DWS Global Small Cap Growth VIP–Class A Shares seeks above-average capital
appreciation over the long term.
DWS Variable Series II —advised by Deutsche Investment Management Americas, Inc. of New York, New York.
DWS Small Mid Cap Growth VIP–Class A Shares seeks long-term capital appreciation.
DWS Small Mid Cap Value VIP–Class A Shares seeks long-term capital appreciation. Sub-advised by Dreman Value Management L.L.C.
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DWS Large Cap Value VIP–Class A Shares seeks to achieve a high rate of total return. Sub-advised by Deutsche Investment Management Americas Inc.
DWS
Investments VIT Funds —advised by Deutsche Investment Management, Inc. of New York, New York.
DWS Small Cap Index VIP–Class A Shares seeks to replicate, as closely as possible, before the deduction of expenses, the performance of the Russell 2000 ® Index, which emphasizes stock of small U.S. companies. Sub-advised by Northern Trust Investments, Inc.
Federated Insurance Series —advised by Federated Investment Management Company of Pittsburgh, Pennsylvania.
Federated Fund for U.S. Government Securities II seeks to provide current income.
Franklin Templeton Variable Insurance Products Trust
Franklin Small Cap Value VIP Fund–Class 2 Shares seeks long-term total return. Advised by Franklin Advisory Services, LLC, Fort Lee, New Jersey.
Templeton Foreign VIP Fund–Class 2 Shares seeks long-term capital growth. Advised by Templeton Investment Counsel, LLC, Fort Lauderdale, Florida.
Templeton Global Bond VIP Fund–Class 2 Shares seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. Advised by Templeton Investment Counsel, LLC, Fort Lauderdale, Florida.
Invesco Variable Insurance Funds— advised by Invesco Advisers, Inc., Houston, Texas, and sub-advised by advisory entities affiliated with Invesco Advisors, Inc.
Invesco V.I. Comstock Fund–Series I Shares seeks capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
Invesco V.I. Growth and Income Fund–Series I Shares seeks long-term growth of capital and income. Invesco V.I. High Yield Fund–Series I Shares seeks current income and, secondarily, capital appreciation.
Invesco V.I. International Growth Fund–Series I Shares seeks long-term growth of capital.
Invesco V.I. Mid Cap Core Equity Fund–Series I Shares seeks long-term growth of capital.
Invesco
V.I. Small Cap Equity Fund–Series I Shares seeks long-term growth of capital.
Invesco V.I. Technology Fund–Series I Shares seeks long-term growth of capital.
Janus Aspen Series —advised by Janus Capital Management LLC of Denver, Colorado.
Janus Aspen Balanced Portfolio–Institutional Shares seeks long-term capital growth, consistent with preservation of capital and balanced by current income.
Janus Aspen Flexible Bond Portfolio–Institutional Shares seeks to obtain maximum total return, consistent with preservation of capital.
Janus Aspen Global Research Portfolio–Institutional Shares seeks
long-term growth of capital.
Janus Aspen Global Technology Portfolio–Institutional Shares seeks long-term growth of capital.
JP Morgan Insurance Trust —advised by advised by J.P. Morgan Investment Management Inc. of New York, New York.
JP Morgan Insurance Trust Small Cap Core Portfolio–Class 1 Shares seeks capital growth over the long term.
Lazard Retirement Series – advised by Lazard Asset Management, LLC of New York, New York.
Lazard Retirement Emerging Markets Equity Series Portfolio-Service Shares seeks long term capital appreciation.
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Lincoln Variable Insurance Products Trust —advised by Lincoln Investment Advisors Corporation of Fort Wayne, Indiana, and sub-advised by BAMCO, Inc. of New York, New York.
LVIP Baron Growth Opportunities Fund–Service Class Shares seeks capital appreciation through long-term investments in securities of small and mid-sized companies with undervalued assets or favorable growth prospects.
MFS ® Variable Insurance Trust —advised by Massachusetts Financial Services Company of Boston, Massachusetts.
MFS ® Utilities Series–Service Class Shares seeks total return.
MFS ® Variable Insurance Trust II —advised by Massachusetts Financial Services Company of Boston, Massachusetts.
MFS ® International Value Portfolio–Service Class Shares seeks capital appreciation.
Neuberger Berman Advisers Management Trust —advised by Neuberger Berman Management LLC of New York, New York.
Neuberger Berman AMT Mid Cap Intrinsic Value Portfolio–Class S Shares seeks growth of capital.
Nationwide Variable Insurance Trust —advised by Nationwide Fund Advisors of King of Prussia, Pennsylvania, and sub-advised
by BlackRock Investment Management, LLC of Plainsboro, New Jersey.
NVIT Mid Cap Index Fund–Class II Shares seeks capital appreciation.
Oppenheimer Variable Account Funds —advised by OFI Global Asset Management, Inc. of New York, New York, and sub-advised by OppenheimerFunds, Inc. of New York, New York.
Oppenheimer Global Fund/VA–Non-Service Shares seeks capital appreciation.
Oppenheimer International Growth Fund/VA–Non-Service Shares seeks capital appreciation.
Oppenheimer Main Street Small Cap Fund ® /VA–Non-Service Shares seeks
capital appreciation.
PIMCO Variable Insurance Trust —advised by Pacific Investment Management Company, LLC of Newport Beach, California.
PIMCO VIT CommodityRealReturn ® Strategy Portfolio–Administrative Class Shares seeks maximum real return, consistent with prudent investment management.
PIMCO VIT High Yield Portfolio–Administrative Class Shares seeks maximum total return, consistent with preservation of capital and prudent investment management.
PIMCO VIT Low Duration Portfolio–Administrative Class Shares seeks maximum total
return, consistent with preservation of capital and prudent investment management.
PIMCO VIT Real Return Portfolio–Administrative Class Shares seeks maximum real return, consistent with preservation of real capital and prudent investment management.
PIMCO VIT Total Return Portfolio–Administrative Class Shares seeks maximum total return, consistent with preservation of capital and prudent investment management.
Pioneer Variable Contracts Trust —advised by Pioneer Investment Management, Inc. of Boston, Massachusetts.
Pioneer Fund VCT Portfolio–Class I Shares seeks reasonable income and capital growth.
Pioneer Mid Cap Value
VCT Portfolio–Class II Shares seeks capital appreciation by investing in a diversified portfolio of securities consisting primarily of common stocks.
Pioneer Select Mid Cap Growth VCT Portfolio–Class I Shares seeks long term capital growth.
The Prudential Series Fund —managed by Prudential Investments LLC of Newark, New Jersey.
The Prudential Series Fund Equity Portfolio–Class II Shares seeks long term growth of capital. Sub-advised by Jennison Associates, LLC of New York, NY.
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The Prudential Series Fund Natural Resources Portfolio–Class II Shares
seeks long-term growth of capital.
Putnam Variable Trust —advised by Putnam Investment Management, LLC of Boston, Massachusetts.
Putnam VT American Government Income Fund–Class IB Shares seeks high current income with preservation of capital as its secondary objective.
Putnam VT Equity Income Fund–Class IB Shares seeks capital growth and current income.
Putnam VT Global Health Care Fund–Class IB Shares seeks capital appreciation.
Putnam VT Investors Fund–Class IA Shares seeks long-term growth of capital and any increased income that results from this growth.
Royce
Capital Fund —advised by Royce & Associates, LLC of New York, New York.
Royce Capital Fund – Small-Cap Portfolio–Service Class Shares seeks long-term growth of capital.
Schwab Annuity Portfolios —advised by Charles Schwab Investment Management, Inc. of San Francisco, California.
Schwab Money Market Portfolio seeks the highest current income consistent with stability of capital and liquidity by investing in high-quality short-term money market investments issued by U.S. and foreign issuers. This Portfolio is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There can be no assurance that the Portfolio will be able to maintain a stable net asset value of
$1.00 per share.
Schwab S&P 500 Index Portfolio seeks to track the total return of the S&P 500 ® Index.
Sentinel Variable Products Trust —advised by Sentinel Asset Management, Inc. of Montpelier, Vermont.
Sentinel Variable Products Bond Fund seeks high current income while seeking to control risk
Sentinel Variable Products Common Stock Fund seeks a combination of growth of capital, current income, growth of income and relatively low risk as compared with the stock market as a whole.
Sentinel Variable Products Small Company Fund seeks
growth of capital.
T. Rowe Price Variable Insurance Portfolio —advised by T. Rowe Price Associates, Inc. of Baltimore, Maryland.
T. Rowe Price Health Sciences Portfolio–Class II Shares seeks long-term capital appreciation.
Touchstone Variable Series Trust —advised by Touchstone Advisors, Inc. of Cincinnati, Ohio.
Touchstone Mid Cap Growth Fund seeks to increase the value of portfolio shares as a primary goal and to earn income as a secondary goal.
Van Eck VIP Trust —advised by Van Eck Associates Corporation of New York New York.
Van Eck VIP Global Hard Assets Fund–Class S Shares
seeks long-term capital appreciation by investing primarily in hard asset securities. Income is a secondary consideration.
Van Eck VIP Unconstrained Emerging Markets Bond Fund–Initial Class Shares seeks high total return—income plus capital appreciation—by investing globally, primarily in a variety of debt securities.
Vanguard Variable Insurance Funds
Vanguard VIF Capital Growth Portfolio seeks to provide long-term capital appreciation. Advised by PRIMECAP Management Company of Pasadena, California.
Vanguard VIF Diversified Value Portfolio seeks to provide long-term capital appreciation and income. Advised by Barrow, Hanley, Mewhinney & Strauss, LLC of Dallas, Texas.
Vanguard VIF Mid-Cap Index Portfolio seeks to track the performance of a benchmark index that measures the investment return of mid-capitalization stocks. Advised by the Vanguard Group, Inc. of Valley Forge, Pennsylvania.
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Vanguard VIF REIT Index Portfolio seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of a benchmark index that measures the performance of publicly traded equity REITs. Advised by the Vanguard Group, Inc. of Valley Forge, Pennsylvania.
Vanguard VIF Small Company Growth Portfolio seeks to provide long-term capital appreciation. Advised by Granahan Investment Management,
Inc. of Waltham, Massachussetts and the Vanguard Group, Inc. of Valley Forge, Pennsylvania.
Wells Fargo Advantage Funds —advised by Wells Fargo Funds Management, LLC, a subsidiary of Wells Fargo & Company headquartered in San Francisco, California.
The investment objectives of the Covered Fund available under the Income Segment are briefly described below and discussed in more detail below under “Guaranteed Lifetime Withdrawal Benefit.”
Great-West Funds, Inc.–
advised by Great-West Capital Management, LLC of Greenwood Village, Colorado.
Great-West SecureFoundation®Balanced Fund–Class G Shares seeks long-term capital appreciation and income.
Meeting Investment Objectives
Meeting investment objectives depends on various factors, including, but not limited to, how well the Portfolio managers anticipate changing economic and market conditions. There is no guarantee that any of these Portfolios will achieve their stated objectives.
Where
to Find More Information About the Portfolios
Additional information about the investment objectives and policies of all the Portfolios and the investment advisory and administrative services and charges can be found in the current prospectuses of the Portfolio, which can be obtained from the Retirement Resource Operations Center. You may also visit schwaballiance.retirementpartner.com .
The Portfolio prospectuses should be read carefully before any decision is made concerning the allocation of Contributions to, or Transfers among, the Sub-Accounts.
Addition, Deletion or Substitution of Sub-Accounts
Great-West does not control the Portfolios
and cannot guarantee that any of the Portfolios will always be available for allocation of Contributions or Transfers. We retain the right to make changes in the Series Account and in its investments.
Great-West reserves the right to discontinue the offering of any Portfolio. If a Portfolio is discontinued, we may substitute shares of another Portfolio or shares of another investment company for the discontinued Portfolio’s shares. Any share substitution will comply with the requirements of the 1940 Act.
If you are contributing to a Sub-Account corresponding to a Portfolio that is being discontinued, you will be given notice prior to the Portfolio’s elimination.
Based on marketing, tax, investment and other conditions, we may establish new Sub-Accounts and make them available to Owners at our discretion. Each additional Sub-Account will
purchase shares in a Portfolio or in another mutual fund or investment vehicle.
If, in our sole discretion, marketing, tax, investment or other conditions warrant, we may also eliminate one or more Sub-Accounts. Before a Sub-Account is eliminated, we will notify you and request that you reallocate the amounts invested in the Sub-Account to be eliminated.
Application and Initial Contributions
The first step to purchasing the Schwab Advisor Choice Variable Annuity is to complete your Contract application and submit it with your initial minimum Contribution of $5,000. You can make initial Contributions by check (payable to Great-West), by transferring amounts from an eligible brokerage
account or by other method approved by Great-West. You also may purchase the Contract through a 1035 Exchange provided that the contract you are exchanging for the Schwab Advisor Choice Variable Annuity has a cash value of at least
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$5,000.
The Contract application and any initial Contributions made by check should be sent to the Retirement Resource Operations Center.
If your application is complete, your Contract will be issued and your Contribution will be credited within two Business Days after receipt by Great-West. Acceptance is subject to sufficient information in a form acceptable to us. We reserve the right to reject any application or
Contribution.
If your application is incomplete, you will be contacted by telephone or email to obtain the required information. If the information necessary to complete your application is not received within five Business Days, we will return to you both your check and the application. If you provide consent we will retain the initial Contribution and credit it as soon as we have completed your application.
Right of Cancellation Period
During the 10 day right of cancellation period, you may cancel your Contract. If you exercise your right of cancellation, you must return the Contract to Great-West or to the representative from whom you purchased it. The Contract will be void from the start and Great-West will refund the greater
of: 1) Contributions (less any withdrawals and distributions taken during the right of cancellation Period); or 2) the Annuity Account Value. If the Contract is issued as a replacement of existing life insurance or annuity coverage, the right of cancellation period is extended to 60 days from the date of receiving it.
After the right of cancellation period, we will allocate the Annuity Account Value held in the Schwab Money Market Sub-Account to the Sub-Accounts selected by the Owner. During the right of cancellation period, the Owner may select among the Sub-Accounts but any selections made during the right of cancellation period will not take effect until the right of cancellation period has expired.
After the right of cancellation period, we allocate Contributions to the Annuity Account in the proportion Requested by the Owner.
If there are no accompanying instructions, then allocations will be made in accordance with standing instructions. Allocations will be effective upon the Transaction Date.
During the right of cancellation period, you may change your Sub-Account allocations as well as your allocation percentages but your changes will not be effective until after the right of cancellation period expires.
Subsequent Contributions
Once your application is complete and we have received your initial Contribution, you can make subsequent Contributions to the Investment Segment at any time prior to the Annuity Commencement Date, as long as the Annuitant is living. Additional Contributions must be at least $500; or, $100 if made via an Automatic Bank
Draft Plan, if available. Total Contributions may exceed $1,000,000 only with our prior approval.
You can make subsequent Contributions by check, Automatic Bank Draft Plan, if available, transfers from your brokerage account or other method approved by Great-West. If you make subsequent Contributions by check, your check should be payable to Great-West.
We will allocate the subsequent Contributions to the Sub-Accounts selected by you and in the proportion Requested by you. If there are no accompanying instructions, Sub-Account allocations will be made in accordance with standing instructions. Allocations will be effective upon the Transaction Date.
You will receive a confirmation of each Contribution you make upon its acceptance. Subsequent Contributions are credited the day they are received in the Retirement Resource Operations Center
at Great-West if they are received on a Business Day. Subsequent Contributions received on non-Business Days will be credited the next Business Day.
If you cancel a purchase payment or if your check is returned due to insufficient funds, you will be responsible for any losses or fees imposed by your bank and losses that may be incurred as a result of any decline in the value of the canceled purchase. We reserve the right to refrain from allocating Contributions to your selected Sub-Accounts until your bank notifies us that your check has cleared.
Great-West reserves the right to modify the limitations set forth in this section.
Annuity Account Value
Before the Annuity Commencement
Date, the value of your Contract is the Annuity Account Value, which, before your Annuity Commencement Date, is the total dollar amount of all Accumulation Units credited to you for each Sub-Account. Initially, the value of each Accumulation Unit was set at $10.00.
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Each Sub-Account’s value prior to the Payout Election Date is equal to:
•
net Contributions allocated to the corresponding Sub-Account,
•
plus or minus any increase or decrease in the value of the assets of the Sub-Account due to investment results,
•
minus the daily mortality and expense risk charge and
•
minus any withdrawals or Transfers from the Sub-Account.
The value of a Sub-Account’s assets is determined at the end of each day
that the New York Stock Exchange is open for regular business (a valuation date). A valuation period is the period between successive valuation dates. It begins at the close of the New York Stock Exchange (generally 4:00 p.m. ET) on each valuation date and ends at the close of the New York Stock Exchange on the next succeeding valuation date.
The Annuity Account Value is expected to change from valuation period to valuation period, reflecting the investment experience of the selected Sub-Account(s), as well as the deductions for applicable charges. The Guarantee Benefit Fee is deducted from Covered Fund Value by means of the cancellation of Accumulation Units and is not part of the Accumulation Unit value calculations.
Upon allocating Contributions to a Sub-Account you will be credited
with variable Accumulation Units in that Sub-Account. The number of Accumulation Units you will be credited is determined by dividing the portion of each Contribution allocated to the Sub-Account by the value of an Accumulation Unit. The value of the accumulation unit is determined and credited at the end of the valuation period during which the Contribution was received.
Each Sub-Account’s Accumulation Unit value is established at the end of each valuation period. It is calculated by multiplying the value of that unit at the end of the prior valuation period by the Sub-Account’s Net Investment Factor for the valuation period. The formula used to calculate the Net Investment Factor is the same for the Investment Segment and Income Segment, as
discussed in Appendix A.
Transfers
While your Contract is in force, and subject to the terms of the GLWB Rider, if applicable, you may Transfer all or part of your Annuity Account Value among and between the Sub-Accounts by telephone, in writing by sending a Request to the Retirement Resource Operations Center or through the Internet at schwaballiance.retirementpartner.com . Incoming Transfers to closed Sub-Accounts are not permitted ; Transfers are permitted after Annuity Payouts from the Investment Segment have begun.
Your Request must specify:
•
the
amounts being Transferred,
•
the Sub-Account(s) from which the Transfer is to be made, and
•
the Sub-Account(s) that will receive the Transfer.
Currently, there is no limit on the number of Transfers you can make among the Sub-Accounts during any calendar year. However, we reserve the right to limit the number of Transfers you make. Also, there is currently no charge for Transfers. We reserve the right to impose such a charge in the future. If we choose to
exercise these rights, we will notify you by sending you a supplement to this prospectus, in accordance with all applicable regulations.
A Transfer generally will be effective on the date the Retirement Resource Operations Center receives the Request for Transfer if received before 4:00 p.m. ET on a Business Day. Any Transfer request received after 4:00 p.m. ET becomes effective on the following Business Day. Under current tax law, there will not be any tax liability to you if you make a Transfer.
Transfers involving the Sub-Accounts will result in the purchase and/or cancellation of Accumulation Units having a total value equal to the dollar amount being transferred. The purchase and/or cancellation of such units is made using the value of the Sub-Accounts as of the end of the valuation date on which
the Transfer is effective.
We reserve the right without prior notice to modify, restrict, suspend, or eliminate the Transfer privileges (including telephone and/or Internet Transfers) at any time.
At present, we do not impose minimums on amounts that must be transferred. However, we reserve the right to impose, from time to time, minimum dollar amounts that may be transferred from a Sub-Account.
We also reserve the right to impose, from time to time, minimum dollar amounts that must remain in a Sub-Account after giving effect to a Transfer from that Sub-Account. At present, we do not impose any such
21
minimums.
Market
Timing and Excessive Trading
The Contracts are intended for long-term investment and not for the purpose of market timing or excessive trading activity by anyone. Market timing activity may dilute the interests of contract owners in the underlying Portfolios. Market timing generally involves frequent or unusually large Transfers that are intended to take advantage of short-term fluctuations in the value of a Portfolio’s portfolio securities and the reflection of that change in the Portfolio’s share price. In addition, frequent or unusually large Transfers may harm performance by increasing Portfolio expenses and disrupting Portfolio management strategies. For example, excessive trading may result in forced liquidations of portfolio securities or cause the Portfolio to keep a relatively high cash position, resulting in increased brokerage costs and lost investment opportunities.
We
maintain procedures designed to prevent or minimize market timing and excessive trading (collectively, “prohibited trading”) by Owners. As part of those procedures, certain of the Portfolios have instructed us to perform standardized trade monitoring, while other Portfolios perform their own monitoring and request reports of the Owner’s trading activity if prohibited trading is suspected. If an Owner’s trading activity is determined to constitute prohibited trading, as defined by the applicable Portfolio, Great-West will notify the Owner that a trading restriction will be implemented if the Owner does not cease the prohibited trading. Some Portfolios may require that trading restrictions be implemented immediately without warning, in which case we will notify the Owner of the restriction imposed by the Portfolio(s), as applicable.
If a Portfolio determines, or, for Portfolios for which we perform trade monitoring, we
determine based on the applicable Portfolio’s definition of prohibited trading, that the Owner continues to engage in prohibited trading, we will restrict the Owner from making Transfers into the identified Portfolio(s) for the period of time specified by the Portfolio(s). Restricted Owners will be permitted to make Transfers out of the identified Portfolio(s) to other available Portfolio(s). When the Portfolio’s restriction period has been met, the Owner will automatically be allowed to resume Transfers into the identified Portfolio(s).
For Portfolios that perform their own monitoring, the Series Account does not impose trading restrictions unless or until a Portfolio first detects and notifies us of prohibited trading activity. Accordingly, we cannot prevent all prohibited trading activity before it occurs, as it may not be possible to identify it unless and until a trading pattern is established. To the extent such Portfolios
do not detect and notify us of prohibited trading or the trading restrictions we impose fail to curtail it, it is possible that a market timer may be able to make prohibited trading transactions with the result that the management of the Portfolios may be disrupted and the Owners may suffer detrimental effects such as increased costs, reduced performance, and dilution of their interests in the affected Portfolios.
We endeavor to ensure that our procedures are uniformly and consistently applied to all Owners, and we do not exempt any persons from these procedures. We do not enter into agreements with Owners whereby we permit prohibited trading. Subject to applicable state law and the terms of each Contract, we reserve the right without prior notice to modify, restrict, suspend or eliminate the Transfer privileges (including telephone Transfers) at any time, to require that all Transfer Requests be made by you and not by your
designee, and to require that each Transfer Request be made by a separate communication to us. We also reserve the right to require that each Transfer Request be submitted in writing and be signed by you.
The Portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the Portfolios should describe any policies and procedures relating to restricting prohibited trading. The frequent trading policies and procedures of a Portfolio may be different, and more or less restrictive, than the frequent trading policies and procedures of other Portfolios and the policies and procedures we have adopted to discourage prohibited trading. For example, a Portfolio may impose a redemption fee. The Owner should also be aware that we are legally obligated to provide (at the Portfolios’ request) information about each amount you cause to be deposited
into a Portfolio (including by way of premium payments and Transfers under your Contract) or removed from the Portfolio (including by way of withdrawals and Transfers under your Contract). If a Portfolio identifies you as having violated the Portfolio’s frequent trading policies and procedures, we are obligated, if the Portfolio requests, to restrict or prohibit any further deposits or exchanges by you in respect to that Portfolio. Under rules adopted by the SEC we are required to: (1) enter into a written agreement with each Portfolio or its principal underwriter that will obligate us to provide to the Portfolio promptly upon request certain information about the trading activity of individual Owners and (2) execute instructions from the Portfolio to restrict or prohibit further purchases or Transfers by specific Owners who violate the frequent trading policies established by the Portfolio.
22
Accordingly,
if you do not comply with any Portfolio’s frequent trading policies and procedures, you may be prohibited from directing any additional amounts into that Portfolio or directing any Transfers or other exchanges involving that Portfolio. You should review and comply with each Portfolio’s frequent trading policies and procedures, which are disclosed in the Portfolios’ current prospectuses.
We may revise our market timing and excessive trading policy and related procedures at our sole discretion, at any time and without prior notice, as we deem necessary or appropriate to comply with state or federal regulatory requirements or to impose additional or alternative restrictions on Owners engaging in prohibited trading. In addition, our orders to purchase shares of the Portfolios are generally subject to acceptance by the Portfolio, and in some cases a Portfolio may reject or reverse our purchase order. Therefore, we reserve the right
to reject any Owner’s Transfer Request if our order to purchase shares of the Portfolio is not accepted by, or is reversed by, an applicable Portfolio.
You should note that other insurance companies and retirement plans may also invest in the Portfolios and that those companies or plans may or may not have their own policies and procedures on frequent Transfers. You should also know that the purchase and redemption orders received by the Portfolios generally are “omnibus” orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. Omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan Owners and/or individual owners of variable insurance contracts. The nature of such orders may limit the Portfolios’ ability to apply their respective frequent trading policies and procedures. As a result, there is a risk that the Portfolios
may not be able to detect potential prohibited trading activities in the omnibus orders they receive. We cannot guarantee that the Portfolios will not be harmed by Transfer activity relating to the retirement plans and/or other insurance companies that invest in the Portfolios. If the policies and procedures of other insurance companies or retirement plans fail to successfully discourage frequent Transfer activity, it may affect the value of your investments in the Portfolios. In addition, if a Portfolio believes that an omnibus order we submit may reflect one or more Transfer Requests from an Owner engaged in frequent Transfer activity, the Portfolio may reject the entire omnibus order and thereby interfere with our ability to satisfy your Request even if you have not made frequent Transfers. For Transfers into more than one investment option, we may reject or reverse the entire Transfer Request if any part of it is not accepted by or is reversed by a Portfolio.
Automatic
Custom Transfers
Dollar Cost Averaging
You may arrange for systematic Transfers from the any Sub-Account in the Investment Segment to any other open Sub-Account in either the Investment Segment or the Income Segment. These systematic Transfers may be used to Transfer values from a Sub-Account to other Sub-Accounts as part of a dollar cost averaging strategy. Dollar cost averaging allows you to buy more units when the price is low and fewer units when the price is high. Over time, your average cost per unit may be more or less than if you invested all your money at one time. However, dollar cost averaging does not assure a greater profit, or any profit, and will not prevent or necessarily alleviate losses in a declining market. There is no charge for participating in Dollar Cost Averaging.
You can set up automatic dollar cost averaging on
a monthly, quarterly, semi-annual, or annual basis. Your Transfer will be initiated on the Transaction Date one frequency period following the date of the request. For example, if you request quarterly Transfers on January 9, your first Transfer will be made on April 9 and every three months on the 9th thereafter. Transfers will continue on that same day each interval unless terminated by you or for other reasons as set forth in the Contract.
If there are insufficient funds in the applicable Sub-Account on the date your Transfer is scheduled, your Transfer will not be made. However, your dollar cost averaging Transfers will resume once there are sufficient funds in the applicable Sub-Account. Dollar cost averaging will terminate automatically when you start taking payouts from the Contract. Dollar cost averaging Transfers must meet the following conditions:
•
The
minimum amount that can be Transferred out of the selected Sub-Account is $100.
• You must: (1) specify the dollar amount to be Transferred, (2) designate the Sub-Account(s) to which the Transfer will be made, and (3) designate the percentage of the dollar amount to be allocated to each Sub-Account into which you are Transferring money. The Accumulation Unit values will be determined on the Transfer date.
How dollar cost averaging works:
23
Month
Contribution
Units
Purchased
Price per
unit
Jan.
$250
10
$25.00
Feb.
250
12
20.83
Mar.
250
20
12.50
Apr.
250
20
12.50
May
250
15
16.67
June
250
12
20.83
Average
market value per unit $18.06
Investor’s average cost per unit $16.85
In the chart above, if all units had been purchased at one time at the highest unit value of $25.00, only 60 units could have been purchased with $1,500. By contributing smaller amounts over time, dollar cost averaging allowed 89 units to be purchased with $1,500 at an average unit price of $16.85. This investor purchased 29 more units at $1.21 less per unit than the average market value per unit of $18.06.
You may not participate in dollar cost averaging and Rebalancer at the same time.
Great-West
reserves the right to modify, suspend, or terminate dollar cost averaging at any time.
Rebalancer
Over time, variations in each Sub-Account’s investment results will change your asset allocation percentages. Rebalancer allows you to automatically reallocate your Investment Segment Account Value to maintain your desired asset allocation. (The Income Segment Account Value is not eligible for the Rebalancer.) Participation in Rebalancer does not assure a greater profit, or any profit, nor will it prevent or necessarily alleviate losses in a declining market. There is no charge for participating in Rebalancer and it is only available for assets held in the Investment Segment.
You can set up Rebalancer as a one-time Transfer or on a quarterly, semi-annual, or annual basis. If you select to rebalance only once, the Transfer will take place on
the Transaction Date of the request.
If you select to rebalance on a quarterly, semi-annual, or annual basis, the first Transfer will be initiated on the Transaction Date one frequency period following the date of the request. For example, if you request quarterly Transfers on January 9, your first Transfer will be made on April 9 and every three months on the 9th thereafter. Transfers will continue on that same day each interval unless terminated by you or for other reasons as set forth in the Contract.
24
How
Rebalancer works:
Suppose you purchased your annuity and you decided to allocate 60% of your initial Contribution to stocks; 30% to bonds and 10% to cash equivalents as in this pie chart:
Now assume that stock Portfolios outperform bond Portfolios and cash equivalents over a certain period of time. Over this period, the unequal performance may alter the asset allocation of the above hypothetical plan to look like this:
Rebalancer automatically reallocates your Annuity Account Value to maintain your desired asset allocation. In this example, the
portfolio would be reallocated back to 60% in stocks; 30% in bonds; 10% in cash equivalents.
On the Transaction Date for the specified Request, assets will be automatically reallocated to the Sub-Accounts you selected. The Rebalancer option will terminate automatically when you start taking payouts from the Contract.
Rebalancer Transfers must meet the following conditions:
•
Your Investment Segment Account Value must be included (except
for Sub-Accounts that are closed to new Contributions and incoming Transfers).
•
You must specify the percentage of your Investment Segment Account Value that you wish allocated to each Sub-Account and the frequency of rebalancing. You may modify the allocations or stop the Rebalancer option at any time.
•
You may not participate in dollar cost averaging and Rebalancer at the same time.
Great-West reserves the right
to modify, suspend, or terminate the Rebalancer option at any time.
Cash Withdrawals
You may withdraw all or part of your Annuity Account Value at any time during the life of the Annuitant and prior to the Annuity Commencement Date by submitting a withdrawal Request to the Retirement Resource Operations Center or via the Internet at schwaballiance.retirementpartner.com ; however, any withdrawals over $25,000 must be submitted in writing. Withdrawals are subject to the rules below and federal or state laws, rules, or regulations may also apply. The amount payable to you if you surrender your Contract is your Annuity Account Value, less any applicable Premium Tax. No withdrawals may be made from the Investment Segment after
the Annuity Commencement Date. If you surrender your Contract, the GLWB Rider, if elected, will terminate.
If you request a partial withdrawal, your Annuity Account Value will be reduced by the partial withdrawal amount and the Death Benefit, if applicable, will be reduced on a proportionate basis measured as a percentage of the partial withdrawal against the current Annuity Account Value. For example, a partial withdrawal of 10% of the Annuity Account Value would reduce your Death Benefit by 10%.
Numerical Example
Sum of Contract and GLWB Rider (if applicable) Contributions = $50,000
Annuity Account Value = $40,000
Withdrawal amount = $4,000
New Annuity Account
Value = $36,000
25
Adjustment to Death Benefit = ($40,000 - $4,000)/$40,000 = 0.90
Guaranteed Minimum Death Benefit = $45,000 ($50,000 x 0.90)
Partial withdrawals are unlimited. However, you must specify the Sub-Account(s) from which the withdrawal is to be made. If you elect the GLWB Rider, withdrawals from the Income Segment significantly could reduce, or even eliminate, the value of the GLWB. Before you decide to take a partial withdrawal from the Income Segment, you should carefully consider the terms and conditions of the GLWB and the impact of any withdrawal on your Benefit Base. If you do not specify from which Sub-Accounts to take the withdrawal,
we will take it from all of your Sub-Accounts in the Investment Segment in proportion to the Annuity Account Value you have in each Sub-Account of the Investment Segment. The minimum partial withdrawal is $500.
The following terms apply to withdrawals:
•
Partial withdrawals or surrenders from the Investment Segment are not permitted after the Annuity Commencement Date;
•
If a partial withdrawal is made within 30 days of the date annuity payouts are scheduled to begin,
we may delay the Annuity Commencement Date by 30 days;
•
A partial withdrawal or a surrender will be effective upon the Transaction Date.
Withdrawal requests submitted in writing must include your original signature. If your instructions are not clear, your request will be denied and no surrender or partial withdrawal will be processed.
If we receive a Request for surrender or partial withdrawal, we may postpone any cash payment from the Annuity Account Value for no more than 7 days.
We may also delay payment for any of the following reasons:
(a)
any
period during which the New York Stock Exchange is closed (other than customary weekend and holding closings) or trading on the New York Stock Exchange is restricted;
(b)
any period during which an emergency exists such that the disposal of or determination of the value of shares of the Portfolios is not reasonably practicable; or
(c)
any other period as the Securities and Exchange Commission may by order permit for the protection of security holders.
After
a withdrawal of all of your Annuity Account Value, or at any time that your Annuity Account Value and Benefit Base are reduced to zero, all your rights under the Contract and GLWB Rider will terminate.
Tax consequences of withdrawals are detailed below, but you should consult a competent tax advisor prior to authorizing a withdrawal from your Annuity Account Value.
Withdrawals to Pay Investment Manager or Financial Advisor Fees
You may request partial withdrawals from your Annuity Account Value and direct us to remit the amount withdrawn directly to your designated Investment Manager or Financial Advisor (collectively “Consultant”). A withdrawal request for this purpose must meet the $500 minimum withdrawal requirements
and comply with all terms and conditions applicable to partial withdrawals, as described above. Tax consequences of withdrawals are detailed below, but you should consult a competent tax advisor prior to authorizing a withdrawal from your Annuity Account to pay Consultant fees.
Tax Consequences of Withdrawals
Withdrawals made for any purpose may be taxable—including payments we make directly to your Consultant and Guaranteed Lifetime Withdrawal Benefits.
In addition, the Code may require us to withhold federal income taxes from withdrawals and report such withdrawals to the Internal Revenue Service (“IRS”). If you request partial withdrawals, your Annuity Account Value will be reduced by the sum of the amount of the withdrawal
and the related withholding.
You may elect, in writing, to have us not withhold federal income tax from withdrawals, unless withholding is mandatory for your Contract. If you are younger than 59 ½, the taxable portion of any withdrawal is generally considered to be an early withdrawal and may be subject to an additional federal penalty tax of 10%.
Some states also require withholding for state income taxes. For details about withholding, please see Federal Tax Matters on page 45.
26
Telephone
and Internet Transactions
You may make Transfer Requests by telephone, fax and/or by Internet. Transfer Requests received before 4:00 p.m. ET will be made on that day at that day’s unit value. Those received after 4:00 p.m. ET will be made on the next Business Day at that day’s unit value.
We will use reasonable procedures to confirm that instructions communicated by telephone, fax and/or Internet are genuine, such as:
•
requiring some form of personal identification prior to acting on instructions;
•
providing
written confirmation of the transaction; and/or
•
tape recording the instructions given by telephone.
If we follow such procedures we will not be liable for any losses due to unauthorized or fraudulent instructions.
We reserve the right to suspend telephone, fax and/or Internet transaction privileges at any time, for some or all Contracts, and for any reason. We currently do not permit partial withdrawals or surrenders by telephone; however you may request partial withdrawal Requests in the amount of $25,000 or less by Internet. All Requests for full surrenders, periodic withdrawals, and partial withdrawals in excess of $25,000 must be in
writing.
Death Benefit
At the time you apply to purchase the Contract, you select one of the two Death Benefit options we offer.
Option 1 — The amount of the Death Benefit under Option 1 will be your Annuity Account Value as of the date we receive a Request for the payout of the Death Benefit, minus any Premium Tax.
The Owner, Annuitant, and Contingent Annuitant each must be age 85 or younger at the time the Contract is issued in order for you to select Option 1. Your Mortality and Expense Risk Charge under Option 1 is 0.49% of the average daily value of the Sub-Accounts to which you have allocated Contributions.
Option
2 — The amount of the Death Benefit under Option 2 will be the greater of:
•
the Annuity Account Value as of the date we receive a Request for the payout of the Death Benefit, minus any Premium Tax; or
•
the sum of Contributions applied to the Contract in both the Investment Segment and the Income Segment, as of the date the Request for payment is received, less the proportionate impact of any distributions, partial or periodic withdrawals and Premium Tax, if any.
The
Owner, Annuitant, and Contingent Annuitant each must be age 80 or younger at the time the Contract is issued in order for you to select Option 2. Your Mortality and Expense Risk Charge under Option 2 is 0.69% of the average daily value of the Sub-Accounts to which you have allocated Contributions.
For a full description of the circumstances under which we pay the Death Benefit, please see Distribution of Death Benefit on page 27 of this Prospectus.
The difference between the two Death Benefit options we offer is that the amount payable upon death (the Death Benefit) is based on different criteria for each option and there is a different Mortality and Expense Risk Charge for each. Option 2 provides for the return of Contributions in the event that amount is greater than the Annuity Account Value (minus any Premium Tax and minus the proportionate
impact of any partial withdrawals). This could happen, for example, if the Death Benefit becomes payable soon after the Contract is purchased (say, one to three years) and, during those years, while Contributions are being made, the investment markets generally are in decline. Under these circumstances, it is possible that the performance of the Sub-Accounts you select may cause the Annuity Account Value to be less than the total amount of Contributions. If you have selected Death Benefit Option 2 on a Contract, your Beneficiary would receive the greater amount, in this case, the sum of all Contributions (minus any Premium Tax and minus the proportionate impact of any partial withdrawals). If you have selected Death Benefit Option 1, your Beneficiary would receive the lesser amount, in this case, the Annuity Account Value (minus any Premium Tax).
The Death Benefit will become payable following our receipt of the Beneficiary’s
claim in good order. When an Owner dies before the Annuity Commencement Date and a Death Benefit is payable to a Beneficiary, the Death Benefit proceeds will remain invested according to the allocation instructions given by the Owner(s) until: (i) new allocation instructions are requested by the Beneficiary; (ii) the Death Benefit is actually paid to the Beneficiary, except where the GLWB Rider may not be maintained by the Beneficiary; or, (iii) a Request for a payout of the Death Benefit is processed, as described below.
27
The amount of the Death Benefit will be determined as of the date we receive a Request for the payout of the Death Benefit. However, on the date a payout option is processed, the Annuity Account Value will be transferred to the Schwab Money
Market Sub-Account unless the Beneficiary elects otherwise.
Subject to the distribution rules below, payout of the Death Benefit may be made as follows:
•
payout in a single sum, or
•
payout under any of the variable annuity options provided under this Contract.
In any event, no payout of benefits provided under the Contract will be allowed that does not satisfy the requirements of the Code and any other applicable
federal or state laws, rules or regulations.
Ownership and Assignment
The Owner, and if selected, Joint Owner, exercise all rights and privileges under the Contract, while the Annuitant is living. Unless otherwise required by the state in which the Contract is issued, the Owner may not be changed and the Contract may not be transferred, sold, assigned, pledged, charged, encumbered, or in any way alienated. A change of Owner must be made in writing in a form satisfactory to us. The change will take effect as of the date the Request is processed, unless you specify a certain date. Any change is subject to any payout or other action we have taken before recording your ownership change. A change in the Owner of the Contract will result in termination of the GLWB Rider except
in certain circumstances. See Termination of the GLWB Rider on page 45.
Grantor Trust Owned Annuity
We will issue the Contract to Grantor Trusts. We will allow a Grantor Trust to be the Owner only if it either has a single Grantor who is a natural person, or has two Grantors who are one another’s Spouse as of the Effective Date. When the Contract is issued, a Grantor of the trust must be an Annuitant, and the Grantor’s spouse may be named as a Joint Annuitant. The Annuitant(s) may not be changed. Contracts owned by a Grantor Trust are not considered owned by a non-natural person and will be subject to the tax requirements generally applicable to Non-Qualified Annuity Contracts or the tax requirements applicable to individual
retirement annuities or Roth IRA annuities if the Contract is a Qualified Annuity Contract under Section 408(b) of the Code or a Roth IRA annuity under Section 408A of the Code. Grantor Trust owned Contracts receive tax deferral in accordance with the Code. Upon the death of the Grantor(s), the Death Benefit will be paid pursuant to the Death Benefit provisions of the Contract.
Joint Annuitants
If the Contract is a Non-Qualified Annuity Contract, you are permitted to name a Joint Annuitant. Joint Annuitants may be named in the application or any time before the Annuity Commencement Date. Joint Annuitants must be one another’s Spouse as of the Effective Date.
Beneficiary
You may select one or more Beneficiaries. If more than one Beneficiary is selected, they will share equally in any Death Benefit payable unless you indicate otherwise. You may change the Beneficiary any time before the Annuitant’s death.
You may also select one or more Contingent Beneficiaries. You may change the Contingent Beneficiary before the Annuitant’s death. If one or more primary Beneficiaries are alive within 30 days after the Annuitant’s death, the Contingent Beneficiary cannot become the primary Beneficiary and any interest the Contingent Beneficiary may have in the Contract will cease.
A change of Beneficiary or Contingent Beneficiary will take effect as of the date the Request is processed, unless the Owner specifies a certain date. If the Owner dies before the Request is processed, the change will take effect as of the date
the Request was made, unless we have already made a payout or otherwise taken action on a designation or change before receipt or processing of such Request. The interest of any Beneficiary who dies before the Owner or the Annuitant will terminate at the death of the Beneficiary and the Contingent Beneficiary will become the Beneficiary. The interest of any Beneficiary who dies at the time of, or within 30 days after the death of an Owner or the Annuitant will also terminate if no benefits have been paid to such Beneficiary, unless the Owner otherwise indicates by Request. The benefits will then be paid to the Contingent Beneficiary. If no Contingent Beneficiary has been designated, then the benefits will be paid as though the Beneficiary had died before the deceased Owner or Annuitant. If no Beneficiary or Contingent Beneficiary
28
survives
the Owner or Annuitant, as applicable, we will pay the Death Benefit proceeds to the Owner’s estate.
If the Beneficiary is not the Owner’s surviving Spouse, she/he may elect, not later than one year after the Owner’s date of death, to receive the Death Benefit in either a single sum or payout under any of the variable annuity options available under the Contract, provided that:
•
such annuity is distributed in substantially equal installments over the life or life expectancy of the Beneficiary or over a period not extending beyond the life expectancy of the Beneficiary and
•
such
distributions begin not later than one year after the Owner’s date of death.
If Great-West does not receive an election from a non-Spouse Beneficiary or substantially equal installments begin later than one year after the Owner’s date of death, then the entire amount must be distributed within five years of the Owner’s date of death. The Death Benefit will be determined as of the Annuity Commencement Date.
If a corporation or other non-individual entity is entitled to receive benefits upon the Owner’s death, the Death Benefit must be completely distributed within five years of the Owner’s date of death.
A Beneficiary or Contingent Beneficiary designated irrevocably may not be changed without the written consent of that Beneficiary, or Contingent Beneficiary, as applicable, except as allowed by law.
Distribution
of Death Benefit
Any Death Benefit payable to a Beneficiary upon the Owner’s death will be distributed as follows:
(1)
If the Owner’s surviving Spouse is the person entitled to receive benefits upon the Owner’s death, the surviving Spouse will be treated as the Owner and will be allowed to take the Death Benefit or continue the Contract in force. However, if single life GAW Installments have been selected for the Income Segment, then the GLWB will terminate and the assets held in the Covered Fund(s) will be sold and the sales proceeds will be transferred to the Schwab Money Market Sub-Account;
(2)
If
a non-Spouse individual is the person entitled to receive benefits upon the Owner’s death, the non-Spouse individual Beneficiary may elect to receive the Death Benefit in either a single sum or payout under any of the variable annuity options available under the Contract, provided that: (a) such annuity is distributed in substantially equal installments over the life or life expectancy of the Beneficiary; and (b) such distributions begin no later than one year after the Owner’s date of death. The GLWB will terminate and the assets held in the Covered Fund(s) will be sold and the sales proceeds will be transferred to the Schwab Money Market Sub-Account. If Great-West does not receive an election from an individual non-Spouse Beneficiary such that substantially equal installments have begun no later than one year after the Owner’s date of death, then the entire amount must be distributed within five years of the Owner’s date
of death.
The Death Benefit will be determined as of the date the payouts commence.
If a Joint Annuitant is named, any reference below to death of the Annuitant means the death of the last surviving Joint Annuitant and the rules below regarding “Death of Owner Who is Not the Annuitant” will apply upon the death of the Owner rather than the rules below regarding the “Death of Owner Who Is the Annuitant.”
Death of Annuitant Who is Not the Owner of the Contract
Upon the death of the Annuitant while the Owner is living, and before the Annuity Commencement Date, no Death Benefit will be payable and the Owner (or the Grantor, if the Owner is a Grantor Trust)
will become the Annuitant unless a Contingent Annuitant has previously been designated. The Owner may designate a new Annuitant, however, at any time, as provided in the Contract.
If the Owner names a Contingent Annuitant prior to the Annuitant’s death, and the Annuitant dies before the Annuity Commencement Date while the Owner and Contingent Annuitant are living, no Death Benefit will be payable and the Contingent Annuitant will become the Annuitant.
If the Annuitant dies after the Annuity Commencement Date and before the entire interest has been distributed, any benefit payable must be distributed to the Beneficiary according to and as rapidly as under the payout option which was in effect on the Annuitant’s date of death.
Death of Owner Who Is Not
the Annuitant
If the Owner dies before annuity payouts commence and there is a Joint Owner who is the surviving Spouse of the deceased Owner, the Joint Owner becomes the Owner and Beneficiary and the Joint Owner
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may elect to take the Death Benefit or to continue the Contract in force.
In all other cases, we will pay the Death Benefit to the Beneficiary even if a Joint Owner (who was not the Owner’s Spouse on the date of the Owner’s death), the Annuitant and/or the Contingent Annuitant are alive at the time of the Owner’s death, unless the sole Beneficiary is the deceased Owner’s surviving Spouse who may elect to become the Owner and Annuitant and
to continue the Contract in force.
If the Owner dies after annuity payouts commence and before the entire interest has been distributed while the Annuitant is living, any benefit payable will continue to be distributed to the Annuitant as rapidly as under the payout option applicable on the Owner’s date of death. All rights granted the Owner under the Contract will pass to any surviving Joint Owner and, if none, to the Annuitant.
Death of Owner Who Is the Annuitant
If there is a Contingent Annuitant and a Joint Owner who is the surviving Spouse of the deceased Owner, the Joint Owner will become the Owner and the Beneficiary, the Contingent Annuitant will become the Annuitant, and the Contract will continue in force.
If
there is a Joint Owner who is the surviving Spouse of the deceased Owner but no Contingent Annuitant, the Joint Owner will become the Owner, Annuitant, and Beneficiary and may elect to take the Death Benefit or continue the Contract in force.
In all other cases, we will pay the Death Benefit to the Beneficiary, even if a Joint Owner (who was not the Owner’s Spouse on the date of the Owner’s death) and/or Contingent Annuitant are alive at the time of the Owner’s death, unless the sole Beneficiary is the deceased Owner’s surviving Spouse who may elect to become the Owner and Annuitant and to continue the Contract in force.
If Owner/Annuitant Dies After Annuity Commencement Date
If the Owner/Annuitant dies after the Annuity Commencement Date, any benefit
payable must be distributed to the Beneficiary in accordance with and at least as rapidly as the annuity option in effect on the date of death.
Contingent Annuitant
While the Annuitant is living, you may, by Request, designate or change a Contingent Annuitant from time to time. A change of Contingent Annuitant will take effect as of the date the request is processed, unless you specify a certain date. Please note you are not required to designate a Contingent Annuitant.
Deferred Payment
If payment of the death benefit is deferred due to an action to recover the proceeds as defined in New York Insurance law section 3214, interest on the death benefit proceeds will be paid from the date of death of the Annuitant at the rate currently paid by Great-West on proceeds left on deposit under the interest
settlement option.
Impact of Withdrawals on Guaranteed Minimum Death Benefit (Option 2)
If you have selected Death Benefit Option 2, you should be aware that distributions and Excess Withdrawals will reduce your Death Benefit on a pro-rata basis.
Numerical Example
Sum of Contract and GLWB Rider Contributions = $50,000
Annuity Account Value = $40,000
Withdrawal amount = $4,000
New Annuity Account Value = $36,000
Adjustment to Death Benefit = ($40,000 - $4,000)/$40,000 = 0.90
Guaranteed Minimum Death Benefit = $45,000 ($50,000 x 0.90)
The
Benefit Base has no value and will not affect the Death Benefit.
Charges and Deductions
No amounts will be deducted from your Contributions except for any applicable Premium Tax. As a result, the full amount of your Contributions (less any applicable Premium Tax) is invested in the Contract.
As more fully described below, charges under the Contract are assessed only as deductions for:
•
Premium
Tax, if applicable; and/or
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•
charges against your Annuity Account Value for our assumption of mortality and expense risks; and/or
. •
Guarantee Benefit Fee, if applicable.
The Contract may be available for use with investment accounts at eligible broker/dealers that charge an annual fee in lieu of sales charges
or an investment advisory fee. Fees for these accounts would be specified in the respective account agreements. Any fees and expenses associated with these accounts will be separate from and in addition to the fees and expenses associated with the Contract. You should ask your Consultant for more details.
Mortality and Expense Risk Charge
The mortality risk we assume is that Annuitants may live for a longer period of time than we estimate. We assume this mortality risk from our contractual obligations to make annuity payouts determined in accordance with the annuity tables and other provisions contained in the Contract which cannot be changed. This means that you can be sure that neither the Annuitant’s longevity nor an unanticipated improvement in general life expectancy will adversely affect the annuity payouts under the Contract. The expense risk we assume is the risk that our
actual expenses in administering the Contracts and the Series Account will be greater than we anticipated.
To compensate us for assuming these risks, we deduct a Mortality and Expense Risk Charge from your Annuity Account Value at the end of each valuation period. If you select Death Benefit Option 1, this is a daily charge equal to an effective annual rate of 0.65%. We guarantee that this charge will never increase beyond 0.49%. If you select Death Benefit Option 2, the Mortality and Expense Risk Charge is a daily charge equal to an effective annual rate of 0.69%. We guarantee that this charge will never increase beyond 0.69% .
The Mortality and Expense Risk Charge is reflected in the unit values of each of the Sub-Accounts you have selected. Thus, this charge will continue to be applicable should you choose a variable annuity payout
option or a periodic withdrawal option.
Annuity Account Values and annuity payouts are not affected by changes in actual mortality experience we incur.
The Mortality and Expense Risk Charge is higher for Owners who have selected Death Benefit Option 2 because we bear substantial risk in connection with that option. Specifically, we bear the risk that we may be required to pay an amount to your Beneficiary that is greater than your Annuity Account Value.
If the Mortality and Expense Risk Charge is insufficient to cover actual costs and risks assumed, we will bear the loss. If this charge is more than sufficient, any excess will be profit for us. Currently, we expect a profit from this charge. Our expenses for distributing the Contracts will be borne by our general assets, which include any profits from this charge.
Expenses
of the Portfolios
The values of the assets in the Sub-Accounts reflect the values of the Sub-Accounts’ respective Portfolio shares and therefore the fees and expenses paid by each Portfolio.
Some of the Portfolios’ investment advisers or administrators may compensate us for providing administrative services in connection with the Portfolios or cost savings experienced by the investment advisers or administrators of the Portfolios. Such compensation is typically a percentage of the value of the assets invested in the relevant Sub-Accounts and generally may range up to 0.35% annually of net assets. GWFS Equities, Inc. (“GWFS”) is the principal underwriter and distributor of the Contracts and may also receive Rule 12b-1 fees (ranging up to 0.25% annually of net assets) directly from certain Portfolios for providing distribution related services related to shares of the Portfolios
offered in connection with a Rule 12b-1 plan. If GWFS receives Rule 12b-1 fees, combined compensation received by us for administrative services and received by GWFS for distribution related services generally ranges up to 0.60% annually of the assets invested in the relevant Sub-Accounts.
Premium Tax
We may be required to pay state Premium Taxes or retaliatory taxes currently ranging from 0% to 3.5% in connection with Contributions or values under the Contracts. Currently, due to our total mix of business, our Premium Tax rate in New York for annuities is 0%. In the future, if we are required to pay Premium Taxes, we will deduct the charges for the Premium Taxes we incur with respect to your Contributions, from amounts withdrawn, or from annuity payments. In some states, charges for both direct Premium Taxes and retaliatory Premium Taxes may be imposed at the same or different times
with respect to the same Contribution, depending on applicable state law.
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Other Taxes
Under present laws, we will incur state or local taxes (in addition to the Premium Tax described above) in New York. No charges are currently deducted for taxes other than Premium Tax. However, we reserve the right to deduct charges in the future for federal, state, and local taxes or the economic burden resulting from the application of any tax laws that we determine to be attributable to the Contract.
Periodic Withdrawals
You may request that all or part of the Investment Segment Account Value be applied to a periodic withdrawal option. All requests for periodic
withdrawals must be in writing. The amount applied to a periodic withdrawal is the Investment Segment Account Value, less Premium Tax, if any.
In requesting periodic withdrawals, you must elect:
•
The withdrawal frequency of either 1-, 3-, 6- or 12-month intervals;
•
A minimum withdrawal amount of at least $100;
•
The
calendar day of the month on which withdrawals will begin;
•
One of the periodic withdrawal payout options discussed below— you may change the withdrawal option and/or the frequency once each calendar year; and
•
The type of allocation of withdrawals from the Investment Segment Sub-Accounts
Á
Withdrawals
may be prorated across the Investment Segment Sub-Accounts in proportion to their assets; or
Á
Withdrawals may be made from specific Investment Segment Sub-Account(s). When the specified Investment Segment Sub-Account(s) is depleted, we will automatically prorate the remaining withdrawals against any remaining Sub-Account assets unless you request otherwise.
While periodic withdrawals are being received:
•
You may continue to exercise
all contractual rights.
•
You may keep the same Sub-Accounts as you had selected before periodic withdrawals began.
•
Charges and fees under the Contract continue to apply.
Periodic withdrawals will cease on the earlier of the date:
•
The amount elected
to be paid under the option selected has been reduced to zero.
•
The Investment Segment Annuity Account Value is zero.
•
You request that withdrawals stop.
•
You purchase an annuity payout option.
•
The
Owner or the Annuitant dies.
We may limit the number of times you may restart a periodic withdrawal program.
Periodic withdrawals made for any purpose may be taxable, subject to withholding and to the 10% federal penalty tax if you are younger than age 59½.
If you choose to receive payouts from your Contract through periodic withdrawals, you may select from the following payout options:
Income for a specified
period (at least 36 months)—You elect the length of time over which withdrawals will be made. The amount paid will vary based on the duration you choose. The amount paid will also vary as a result of investment performance.
Income of a specified amount (at least 36 months)—You elect the dollar amount of the withdrawals. Based on the amount elected, the duration may vary. The duration may also vary as a result of investment performance.
Any other form of periodic withdrawal acceptable to Great-West which is for a period of at least 36 months.
In
accordance with the provisions outlined in this section, you may request a periodic withdrawal to remit fees paid to your Consultant. There may be income tax consequences to any periodic withdrawal made for this purpose. Please see Cash Withdrawals on page 25.
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Annuity Payouts From the Investment Segment
You can choose the date that you wish annuity payouts from the Investment Segment to start (the Payout Election Date) either when you purchase the Contract or at a later date. You can change your selection at any time up to 30 days before the annuity date that you have selected.
If you do not select a Payout Election Date, payouts will begin on the Annuitant’s 99th birthday. If the Owner does not take annuity payouts from the Investment Segment, the entire Annuity Account Value will be annuitized at that time and any benefit under the GLWB Rider will terminate. If you have initiated Installments under the GLWB Rider, only the Investment Segment will be annuitized.
If you have not elected a payout option within 30 days of the Annuity Commencement Date, your Investment Segment Annuity Account Value will be paid out as a variable life annuity with a guaranteed period of 15 years.
The amount to be paid out will be based on the Investment Segment Account Value or Annuity Account Value, if applicable, on the Annuity Commencement Date. The minimum amount
that may be withdrawn from the Investment Segment Account Value to purchase an annuity payout option is $2,000. If your Investment Segment Account Value is less than $2,000, we may pay the amount in a single sum subject to the Contract provisions applicable to a partial withdrawal.
If you choose to receive variable annuity payouts from your Contract, you may select from the following payout options:
Variable life annuity with guaranteed period—This option provides for payouts during a guaranteed period or for the lifetime of the Annuitant, whichever
is longer. The guaranteed period may be 5, 10 or 15 years. Upon the death of the Annuitant, the Beneficiary will receive the remaining payouts at the same interval elected by the Owner.
Variable life annuity without guaranteed period—This option provides payouts during the lifetime of the Annuitant. The annuity terminates with the last payout due prior to the death of the Annuitant. Because no minimum number of payouts is guaranteed, this option may offer the maximum level of payouts. It is possible that only one payout may be made if the Annuitant dies before the date on which the second payout is due.
Any other form of variable annuity payout that is acceptable to Great-West.
Under
an annuity payout option, you can receive payouts monthly, quarterly, semi-annually or annually in payments which must be at least $50. We reserve the right to make payouts using the most frequent payout interval which produces a payout of at least $50. Once annuity payouts commence, you cannot make Contributions or take withdrawals, other than your annuity payouts , but you may continue to Transfer among and between Sub-Accounts.
If you elect to receive a single sum payment, the amount paid is the Surrender Value.
Amount of First Variable Payout
The first payout under a variable annuity payout option will be based on the value of the amounts held in the Investment Segment Sub-Accounts or Annuity Account, if applicable, you have selected on the first valuation date preceding the Annuity Commencement Date. We determine
the first payout under a variable annuity option by applying the appropriate rate to the amount applied under the payout option. The rate applied reflects an assumed investment return (“AIR”) of 2.5%.
For annuity options involving life income, the actual age, year in which annuitization commences and gender of the Annuitant will affect the amount of each payout. We reserve the right to ask for satisfactory proof of the Annuitant’s age. We may delay annuity payouts until satisfactory proof is received. Because payouts to older Annuitants are expected to be fewer in number, the amount of each annuity payout under a selected annuity form will be greater for older Annuitants than for younger Annuitants.
If the age of the Annuitant has been misstated, the payouts established will be made on the basis of the correct age. If payouts were too large because of misstatement, we may deduct
the difference with interest us from the next payout or payouts. If payouts were too small, we may add the difference with interest to the next payout. The interest rate used will be 3%.
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Annuity Units
We determine the number of Annuity Units paid for each Sub-Account by dividing the amount of the first payout by its Annuity Unit value on the first valuation date preceding the Annuity Commencement Date. The number of Annuity Units used to calculate each payout for a Sub-Account remains fixed during the Annuity Payout Period.
Amount of Variable Payouts After the First Payout
Payouts after the first will vary depending upon the investment performance
of the Investment Segment Sub-Accounts or Annuity Account, if applicable. Your payouts will increase in amount over time if the Sub-Accounts you select earn more than the 2.5% AIR. Likewise, your payouts will decrease over time if the Sub-Accounts you select earn less than the 2.5% AIR. We determine the subsequent amount paid from each Sub-Account by comparing the actual performance of the Sub-Account to the AIR.
Transfers After the Variable Annuity Commencement Date
Once annuity payouts have begun, Transfers may be made within the variable annuity payout option among the available Investment Segment Sub-Accounts. Transfers after the Annuity Commencement Date will be made by converting the number of Annuity Units being Transferred to the number of Annuity Units of the Investment Segment Sub-Account to which the Transfer is made. The result will be that the next annuity payout, if
it were made at that time, would be the same amount that it would have been without the Transfer. Thereafter, annuity payouts will reflect changes in the value of the new Annuity Units.
Other Restrictions (Investment Segment Only)
Once payouts start from the Investment Segment under the annuity payout option you select:
•
no changes can be made in the payout option;
•
no additional Contributions to the Investment Segment will be accepted under the
Contract; and
•
no further withdrawals, other than withdrawals made to provide annuity benefits or satisfy the terms of the GLWB Rider, will be allowed.
A portion or the entire amount of the annuity payouts may be taxable as ordinary income. If, at the time the Annuity Commencement Date we have not received a proper written election not to have federal income taxes withheld, we must by law withhold such taxes from the taxable portion of such annuity payouts and remit that amount to the federal government. State income tax withholding may also apply. Please see Federal Tax Matters on page 45 for details.
Guaranteed
Lifetime Withdrawal Benefit
When you purchase the Contract, you have the option of allocating Contributions under the GLWB Rider to a Covered Fund(s) in the Income Segment. If you exercise this option, the GLWB will provide you with a Guaranteed Lifetime Withdrawal Benefit, provided all conditions, described below, are met.
GLWB Accumulation Phase
The GLWB Accumulation Phase begins when you make a GLWB election by investing in a Covered Fund(s) in the Income Segment. The GLWB Accumulation Phase ends when you elect to begin taking GAWs. During the Accumulation Phase, a Benefit Base will be established which will be used later to determine, in part, the amount of your GAWs. You may elect the GLWB by allocating contributions to the Covered Fund(s) on any Business Day as long as you are younger than age 85 on the GLWB Rider Election Date. We
will record the GLWB Rider Election Date.
Guarantee Benefit Fee
The annual Guarantee Benefit Fee is assessed quarterly, in arrears, during the GLWB Accumulation Phase and GAW Phase. One-fourth of the Guarantee Benefit Fee is deducted quarterly from your Covered Fund(s) Value no later than the 10th Business Day of the month following the calendar quarter end by means of the cancellation of Accumulation Units. The Guarantee Benefit Fee will be calculated based on your Covered Fund(s) Value, subject to the Benefit Base cap, as of the date of the deduction. The Benefit Base may or may not equal the Covered Fund Value at the time the Guarantee Benefit Fee is calculated. The Benefit Base will
always be greater than or equal to the Covered Fund Value when the Guarantee Benefit Fee is calculated on a Ratchet Date. We reserve the right to change the frequency of the deduction upon thirty (30) days prior written notice. The Guarantee Benefit Fee will not be assessed during the GLWB Settlement Phase.
The first Guarantee Benefit Fee you pay will be pro-rated based on the portion of the quarter in which you allocated Contributions to the Covered Fund(s). The current Guarantee Benefit Fee is 1.00% of the Covered
34
Fund(s) Value held in the Income Segment. We reserve the right to change the frequency and amount of the Guarantee Benefit Fee for any reason, including, but not limited to, current market conditions, Owner demand, and changes
in the design, upon thirty (30) days prior written notice to you. However, the Guarantee Benefit Fee will never be less than 0.70% or greater than 1.50% of your Income Segment Covered Fund(s) Value. We determine the Guarantee Benefit Fee based on observations of a number of long-term experience factors, including, but not limited to, interest rates, volatility, investment returns, expenses, mortality, and lapse rates. As an example, if mortality experience improves faster than we have anticipated, and the population in general is expected to live longer than initially projected, we might increase the Guarantee Benefit Fee to reflect our increased probability of paying longevity benefits. However, improvements in mortality experience is provided as an example only. We reserve the right to change the Guarantee Benefit Fee at our discretion and for any reason, whether or not these experience factors change (although we will never increase the fee above the maximum or decrease
the fee below the minimum). We do not need the happening of any event before we may change the Guarantee Benefit Fee.
Unless otherwise stated, any change to the fee will affect all assets in the Covered Fund(s) in the Income Segment.
If you terminate the GLWB Rider, a final pro-rated Guarantee Benefit Fee will be deducted based on the portion of the last quarter that the GLWB Rider was in effect.
The Covered Fund(s)
The GLWB Rider provides protection relating to your Covered Funds by ensuring that, regardless of how your Covered Fund(s) actually performs or the actual Covered Fund Value when you begin your GAWs for retirement or other purposes, you will receive predictable income payments for as long as you live so long as specified conditions are met.
The
Covered Fund(s) may be managed in a more conservative fashion than other Portfolios available to you, which may reduce overall volatility in investment performance, may reduce investment returns and may reduce the likelihood that we will be required to make payments under the GLWB Rider. The reduction in volatility permits us to more effectively provide the guarantees under the Rider. If you do not purchase the GLWB Rider, it is possible that you may invest in other Portfolios that experience higher growth or lower losses, depending on the market, than the Covered Fund(s)’ experience. It is impossible to know how various investments will fare on a comparative basis.
We may, without your consent, offer new Covered Fund(s) or cease offering Covered Fund(s). We may make such a change due to a fund reorganization, fund substitution, to help protect our ability to provide the guarantees under the GLWB Rider, or otherwise. If such
a change is required, we will notify you in writing prior to the effective date of such change (generally 90 calendar days unless we are required to give less notice) to allow you to reallocate your Covered Fund Value to maintain your GLWB Rider benefits. If a Covered Fund is closed, you will maintain your Benefit Base in that Covered Fund and all rights under the Rider unless and until you Transfer assets out of the Covered Fund or terminate your Contract, in which case your GLWB Rider will terminate. If you are if investing via an Automatic Bank Draft Plan to the closing Covered Fund or utilizing an automatic custom transfer feature such as Dollar Cost Averaging involving the closing Covered Fund, you should contact an annuity account representative to make alternate arrangements.
Covered Fund Value
Your Covered Fund Value is the aggregate value of each Covered Fund. Your Covered
Fund Value may increase with positive market performance or by Contributions to the Income Segment. Your Covered Fund Value may decrease with negative market performance, deduction of the Guaranteed Benefit Fee or by taking an Excess Withdrawal or GAWs. Your Guaranteed Benefit Fee will be calculated based on your the Covered Fund Value as of the date the fee is deducted each quarter.
The Benefit Base
The Benefit Base is separate from your Covered Fund(s) Value. It is not a cash value. Rather, your Benefit Base is used to calculate Installment Payments during the GAW Phase and the Settlement Phase. Your Benefit Base and your Covered Fund(s) Value may not be equal to one another. Although your Benefit Base is related to your Covered Fund Value in that your Benefit Base will be ratcheted up if the Covered Fund Value is greater than your Benefit Base on the Ratchet Date, at all other
times during the year, your Covered Fund Value may be higher or lower than the Benefit Base depending on market performance and other factors impacting the Covered Fund. Your Initial Benefit Base is the sum of all GLWB Rider Contributions initially allocated to the
35
Covered Fund(s) in the Income Segment on the GLWB Rider Election Date.
Each Covered Fund will have its own Benefit Base. A Covered Fund Benefit Base cannot be transferred to another Covered Fund unless we require a Transfer as a result of the Covered Fund being eliminated or liquidated.
•
We
increase your Benefit Base on a dollar-for-dollar basis each time you make a GLWB Rider Contribution to a Covered Fund(s).
•
We decrease your Benefit Base on a proportionate basis each time you make an Excess Withdrawal.
•
On each Ratchet Date during the GLWB Accumulation Phase and the GAW Phase, we will increase your Benefit Base to equal your current Covered Fund Value if
your Covered Fund Value is greater than your Benefit Base. (If so, your Benefit Base will then reflect positive Covered Fund performance.)
A few things to keep in mind regarding the Benefit Base:
•
The Benefit Base is used only for purposes of calculating your Installment Payments during the GAW Phase and the GLWB Settlement Phase. It has no other purpose. The Benefit Base does not provide and is not available as a cash value or settlement value.
•
It is important that you do
not confuse your Benefit Base with the Covered Fund(s) Value.
•
During the GLWB Accumulation Phase and the GAW Phase, the Benefit Base will be re-calculated on an annual basis, as described below, and each time you make a GLWB Rider Contribution or take an Excess Withdrawal.
Subsequent Contributions to Your Covered Fund(s)
During the GLWB Accumulation Phase and the GAW Phase, you may make additional GLWB Rider Contributions to the Covered Fund(s) in addition to your initial GLWB Rider Contribution. Additional GLWB Rider Contributions may not be made after the GLWB Accumulation Phase ends. Any subsequent GLWB Rider Contribution is subject
to any minimum investment or Transfer requirements imposed by the Contract. Please see the Covered Fund(s) prospectus for more information.
All additional GLWB Rider Contributions made after the GLWB Rider Election Date will increase the Benefit Base dollar-for-dollar on the date the GLWB Rider Contribution is made. We will not consider the additional purchase of shares of a Covered Fund(s) through reinvested dividends, capital gains, and/or settlements to be a GLWB Rider Contribution. However, they will increase the Covered Fund(s) Value.
We reserve the right to reject additional GLWB Rider Contributions at any time and for any reason. Great-West will provide you with 30 days prior written notice if it determines not to accept additional GLWB Rider Contributions. If Great-West refuses additional GLWB Rider Contributions, you will retain all other rights under the GLWB Rider.
Annual
Adjustments to Your Benefit Base
During the Accumulation Phase, a Ratchet Date is the anniversary of the Owner’s GLWB Rider Election Date and each anniversary thereafter. On each Ratchet Date, we will evaluate your Benefit Base, and will adjust your Benefit Base to equal the greater of:
•
your current Benefit Base; or
•
your current Covered Fund(s) Value.
It is important to be aware that
even though your Covered Fund(s) Value may increase throughout the year due to capital appreciation, the Benefit Base will not similarly increase until the next Ratchet Date. Unlike Covered Fund(s) Value, your Benefit Base will never decrease solely due to negative Covered Fund(s) performance.
It is important to note that annual adjustments to your Benefit Base will not impact your Covered Fund Value. Your Covered Fund Value can only increase or decrease as described above.
Benefit Base Cap
The Benefit Base may not exceed $5 million. Any value over $5 million will be considered excess Covered Fund(s) Value and will not be used to calculate GAWs. An Owner may Transfer or Distribute any excess Covered Fund(s) Value on a dollar for dollar basis without reducing the Benefit Base and such transfers
will not be considered an Excess Withdrawal. However, if the Covered Fund(s) Value falls below $5 million due to an Excess Withdrawal, the Benefit Base will be adjusted as described below.
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Excess Withdrawals
The Benefit Base may be adjusted as a result of Excess Withdrawals. During the GLWB Accumulation Phase, except as described above with respect to the Benefit Base Cap, any withdrawals or Transfers from your Covered Fund(s) Value will be categorized as Excess Withdrawals.
You may make withdrawals or change your investments at any time and in any amount that you wish, subject to any federal tax limitations. Additionally, any withdrawals to satisfy your required minimum distribution obligations
under the Code (Qualified Annuity Contract owners only) will be considered an Excess Withdrawal if taken during the GLWB Accumulation Phase.
You should carefully consider the effect of an Excess Withdrawal on both the Benefit Base and the Covered Fund(s) Value during the GLWB Accumulation Phase, as this may affect your future benefits under the GLWB Rider. You are solely responsible for any adverse consequences that may result from any Distributions or withdrawals. You should consult with a financial advisor prior to taking a Distribution or making a withdrawal. In the event you decide to take an Excess Withdrawal, as discussed below, your Covered Fund(s) Value will be adjusted dollar-for-dollar in the amount of the Excess Withdrawal. The Benefit Base will be adjusted at the time the Excess Withdrawal is made by the ratio of the Covered Fund(s) Value immediately after the Excess
Withdrawal to the Covered Fund(s) Value immediately before the Excess Withdrawal. Accordingly, your Benefit Base could be reduced by more than the amount of the withdrawal.
Types of Excess Withdrawals
A Distribution or Transfer during the GLWB Accumulation Phase is considered an Excess Withdrawal. An Excess Withdrawal will reduce your Benefit Base and Covered Fund(s) Value. A Distribution occurs when money is paid to you. A Transfer is the movement of money from one Covered Fund to any other Sub-Account, including another Covered Fund. If you Transfer any amount out of a Covered Fund, then you will be prohibited from making any Transfers into the same Covered Fund for at least ninety (90) calendar days.
Numerical Example
Excess Withdrawals during the GLWB Accumulation Phase
are illustrated as follows:
Covered Fund Value before the Excess Withdrawal adjustment = $50,000
Benefit Base = $100,000
Excess Withdrawal amount: $10,000
Covered Fund Value after adjustment= $50,000 - $10,000 = $40,000
Covered Fund Value adjustment = $40,000/$50,000 = 0.80
Adjusted Benefit Base = $100,000 x 0.80 = $80,000
Fees Associated with the Covered Fund(s).
Neither the Guarantee Benefit Fee, the mortality and expense charge, nor any other fees or charges assessed to the Covered Fund(s) Value as directed by a Consultant
and as agreed to by Great-West shall be treated as an Excess Withdrawal. Additionally, you may make a withdrawal of up to 1.5% of the Covered Fund(s) Value to pay for asset management or advisory service fees associated with the Income Segment without the withdrawal being considered an Excess Withdrawal. If these fees exceed 1.5% of the Covered Fund(s) Value, and the entire amount of the fees are withdrawn from the Covered Fund(s) Value, the amount withdrawn above the 1.5% limit will be considered an Excess Withdrawal and will reduce the Benefit Base as described above.
Treatment of a Distribution During the GLWB Accumulation Phase.
At the time of any partial or periodic Distribution, if the Covered Person is 59 ½ years of age or older, you may elect to begin the GAW Phase (as described below) and begin receiving GAWs at that time. If you choose not to begin the GAW Phase, the Distribution
will be treated as an Excess Withdrawal and will reduce your Covered Fund(s) Value and your Benefit Base (as described above).
If the Covered Person is not yet 59 ½ years old, then any partial or periodic Distribution will be treated as an Excess Withdrawal as described above.
Any Distribution made during the Accumulation Phase to satisfy any contribution limitation imposed under federal law will be considered an Excess Withdrawal at all times. You should consult a qualified tax advisor regarding contribution limits and other tax implications.
Death During the GLWB Accumulation Phase
In the case of a Non-Qualified Annuity Contract, if an Owner dies before the Initial Installment Date, the GLWB
37
will
terminate and the Covered Fund(s) Value shall be paid to the Beneficiary in accordance with the terms of the Contract (unless a Spouse Beneficiary makes an election to continue the Contract as provided in this section).
If a Spouse Beneficiary who was legally married to the deceased Owner under applicable law as of the date of death becomes the sole Owner and Beneficiary under the terms of the Contract, the Spouse Beneficiary may continue the Contract and maintain the deceased Owner’s current Benefit Base as of the date of death. In this case, the Ratchet Date will continue to be the same date as it was under the deceased Owner. A Spouse Beneficiary also has the option to establish a new GLWB Rider Election Date with a new Benefit Base based on the current Covered Fund Value. In this case, the Ratchet Date will be the anniversary of the new GLWB Rider Election Date. In either situation, the Spouse Beneficiary shall become the
sole Owner. The new Owner will be subject to all terms and conditions of the GLWB Rider, Contract and the Code, if applicable. Any election made by a Spouse Beneficiary pursuant to this section is irrevocable.
A non-Spouse Beneficiary cannot elect to maintain the Benefit Base. Upon the death of the Owner, the deceased Owner’s Covered Fund Value will be liquidated and will be transferred into the Schwab Money Market Sub-Account, or any other fund as approved by Great-West and distributed to the non-Spouse Beneficiary.
GAW Phase
The GAW Phase begins when you elect to receive GAWs under the GLWB Rider. The GAW Phase continues until the Covered Fund(s) Value reaches zero and the GLWB Settlement Phase begins. The GAW Phase cannot begin until all Covered Persons attain age 59 ½.
To initiate the GAW
Phase, you must submit a written Request to Great-West. At that time, you must provide sufficient documentation in good order and in a manner reasonably satisfactory to Great-West for Great-West to determine the age of each Covered Person. You may also begin the GAW Phase by initiating a Distribution while you are in the GLWB Accumulation Phase and the Covered Person(s) is 59 ½ years of age or older. At that time, you may elect to begin receiving Installments and establish your GAW%. If you choose not to establish the GAW%, the Distribution will be treated as an Excess Withdrawal and the GAW Phase will not begin. If the Covered Person(s) is not yet 59 ½ years old, then any partial or periodic Distribution will be treated as an Excess Withdrawal and the GAW Phase will not begin. In these situations, the Benefit Base will be adjusted by the ratio of the Covered Fund(s) Value after the Excess Withdrawal to the previous Covered Fund(s) Value.
Because
the GAW Phase cannot begin until all Covered Persons under the GLWB Rider attain age 59 ½, any Distributions taken before then will be considered Excess Withdrawals and will be deducted from the Covered Fund(s) Value and Benefit Base. See Accumulation Phase for more information. If the Annuity Account is not held jointly, the Owner’s Spouse must be the sole Beneficiary. Installments will not begin until such change is made.
Because of decreasing life expectancy as you age, in certain circumstances, the longer you wait to start taking GAWs, the less likely it is that you will benefit from your GLWB Rider. On the other hand, the earlier you begin taking GAWs, the lower the GAW Percentage you will receive and therefore the lower your GAWs (if any) will be. You should talk to your Consultant or tax advisor before initiating
the GAW Phase to determine the most financially beneficial time for you to begin taking GAWs.
Calculation of Guaranteed Annual Withdrawals
It is important that you understand how the GAW is calculated because it will affect the benefits you receive under the GLWB Rider. Once you initiate the GAW Phase by submitting a Request to begin receiving GAW payments, we will verify the age of the Covered Person(s) and then determine the amount of the GAW.
To determine the amount of the GAW, we will compare the current Benefit Base to the current Covered Fund Value on the Initial Installment Date. If the Covered Fund Value is greater than the Benefit Base, we will increase the Benefit Base to equal the Covered Fund Value, and the GAW will be based on the increased Benefit Base amount.
During the GAW Phase,
your Benefit Base may receive an annual adjustment. This adjustment is discussed below, and, if applicable, will occur on your Ratchet Date. Your Ratchet Date will become the anniversary of the Initial Installment Date and will no longer be the anniversary of the GLWB Rider Election Date as it was during the GLWB Accumulation Phase.
We use your Benefit Base to calculate the GAW you receive. However, even though the Benefit Base may be adjusted annually, your GAW% will not change unless there is a Reset of the GAW%. See Optional Reset of
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the GAW% During the GAW Phase below.
It is important to note that Installments during the GAW Phase will reduce your Covered Fund(s) Value on a dollar-for-dollar basis, but they will not reduce your Benefit Base.
Calculation of Installment Amount.
The GAW% is based on the age of the Covered Person(s) as of the date we calculate the first Installment. If there are two Covered Persons, the GAW% is based on the age of the younger Covered Person.
The GAW% for a single Covered Person is based on the following schedule:
Guaranteed Withdrawal Percentage for a Single Covered Person:
Age
GAW%
59.5
– 64
4.00%
65 – 69
5.00%
70 – 79
6.00%
80+
7.00%
If there are Joint Covered Persons, a single GAW% is calculated based on the age of the younger Covered Person. This rate is the Joint GAW% and is based on the following schedule:
Guaranteed Annual Withdrawal Percentage for Joint Covered Persons:
Age
of the Younger Covered Person
GAW%
59.5 – 64
3.50%
65 – 69
4.50%
70 – 79
5.50%
80+
6.50%
To calculate the GAW, we multiply the Benefit Base by the GAW%, calculated based on the table above, on the Initial Installment Date.
The amount of the Installment equals the GAW divided by the number of payments per year under the elected Installment Frequency Option, as described below.
Numerical Examples of the Guaranteed Annual Withdrawal.
Scenario #1: 72 Year Old Single Covered Person
Benefit Base = $80,000
Single GAW%: 6.00%
GAW = $4,800 ($80,000 x 6.00%)
Scenario
#2: 68 Year Old Joint Covered Person with a 63 Year Old Spouse
Benefit Base = $80,000
Joint GAW% = 3.50% (for 63 year old)
GAW = $2,800 ($80,000 x 3.50%)
Scenario #3: 60 Year Old Single Covered Person
Benefit Base = $80,000
Single GAW%: 4.00%
GAW = $3,200 ($80,000 x 4.00%)
Scenario #4: 71 Year Old Joint Covered Person with a 65 Year Old Spouse
Benefit Base = $80,000
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Joint
GAW% = 4.50% (for a 65 year old)
GAW = $3,600 ($80,000 x 4.50%)
Any election which affects the calculation of the GAW is irrevocable. Please consider all relevant factors when making an election to begin the GAW Phase. For example, an election to begin receiving Installments based on a sole Covered Person cannot subsequently be changed to joint Covered Persons once the GAW Phase has begun. Similarly, an election to receive Installments based on joint Covered Persons cannot subsequently be changed to a sole Covered Person. Installments will reduce the Covered Fund(s) Value on a dollar-for-dollar basis.
Installment Frequency Options.
Your Installment Frequency Options are as follows:
(a)
Annual
– the GAW will be paid on the Initial Installment Date and each anniversary annually, or next business day, thereafter.
(b)
Semi-Annual – half of the GAW will be paid on the Initial Installment Date and in Installments every 6 month anniversary, or next business day, thereafter.
(c)
Quarterly – one quarter of the GAW will be paid on the Initial Installment Date and in Installments every 3 month anniversary, or next business day, thereafter.
(d)
Monthly
– one-twelfth of the GAW will be paid on the Initial Installment Date and in Installments every monthly anniversary, or next business day, thereafter.
You may Request to change the Installment Frequency Option starting on each Ratchet Date during the GAW Phase.
Great-West may allow Installments that in total over the year are less than the GAW. If the total GAW amount is not taken as Installments, the amount not taken does not increase future GAW amounts.
Lump Sum Distribution Option
At any time during the GAW Phase, if you are receiving Installments more frequently than annually, you may elect to take a lump sum Distribution up to the remaining scheduled amount of the GAW for that year.
Numerical Example of Lump Sum Distribution
Assume the following:
GAW = $4,800 with a monthly distribution of $400
Three monthly Installments have been made (3 x $400 = $1,200)
Remaining GAW = GAW – paid Installments to date = $4,800 - $1,200 = $3,600
So, a Lump Sum Distribution of $3,600 may be taken.
Suspending and Re-Commencing Installments After a Lump Sum Distribution
It is your responsibility to Request the suspension of the remaining Installments that are scheduled to be paid during the year until the next Ratchet Date. If you choose not to suspend the remaining Installments for the year, an Excess Withdrawal may occur. (See Effect of Excess Withdrawals
During the GAW Phase described below).
After receiving a Lump Sum Distribution and suspending Installments, you must notify Great-West that you wish to recommence Installment payments for the next year. Great-West must receive notice 30 calendar days before the next Ratchet Date that you wish to recommence payments; otherwise, Great-West will not make any Installments. The Ratchet Date will not change if Installments are suspended.
The Owner is solely responsible for any adverse consequences that may result of any Distributions or withdrawals. The Owner should consult with a financial advisor prior to making any withdrawals.
Ratchet to Benefit Base During the GAW Phase
Once a year, on your Ratchet Date, we will review your GAW
and may make an adjustment by increasing your GAW amount. This adjustment, if applicable, will be made by a Ratchet. Just like the Accumulation Phase, we will compare the Covered Fund Value to determine if it exceeds the Benefit Base. If so, we will adjust the Benefit Base to equal the Covered Fund Value.
On each Ratchet Date, the Benefit Base automatically adjusts to the greater of:
(a) the current Benefit Base; or
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(b) the current Covered Fund Value.
GAWs will adjust annually on the Ratchet Date based on the new Benefit Base.
Optional Reset of the GAW% During the GAW Phase
Annually,
you may Request a Reset of the GAW% within thirty (30) calendar days prior to the Ratchet Date. If requested, the Company shall multiply the Covered Fund Value as of the Ratchet Date by the Attained Age GAW% (based on your or the younger Joint Covered Person’s Attained Age on the Ratchet Date) and determine if it is higher than the current Benefit Base multiplied by the current GAW%. If so, the current GAW% will change to the Attained Age GAW% and the Benefit Base will change to the current Covered Fund Value as of the Ratchet Date. If it does not, the Reset will not take effect but a Ratchet may still occur. If the Reset takes effect, it will be effective on the Ratchet Date as the Ratchet Date does not change due to Reset.
Example:
If
(Attained Age GAW%) x (Covered Fund Value as of Ratchet Date)
is greater than
(Current GAW%) x (Current Benefit Base)
Then
(Attained Age GAW%) x (Covered Fund Value as of Ratchet Date) becomes new GAW and
(Covered Fund Value) = (New Benefit Base)
Numerical Example When Reset is Beneficial:
Age
at Initial Installment Date: 60
Attained Age: 70
Covered Fund Value = $120,000
Current Benefit Base = $125,000
Current GAW% before Ratchet Date: 4%
Attained Age GAW% after Ratchet Date: 6%
(Current GAW%) x (Current Benefit Base) = 4% x $125,000 = $5,000
(Attained Age GAW%) x (Covered Fund Value) = 6% x $120,000 = $7,200
So New GAW is $7,200
New Benefit Base is $120,000
New GAW% of 6% will take effect.
Numerical
Example When Reset is NOT Beneficial:
Age at Initial Installment Date: 60
Attained Age: 70
Covered Fund Value = $75,000
Current Benefit Base = $125,000
Current GAW% before Ratchet: 4%
Attained Age GAW% after Ratchet Date: 6%
(Current GAW%) x (Current Benefit Base) = 4% x $125,000 = $5,000
(Attained age withdrawal %) x (Covered Fund Value) = 6% x $75,000 = $4,500
So Because $4,500 is less than current
GAW of $5,000, no Reset of the GAW% will take effect.
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Additional GLWB Rider Contributions During the GAW Phase
Additional GLWB Rider Contributions made after the Initial Installment Date will increase the Benefit Base dollar-for-dollar on the date the GLWB Rider Contribution is made and will increase the GAW amount for the current year.
To calculate the new GAW amount, we multiply the new Benefit Base by the current GAW%.
In addition, the amount of your next Installment payment will be equal to the new GAW amount divided by the number of payments per year under your elected Installment Frequency Option (assuming no Ratchet, Reset or Excess Withdrawal
occurs before the next Installment payment).
Payments on Death During GAW Phase
If an Owner Dies After the Initial Installment Date as a Single Covered Person for Non-Qualified Annuity Contracts
If an Owner dies after the Initial Installment Date without a second Covered Person, the GLWB will terminate and no further Installments will be paid. If the death occurs before the GLWB Settlement Phase, the remaining Covered Fund Value will be liquidated and will be transferred into the Schwab Money Market Sub-Account, or any other fund as approved by Great-West, and distributed to the Beneficiary. If permitted by the Contract and the Code, if applicable, the Beneficiary may elect to have a new Contract issued with the Beneficiary as the sole Owner and Covered Person, in which event an initial Benefit Base shall be established and he or she will
be subject to all terms and conditions of the Contract and the Code, if applicable. Any election made by the Beneficiary is irrevocable.
If an Owner Dies After the Initial Installment Date while Second Covered Person is Living for Non-Qualified Annuity Contracts
Upon the death of an Owner after the Initial Installment Date, and while a second Covered Person who was legally married to the deceased Owner under applicable federal law on the date of death is still living, the surviving Covered Person will become the sole Owner and Beneficiary (if permitted by the terms of the Contract and the Code, if applicable), and he or she will acquire all rights under the Contract and will continue to receive GAWs based on the deceased Owner’s election. Installments may continue to be paid to the surviving Covered Person based on the GAW% for Joint Covered Persons. Installments will continue to
be paid to the surviving Covered Person until his or her death and, upon death, the surviving Covered Person’s beneficiary will receive any remaining Covered Fund(s) Value if such death occurs before the GLWB Settlement Phase. Alternatively, the surviving Covered Person may elect to receive his or her portion of the Covered Fund(s) Value as a lump sum Distribution. In either situation the Ratchet Date will be the date when the Annuity Account is established.
To the extent the surviving Covered Person/Beneficiary becomes the sole Owner, he or she will be subject to all terms and conditions of the Contract, the GLWB Rider and the Code, if applicable.
Any election made by the Beneficiary pursuant to this section is irrevocable.
If the Owner Dies After the Initial Installment Date as a Single Covered Person for Qualified Annuity Contracts
If
the Owner dies after the Initial Installment Date without a second Covered Person, the GLWB will terminate and no further Installments will be paid. If the death occurs before the GLWB Settlement Phase, the remaining Covered Fund Value shall be distributed to the Beneficiary in accordance with the terms of the Contract. If permitted by the Contract and the Code, the Owner’s Beneficiary may elect to continue the Contract in which event an initial Benefit Base shall be established and he or she will be subject to all terms and conditions of the GLWB Rider and the Code. Any election made by the Beneficiary is irrevocable.
If the Owner Dies After the Initial Installment Date while Second Covered Person is Living for Qualified Annuity Contracts
Upon the death of an Owner after the Initial Installment
Date, and while the second Covered Person is still living, the second Covered Person/Beneficiary may elect to become an Owner (if permitted by the Contract and the Code) and he or she will acquire all rights under the GLWB Rider and continue to receive GAWs based on the original Owner’s election. Installments may continue to be paid to the surviving Covered Person based on the GAW% for Joint Covered Persons. Installments will continue to be paid to the surviving Covered Person until his or her death and, upon death, the surviving Covered Person’s beneficiary will receive any remaining Covered Fund Value. Alternatively, he or she may elect to receive his or her portion of the Covered Fund Value
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as a lump sum Distribution or can separately elect to become an Owner. In either situation
the Ratchet Date will be the date when the Account is established.
To the extent the Beneficiary becomes an Owner, he or she will be subject to all terms and conditions of the GLWB Rider and the Code.
Effect of Excess Withdrawals During the GAW Phase
After the Initial Installment Date, the portion of Distributions or Transfers that, combined with all other amounts, exceeds the GAW amount will be considered an Excess Withdrawal. The Benefit Base will be adjusted by the ratio of the new Covered Fund(s) Value (after the Excess Withdrawal) to the previous Covered Fund(s) Value (before the Excess Withdrawal). If an Excess Withdrawal occurs, the GAW and current Benefit Base will be adjusted on the next Ratchet Date.
If an Owner requests a Distribution or Transfer over the telephone, Great-West will advise
the Owner whether such Distribution or Transfer will be considered an Excess Withdrawal and/or advise the maximum amount that he or she could receive prior to the Distribution or Transfer being considered an Excess Withdrawal. Alternatively, if an Owner makes a Request in writing, Great-West will advise the Owner that Excess Withdrawals could reduce future benefits by more than the dollar amount of the Excess Withdrawal and that the Owner may contact Great-West by telephone to determine whether, as of the date of the Request, the requested Distribution or Transfer would be considered an Excess Withdrawal. The actual dollar effect of such Distribution or Transfer will be determined as of the date that Great-West receives the Request, subject to the terms set forth in the written Request.
Numerical Example:
Covered
Fund Value before GAW =
$55,500
Benefit Base =
$100,000
GAW % =
5.5%
GAW Amount =
$100,000
x 5.5% = $5,500
Total annual withdrawal: $10,500
Excess Withdrawal =
$10,500 – $5,500 = $5,000
Covered Fund Value after GAW =
$55,500
– $5,500 = $50,000
Covered Fund Value after Excess Withdrawal =
$50,000 – $5,000 = $45,000
Adjustment due to Excess Withdrawal =
$45,000/$50,000 = 0.90
Adjusted Benefit Base =
$100,000 x 0.90 = $90,000
Adjusted
GAW Amount =
$90,000 x 5.5% = $4,950
(Assuming no GAW increase on succeeding Ratchet Date)
GLWB Settlement Phase
The GLWB Settlement Phase begins when the Covered Fund(s) Value has reduced to zero as a result of negative Covered Fund(s) performance, payment of the Guarantee Benefit Fee, certain other fees (e.g., Mortality and Expense fees, advisory fees or asset management fees), and/or GAWs, but the Benefit Base is still positive.
When the GLWB Settlement Phase begins, if the remaining Covered
Fund(s) Value is less than the amount of the final Installment in the GAW Phase, Great-West will pay the remaining balance of the Installment within 7 days from the Installment Date. Installments continue for your life under the terms of the GLWB Rider, but all other rights and benefits under the GLWB Rider will terminate. Installments will continue in the same frequency
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as previously elected, and cannot be changed during the Settlement Phase.
Distributions and Transfers are not permitted during the Settlement Phase.
During the Settlement Phase, the Guarantee Benefit Fee will not be deducted. When the last Covered Person dies during the Settlement Phase, the Rider will terminate and no Installments
will be paid to the Beneficiary.
Divorce and the Income Segment
Divorce During the GLWB Accumulation Phase – Non-Qualified Annuity Contracts
If the Annuity Account is transferred or split pursuant to a settlement agreement or a court-issued divorce Decree before the Initial Installment Date, the Owner(s) must immediately notify us and provide a copy of the Decree and any other information that we may require.
If the former Spouse of the Owner becomes the sole Owner of the Annuity Account by a settlement agreement or a court-issued divorce Decree, the Owner may request that the Contract be reissued with the former Spouse as the sole Owner, otherwise the Contract and GLWB Rider will be terminated. If the Contract is so reissued, the current Benefit Base will be maintained.
If
the Annuity Account is divided between the Owner and the Owner’s former Spouse by a settlement agreement or a court-issued divorce Decree, the Owner(s) may request that the Contract be reissued as one new Contract with one of the former Spouses as sole Owner and Covered Person, or as two new Contracts, each with one of the former Spouses as Owner and Covered Person. Otherwise the Contract and GLWB Rider will be terminated. If the Contract is reissued as one new Contract, the Benefit Base will be proportionate to the share of the Covered Fund Value allocated to the former Spouse as of the date of reissuance. If the Contract is reissued as two new Contracts, the Benefit Base will be divided in the same proportion as the respective Covered Fund Values as of the date of reissuance.
Divorce During the GLWB Accumulation Phase – Qualified Annuity Contracts
Pursuant to Section 408(d)(6)
of the Code and the regulations thereunder, Great-West will make payment to the Alternate Payee and/or establish an Annuity Account on behalf of the Alternate Payee named in a Decree received during the GLWB Accumulation Phase. The Alternate Payee shall be responsible for submitting a Request to begin Distributions in accordance with the Code.
If the Alternate Payee named in the Decree is the Owner’s Spouse during the Accumulation Phase, he or she may elect to become an Owner, either by maintaining the current Benefit Base of the previous Owner, divided pursuant to the terms of the Decree, or establishing a new Benefit Base based on the current Covered Fund Value on the date his or her Annuity Account is established and he or she will continue as an Owner. If the Alternate Payee elects to maintain the current Benefit Base, the Benefit Base will be divided between the Owner and the Alternate Payee in the same proportion as their
respective Covered Fund Values pursuant to the terms of the Decree In either situation, the Alternate Payee’s Election Date shall be the date the Annuity Account is established.
To the extent that the Alternate Payee becomes an Owner, she or he will be subject to all terms and conditions of the Contract.
Any election made by the Alternate Payee pursuant to this section is irrevocable
Divorce During the GAW Phase – Non-Qualified Annuity Contracts
If the Annuity Account is transferred or split pursuant to a settlement agreement or a court-issued divorce Decree after the Initial Installment Date but before the GLWB Settlement Phase, the Owner(s) must immediately notify Great-West and provide the information that Great-West requires.
Pursuant to the agreement
or decree, if there is a single Covered Person, the Benefit Base and GAW will be divided between the Spouses in the same proportion as their respective Covered Fund Values as of the effective date of the agreement or decree. The Owner may continue to receive proportional GAWs after the Annuity Accounts are split. The former Spouse may elect to receive his or her portion of the Covered Fund Value as a lump sum Distribution or can separately elect to become and Owner and receive his or her proportional GAWs.
Pursuant to the agreement or decree, if there are two Covered Persons, the Benefit Base and GAW will be divided in the same proportion as their respective Covered Fund Values as of the effective date of the agreement or decree. The Owner may continue to receive the proportional GAWs after the Annuity Accounts are split, based on the amounts calculated pursuant to the joint Covered Persons GAW%. The former Spouse
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may
elect to receive his or her portion of the Covered Fund Value as a lump sum Distribution or can separately elect to continue proportionate GAWs in the GAW Phase based on the amounts calculated pursuant to the joint Covered Persons GAW% after the Annuity Accounts are split. A new Installment anniversary date will be established for the former Spouse on the date the Annuity Accounts are split.
In the alternative, the former Spouse may establish a new GLWB in the Accumulation Phase with the Benefit Base based on the current Covered Fund Value on the date his or her Annuity Account is established.
To the extent that the former Spouse becomes an Owner, he or she will be subject to all terms and conditions of the GLWB Rider and the Code.
Any election made by the former Spouse pursuant to this section is irrevocable.
Divorce
During the GAW Phase – Qualified Annuity Contracts
Pursuant to Section 408(d)(6) of the Code and the regulations thereunder, Great-West will make payment to the Alternate Payee and/or establish an Annuity Account on behalf of the Alternate Payee named in a Decree approved during the GAW Phase. The Alternate Payee shall be responsible for submitting a Request to begin Distributions in accordance with the Code.
Pursuant to the instructions in the Decree, if there is a single Covered Person, the Benefit Base and GAW will be divided in the same proportion as their respective Covered Fund Values as of the effective date of the Decree. The Owner may continue to receive the proportional GAWs after the Annuity Accounts are split. If the Alternate Payee is the Owner’s Spouse, he or she may elect to receive his or her portion of the Covered Fund Value as a lump sum Distribution or can separately
elect to become an Owner.
Pursuant to the instructions in the Decree, if there are two Covered Persons, the Benefit Base and GAW will be divided in the same proportion as their respective Covered Fund Values as of the effective date of the Decree. The Owner may continue to receive the proportional GAWs after the Annuity Accounts are split, based on the amounts calculated pursuant to the joint Covered Persons GAW%. If the Alternate Payee is the Owner’s Spouse, he or she may elect to receive his or her portion of the Covered Fund Value as a lump sum Distribution or can separately elect to continue proportionate GAWs in the GAW Phase based on the amounts calculated pursuant to the joint Covered Persons GAW% after the Annuity Accounts are split. A new Installment anniversary date will be established for the Alternate Payee on the date the Annuity Accounts are split.
In the alternative,
the Alternate Payee may establish a new GLWB in the Accumulation Phase with the Benefit Base based on the current Covered Fund Value on the date his or her Annuity Account is established.
To the extent that the Alternate Payee becomes an Owner, he or she will be subject to all terms and conditions of the GLWB Rider and the Code.
Any election made by the Alternate Payee pursuant to this section is irrevocable.
Divorce During the GLWB Settlement Phase
If a Request is made in connection with a divorce, Great-West will divide the Installment pursuant to the terms of any settlement or divorce decree. Installments will continue pursuant to the lives of each payee.
Termination of the GLWB Rider
The GLWB Rider will
terminate upon the earliest of:
(a)
the date of death of the Owner if there is no surviving Covered Person;
(b)
the date there is no longer a Covered Person under the GLWB Rider;
(c)
the date the Contract is terminated;
(d)
the
date the Benefit Base is reduced to zero prior to the GLWB Settlement Phase due to one or more Excess Withdrawals;
(e)
the Annuity Commencement Date, if no Installments have been taken; or
(f)
when the Guarantee Benefit Fee is not received by Great-West, when due.
If the GLWB is cancelled, the Benefit Base, GAW and any other benefit accrued or received under the GLWB shall terminate. The Owner may not make any subsequent GLWB Rider Contributions into the same
Covered Fund(s) until at least ninety (90) calendar days after termination of the GLWB, at which point a new GLWB Rider Election Date shall be recorded. In such an event, the Benefit Base will be based on the current Covered Fund(s) Value on the date the new GLWB is established.
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We will not provide Owners with notice prior to termination of the Contract or GLWB Rider and the Guarantee Benefit Fee will not be refunded upon termination of the GLWB Rider.
You should consult with your financial professional to assist you in determining whether the GLWB Rider is suited for your financial needs and investment risk tolerance. Adding the GLWB Rider to your Contract may not be in your interest since all conditions of the Rider must be met, an additional
annual fee is imposed and a Covered Person must remain living for you to receive certain benefits. Furthermore, the GLWB Rider contains different investment options (Covered Funds) and special investment limitations with conditions than otherwise available under the Contract. You should carefully consider each of these factors before deciding if a GLWB Rider is suitable for your needs, especially at older ages.
Seek Tax Advice
The following discussion of the federal income tax consequences is only a brief summary of general information and is not intended as tax advice to any individual. The federal income tax consequences discussed here reflect our understanding of current law and the law may change. Federal estate tax consequences and state and local estate, inheritance,
and other tax consequences of ownership or receipt of distributions under a Contract depend on your individual circumstances or the circumstances of the person who receives the distribution. You should consult a tax advisor for further information.
Federal Tax Matters
The following discussion is a general description of the federal income tax considerations relating to the Contract and is not intended as tax advice. This discussion assumes that the Contract qualifies as an annuity contract for federal income tax purposes. This discussion is not intended to address the tax consequences resulting from all situations. If you are concerned about the tax implications relating to the ownership or use of the Contract, you should consult a competent tax advisor as to how the tax rules apply to you before initiating any transaction.
This
discussion is based upon our understanding of the present federal income tax laws as they are currently interpreted by the IRS. No representation is made as to the likelihood of the continuation of the present federal income tax laws or of the current interpretation by the IRS. Moreover, no attempt has been made to consider any applicable state or other tax laws.
Because tax laws, rules, and regulations are constantly changing, we do not make any guarantees about the Contract’s tax status.
Taxation
of Annuities
Section 72 of the Code governs the taxation of annuities. An owner who is a “natural person” will not generally be taxed on increases, if any, in the value of the Annuity Account Value until all or part of the Annuity Account Value is distributed (for example, withdrawals, GAW payments or annuity payouts under the annuity payout option elected). Under a Grantor Trust, the Grantor(s), who must be a natural person(s), is treated as the Owner of the Contract for tax purposes. The taxable portion of a distribution (in the form of a single sum payout, a withdrawal, a GAW payment or an annuity) is taxable as ordinary income.
Withdrawals
Partial withdrawals, including GAW payments and periodic withdrawals that are not part of an annuity, are generally treated as taxable income to the extent that the Annuity Account Value immediately
before the withdrawal exceeds the “investment in the Contract” at that time. Full surrenders are treated as taxable income to the extent that the amount received exceeds the “investment in the Contract.” The taxable portion of any withdrawal is taxed at ordinary income tax rates.
The IRS has not provided guidance as to the tax treatment of the charge for the GLWB (the Guarantee Benefit Fee) under the Contract. The IRS could treat the deduction of the Guarantee Benefit Fee from the Covered Fund Value as a deemed withdrawal from the contract subject to current income tax to the extent the amount deemed received exceeds the investment in the Contract and, if applicable, the 10% premature distribution penalty tax. We do not currently report charges for the GLWB as withdrawals, but we will do so in the future if the IRS requires that we do so.
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Annuity
Payouts
Although the tax consequences will vary depending on the annuity form elected under the Contract, in general, only the portion of the annuity payout that exceeds the exclusion amount will be taxed. The exclusion amount is generally determined by a formula that establishes the ratio of the “investment in the Contract” to the expected return under the Contract. For variable annuity payouts, in general there is no tax on the portion of each payout which represents the same ratio that the “investment in the Contract” allocated to the variable annuity payouts bears to the number of payouts expected to be made (determined by Treasury Department regulations which take into account the Annuitant’s life expectancy and the form of annuity benefit selected). However, the remainder of each annuity payout is taxable. Once the “investment in the Contract” has been fully recovered, the full amount of any additional
annuity payouts is taxable. If the annuity payments stop as a result of an Annuitant’s death before full recovery of the “investment in the Contract,” you should consult a competent tax advisor regarding the deductibility of the unrecovered amount.
Under a tax provision enacted in 2010, if part of an annuity contract’s value is applied to an annuity option that provides payments for one or more lives or for a period of at least ten years, those payments may be taxed as annuity payments instead of withdrawals.
The taxable portion of any annuity payout is taxed at ordinary income tax rates.
Penalty Tax
There may be a federal income tax penalty imposed equal to 10% of the amount treated as taxable income. In general, however, there is no penalty tax on distributions:
•
Made on or after the date on which the Owner reaches age 59 ½.
•
Made as a result of death or disability of the Owner.
•
Received in substantially equal periodic payouts (at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and the Beneficiary.
Similar
penalties are imposed on premature distributions from Qualified Annuity Contracts. For more details regarding this penalty tax and other exemptions that may be applicable, consult a competent tax advisor.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the death of an Owner. Generally such amounts are included in the income of the recipient as follows:
•
If distributed in a lump sum, they are taxed in the same manner as a full withdrawal, as described above.
•
If
distributed under an annuity form, they are taxed in the same manner as annuity payouts, as described above.
Distribution at Death
For a Non-Qualified Annuity Contract to be treated as an annuity contract for federal income tax purposes, the terms of the Contract must provide the following two distribution rules:
•
If the Owner dies before the date annuity payouts start, the entire Annuity Account Value must generally be distributed within five years after the date of death. If payable to a designated Beneficiary, the distributions may be paid over the life of that designated Beneficiary or over a period not extending beyond the life expectancy of that Beneficiary,
so long as payouts start within one year of the Owner’s death. If the sole designated Beneficiary is the Owner’s Spouse, the Contract may be continued in the name of the Spouse as Owner.
•
If the Owner dies on or after the date annuity payouts start, and before the entire interest in the Contract has been distributed, payments under the Contract must continue on the same or on a more rapid schedule than that provided for in the method in effect on the date of death.
See the discussion below for Required Minimum Distributions from Qualified Annuity Contracts.
Diversification of Investments
For
a Non-Qualified Annuity Contract to be treated as an annuity for federal income tax purposes, the investments of the Sub-Accounts must be “adequately diversified” in accordance with Treasury Department Regulations. If the Series Account or a Sub-Account failed to comply with these diversification standards, a Non-Qualified Annuity Contract would not be treated as an annuity contract for federal income tax purposes and the Owner would generally be taxable currently on the excess of the Annuity Account Value over the “investment in the Contract.”
Although we may not control the investments of the Covered Fund(s) or the Portfolios, we expect that the Covered Fund(s) and the Portfolios will comply with such regulations so that the Sub-Accounts will be
47
considered
“adequately diversified.” Owners bear the risk that the entire Non-Qualified Annuity Contract could be disqualified as an annuity under the Code due to the failure of the Series Account or a Sub-Account to be deemed to be adequately diversified.
Owner Control
In connection with its issuance of temporary and proposed regulations under Section 817(h) in 1986, the Treasury Department announced that those regulations did not “provide guidance concerning the circumstances in which investor control of the investments of a segregated asset account may cause the investor (i.e., the Owner), rather than the insurance company to be treated as the owner of the assets in the account” (which would result in the current taxation of the income on those assets to the Owner). In Revenue Ruling 2003-91, the IRS provided such guidance by describing the circumstances under which the owner
of a variable contract will not possess sufficient control over the assets underlying the contract to be treated as the owner of those assets for federal income tax purposes. Rev. Rul. 2003-91 states that the determination of whether the owner of a variable contract is to be treated as the owner of the assets held by the insurance company under the contract will depend on all of the facts and circumstances. We do not believe that the ownership rights of an Owner under the Contract would result in any Owner being treated as the owner of the assets of the Contract under Rev. Rul. 2003-91. However, we do not know whether the IRS will provide additional guidance on this issue and what standards that guidance may contain. Therefore, we reserve the right to modify the Contract as necessary to attempt to prevent an Owner from being considered the owner of a pro rata share of the assets of the Contract.
Multiple Contracts
All
deferred, Non-Qualified Annuity Contracts that are issued by Great-West (or our affiliates) issues to the same Owner during any calendar year must be treated as a single annuity contract for purposes of determining the taxable amount.
Withholding
Distributions generally are subject to withholding at rates that vary according to the type of distribution and the recipient’s tax status. Recipients, however, generally are provided the opportunity to elect not to have tax withheld from distributions.
Section 1035 Exchanges
Code Section 1035 provides that no gain or loss shall be recognized on the exchange of one annuity contract for another. Generally, an annuity contract issued in an exchange for another annuity contract is treated as new for purposes of the penalty and distribution at death rules.
If the initial Contribution is made as a result of an exchange or surrender of another annuity contract, we may require you to inform us regarding the federal income tax status of the previous annuity contract.
In Revenue Procedure 2011-38, the IRS eased the restrictions on when a partial transfer between annuity contracts will be treated as a tax-free exchange under Code Section 1035. The original restrictions were imposed by Revenue Procedure 2008-24, which set forth the circumstances under which a direct transfer of a portion of the cash surrender value of an existing annuity contract for a second annuity contract would be treated by the IRS as a tax-free exchange.
Under Rev. Proc. 2011-38:
1. The period of time in which cash can be withdrawn from either contract after a partial transfer
has been significantly shortened from 12 months beginning on the date of the transfer to 180 days, and
2. Annuity payments that satisfy the partial annuitization rule of IRC § 72(a)(2) will not be treated as a distribution from either the old or new contract.
Rev. Proc. 2011-38 is effective for transfers that are completed on or after October 24, 2011.
Please discuss any tax consequences concerning any contemplated or completed transactions with a competent tax advisor.
Investment Income Surtax
In taxable years beginning in 2013, distributions from Non-Qualified Annuity Contracts are considered “investment income” for purposes of the newly enacted Medicare tax on investment income. Thus, in
certain circumstances, a 3.8% tax may be applied to some or all of the taxable portion of distributions (e.g., earnings) to individuals, trusts, and estates whose income exceeds certain threshold amounts as follows: an amount equal
48
to the lesser of (a) “net investment income”; or (b) the excess of a taxpayer’s modified adjusted gross income over a specified income threshold ($250,000 for married couples filing jointly, $125,000 for married couples filing separately, and $200,000 for everyone else). “Net investment income” is defined for this purpose as including the excess (if any) of gross income from annuities over allowable deductions, as such terms are defined in the Health Care and Education Reconciliation Act of 2010. The term net investment income excludes
any distribution from an IRA or certain other retirement plans or arrangements. The IRS has issued regulations implementing this new provision of the law. Please consult the impact of the Investment Income Surtax on you with a competent tax advisor.
Domestic Partnerships, Civil Unions and Same-Sex Marriages
On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service, following the U.S. Supreme Court’s decision in United States v. Windsor, jointly announced the issuance of Revenue Ruling 2013-17, providing guidance on the federal taxation of same-sex couples. Windsor invalidated the limitation of marriage to opposite-sex couples in the federal Defense of Marriage Act (“DOMA”). Ruling 2013-17 holds that
for all federal tax purposes, including income, gift and estate tax, the IRS will recognize same-sex marriages that are legally valid in the state where the couple married, regardless of whether the state in which the couple resides would recognize the marriage.
DOMA still affects the federal tax status of same-sex civil unions and domestic partnerships. For Federal tax purposes, the term “marriage” does not include registered domestic partnerships, civil unions, or other similar formal relationships recognized under state law that are not denominated as a marriage under that state’s law. Thus, domestic partners and individuals in civil unions are not treated as “Spouses” under this Contract. You are strongly encouraged to consult with a qualified financial advisor and/or tax advisor for additional information on your state’s law regarding civil unions and same-sex marriages.
Qualified
Annuity Contracts
Notwithstanding any provision of the Contract or GLWB Rider, certain provisions apply to Contracts intended to qualify as Individual Retirement Annuities under section 408(b) of the Code or Roth Individual Retirement Annuities under section 408A of the Code:
•
Only the Owner may be the Annuitant of the Contract;
•
Only one Owner may be established under the Contract;
•
The
Contract will be established for the exclusive benefit of the Owner and the Beneficiary;
•
The entire interest of the Owner is non-forfeitable;
•
The Contract is non-transferable. The Owner may not borrow any money under the Contract or pledge it as security for a loan. The Owner may not sell, assign or transfer the Contract, unless permitted by a Divorce or Separation Decree.
•
Separate
records will be maintained for the interest of each Owner. Great-West will furnish an annual calendar year report on the status of the Contract and such information concerning required minimum distributions as is prescribed by the Commissioner of Internal Revenue.
Contributions to Qualified Annuity Contracts
Except in the case of a “rollover contribution” as permitted by sections 402(c), 402(e)(6), 403(a)(4), 403(b)(8) 403(b)(10) 408(d)(3) or 457(e)(16) of the Code or a Contribution made in accordance with the terms of a Simplified Employee Pension (SEP), as described in § 408(k), Contributions will only be accepted if they are in cash. The total of such Contributions shall not exceed the maximum as Section 219(b)(5)(A) of the Code may allow, for any taxable year, regardless of whether such Contributions are deductible by the Owner under Section 219(b)(1)
of the Code. In the case of an individual who is age 50 or older, the annual cash Contribution limit is increased by the amount as Section 219(b)(5)(B) of the Code may allow for any taxable year.
The Owner shall have the sole responsibility for determining whether any premium payment meets applicable income tax requirements.
Required Minimum Distributions from Qualified Annuity Contracts
Required Minimum Distributions (“RMDs”) made from the GLWB Rider will only be made in a manner consistent with the required minimum distribution rules or other provisions of the Code. It is the responsibility of the Owner to Request payments in accordance with the minimum distribution requirements of the Code. Great-West is not responsible for any penalties resulting from a failure to Request timely payments in the proper amount. The Owner must begin
to take payments which satisfy the minimum distribution requirements of the Code no later than April 1 of the calendar year following the calendar year in which the Owner attains age 70 ½. If you own a
49
Roth IRA, you are not required to receive minimum distributions from your Roth IRA during your life.
Any RMD during the GLWB Accumulation Phase will be considered an Excess Withdrawal.
During the GAW Phase, RMDs will not be considered to be Excess Withdrawals if the required minimum distribution causes the total Distributions to exceed the GAW amount to the extent the RMD Amount is attributable to the Covered Fund(s).
The Owner
should consult a tax advisor regarding withdrawals to satisfy his or her RMD amount
Distributions Before Death in Qualified Annuity Contracts
Notwithstanding any provision of the Contract, GLWB Rider or Endorsement to the contrary, the distribution of the individual’s interest in the Qualified Annuity Contract shall be made in accordance with the requirements of Section 408(b)(3) of the Code and the regulations thereunder. If you own a Roth IRA, you are not required to receive minimum distributions from your Roth IRA during your life.
The Owner’s entire interest in the Contract must be distributed, or begin to be distributed, by the Owner’s required beginning date, which is April 1 of the calendar year following the calendar year in which the Owner reaches age 70 ½. For that year, and each succeeding year, a distribution must be made on
or before December 31. By the required beginning date, the Owner may elect to have the balance in the Contract distributed in one of the following forms:
(a)
a single sum payment;
(b)
equal or substantially equal payments no less frequently than annually over the life of the Owner;
(c)
equal or substantially equal
payments no less frequently than annually over the lives of the Owner and the designated Beneficiary;
(d)
equal or substantially equal payments no less frequently than annually over a period not extending beyond the Owner’s life expectancy; or
(e)
equal or substantially equal payments no less frequently than annually over a period not extending beyond the joint life and last survivor expectancy of the Owner and the designated Beneficiary.
All distributions
made hereunder shall be made in accordance with section 401(a)(9) of the Code, including the incidental death benefit requirements, and any other applicable regulations.
If payment is not to be made in the form of periodic annuity payments on an irrevocable basis (except for acceleration), the amount to be distributed each year, beginning with the first calendar year for which distributions are required and then for each succeeding calendar year will be determined under the applicable provisions of the Code and the implementing regulations.
Distributions Upon Death in Qualified Annuity Contracts
Distributions beginning before death. If the Owner dies after distribution has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used
prior to the individual’s death.
Distributions beginning after death. If the Owner dies before distribution has begun, distribution of the individual’s entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the individual’s death unless an election is made to receive distribution in accordance with (1) or (2) below:
1)
If the Owner’s interest is payable to a designated Beneficiary, then the entire interest of the individual may be distributed in equal or substantially equal payments over the life or over a period certain not greater than the life expectancy of the designated Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Owner died.
2)
If the designated Beneficiary is the Owner’s surviving Spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the later of (A) December 31 of the calendar year immediately following the calendar year in which the individual died or (B) December 31 of the calendar year in which the individual would have attained age 70 ½.
3)
If the designated Beneficiary is the Owner’s surviving Spouse, the Spouse may
treat the Contract as his or her own Qualified Annuity Contract. This election will be deemed to have been made if such surviving Spouse makes a regular Contribution to the Contract, makes a rollover to or from such Contract, or fails to elect any of the above provisions.
Life expectancy is computed by use of the single life table in Q&A 1 of Section 1.401(a)(9)-9 of the regulations.
50
If distributions are being made to a surviving Spouse as the sole designated Beneficiary, such Spouse’s remaining life expectancy for a year is the number in the single life table corresponding to such Spouse’s age in each year after the calendar year of the Owner’s death. In all other cases, remaining life expectancy for a year is the
number in the single life table corresponding to the Beneficiary’s age in the year following the calendar year of the individual’s death and reduced by 1 for each subsequent year.
Distribution of the Contracts
We offer the Contract on a continuous basis. We have entered into a distribution agreement with Charles Schwab & Co., Inc. (“Schwab”) and GWFS. Contracts are sold to clients of registered investment advisors in those states where the Contract may lawfully be sold by licensed insurance agents who are registered representatives. Schwab is registered as a broker/dealer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is a member of FINRA. Schwab’s principal offices are located at 211 Main Street, San
Francisco, California94105.
GWFS is the principal underwriter and distributor of the Contracts and is a wholly-owned subsidiary of Great-West. GWFS is registered with the SEC as a broker/dealer under the Exchange Act and is a member of FINRA. Its principal offices are located at 8515 East Orchard Road, Greenwood Village, Colorado, 80111.
Great-West (or its affiliates, for purposes of this section only, collectively, "the Company") pays Schwab compensation for the promotion and sale of the Contract as described below. Compensation paid to Schwab is not paid directly by the Owner or the Series Account. The Company intends to fund this compensation through fees and charges imposed under the Contract
and payable to the Company, and from profits on payments received by the Company from Portfolios’ advisers or administrators for providing administrative, marketing, and other support and services to the Portfolios. See “Expenses of the Portfolios” on page 31 of this Prospectus. The Company pays a portion of these proceeds to Schwab for distribution services.
As compensation for distribution services and some Contract administrative services, the Company pays Schwab an annual fee equal to 0.14% of average daily Series Account assets. In addition, the Company pays Schwab amounts it receives from Portfolios for providing administrative and distribution related services . These amounts vary from Portfolio to Portfolio, but the combined compensation generally ranges up to 0.60% annually of the assets invested in the relevant Sub-Accounts. Due to varying nature of this compensation,
the annual rate paid under this fee alternative is higher for certain Sub-Accounts than for other Sub-Accounts. This may create a conflict of interest by influencing Schwab representatives to recommend the certain Sub-Accounts over other Sub-Accounts. The Company also may pay a marketing allowance or allow other promotional incentives or payments to Schwab in the form of cash or other compensation, as mutually agreed upon by the Company and Schwab, to the extent permitted by FINRA rules and other applicable laws and regulations.
You should ask your Consultant or other Schwab representative for further information about what compensation he or she, or Schwab, may receive in connection with your purchase of a Contract.
Voting Rights
In
general, you do not have a direct right to vote the Portfolio shares held in the Series Account. However, under current law, you are entitled to give us instructions on how to vote the shares. We will vote the shares according to those instructions at regular and special shareholder meetings. If the law changes and we can vote the shares in our own right, we may elect to do so.
Before the Annuity Commencement Date, you have the voting interest. The number of votes available to you will be calculated separately for each of your Sub-Accounts. That number will be determined by applying your percentage interest, if any, in a particular Sub-Account to the total number of votes attributable to that Sub-Account. You hold a voting interest in each Sub-Account to which your Annuity Account Value is allocated. If you select a variable annuity option, the votes attributable to your Contract will decrease as annuity payouts are made.
The
number of votes of a Portfolio will be determined as of the date established by that Portfolio for determining shareholders eligible to vote at the meeting of the Portfolio. Voting instructions will be solicited by communication prior to such meeting in accordance with procedures established by the respective Portfolios.
If we do not receive timely instructions and Owners have no beneficial interest in shares held by us, we will vote according to the voting instructions as a proportion of all Contracts participating in the Sub-Account. If you indicate in your instructions that you do not wish to vote an item, we will apply your instructions on a pro rata
51
basis to reduce the votes eligible to be cast.
Each
person or entity having a voting interest in a Sub-Account will receive proxy material, reports, and other material relating to the appropriate Portfolio.
Please note, generally the Portfolios are not required to, and do not intend to, hold annual or other regular meetings of shareholders.
Owners have no voting rights in Great-West.
Rights Reserved by Great-West
We reserve the right to make certain changes we believe would best serve the interests of Owners and Annuitants or would be appropriate in carrying out the purposes of the Contract. Any changes will be made only to the extent and in the manner permitted by applicable laws. Also, when required by law, we will obtain your approval
of the changes and approval from any appropriate regulatory authority. Approval may not be required in all cases, however. Examples of the changes we may make include:
•
To operate the Series Account in any form permitted under the 1940 Act or in any other form permitted by law.
•
To Transfer any assets in any Sub-Account to another Sub-Account, or to one or more separate accounts; or to add, combine or remove Sub-Accounts of the Series Account.
•
To
substitute, for the Portfolio shares in any Sub-Account, the shares of another Portfolio or shares of another investment company or any other investment permitted by law.
•
To cease accepting Contributions at any time for any reason.
•
To make any changes required by the Code or by any other applicable law in order to continue treatment of the Contract as an annuity.
•
To
change the time or time of day that a valuation date is deemed to have ended.
•
To make any other necessary technical changes in the Contract in order to conform with any action the above provisions permit us to take, including changing the way we assess charges, without increasing them for any outstanding Contract beyond the aggregate amount guaranteed.
• To limit the number of Contracts that you may purchase.
Legal Proceedings
Currently, the Series Account is not a party to, and
its assets are not subject to any material legal proceedings. Further, Great-West is not currently a party to, and its property is not currently subject to, any material legal proceedings. The lawsuits to which Great-West is a party are, in the opinion of management, in the ordinary course of business, and are not expected to have a material adverse effect on the financial results, conditions, or prospects of Great-West.
Legal Matters
Advice regarding certain legal matters concerning the federal securities laws applicable to the issue and sale of the Contract has been provided by Carlton Fields Jorden Burt, P.A.
Pursuant to Commodity Futures Trading Commission Rule 4.5, Great-West has claimed an exclusion from the definition of
the term “commodity pool operator” under the Commodity Exchange Act. Therefore, it is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.
Independent Registered Public Accounting Firm and Independent Auditors
The financial statements and financial highlights of each of the investment divisions of the Variable Annuity-1 Series Account of Great-West Life & Annuity Insurance Company of New York included in the Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing in the Registration Statement. Such financial statements
and financial highlights have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Great-West Life & Annuity Insurance Company of New York included in the Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing in the Registration Statement (which report expresses an unqualified opinion
52
and includes an emphasis-of-matter paragraph referring to the financial statements which have been prepared from the separate records
maintained by the Company and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company). Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
Abandoned Property Requirements
Every state has unclaimed property laws that generally provide for escheatment to the state of unclaimed property (including proceeds of annuity contracts) under various circumstances. This “escheatment” is revocable, however, and the state is obligated to pay the applicable proceeds if the property owner steps forward to claim it with the proper documentation. To help prevent such escheatment,
it is important that you keep your contact and other information on file with us up to date, including the names, contact information, and identifying information for the Owner, Annuitant, and Beneficiaries.
Available Information
You may request a free copy of the SAI. Please direct any oral, written, or electronic request for such documents to:
The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information filed electronically by Great-West concerning the Contract and the Series Account.
You also can review and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference room by calling the SEC at 1-800-SEC-0330.
The
SAI contains more specific information relating to the Series Account and Great-West, such as:
•
general information;
•
Great-West Life & Annuity Insurance Company of New York and the Variable Annuity-1 Series Account;
•
calculation of annuity payouts;
•
services;
•
withholding; and
•
financial statements.
53
Appendix A – Net Investment Factor
The Net Investment Factor is determined
by dividing (a) by (b), and subtracting (c) from the result where:
(a) is the net result of:
1) the net asset value per share of the Portfolio shares determined as of the end of the current Valuation Period, plus
2) the per share amount of any dividend (or, if applicable, capital gain distributions) made by the Portfolio on shares if the “ex-dividend” date occurs during the current Valuation Period, minus or plus
3) a per unit charge or credit for any taxes incurred by or provided for in the Sub-Account, which is determined by Great-West to have resulted from the investment operations of the Sub-Account, and
(b) is the results of:
1) the net asset value per share of the Portfolio shares determined
as of the end of the immediately preceding Valuation Period; minus or plus
2) the per unit charge or credit for any taxes incurred by or reserved for in the Sub-Account for the immediately preceding Valuation Period; and
(c) is an amount representing the Mortality and Expense Risk Charge deducted from each Sub-Account on a daily basis. Such amount is equal to 0.49% if you have selected Death Benefit Option 1 or 0.69% if you have selected Death Benefit Option 2.
The Net Investment Factor may be greater than, less than, or equal to one. Therefore, the Accumulation Unit value may increase, decrease, or remain unchanged.
The net asset value per share referred to in paragraphs (a)(1) and (b) above, reflects the investment performance of the Portfolio as well as the payment of Portfolio expenses.
A-1
VARIABLE ANNUITY-1 SERIES ACCOUNT
SCHWAB ADVISOR CHOICE VARIABLE ANNUITY TM
Individual Flexible Premium Deferred
Variable Annuity Contracts
issued
by
Great-West Life & Annuity Insurance Company of New York
This Statement of Additional Information is not a prospectus and should be read in conjunction with the Prospectus, dated [May XX, 2014] , which is available without charge by contacting the Retirement Resource Operations Center, P.O. Box 173921, Denver, Colorado80217-3921 or at 1-1-877-723-8723.
The date of this Statement of Additional Information is
In order to supplement the description in the Prospectus, the following provides additional information about the Contracts and other matters which may be of interest to you. Terms not defined in this Statement of Additional Information have the same meanings as are
defined in the Prospectus under the heading "Definitions."
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
AND THE VARIABLE ANNUITY-1 SERIES ACCOUNT
Great-West Life & Annuity Insurance Company of New York (the "Company" or "Great-West") (formerly known as First Great-West Life & Annuity Insurance Company, and before that as Canada Life Insurance Company of New York), the issuer of the Contract, is a New York corporation qualified to sell life insurance and annuity contracts in New York. It was qualified to do business on June 7, 1971. The Company is a wholly-owned subsidiary of Great-West Life & Annuity Insurance Company ("GWL&A"),
a Colorado stock life insurance company. GWL&A is a wholly owned subsidiary of GWL&A Financial, Inc., a Delaware holding company. GWL&A Financial, Inc. is an indirect wholly-owned subsidiary of Great-West Lifeco Inc., a Canadian holding company. Great-West Lifeco Inc. is a subsidiary of Power Financial Corporation, a Canadian holding company with substantial interests in the financial services industry. Power Financial Corporation is a subsidiary of Power Corporation of Canada, a Canadian holding and management company. Through a group of private holding companies, The Desmarais Family Residuary Trust, which was created on October 8, 2013 under the Last Will and Testament of Paul G. Desmarais, has voting control of Power Corporation of Canada..
The assets allocated to the Variable Annuity-1 Series Account (the
(“Series Account”) are the exclusive property of the Company. Registration of the Series Account under the Investment Company Act of 1940 does not involve supervision of the management or investment practices or policies of the Series Account or of the Company by the Securities and Exchange Commission. The Company may accumulate in the Series Account proceeds from charges under the Contracts and other amounts in excess of the Series Account assets representing reserves and liabilities under the Contract and other variable annuity contracts issued by the Company. The Company may from time to time transfer to its general account any of such excess amounts. Under certain remote circumstances, the assets of one Sub-Account may not be insulated from liability associated with another Sub-Account.
CALCULATION
OF ANNUITY PAYOUTS
Variable Annuity Options
The Company converts the Accumulation Units for each Investment Segment Sub-Account held by you into Annuity Units at their values determined as of the end of the valuation period which contains the Annuity Commencement Date. The number of Annuity Units paid for each Investment Segment Sub-Account is determined by dividing the amount of the first payment by the Annuity Unit value on the first valuation date preceding the date the first payout is due. The number of Annuity Units used to calculate each payout for an Investment Segment Sub-Account remains fixed during the Annuity Payout Period.
The
first payment under a variable annuity payout option will be based on the value of each Investment Segment Sub-Account on the first valuation date preceding the Annuity Commencement Date. We will determine it by applying the appropriate rate to the amount applied under the payout option. Payments after the first will vary depending upon the investment experience of the Investment Segment Sub-Accounts. The subsequent amount paid is determined by multiplying (a) by (b) where (a) is the number of Annuity Units to be paid and (b) is the Annuity Unit value on the first valuation date preceding the date the annuity payout is due. The total amount of each variable annuity payout will be the sum of the variable annuity payments for each Sub-Account.
B-3
POSTPONEMENT
OF PAYOUTS
With respect to amounts allocated to the Series Account, payout of any amount due upon a total or partial surrender, death or under an annuity option will ordinarily be made within seven days after all documents required for such payout are received by the Retirement Resource Operations Center. However, the determination, application or payout of any death benefit, Transfer, full surrender, partial withdrawal or annuity payout may be deferred to the extent dependent on Accumulation or Annuity Unit Values, for any period during which the New York Stock Exchange is closed (other than customary weekend and holiday closings) or trading on the New York Stock Exchange is restricted as determined by the Securities and Exchange Commission, for any period during which any emergency exists as a result of which it is not reasonably practicable for the Company to determine
the investment experience of such Accumulation or Annuity Units or for such other periods as the Securities and Exchange Commission may by order permit for the protection of investors.
SERVICES
A. Safekeeping of Series Account Assets
The assets of the Series Account are held by Great-West. The assets of the Series Account are kept physically segregated and held separate and apart from the general account of Great-West. Great-West maintains records of all purchases and redemptions of shares of the underlying Portfolios. Additional protection
for the assets of the Series Account is afforded by a financial institution bond that includes fidelity coverage issued to Great-West Lifeco Inc. and subsidiary companies in the amount of $50 million (Canadian) per occurrence and $100 million (Canadian) in the aggregate, which covers all officers and employees of Great-West.
B. Independent Registered Public Accounting Firm and Independent Auditors
Deloitte & Touche LLP, 555 Seventeenth Street, Suite 3600, Denver,
Colorado80202, serves as the Company’s independent auditor and serves as the Series Account’s independent registered public accounting firm. Deloitte & Touche LLP audits financial statements for the Company and the Series Account and provides other audit, tax, and related services.
The financial statements and financial highlights of each of the investment divisions of the Variable Annuity-1 Series Account of Great-West Life & Annuity Insurance Company of New York included in this Statement of Additional Information have been audited by Deloitte
& Touche LLP, an independent registered public accounting firm, as stated in their report appearing in the Registration Statement. Such financial statements and financial highlights have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Great-West Life & Annuity Insurance Company of New York included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing in the Registration Statement (which report expresses an unqualified opinion and includes an emphasis-of-matter paragraph referring to the financial statements which have been prepared from the separate records maintained by the Company
and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company). Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
C. Principal Underwriter
The offering of the Contracts is made on a continuous basis by GWFS Equities, Inc. ("GWFS"), an affiliate of Great-West. GWFS is a Delaware corporation and is a member of FINRA. The Company does not anticipate
B-4
discontinuing
the offering of the Contract, although it reserves the right to do so. The Contract generally will be issued for Annuitants from birth to age eighty-five.
D. Administrative Services
Great-West and GWL&A have entered into an Administrative Services Agreement dated August 1, 2003, as amended. Pursuant to the agreement, GWL&A performs certain corporate support services, investment services and other back office administrative services for Great-West. In addition, certain of GWL&A's property, equipment, and facilities are made available for Great-West for its
operations. All charges for services and use of facilities to the extent practicable reflect actual costs, and are intended to be in accordance with New York Insurance Laws.
Certain administrative services are provided by GWFS to assist Great-West in processing the Contracts. These services are described in written agreements between GWFS and Great-West. .
WITHHOLDING
Annuity payouts and other amounts received under the Contract are subject to income tax withholding unless the recipient elects not to have taxes withheld. The amounts withheld will vary among recipients depending on the tax status of the individual and
the type of payouts from which taxes are withheld.
Notwithstanding the recipient's election, withholding may be required with respect to certain payouts to be delivered outside the United States and with respect to certain distributions from certain types of qualified retirement plans, unless the proceeds are transferred directly to another qualified retirement plan. Moreover, special "backup withholding" rules may require the Company to disregard the recipient's election if the recipient fails to supply the Company with a taxpayer identification number ("TIN") (social security number for individuals), or if the Internal Revenue Service notifies the Company that the TIN provided by the recipient is incorrect.
Foreign
Account Tax Compliance Act (“FATCA”)
Beginning in 2014, we may be required to withhold at a rate of 30% under FATCA on certain distributions to foreign financial institutions and non-financial foreign entities holding accounts on behalf of and/or the assets of U.S. persons unless the foreign entities provide us with certain certifications regarding their status under FATCA on the applicable IRS forms. Prospective purchasers with accounts in foreign financial institutions or non-financial foreign entities are advised to consult with a competent tax advisor regarding the application of FATCA to their purchase situation.
FINANCIAL STATEMENTS
The
financial statements of Great-West Life & Annuity Insurance Company of New York should be considered only as bearing upon Depositor's ability to meet its obligations under the Contracts, and they should not be considered as bearing on the investment performance of the Series Account. The variable interests of Contract Owners under the Contracts are affected solely by the investment results of the Series Account.
B-5
Great-West Life & Annuity Insurance Company of New York (a wholly-owned subsidiary of Great-West Life & Annuity Insurance Company)
and Related Statements of Income, Comprehensive Income, Stockholder’s Equity and Cash Flows for Each of the Three Years in the Period Ended December 31, 2013 and Independent Auditors’ Report
INDEPENDENT
AUDITORS' REPORT
To the Board of Directors and Stockholder of
Great-West Life & Annuity Insurance Company of New York
White Plains, New York
We have audited the accompanying financial statements of Great-West Life & Annuity Insurance Company of New York (the "Company") (a wholly owned subsidiary of Great-West Life & Annuity Insurance Company), which comprise the balance sheets as of December 31, 2013 and 2012 and the related statements of income, comprehensive income, stockholder’s equity, and cash flows for each of the three years in the period
ended December 31, 2013 and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Great-West Life & Annuity Insurance Company
of New York as of December 31, 2013 and 2012 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
Also as discussed in Note 1 to the financial statements, the accompanying financial statements have been prepared from the separate records maintained by the Company and may not necessarily be indicative of the conditions
that would have existed or the results of operations if the Company had been operated as an unaffiliated company. Portions of certain expenses represent allocations made from affiliates and may not necessarily be indicative of the conditions that would have existed if the Company had operated as an unaffiliated business. Our opinion is not modified with respect to this matter.
Other
comprehensive income includes the non-credit component of impaired losses (gains) on fixed maturities available-for-sale in the amounts of $665, $1,543 and $(1,011) for the years ended December 31, 2013, 2012 and 2011, respectively.
See
notes to financial statements.
6
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Supplemental
disclosures of cash flow information:
Net cash paid during the year for income taxes
$
(1,752
)
$
(1,094
)
$
(6,184
)
Non-cash
investing transactions during the year:
Fair value of assets acquired in settlement of
fixed maturity investments
$
—
$
—
$
14
Fixed
maturity investments, available-for-sale
acquired in reinsurance termination (See Note 3)
(44,104
)
—
—
Policy loans acquired in reinsurance
termination (See Note 3)
(6,468
)
—
—
See
notes to financial statements.
(Concluded)
9
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
1. Organization and Significant Accounting Policies
Organization
Great-West Life & Annuity Insurance
Company of New York (the “Company”) is a direct wholly-owned subsidiary of Great-West Life & Annuity Insurance Company (“GWL&A”) which is a direct wholly-owned subsidiary of GWL&A Financial Inc. (“GWL&A Financial”), a holding company formed in 1998. GWL&A Financial is a direct wholly-owned subsidiary of Great-West Lifeco U.S. Inc. (“Lifeco U.S.”) and an indirect wholly-owned subsidiary of Great-West Lifeco Inc. (“Lifeco”), a Canadian holding company. The Company offers a wide range of life insurance, retirement and investment products to individuals, businesses and other private and public organizations throughout the United States. The Company is an insurance company domiciled in the State of New York and is subject to regulation by the New York State Department of Financial Services.
Basis of Presentation
The
financial statements include the accounts of the Company.
Reclassification
Certain amounts reported in the financial statements and notes to the financial statements as of and for the years ended December 31, 2012 and 2011 have been reclassified to conform to current period presentation.
Use of Estimates
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are required to account for items and matters such as, but not limited to, the valuation of investments in the absence of quoted market values, impairment of investments, valuation of DAC, valuation of policy benefit liabilities and the valuation of deferred tax assets. Actual results could differ from those estimates.
The Company is a member of a controlled group and therefore, its results may not be indicative of those of a stand-alone company.
Summary of Significant Accounting Policies
Investments
Investments
are reported as follows:
1.The Company classifies the majority of its fixed maturity and all of its equity investments as available-for-sale. All available-for-sale fixed maturity and equity investments are recorded at fair value with the related net unrealized gain or loss, net of policyholder related amounts and deferred taxes, recorded in accumulated other comprehensive income (loss) (“AOCI”). The Company recognizes the acquisition of its public fixed maturity and equity investments on a trade date basis. Net unrealized gains and losses related to participating contract policies that have not been distributed are included in undistributed earnings on participating business.
Premiums and discounts are recognized as a component of net investment income
using the scientific interest method, realized gains and losses are included in net realized investment gains (losses) and declines in value determined to be other-than-temporary are included in total other-than-temporary losses.
The Company purchases fixed maturity securities which are classified as held for trading. Assets in the held for trading category are carried at fair value with changes in fair value reported in net investment income.
The recognition of income on certain investments (e.g. loan-backed securities, including mortgage-backed and asset-
10
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
backed securities) is dependent upon market conditions, which may result in prepayments and changes in amounts to be earned. Prepayments on all mortgage-backed and asset-backed securities are monitored monthly and amortization of the premium and/or the accretion of the discount associated with the purchase of such securities are adjusted by such prepayments.
2.Mortgage loans on real estate consist of domestic commercial collateralized loans and are carried at their unpaid principal balances adjusted for any unamortized premiums or discounts
and mortgage provision allowances. Interest income is accrued on the unpaid principal balance for all loans, except for loans on non-accrual status. Premiums and discounts are amortized to net investment income using the scientific interest method. Prepayment penalty fees are recognized in other realized investment gains upon receipt.
The Company actively manages its mortgage loan portfolio by completing ongoing comprehensive analysis of factors such as debt service coverage ratios, loan-to-value ratios, payment status, default or legal status, annual collateral property evaluations and general market conditions. On a quarterly basis, the Company reviews the above primary credit quality indicators in its internal risk assessment of loan impairment and credit loss. Management’s risk assessment process is subjective and includes the categorization of all loans, based on the above
mentioned credit quality indicators, into one of the following categories:
•Performing - generally indicates the loan has standard market risk and is within its original underwriting guidelines.
•Non-performing - generally indicates there is a potential for loss due to the deterioration of financial/monetary default indicators or potential foreclosure. Due to the potential for loss, these loans are evaluated for impairment.
The Company’s mortgage provision allowance is reviewed quarterly. The determination of the calculation and the adequacy of the mortgage provision allowance and mortgage impairments involve judgments that incorporate qualitative and quantitative Company and industry mortgage
performance data. Management’s periodic evaluation and assessment of the adequacy of the mortgage provision allowance and the need for mortgage impairments is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the fair value of the underlying collateral, composition of the loan portfolio, current economic conditions, loss experience and other relevant factors. Loans included in the non-performing category and other loans with certain substandard credit quality indicators are individually reviewed to determine if a specific impairment is required. Risk is mitigated through first position collateralization, guarantees, loan covenants and borrower reporting requirements. Since the Company does not originate or hold uncollateralized mortgages, loans are generally not deemed fully uncollectable. Generally, unrecoverable amounts are written off during the final stage of the foreclosure process.
Loan
balances are considered past due when payment has not been received based on contractually agreed upon terms. For loan balances greater than 90 days past due or in the process of foreclosure, all accrual of interest is discontinued. The Company resumes interest accrual on loans when a loan returns to current status. Interest accrual may also resume under new terms when loans are restructured or modified.
On a quarterly basis, any loans with terms that were modified during that period are reviewed to determine if the loan modifications constitute a troubled debt restructuring (“TDR”). In evaluating whether a loan modification constitutes a TDR, it must be determined that the modification is a significant concession and the debtor is experiencing financial difficulties.
3.Policy
loans are carried at their unpaid balances. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policy.
4.Short-term investments include securities purchased with initial maturities of one year or less and are carried at fair value which is approximated from amortized cost. The Company classifies its short-term investments as available-for-sale
5.The Company participates in a securities lending program in which the Company lends securities that are held as part of its general account investment portfolio to third parties. The Company does not enter into these types of transactions for liquidity purposes, but rather for yield enhancements on its investment portfolio. The borrower
can return and the Company can request the loaned securities at any time. The Company maintains ownership of the
11
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
securities at all times and is entitled to receive from the borrower any payments for interest received on such securities during the loan term. Securities lending transactions are accounted for as secured borrowings. The securities lending agent indemnifies the Company against borrower risk, meaning
that the lending agent agrees contractually to replace securities not returned due to a borrower default. The Company generally requires initial collateral in an amount greater than or equal to 102% of the fair value of domestic securities loaned and 105% of foreign securities loaned. Such collateral is used to replace the securities loaned in event of default by the borrower. Acceptable collateral is generally defined as government securities, letters of credit and/or cash collateral. Some cash collateral may be invested in short-term repurchase agreements which are also collateralized by U.S. Government or U.S. Government Agency securities.
6.The Company’s other-than-temporary impairments (“OTTI”) accounting policy requires that a decline in the value of a security below its cost or amortized cost basis be assessed to determine if the decline is other-than-temporary. The assessment of
whether an OTTI has occurred on fixed maturity investments where management does not intend to sell the fixed maturity investment and it is not more likely than not the Company will be required to sell the fixed maturity investment before recovery of its amortized cost basis, is based upon management’s case-by-case evaluation of the underlying reasons for the decline in fair value of each individual security. Management considers a wide range of factors, as described below, regarding the security issuer and uses its best judgment in evaluating the cause of the decline in its estimated fair value and in assessing the prospects for near-term recovery.
Considerations used by the Company in the impairment evaluation process include, but are not limited to, the following:
•The
extent to which estimated fair value is below cost;
•The decline in fair value is attributable to specific adverse conditions affecting a particular instrument, its issuer, an industry or geographic area;
•The length of time for which the estimated fair value has been below cost;
•Downgrade of a fixed maturity investment by a credit rating agency;
•Deterioration of the financial condition of the issuer;
•The payment structure of the fixed maturity investment and the likelihood of the issuer being able to make payments in the future; and
•Whether dividends have been reduced
or eliminated or scheduled interest payments have not been made.
If either (a) management has the intent to sell a fixed maturity investment or (b) it is more likely than not the Company will be required to sell a fixed maturity investment before its anticipated recovery, a charge is recorded in net realized investment losses equal to the difference between the fair value and cost or amortized cost basis of the security. If management does not intend to sell the security and it is not more likely than not the Company will be required to sell the fixed maturity investment before recovery of its amortized cost basis, but the present value of the cash flows expected to be collected (discounted at the effective interest rate implicit in the fixed maturity investment prior to impairment) is less than the amortized cost basis of the fixed maturity investment (referred to as the credit
loss portion), an OTTI is considered to have occurred. In this instance, total OTTI is bifurcated into two components: the amount related to the credit loss, which is recognized in current period earnings; and the amount attributed to other factors (referred to as the non-credit portion), which is recognized as a separate component in AOCI. The expected cash flows utilized during the impairment evaluation process are determined using judgment and the best information available to the Company including default rates, credit ratings, collateral characteristics and current levels of subordination. After the recognition of an OTTI, a fixed maturity investment is accounted for as if it had been purchased on the measurement date of the OTTI, with an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. The difference between the new amortized cost basis and the future cash flows is accreted into net investment income. The
Company continues to estimate the present value of cash flows expected to be collected over the life of the security.
Fair Value
Certain assets and liabilities are recorded at fair value on the Company’s balance sheets. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company categorizes its assets and liabilities measured at fair value on a recurring basis into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest
12
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Company’s assets and liabilities recorded at fair value on a recurring basis have been categorized based upon the following fair value hierarchy:
•Level 1 inputs utilize observable, quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Financial assets and liabilities utilizing
Level 1 inputs include certain money market funds.
•Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The fair values for some Level 2 securities are obtained from pricing services. The inputs used by the pricing services are reviewed at least quarterly or when the pricing vendor issues updates to its pricing methodology. For fixed maturity securities and separate account assets, inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark
securities, bids, evaluated bids, offers and reference data including market research publications. Additional inputs utilized for assets and liabilities classified as Level 2 are:
◦Asset-backed, residential mortgage-backed, commercial mortgage-backed securities and collateralized debt obligations - new issue data, monthly payment information, collateral performance and third party real estate analysis.
◦U.S. states and their subdivisions - material event notices.
◦Equity investments - exchange rates, various index data and news sources.
◦Short-term investments - valued based on amortized cost.
◦Separate
account assets - exchange rates, various index data and news sources, amortized cost (which approximates fair value), trading activity, swap curves, credit spreads, recovery rates, restructuring, currency volatility, net present value of cash flows and quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
•Level 3 inputs are unobservable and include situations where there is little, if any, market activity for the asset or liability. In general, the prices of Level 3 securities are obtained from single broker quotes and internal pricing models. If the broker’s inputs are largely unobservable, the valuation is classified as a Level 3. Broker quotes are validated through an internal analyst review process, which includes validation through known market conditions and other relevant
data, as noted below. Internal models are usually cash flow based utilizing characteristics of the underlying collateral of the security such as default rate and other relevant data. Inputs utilized for securities classified as Level 3 are as follows:
◦Corporate debt securities – unadjusted single broker quotes which may be in an illiquid market or otherwise deemed unobservable.
◦Asset-backed securities - internal models utilizing asset-backed securities index spreads.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety
falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Overall, transfers between levels are attributable to a change in the observability of inputs. Assets and liabilities are transferred to a lower level in the hierarchy when a significant input cannot be corroborated with market observable data. This may occur when market activity decreases and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred to a higher level in the hierarchy when circumstances change such that
a significant input can
13
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
be corroborated with market observable data. This may be due to a significant increase in market activity including recent trades, a specific event, or one or more significant input(s) becoming observable. All transfers between levels are recognized at the beginning of the reporting period in which the transfer occurred.
The
policies and procedures utilized to review, account for and report on the value and level of the Company’s securities were determined and implemented by the Finance division. The Investments division is responsible for the processes related to security purchases and sales and provides valuation and leveling input to the Finance division when necessary. Both divisions within the Company have worked in conjunction to establish thorough pricing, review, approval, accounting and reporting policies and procedures around the securities valuation process.
Internal pricing models may be used to value certain Level 3 securities. These models have been created by the Company based on specific characteristics of the portfolio, such as the high level of illiquidity, the low level of market making and trading activity and the collateralized nature of certain securities. These models are
recalibrated monthly by adjusting the inputs based on current public security market conditions and how those conditions apply to the Company’s portfolio. Internal model input assumptions may include: prepayment speeds, constant default rates and the Asset Backed Securities Index (“ABX Index”) spread adjusted by an internally calculated liquidity premium. The primary inputs into the internal pricing models are the constant default rate and the internally adjusted ABX Index spread. Additionally, a monthly comparison of the internally developed model prices to pricing vendor evaluations is performed and analyzed. The Company determined the use of internal models was more accurate for certain securities categorized as Level 3 primarily because the internally adjusted ABX Index spread is a better indication of fair value than spread assumptions used by external pricing models in illiquid markets. The internally adjusted ABX Index spread captures exposure to similar
cash flows as the Company’s portfolio in a liquid and actively traded market and includes additional spread assumptions for potential illiquidity of the underlying collateral.
14
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
In some instances, securities are priced using external broker quotes. In most cases, when broker quotes are used as pricing inputs, more than one broker quote is obtained. External broker
quotes are reviewed internally by comparing the quotes to similar securities in the public market and/or to vendor pricing, if available. Additionally, external broker quotes are compared to market reported trade activity to ascertain whether the price is reasonable, reflective of the current market prices and takes into account the characteristics of the Company’s securities.
Derivative financial instruments
The Company enters into derivative transactions which include the use of U.S. government treasury futures contracts. The Company uses these derivative instruments to manage interest rate risk. Derivative instruments are not used for speculative reasons.
All derivatives,
regardless of hedge accounting treatment, are recorded in other assets and other liabilities at fair value. Accounting for the ongoing changes in the fair value of a derivative depends upon the intended use of the derivative and its designation as determined when the derivative contract is entered into. If the derivative is designated as a fair value hedge, the changes in its fair value and of the fair value of the hedged item attributable to the hedged risk are recognized in earnings in net investment income. Investment gains and losses generally result from the termination of derivative contracts prior to expiration.
Cash
Cash includes only amounts in demand deposit accounts.
Book
overdrafts occur when checks have been issued by the Company, but have not been presented to the Company’s disbursement bank accounts for payment. These bank accounts allow the Company to delay funding of the issued checks until they are presented for payment. This delay in funding results in a temporary source of financing. The activity related to book overdrafts is included in the financing activities in the statement of cash flows. The book overdrafts are included in other liabilities.
Deferred acquisition costs and value of business acquired
The Company incurs costs in connection with the acquisition of new and renewal insurance business. Costs that vary directly with and relate to the successful production of new business are deferred as DAC. These costs consist primarily of
commissions, costs associated with the Company’s sales representatives and policy issuance and underwriting expenses related to the production of successfully acquired new business or the acquisition of insurance or annuity contracts. A success factor is derived from actual contracts issued by the Company from requests for proposals or applications received. VOBA represents the estimated fair value of insurance or annuity contracts acquired either directly through the acquisition of another insurance company or through the acquisition of insurance or annuity contracts through assumption reinsurance transactions. The recoverability of such costs is dependent upon the future profitability of the related business.
DAC and VOBA associated with the annuity products and flexible premium universal life insurance products are being amortized over the life of the contracts in proportion
to the emergence of gross profits. Retrospective adjustments of these amounts are made when the Company revises its estimates of current or future gross profits. DAC and VOBA associated with traditional life insurance are amortized over the premium-paying period of the related policies in proportion to premium revenues recognized. DAC and VOBA, for applicable products, are adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or charges included in AOCI.
15
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in
Thousands, Except Share Amounts)
Separate accounts
Separate account assets and related liabilities are carried at fair value in the accompanying balance sheets. The Company issues variable annuity contracts and variable universal life contracts through separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder and therefore, are not included in the Company's statements of income.
Revenues to the Company from the separate accounts consist of contract maintenance fees, investment management fees, administrative
fees and mortality and expense risk charges.
The Company’s separate accounts invest in shares of Great-West Funds Inc. and Putnam Funds, open-end management investment companies, which are affiliates of the Company, and shares of other non-affiliated mutual funds and government and corporate bonds.
Life insurance and annuity future benefits
Life insurance and annuity future benefits with life contingencies in the amounts of $411,097 and $395,417 at December 31, 2013 and 2012, respectively, are computed on the basis of assumed investment yield, mortality, morbidity and expenses, including a margin for
adverse deviation. These future policy benefits are calculated as the present value of future benefits (including dividends) and expenses less the present value of future net premiums. The assumptions used in calculating the future policy benefits generally vary by plan, year of issue and policy duration. Additionally, these future policy benefits are established for claims that have been incurred but not reported based on factors derived from past experience.
Annuity contract benefits without life contingencies in the amounts of $377,020 and $361,272 at December 31, 2013 and 2012, respectively, are established at the contract holder’s account value, which is equal to cumulative deposits and credited interest, less withdrawals and mortality and expense and/or administrative service
charges. The Company’s general account also has some immediate annuities. Future benefits for immediate annuities without life contingent payouts are computed on the basis of assumed investment yield and expenses.
Reinsurance ceded
In the normal course of its business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding risks to other insurance enterprises under excess coverage, quota share, yearly renewable term, coinsurance and modified coinsurance contracts. For each of its reinsurance agreements, the Company determines if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. If the Company determines that a reinsurance agreement
does not provide indemnification against loss or liability relating to insurance risk, the Company records the agreement using the deposit method of accounting. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims.
Policy benefits and policy and contract claims ceded to other insurance companies are carried as a reinsurance receivable in the accompanying balance sheets. The cost of reinsurance related to long duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.
Policy and contract claims
Policy
and contract claims include provisions for claims incurred but not reported and claims in the process of settlement. The provision for claims incurred but not reported is valued based primarily on the Company’s prior experience. Claims in the process of settlement are valued in accordance with the terms of the related policies and contracts.
Participating business
The Company has participating policies in which the policyholder shares in the Company’s earnings through policyholder
16
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial
Statements
(Dollars in Thousands, Except Share Amounts)
dividends that reflect the difference between the assumptions used in the premium charged and the actual experience on those policies. The amount of dividends to be paid is determined by the Board of Directors of the Company.
Participating life and annuity policy benefit liabilities are $113,849 and $111,934 at December 31, 2013 and 2012, respectively. Participating business comprises approximately 16% and 11% of the Company’s individual life insurance in-force at December 31, 2013
and 2012, and 92%, 43% and 37% of individual life insurance premium income for the years ended December 31, 2013, 2012 and 2011, respectively. The policyholder’s share of net income on participating policies that cannot be distributed to the Company’s stockholder and has not been distributed to participating policyholders is excluded from stockholder’s equity and included in undistributed earnings on participating business in the balance sheet.
Unearned revenue liability (“URL”) relates to universal life and investment products and
represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized over the life of the contracts in proportion to the emergence of gross profits, similar to DAC. Such amortization is recorded in fee income.
Recognition of premium and fee income and benefits and expenses
Life insurance premiums are recognized when due. Annuity contract premiums with life contingencies are recognized as received. Revenues for annuity and other contracts without significant life contingencies consist of contract charges for the cost of insurance and contract administration and surrender fees that have been assessed against the contract account balance during the period and are recognized when earned. Fees from assets under management, assets
under administration, shareholder servicing, mortality and expense risk charges, administration and record-keeping services and investment advisory services are recognized when due. Benefits and expenses on policies with life contingencies are associated with earned premiums so as to result in recognition of profits over the life of the contracts. Premiums and policyholder benefits and expenses are presented net of reinsurance.
Net investment income
Interest income from fixed maturities and mortgage loans on real estate is recognized when earned. Net investment income on equity securities is primarily comprised of dividend income and is recognized on the ex-dividend date.
Realized investment gains
(losses) and derivative financial instruments
Realized investment gains and losses are reported as a component of revenues and are determined on a specific identification basis. Realized investment gains and losses also result from certain fair-value hedge relationships.
Income taxes
Income taxes are recorded using the asset and liability method in which deferred tax assets and liabilities are recorded for expected future tax consequences of events that have been recognized in either the Company’s financial statements or consolidated tax returns. In estimating future tax consequences, all expected future events, other than enactments or changes in the tax laws or rules, are considered. A valuation
allowance is provided to the extent that it is more likely than not that deferred tax assets will not be realized. Although realization is not assured, management believes it is more likely than not that the deferred tax asset will be realized. The effect on deferred taxes from a change in tax rates is recognized in income in the period that includes the enactment date.
2. Application of Recent Accounting Pronouncements
Recently adopted accounting pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02 Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU No. 2013-02”). ASU No. 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income for each applicable component of net income on a
17
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
prospective basis. ASU No. 2013-02 supersedes the presentation requirements for reclassifications out of accumulated other comprehensive income in ASU No. 2011-05
Comprehensive Income (Topic 220): Presentation of Comprehensive Income and ASU No. 2011-12 Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2013-02 was effective for fiscal years beginning after December 15, 2012. The Company adopted the provisions of ASU No. 2013-02 for its fiscal year beginning January 1, 2013. The adoption did not have a material impact on the Company’s financial statements; see additional disclosures required for amounts reclassified out of accumulated other comprehensive income in Note 10.
3. Related
Party Transactions
In the normal course of its business, the Company enters into reinsurance agreements with related parties.
Included in the balance sheets are the following related party amounts:
Reinsurance
recoveries on life and other policy benefits
from related parties
(2,395)
(3,673)
(7,251)
On
January 1, 2013, the Company terminated its reinsurance agreement with an affiliate, The Canada Life Assurance Company (“CLAC”), pursuant to which it had ceded certain participating life business on a coinsurance basis. As a result of that termination, the Company recorded the following increases (decreases), at fair value, in its balance sheet in connection with the termination of the reinsurance agreement:
Assets
Liabilities
Fixed
maturities, available-for-sale
$
44,104
Undistributed earnings on
Policy loans
6,468
participating business
$
7,355
Reinsurance
receivable
(42,297
)
Due to parent and affiliates
3,841
Investment income due and accrued
347
Deferred
income tax asset, net
2,574
Total
$
11,196
Total
$
11,196
On
January 1, 2013, the Company recorded the following increases (decreases) in its statement of income in connection with the termination of the reinsurance agreement:
Premium income
$
42,297
Other revenue
7,355
Total
49,652
Increase
(decrease) in future policy benefits
41,297
Dividends to policyholders
1,000
Total
42,297
Participating policyholders' net income
7,355
Provision
for policyholders' share of earnings (losses) on participating business
7,355
Net income available to shareholder
$
—
18
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
Participating
policyholders share in the financial results of the participating business in the form of policyholder dividends. The policyholder dividends can be distributed directly to the policyholders in the form of cash or through an increase in benefits such as paid-up additions. The participating policyholder earnings that cannot be distributed to the Company’s shareholder and has not been distributed to participating policyholders are not included in the Company’s net income and are reflected in liabilities in undistributed earnings on participating business in the Company’s balance sheets. As such, the transaction above had no impact on net income available to the Company’s shareholder.
The Company, GWL&A and certain GWL&A subsidiaries have service agreements whereby GWL&A and certain GWL&A subsidiaries administer, distribute and underwrite business for the Company and administer its investment portfolio. The
amounts recorded are based upon estimated costs incurred and resources expended. The amounts incurred for these services from GWL&A and certain GWL&A subsidiaries are summarized as follows:
In
September 2013, GWL&A transferred $24,858 of cash and future policy benefits to the Company. The transfer of cash and future policy benefits relate to contracts with policyholders domiciled in the state of New York that were previously accounted for on the books of GWL&A.
In addition, the Company and GWL&A have an agreement whereby GWL&A has committed to provide financial support related to the maintenance of adequate regulatory surplus and liquidity.
4. Summary of Investments
The following tables summarize fixed maturity investments and equity securities classified as available-for-sale and the non-credit-related component of OTTI in AOCI:
19
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
(1)
Indicates the amount of any OTTI (gain) loss included in AOCI that is included in gross unrealized gains and losses. OTTI (gain) loss included in AOCI, as presented above, includes both the initial recognition of non-credit losses and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that had previous non-credit impairment. The non-credit loss component of OTTI (gain) loss was in an unrealized gain position due to increases in estimated fair value subsequent to initial recognition of non-credit losses on such securities.
20
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
(1)
Indicates the amount of any OTTI (gain) loss included in AOCI that is included in gross unrealized gains and losses. OTTI (gain) loss included in AOCI, as presented above, includes both the initial recognition of non-credit losses and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that had previous non-credit impairment. The non-credit loss component of OTTI (gain) loss for corporate debt securities was in an unrealized gain position due to increases in estimated fair value subsequent to initial recognition of non-credit losses on such securities.
See Note 6 for additional discussion regarding fair value measurements.
The amortized cost and estimated fair value of fixed maturity investments classified
as available-for-sale, based on estimated cash flows, are shown in the table below. Actual maturities will likely differ from these projections because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Included
in net investment income are unrealized gains (losses) of ($2,125), $221 and $271 on held-for-trading fixed maturity investments still held at December 31, 2013, 2012 and 2011, respectively.
Mortgage loans on real estate – The following table summarizes the carrying value of the mortgage loan portfolio by component:
The
recorded investment of the mortgage loan portfolio categorized as performing was $95,252 and $93,602 as of December 31, 2013 and 2012, respectively.
The following table summarizes activity in the mortgage provision allowance:
Occasionally,
the Company elects to grant a concession to a debtor with financial difficulties in an attempt to protect as much of its investment as possible. During the year ended December 31, 2013, the Company had two loans, with remaining principal balances of $1,234, classified as troubled debt restructurings. The loan modification on one loan forgave $247 of principal and, subsequent to the concession, the remaining loan balance was paid in full. The loan modifications on the second loan included a reduced interest rate and maturity extension but the Company expects a full recovery.
Securities lending - The Company participates in a securities lending program whereby securities are loaned to third parties. Securities with a cost or amortized cost of $13,169 and $9,989 and estimated fair values of $12,838 and $10,008
were on loan under the program at December 31, 2013 and 2012, respectively. The Company received restricted cash of $11,177 and $10,234 and a security with a fair value of $2,033 and zero as collateral at December 31, 2013 and 2012, respectively.
Unrealized losses on fixed maturity investments classified as available-for-sale - The following tables summarize unrealized investment losses, including the non-credit-related portion of OTTI losses reported in AOCI, by class of investment:
Estimated
Unrealized
Estimated
Unrealized
Estimated
Unrealized
Fixed
Maturities
fair value
loss and OTTI
fair value
loss and OTTI
fair value
loss and OTTI
U.S.
government direct obligations
and
U.S. agencies
$
53,401
$
3,167
$ -
$ -
$
53,401
$
3,167
Obligations
of U.S. states
and
their subdivisions
2,523
282
-
-
2,523
282
Foreign
government securities
2,604
14
-
-
2,604
14
Corporate
debt securities
149,452
7,673
21,535
2,208
170,987
9,881
Asset-backed
securities
8,955
231
5,182
617
14,137
848
Residential
mortgage-backed
securities
9,136
819
-
-
9,136
819
Commercial
mortgage-backed
securities
5,742
198
-
-
5,742
198
Total
fixed maturities
$
231,813
$
12,384
$
26,717
$
2,825
$
258,530
$
15,209
Total
number of securities in an
unrealized
loss position
65
9
74
23
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Fixed
maturity investments - Total unrealized losses and OTTI increased by $12,687 from December 31, 2012 to December 31, 2013. The increase in unrealized losses was in the less than twelve month category which increased by $11,469 from December 31, 2012 to December 31, 2013.
This increase was across all asset classes and was due to higher interest rates resulting in generally lower valuations of these fixed maturity securities. The number of securities with unrealized losses in the less than twelve months category increased from 18 at December 31, 2012 to 65 at December
31, 2013. The securities continue to be rated investment grade.
Total unrealized losses greater than twelve months increased by $1,218 from December 31, 2012 to December 31, 2013. Corporate debt securities account for 78%, or $2,208, of the unrealized losses and OTTI greater than twelve months as of December 31, 2013.
Asset-backed securities account for the remaining 22% of unrealized losses and OTTI greater than twelve months as of December 31, 2013. Of the $617 of unrealized losses and OTTI over twelve months on asset-backed securities, 55%, or $340, are on securities which continue to be rated investment grade while 45%, or $277,
are considered non-investment grade securities. The present value of the cash flows expected to be collected is not less than amortized cost and management does not have the intent to sell these assets; therefore, an OTTI was not recognized in earnings.
See Note 6 for additional discussion regarding fair value measurements.
Other-than-temporary impairment recognition - The Company recorded OTTI on fixed maturity investments as follows:
The Company recorded no OTTI on fixed maturity investments during the year ended December 31, 2013.
(1)
All of the $1,315 in credit related OTTI is bifurcated credit loss recognized on one asset-backed fixed maturity.
(2) Amounts are recognized in OCI in the period incurred.
The OTTI of fixed maturity securities where the loss portion is bifurcated and the credit related component is recognized in realized investment gains (losses) is summarized as follows:
In
2012 and 2011, realized gains (losses) on the provision for mortgage impairments, net of recoveries, was $780 and ($130), respectively. In 2012 and 2011, realized gains (losses) on mortgage loan activity not related to the provision was $291 and $48, respectively and was included in Other. In the current year, all mortgage loan activity has been included in a single line item.
Included in net investment income and realized investment gains (losses) are amounts allocable to the participating fund account. This allocation is based upon the activity in a specific block of investments that is segmented for the benefit of the participating fund account. The amounts of net investment income allocated to the participating fund account were $4,176, $3,165 and $4,095 for the years ended December 31, 2013, 2012
and 2011, respectively. The amounts of realized investment gains (losses) allocated to the participating fund account were $(327), $503 and $279 for the years ended December 31, 2013, 2012 and 2011, respectively.
5. Derivative financial instruments
The Company enters into derivative transactions which include the use of U.S. government treasury futures contracts which are used to hedge the economic risks of certain transactions.
Fair value hedges - Interest
rate futures are used to manage the interest rate risk of the change in the fair value of certain fixed rate maturity investments. All fair value hedges were closed as of the year ended December 31, 2011.
The Company recognized total derivative gains (losses) in net investment income of zero, zero, and ($3,839) for the years ended December 31, 2013, 2012 and 2011, respectively. The Company realized net investment gains (losses) on closed derivative positions of zero, zero, and $3,700 for the years ended December 31, 2013, 2012 and 2011,
respectively. The preceding amounts are all shown net of any gains (losses) on the hedged assets in a fair value hedge that has been recorded in net investment income.
26
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
The following table presents the effect of derivative instruments in the statements of income reported by fair value hedges:
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share
Amounts)
6. Fair Value Measurements
Recurring fair value measurements
The following tables present the Company’s financial assets and liabilities carried at fair value on a recurring basis by fair value hierarchy category:
Assets
and liabilities measured at fair value on a recurring basis
The
methods and assumptions used to estimate the fair value of the Company’s financial assets and liabilities carried at fair value on a recurring basis are as follows:
Fixed maturity and equity investments
The fair values for fixed maturity and equity investments are based upon market prices from independent pricing
29
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
services. In
cases where market prices are not readily available, such as for private fixed maturity investments, fair values are estimated by the Company. To determine estimated fair value for these instruments, the Company generally utilizes discounted cash flows calculated at current market rates on investments of similar quality and term. Fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty.
Short-term investments and securities lending agreements
The amortized cost of short-term investments, collateral under securities lending agreements and payable under securities lending agreements
is a reasonable estimate of fair value due to their short-term nature and the high credit quality of the issuers.
Separate account assets
Separate account assets include investments in mutual fund securities. Mutual funds are recorded at net asset value, which approximates fair value, on a daily basis.
Assets measured at fair value using significant unobservable inputs (Level 3)
The following tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
(1)
Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors.
(1)
Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors.
31
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
The following tables presents significant unobservable inputs used during the valuation of certain assets categorized within Level 3 of the recurring fair value measurements table:
(2) Includes an internally calculated liquidity premium adjustment of 217.
At December 31, 2013, after adjusting the ABX Index spread assumption by the liquidity premium, the overall discount rate ranged from 373 to 647 basis points. The constant default rate assumption ranged from 2.1 to 4.6.
(2) Includes an internally calculated liquidity premium adjustment of 217.
At December 31, 2012, after adjusting the ABX Index spread assumption by the liquidity premium, the overall discount rate ranged from 658 to 918 basis points. The constant default rate assumption ranged from 2.1 to 4.6.
The
significant unobservable inputs used in the fair value measurement of asset-backed securities are prepayment speed assumptions, constant default rate assumptions and the ABX Index spread adjusted by an internally calculated liquidity premium with the primary inputs being the constant default rate assumption and the adjusted ABX Index spread assumption. As the constant default rate assumption or the adjusted ABX Index spread assumption decreases, the price and therefore, the fair value, of the securities increases.
Fair value of financial instruments
The following tables summarize the carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value on a recurring basis:
32
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
The
methods and assumptions used to estimate the fair value of financial instruments not carried at fair value on a recurring basis are summarized as follows:
Mortgage loans on real estate
Mortgage loan fair value estimates are generally based on discounted cash flows. A discount rate matrix is used where the discount rate valuing a specific mortgage generally corresponds to that mortgage’s remaining term and credit quality. Management believes the discount rate used is comparable to the credit, interest rate, term, servicing costs and risks of loans similar to the portfolio loans that the Company would make today given its internal pricing strategy. The estimated fair value was classified as Level 2.
Policy
loans
Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value. The estimated fair value was classified as Level 2.
Annuity contract benefits without life contingencies
The
estimated fair value of annuity contract benefits without life contingencies is estimated by discounting the projected expected cash flows to the maturity of the contracts utilizing risk-free spot interest rates plus a provision for the Company’s credit risk. The estimated fair value was classified as Level 2.
Policyholders’ funds
The carrying amount of policyholders’ funds approximates the fair value since the Company can change the interest credited rates with 30 days notice. The estimated fair value was classified as Level 2.
7. Reinsurance
In
the normal course of its business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding risks to other insurance enterprises under excess coverage, quota share, yearly renewable term and coinsurance contracts. On existing business, the Company retains a maximum of $250 of coverage per individual life. For new term life insurance policies, the Company retains 100% of the first $50 of coverage per individual life and 50% of coverage in excess of $50 up to a maximum retention of $250 per individual life. For new business-owned life insurance policies, the Company retains 100% of the first $250 per individual life. New term and business-owned life insurance policies are reinsured to GWL&A. The Company does not assume business under reinsurance agreements.
33
GREAT-WEST LIFE
& ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
Ceded reinsurance contracts do not relieve the Company from its obligations to policyholders. The failure of reinsurers to honor their obligations could result in losses to the Company. Consequently, allowances are established for amounts deemed uncollectible. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. At December
31, 2013 and 2012, the reinsurance receivables had carrying values in the amounts of $5,495 and $49,013, respectively. Included in these amounts are $2,624 and $44,002 at December 31, 2013 and 2012, respectively, associated with reinsurance agreements with related parties. At December 31, 2013 and 2012, 24% and 89%, respectively, of the total reinsurance receivable was due from CLAC, a related party.
The following tables summarize life insurance in-force and total premium income at and for the year ended December 31, 2013:
Written
and
Reinsurance
earned direct
ceded
Net
Life
insurance in-force:
Individual
$
3,413,560
$
(1,839,552
)
$
1,574,008
Premium
income:
Life insurance
$
17,836
$
35,069
$
52,905
The
following tables summarize life insurance in-force and total premium income at and for the year ended December 31, 2012:
Written and
Reinsurance
earned
direct
ceded
Net
Life insurance in-force:
Individual
$
3,724,375
$
(2,142,236
)
$
1,582,139
Premium
income:
Life insurance
$
18,541
$
(9,694
)
$
8,847
The
following table summarizes total premium income for the year ended December 31, 2011:
Written and
Reinsurance
earned
direct
ceded
Net
Premium income:
Life insurance
$
19,751
$
(11,173
)
$
8,578
Reinsurance
recoveries for life and other policy benefits were $3,879, $4,871 and $10,918 for the years ended December 31, 2013, 2012 and 2011, respectively.
34
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
8. Deferred Acquisition Costs and Value of Business Acquired
The
following table summarizes activity in DAC and VOBA:
At December 31, 2013 and 2012, the Company had 10,000 shares of $1,000 par value common stock authorized, 2,500 of which were issued and outstanding at both dates.
The Company’s net income and capital and surplus, as determined in accordance with statutory accounting principles and practices as prescribed by the National Association of Insurance Commissioners (“NAIC”), is as follows:
2013
2012
2011
2013
2012
Net
(loss) income
$
(4,477
)
$
4,505
$
6,937
Capital and surplus
$
79,530
$
83,008
Regulatory
compliance is determined by a ratio of a company’s total adjusted capital (“TAC”) to its authorized control level risk-based capital (“ACL”), as determined in accordance with statutory accounting principles and practices as prescribed by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The minimum level of TAC before corrective action commences is 200% of ACL. The Company’s risk-based capital ratio was in excess of the required amount as of December 31, 2013.
As an insurance company domiciled in the State of New York, the Company is required to maintain a minimum of $6,000 of capital and surplus. Dividends are paid as determined by the Board of Directors, subject to restrictions as discussed below.
The
maximum amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of New York, without prior approval of the Superintendent, is subject to restrictions relating to statutory surplus and statutory net gain from operations. As filed with the New York State Department of Financial Services, statutory surplus and net gain from operations at and for the year ended December 31, 2013 were $79,530 and $90, respectively. Based on the as filed amounts, the Company may pay up to $7,953 of dividends in 2014 without the approval of the New York Superintendent of Financial Services.
35
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes
to Financial Statements
(Dollars in Thousands, Except Share Amounts)
10. Other Comprehensive Income
The following tables present the accumulated balances for each classification of other comprehensive income (loss):
Deferred
income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. The tax effect of temporary differences, which give rise to the deferred tax assets and liabilities, is as follows:
Amounts
presented for investment assets above include $(897) and $(10,812) related to the unrealized (gains) losses on the Company’s fixed maturity and equity investments, which are classified as available-for-sale at December 31, 2013 and 2012, respectively.
The Company and its ultimate U.S. parent, Lifeco U.S., have entered into an income tax allocation agreement whereby Lifeco U.S. files a consolidated federal income tax return. Under the agreement, these companies are responsible for and will receive the benefits of any income tax liability or benefit computed on a separate tax return basis.
The Company files income tax returns in the U.S. federal jurisdiction and various states. With few exceptions,
the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years 2009 and prior. Tax years 2010, 2011, and 2012 are open to federal examination by the Internal Revenue Service. The Company does not expect significant increases or decreases to unrecognized tax benefits relating to federal, state or local audits.
Included in due to parent and affiliates at December 31, 2013 and 2012 is $3,234 and $687, respectively, of income taxes payable to affiliates related to the consolidated income tax return filed by GWL&A and certain subsidiaries. Included in the balance sheet at December 31, 2013 and 2012 is $143 and $735, respectively, of income taxes
receivable in other assets primarily related to the separate state income tax returns filed by the Company.
39
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
(Dollars in Thousands, Except Share Amounts)
13. Commitments and Contingencies
The Company is involved in various
legal proceedings that arise in the ordinary course of its business. In the opinion of management, after consultation with counsel, the resolutions of these proceedings are not expected to have a material effect on the Company’s financial position, results of its operations or cash flows.
The Company makes commitments to fund investments in the normal course of its business. The amounts of these unfunded commitments at December 31, 2013 and 2012 were $4,000 and $5,000, respectively, all of which is due within one year from the dates indicated.
14. Subsequent Event
Management
has evaluated subsequent events for potential recognition or disclosure in the Company’s financial statements through April 15, 2014, the date on which the Company’s financial statements were issued. No subsequent event has occurred requiring its recognition or disclosure in the Company’s financial statements.
40
Variable
Annuity-1 Series Account of Great-West Life & Annuity Insurance Company of New York
The Variable Annuity-1 Series Account (the Series Account), a separate account of Great-West Life & Annuity Insurance Company of New York (the Company), is registered as a unit investment trust under the
Investment Company Act of 1940, as amended, and exists in accordance with regulations of the New York State Department of Financial Services. The Series Account is a funding vehicle for individual variable annuity contracts. The Series Account consists of numerous investment divisions (Investment Divisions), each being treated as an individual accounting entity for financial reporting purposes, and each investing all of its investible assets in the named underlying mutual fund.
Under applicable insurance law, the assets and liabilities of each of the Investment Divisions of the Series Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Series Account's assets applicable to the reserves and other contract liabilities with respect to the Series Account is not chargeable with liabilities arising out of any other business the Company may conduct.
The
preparation of financial statements and financial highlights of each of the Investment Divisions in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and financial highlights and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Security Valuation
Mutual fund investments held by the Investment Divisions are valued at the reported net asset values of such underlying mutual funds, which value their investment securities at fair value.
The Series Account classifies its valuations into three levels based upon the transparency of inputs
to the valuation of the Series Account’s investments. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. The three levels are defined as follows:
Level 1 – Valuations based on unadjusted quoted prices for identical securities in active markets.
Level 2 – Valuations based on either directly or indirectly observable inputs other than quoted prices included in Level 1. These may include quoted prices for similar assets in active markets.
Level 3 – Valuations based on inputs that are unobservable and significant to the fair value measurement and may include prices obtained from single broker quotes. Unobservable inputs reflect the reporting entity’s own assumptions and would be based on the best information available under the circumstances.
As
of December 31, 2013, the only investments of each of the Investment Divisions of the Series Account were in underlying mutual funds that are actively traded, therefore 100% of the investments are valued using Level 1 inputs. The Series Account recognizes transfers between the levels as of the beginning of the quarter in which the transfer occurred. There were no transfers between Levels 1 and 2 during the year.
Security Transactions and Investment Income
Transactions are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date and
the amounts distributed to the Investment Division for its share of dividends are reinvested in additional full and fractional shares of the related mutual funds.
Contracts in the Payout Phase
Net assets of each Investment Division allocated to contracts in the payout phase are computed according to the 2000 Individual Annuitant Mortality Table. The assumed investment return is 5 percent. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Series Account by the Company to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the Company. Any adjustments to these amounts are reflected in Adjustments to net assets allocated to contracts in payout phase on the Statement of Changes in Net Assets of the applicable Investment Divisions.
Federal
Income Taxes
The operations of each of the Investment Divisions of the Series Account are included in the federal income tax return of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (IRC). The Company is included in the consolidated federal tax return of Great-West Lifeco U.S. Inc. Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of each of the Investment Divisions of the Series Account to the extent the earnings are credited under the contracts. Based on this, no charge is being made currently to the Series Account for federal income taxes. The Company will periodically review the status of the federal income tax policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the contracts.
Purchase
Payments Received
Purchase payments received from contract owners by the Company are credited as accumulation units, and are reported as Contract Transactions on the Statement of Changes in Net Assets of the applicable Investment Divisions.
Net Transfers
Net transfers include transfers between Investment Divisions of the Series Account as well as transfers between other investment options of the Company, not included in the Series Account.
2.
PURCHASES AND SALES OF INVESTMENTS
The
cost of purchases and proceeds from sales of investments for the year ended December 31, 2013 were as follows:
Investment Division
Purchases
Sales
Alger Large Cap Growth Portfolio
$
46,139
$
302,801
Alger
Mid Cap Growth Portfolio
5,964
21,382
AllianceBernstein VPS Growth And Income Portfolio
578
371
AllianceBernstein
VPS Growth Portfolio
161
487
Investment Division
Purchases
Sales
AllianceBernstein
VPS International Growth Portfolio
$
23,956
$
386,073
AllianceBernstein VPS International Value Portfolio
10,806
98,682
AllianceBernstein
VPS Real Estate Investment Portfolio
253,028
88,278
AllianceBernstein VPS Small/Mid Cap Value Portfolio
161,099
108,329
American
Century Investments VP Balanced Fund
188,662
203,191
American Century Investments VP Income & Growth Fund
1,171
341
American
Century Investments VP International Fund
4,323
7,905
American Century Investments VP Mid Cap Value Fund
118,386
46,203
American
Century Investments VP Value Fund
227,761
487,975
Columbia Variable Portfolio - Marsico 21St Century Fund
43,787
13,338
Columbia
Variable Portfolio - Seligman Global Technology Fund
129,705
6,309
Columbia Variable Portfolio - Small Cap Value Fund
Neuberger
Berman AMT Mid Cap Intrinsic Value Portfolio
141
6,598
NVIT Mid Cap Index Fund
194,174
197,034
Oppenheimer
Global Securities Fund/VA
45,718
233,396
Oppenheimer International Growth Fund/VA
106,052
13,285
Pimco
VIT High Yield Portfolio
1,826,477
2,006,318
Pimco VIT Low Duration Portfolio
1,327,188
628,502
Pimco
VIT Total Return Portfolio
1,615,242
1,933,262
Pioneer Emerging Markets VCT Portfolio
44
40
Pioneer
Fund VCT Portfolio
20,155
22,743
Pioneer Growth Opportunities VCT Portfolio
52,113
75,474
Pioneer
Mid Cap Value VCT Portfolio
6,330
5,187
Prudential Series Fund Equity Portfolio
—
190,450
Prudential
Series Fund Natural Resources Portfolio
—
25,966
Putnam VT American Government Income Fund
34
15
Putnam
VT Equity Income Fund
122,554
37,545
Putnam VT Global Health Care Fund
290,036
180,548
Royce
Capital Fund - Small-Cap Portfolio
22,885
171,607
Schwab Markettrack Growth Portfolio II
27,327
83,304
Schwab
Money Market Portfolio
7,498,246
9,936,740
Schwab S&P 500 Index Portfolio
1,777,577
1,514,570
Sentinel
Variable Products Bond Fund
23,651
144,977
Sentinel Variable Products Common Stock Fund
243,736
140,929
Sentinel
Variable Products Small Company Fund
32,951
14,424
Templeton Foreign Securities Fund
186,568
34,028
Third
Avenue Value Portfolio
6,936
94,834
Touchstone VST Mid Cap Growth Fund
19,145
983
Universal
Institutional Fund U.S. Real Estate Portfolio
63,191
211,398
Van Eck VIP Global Bond Fund
116,808
238,299
Van
Eck VIP Global Hard Assets Fund
116,518
68,955
Wells Fargo Advantage VT Discovery Fund
17,940
26,111
Wells
Fargo Advantage VT Opportunity Fund
17,129
75,287
Wells Fargo Advantage VT Small Cap Value Fund
1,475
8,702
3.
EXPENSES
AND RELATED PARTY TRANSACTIONS
Contract Maintenance Charges
The Company deducts from each participant account in the Schwab Select Annuity contract a $25 annual maintenance charge on accounts under $50,000 as of each contract's anniversary date. This charge is recorded as Contract maintenance charges on the Statement of Changes in Net Assets of the applicable Investment Divisions.
Transfer Fees
The Company charges $10 in the Schwab Select Annuity contract for each transfer between Investment Divisions in excess of 12 transfers in any calendar year. This charge is recorded as Transfers for contract benefits and terminations on the Statement of Changes in Net Assets of the applicable Investment Divisions.
Deductions for Premium Taxes
The
Company may deduct from each contribution in both the Schwab Select Annuity contract and Schwab OneSource Annuity contract any applicable state premium tax or retaliatory tax, which currently range from 0% to 3.5%. This charge is netted with Purchase payments received on the Statement of Changes in Net Assets of the applicable Investment Divisions.
Deductions for Assumption of Mortality and Expense Risks
The Company deducts an amount, computed and accrued daily, from the unit value of each Investment Division of the Schwab Select Annuity contract, equal to an annual rate of 0.85%, and an amount, computed and accrued daily, from the unit value of each Investment Division of the Schwab OneSource Annuity contract, equal to an annual rate of 0.65% to 0.85%, depending on the death benefit option chosen. These charges compensate the Company for its assumption of certain mortality, death
benefit, and expense risks. The level of these charges is guaranteed and will not change. The charges are recorded as Mortality and expense risk in the Statement of Operations of the applicable Investment Divisions.
If the above charges prove insufficient to cover actual costs and assumed risks, the loss will be borne by the Company; conversely, if the amounts deducted prove more than sufficient, the excess will be a profit to the Company.
4.
FINANCIAL HIGHLIGHTS
For each Investment Division, the accumulation units outstanding,
net assets, investment income ratio, the range of lowest to highest expense ratio (excluding expenses of the underlying funds), total return and accumulation unit fair values for each year or period ended December 31 are included on the following pages. As the unit fair value for the Investment Divisions of the Series Account are presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some unit values shown on the Statement of Assets and Liabilities which are calculated on an aggregated basis, may not be within the ranges presented.
The Expense Ratios represent the annualized contract expenses of the respective Investment Divisions of the Series Account, consisting of mortality
and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded.
The Total Return amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and expenses assessed through the reduction of unit values. These returns do not include
any expenses assessed through the redemption of units. Investment Divisions with a date notation indicate the effective date that the investment option was available in the Series Account. The total returns are calculated for each period indicated or from the effective
date through the end of the reporting period and are not annualized for periods less than one year. As the total returns for the Investment Divisions are presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented.
The Investment Income Ratio represents the dividends, excluding distributions of capital gains, received by the Investment Division from the underlying mutual fund divided by average net assets during the period. It is not annualized for periods less than one year. The ratio excludes those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Investment Division is affected by the timing of the declaration of dividends by the underlying fund in which the Investment Division
invests.
Effective for the year ending December 31, 2013, the financial highlights for the Schwab OneSource Annuity contract and the Schwab Select Annuity contract have been combined to be consistent with the presentation of the financial statements. All five years of financial highlight information have been combined for presentation purposes.
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
ALGER
LARGE CAP GROWTH PORTFOLIO
2013
46
$
26.58
to
$
13.90
$
1,186
0.78
%
0.65
%
to
0.85
%
33.90
%
to
34.17
%
2012
57
$
19.85
to
$
10.36
$
1,121
1.15
%
0.65
%
to
0.85
%
8.95
%
to
9.17
%
2011
60
$
18.22
to
$
9.49
$
1,085
0.99
%
0.65
%
to
0.85
%
(1.19
)%
to
(0.94
)%
2010
63
$
18.44
to
$
9.58
$
1,137
0.73
%
0.65
%
to
0.85
%
12.44
%
to
12.57
%
2009
75
$
16.40
to
$
8.51
$
1,223
0.69
%
0.65
%
to
0.85
%
46.30
%
to
46.72
%
ALGER
MID CAP GROWTH PORTFOLIO
2013
15
$
21.16
to
$
12.15
$
274
0.33
%
0.65
%
to
0.85
%
34.69
%
to
35.00
%
2012
17
$
15.71
to
$
9.00
$
216
0.00
%
0.65
%
to
0.85
%
15.26
%
to
15.38
%
2011
22
$
13.13
to
$
13.13
$
284
0.34
%
0.85
%
to
0.85
%
(9.07
)%
to
(9.07
)%
2010
29
$
14.99
to
$
8.56
$
381
0.00
%
0.65
%
to
0.85
%
18.36
%
to
18.72
%
2009
32
$
12.66
to
$
7.21
$
359
0.00
%
0.65
%
to
0.85
%
50.36
%
to
50.84
%
ALLIANCEBERNSTEIN
VPS GROWTH AND INCOME PORTFOLIO
2013
3
$
15.10
to
$
15.10
$
50
1.32
%
0.85
%
to
0.85
%
33.87
%
to
33.87
%
2012
3
$
11.28
to
$
11.28
$
37
1.59
%
0.85
%
to
0.85
%
16.53
%
to
16.53
%
2011
3
$
9.68
to
$
9.68
$
32
1.32
%
0.85
%
to
0.85
%
5.33
%
to
5.33
%
2010
3
$
9.19
to
$
9.19
$
30
0.00
%
0.85
%
to
0.85
%
12.19
%
to
12.19
%
2009
11
$
8.19
to
$
8.19
$
91
4.68
%
0.85
%
to
0.85
%
19.74
%
to
19.74
%
ALLIANCEBERNSTEIN
VPS GROWTH PORTFOLIO
2013
5
$
14.37
to
$
14.37
$
67
0.28
%
0.85
%
to
0.85
%
32.93
%
to
32.93
%
2012
4
$
10.81
to
$
10.81
$
50
0.06
%
0.85
%
to
0.85
%
12.72
%
to
12.72
%
2011
4
$
9.59
to
$
9.59
$
41
0.00
%
0.85
%
to
0.85
%
0.42
%
to
0.42
%
2010
5
$
9.55
to
$
9.55
$
43
0.23
%
0.85
%
to
0.85
%
14.08
%
to
14.08
%
2009
9
$
8.37
to
$
8.37
$
74
0.00
%
0.85
%
to
0.85
%
32.02
%
to
32.02
%
ALLIANCEBERNSTEIN
VPS INTERNATIONAL GROWTH PORTFOLIO
2013
29
$
15.21
to
$
8.83
$
433
0.80
%
0.65
%
to
0.85
%
12.58
%
to
12.77
%
2012
60
$
13.51
to
$
7.83
$
727
1.70
%
0.65
%
to
0.85
%
14.59
%
to
14.81
%
2011
59
$
11.79
to
$
6.82
$
628
3.03
%
0.65
%
to
0.85
%
(16.56
)%
to
(16.32
)%
2010
74
$
14.13
to
$
8.15
$
930
2.07
%
0.65
%
to
0.85
%
11.94
%
to
12.10
%
2009
97
$
12.62
to
$
7.27
$
1,122
4.58
%
0.65
%
to
0.85
%
38.38
%
to
38.74
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
ALLIANCEBERNSTEIN
VPS INTERNATIONAL VALUE PORTFOLIO
2013
20
$
8.44
to
$
7.43
$
162
5.46
%
0.65
%
to
0.85
%
21.97
%
to
22.20
%
2012
34
$
6.92
to
$
6.08
$
221
1.55
%
0.65
%
to
0.85
%
13.63
%
to
13.86
%
2011
37
$
6.09
to
$
5.34
$
229
4.00
%
0.65
%
to
0.85
%
(19.97
)%
to
(19.82
)%
2010
41
$
7.61
to
$
6.66
$
309
2.50
%
0.65
%
to
0.85
%
3.71
%
to
3.90
%
2009
80
$
7.34
to
$
6.41
$
565
0.94
%
0.65
%
to
0.85
%
33.70
%
to
33.82
%
ALLIANCEBERNSTEIN
VPS REAL ESTATE INVESTMENT PORTFOLIO
(Effective
date 05/01/2008)
2013
28
$
12.61
to
$
12.75
$
361
1.53
%
0.65
%
to
0.85
%
3.36
%
to
3.49
%
2012
19
$
12.20
to
$
12.32
$
234
1.12
%
0.65
%
to
0.85
%
20.20
%
to
20.43
%
2011
16
$
10.15
to
$
10.23
$
162
1.35
%
0.65
%
to
0.85
%
8.09
%
to
8.37
%
2010
13
$
9.39
to
$
9.44
$
120
1.05
%
0.65
%
to
0.85
%
25.20
%
to
25.53
%
2009
7
$
7.50
to
$
7.52
$
55
3.10
%
0.65
%
to
0.85
%
28.42
%
to
28.55
%
ALLIANCEBERNSTEIN
VPS SMALL/MID CAP VALUE PORTFOLIO
2013
19
$
17.60
to
$
16.44
$
332
0.52
%
0.65
%
to
0.85
%
36.86
%
to
37.23
%
2012
17
$
12.86
to
$
11.98
$
205
0.53
%
0.65
%
to
0.85
%
17.77
%
to
17.91
%
2011
22
$
10.92
to
$
10.16
$
231
0.50
%
0.65
%
to
0.85
%
(9.15
)%
to
(8.96
)%
2010
24
$
12.02
to
$
11.16
$
281
0.51
%
0.65
%
to
0.85
%
25.81
%
to
26.10
%
2009
22
$
9.55
to
$
8.85
$
200
1.22
%
0.65
%
to
0.85
%
41.69
%
to
(11.50
)%
AMERICAN
CENTURY INVESTMENTS VP BALANCED FUND
2013
35
$
18.32
to
$
13.85
$
588
1.60
%
0.65
%
to
0.85
%
16.47
%
to
16.68
%
2012
35
$
15.73
to
$
11.87
$
535
2.16
%
0.65
%
to
0.85
%
10.85
%
to
11.04
%
2011
33
$
14.19
to
$
10.69
$
447
1.94
%
0.65
%
to
0.85
%
4.42
%
to
4.70
%
2010
36
$
13.59
to
$
10.21
$
469
1.92
%
0.65
%
to
0.85
%
10.69
%
to
10.86
%
2009
35
$
12.28
to
$
9.21
$
409
5.21
%
0.65
%
to
0.85
%
14.55
%
to
14.69
%
AMERICAN
CENTURY INVESTMENTS VP INCOME & GROWTH FUND
(Effective
date 05/01/2008)
2013
4
$
14.24
to
$
14.24
$
60
2.23
%
0.65
%
to
0.65
%
34.88
%
to
34.88
%
2012
4
$
10.55
to
$
10.55
$
44
2.08
%
0.65
%
to
0.65
%
14.05
%
to
14.05
%
2011
4
$
9.25
to
$
9.25
$
41
1.58
%
0.65
%
to
0.65
%
2.44
%
to
2.44
%
2010
4
$
8.98
to
$
9.03
$
40
1.25
%
0.65
%
to
0.85
%
13.10
%
to
13.44
%
2009
4
$
7.94
to
$
7.96
$
29
3.72
%
0.65
%
to
0.85
%
17.11
%
to
17.23
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
AMERICAN
CENTURY INVESTMENTS VP INTERNATIONAL FUND
2013
13
$
21.65
to
$
21.65
$
288
1.66
%
0.85
%
to
0.85
%
21.42
%
to
21.42
%
2012
14
$
17.83
to
$
17.83
$
242
0.90
%
0.85
%
to
0.85
%
20.07
%
to
20.07
%
2011
16
$
14.85
to
$
14.85
$
238
1.38
%
0.85
%
to
0.85
%
(12.75
)%
to
(12.75
)%
2010
18
$
17.02
to
$
17.02
$
311
2.28
%
0.85
%
to
0.85
%
12.33
%
to
12.33
%
2009
19
$
15.15
to
$
15.15
$
294
2.26
%
0.85
%
to
0.85
%
32.66
%
to
32.66
%
AMERICAN
CENTURY INVESTMENTS VP MID CAP VALUE FUND
(Effective
date 05/01/2009)
2013
16
$
22.54
to
$
22.75
$
363
1.10
%
0.65
%
to
0.85
%
28.80
%
to
29.04
%
2012
13
$
17.50
to
$
17.63
$
218
1.89
%
0.65
%
to
0.85
%
15.21
%
to
15.46
%
2011
8
$
15.19
to
$
15.27
$
116
1.31
%
0.65
%
to
0.85
%
(1.68
)%
to
(1.48
)%
2010
6
$
15.45
to
$
15.50
$
79
2.12
%
0.65
%
to
0.85
%
18.22
%
to
18.23
%
2009
5
$
13.07
to
$
13.11
$
61
0.72
%
0.65
%
to
0.85
%
30.70
%
to
31.10
%
AMERICAN
CENTURY INVESTMENTS VP VALUE FUND
2013
74
$
21.30
to
$
14.75
$
1,425
1.65
%
0.65
%
to
0.85
%
30.59
%
to
30.88
%
2012
91
$
16.31
to
$
11.27
$
1,318
1.94
%
0.65
%
to
0.85
%
13.58
%
to
13.84
%
2011
87
$
14.36
to
$
9.90
$
1,110
2.05
%
0.65
%
to
0.85
%
0.21
%
to
0.41
%
2010
81
$
14.33
to
$
9.86
$
1,063
2.22
%
0.65
%
to
0.85
%
12.44
%
to
12.69
%
2009
87
$
12.74
to
$
8.75
$
1,036
5.37
%
0.65
%
to
0.85
%
18.84
%
to
19.05
%
COLUMBIA
VARIABLE PORTFOLIO - MARSICO 21ST CENTURY FUND
(Effective
date 05/01/2009)
2013
3
$
20.88
to
$
21.08
$
64
0.21
%
0.65
%
to
0.85
%
40.80
%
to
41.10
%
2012
1
$
14.83
to
$
14.83
$
21
0.00
%
0.85
%
to
0.85
%
10.18
%
to
10.18
%
2011
1
$
13.46
to
$
13.46
$
8
0.00
%
0.85
%
to
0.85
%
(12.88
)%
to
(12.88
)%
2010
1
$
15.45
to
$
15.45
$
18
0.00
%
0.85
%
to
0.85
%
15.76
%
to
15.76
%
2009
0
*
$
13.35
to
$
13.35
$
2
0.00
%
0.85
%
to
0.85
%
33.50
%
to
33.50
%
COLUMBIA
VARIABLE PORTFOLIO - SELIGMAN GLOBAL TECHNOLOGY FUND
(Effective
date 03/11/2011)
2013
14
$
12.22
to
$
12.29
$
168
0.00
%
0.65
%
to
0.85
%
24.44
%
to
24.65
%
2012
3
$
9.82
to
$
9.82
$
25
0.00
%
0.85
%
to
0.85
%
6.05
%
to
6.05
%
2011
3
$
9.26
to
$
9.27
$
26
0.00
%
0.65
%
to
0.85
%
(7.40
)%
to
(7.30
)%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
COLUMBIA
VARIABLE PORTFOLIO - SMALL CAP VALUE FUND
(Effective
date 05/01/2009)
2013
1
$
21.61
to
$
21.81
$
11
0.63
%
0.65
%
to
0.85
%
32.90
%
to
33.15
%
2012
5
$
16.26
to
$
16.38
$
84
0.29
%
0.65
%
to
0.85
%
10.31
%
to
10.53
%
2011
5
$
14.74
to
$
14.82
$
78
0.56
%
0.65
%
to
0.85
%
(6.94
)%
to
(6.73
)%
2010
11
$
15.84
to
$
15.89
$
175
1.17
%
0.65
%
to
0.85
%
25.43
%
to
25.61
%
2009
5
$
12.63
to
$
12.65
$
58
0.00
%
0.65
%
to
0.85
%
26.30
%
to
26.50
%
DELAWARE
VIP SMALL CAP VALUE SERIES
2013
23
$
28.91
to
$
17.35
$
564
0.63
%
0.65
%
to
0.85
%
32.37
%
to
32.65
%
2012
17
$
21.84
to
$
13.08
$
323
0.58
%
0.65
%
to
0.85
%
12.98
%
to
13.25
%
2011
16
$
19.33
to
$
11.55
$
287
0.53
%
0.65
%
to
0.85
%
(2.18
)%
to
(2.04
)%
2010
15
$
19.76
to
$
11.79
$
271
0.75
%
0.65
%
to
0.85
%
31.17
%
to
31.44
%
2009
20
$
15.06
to
$
8.97
$
280
0.96
%
0.65
%
to
0.85
%
30.62
%
to
30.95
%
DELAWARE
VIP SMID CAP GROWTH SERIES
(Effective
date 05/01/2006)
2013
19
$
20.47
to
$
20.70
$
402
0.02
%
0.65
%
to
0.85
%
40.11
%
to
40.43
%
2012
37
$
14.85
to
$
14.74
$
538
0.26
%
0.65
%
to
0.85
%
10.08
%
to
10.25
%
2011
25
$
13.49
to
$
13.37
$
340
1.07
%
0.65
%
to
0.85
%
7.23
%
to
7.48
%
2010
19
$
12.58
to
$
12.44
$
240
0.00
%
0.65
%
to
0.85
%
35.17
%
to
35.36
%
2009
5
$
9.31
to
$
9.19
$
42
0.00
%
0.65
%
to
0.85
%
44.12
%
to
44.72
%
DREYFUS
IP MIDCAP STOCK PORTFOLIO
2013
3
$
23.87
to
$
23.87
$
63
1.34
%
0.85
%
to
0.85
%
33.82
%
to
33.82
%
2012
3
$
17.83
to
$
17.83
$
47
0.45
%
0.85
%
to
0.85
%
18.71
%
to
18.71
%
2011
4
$
15.02
to
$
15.02
$
53
0.50
%
0.85
%
to
0.85
%
(0.46
)%
to
(0.46
)%
2010
4
$
15.09
to
$
15.09
$
53
0.96
%
0.85
%
to
0.85
%
26.00
%
to
26.00
%
2009
4
$
11.98
to
$
11.98
$
42
2.01
%
0.85
%
to
0.85
%
34.46
%
to
34.46
%
DREYFUS
VIF APPRECIATION PORTFOLIO
2013
68
$
16.42
to
$
14.49
$
1,068
1.85
%
0.65
%
to
0.85
%
20.03
%
to
20.35
%
2012
101
$
13.68
to
$
12.04
$
1,325
3.75
%
0.65
%
to
0.85
%
9.53
%
to
9.75
%
2011
99
$
12.49
to
$
10.97
$
1,181
1.61
%
0.65
%
to
0.85
%
8.14
%
to
8.29
%
2010
91
$
11.55
to
$
10.13
$
1,009
2.10
%
0.65
%
to
0.85
%
14.30
%
to
14.59
%
2009
80
$
10.11
to
$
8.84
$
778
2.27
%
0.65
%
to
0.85
%
21.51
%
to
21.76
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
DREYFUS
VIF GROWTH AND INCOME PORTFOLIO
2013
4
$
16.05
to
$
16.05
$
63
0.89
%
0.85
%
to
0.85
%
35.67
%
to
35.67
%
2012
4
$
11.83
to
$
11.83
$
51
1.39
%
0.85
%
to
0.85
%
17.01
%
to
17.01
%
2011
5
$
10.11
to
$
10.11
$
52
1.27
%
0.85
%
to
0.85
%
(3.62
)%
to
(3.62
)%
2010
5
$
10.49
to
$
10.49
$
54
1.20
%
0.85
%
to
0.85
%
17.62
%
to
17.62
%
2009
6
$
8.92
to
$
8.92
$
54
1.29
%
0.85
%
to
0.85
%
27.79
%
to
27.79
%
DWS
CAPITAL GROWTH VIP
2013
47
$
15.61
to
$
14.40
$
723
1.31
%
0.65
%
to
0.85
%
33.53
%
to
33.70
%
2012
52
$
11.69
to
$
10.77
$
601
0.82
%
0.65
%
to
0.85
%
15.06
%
to
15.31
%
2011
71
$
10.16
to
$
9.34
$
697
0.65
%
0.65
%
to
0.85
%
(5.31
)%
to
(5.08
)%
2010
54
$
10.73
to
$
9.84
$
558
0.70
%
0.65
%
to
0.85
%
15.74
%
to
15.90
%
2009
38
$
9.27
to
$
8.49
$
351
1.38
%
0.65
%
to
0.85
%
25.78
%
to
(15.10
)%
DWS
CORE EQUITY VIP
2013
17
$
14.23
to
$
15.02
$
267
1.53
%
0.65
%
to
0.85
%
36.17
%
to
36.42
%
2012
22
$
10.45
to
$
11.01
$
250
1.21
%
0.65
%
to
0.85
%
14.84
%
to
15.05
%
2011
13
$
9.10
to
$
9.57
$
138
1.23
%
0.65
%
to
0.85
%
(0.98
)%
to
(1.14
)%
2010
13
$
9.19
to
$
9.68
$
142
1.60
%
0.65
%
to
0.85
%
13.43
%
to
13.08
%
2009
16
$
8.10
to
$
8.10
$
130
1.84
%
0.85
%
to
0.85
%
33.00
%
to
33.00
%
DWS
LARGE CAP VALUE VIP
2013
20
$
16.20
to
$
12.36
$
324
2.14
%
0.65
%
to
0.85
%
29.81
%
to
29.97
%
2012
23
$
12.48
to
$
9.51
$
284
1.97
%
0.65
%
to
0.85
%
8.81
%
to
9.18
%
2011
26
$
11.47
to
$
8.71
$
301
2.10
%
0.65
%
to
0.85
%
(0.86
)%
to
(0.80
)%
2010
32
$
11.57
to
$
8.78
$
362
2.27
%
0.65
%
to
0.85
%
9.79
%
to
10.03
%
2009
24
$
10.54
to
$
7.98
$
239
3.64
%
0.65
%
to
0.85
%
24.29
%
to
24.69
%
DWS
SMALL CAP INDEX VIP
2013
22
$
27.11
to
$
16.41
$
512
1.61
%
0.65
%
to
0.85
%
37.47
%
to
37.67
%
2012
26
$
19.72
to
$
11.92
$
446
0.84
%
0.65
%
to
0.85
%
15.25
%
to
15.50
%
2011
22
$
17.11
to
$
10.32
$
320
0.87
%
0.65
%
to
0.85
%
(5.21
)%
to
(4.97
)%
2010
23
$
18.05
to
$
10.86
$
358
0.88
%
0.65
%
to
0.85
%
25.32
%
to
25.55
%
2009
25
$
14.40
to
$
8.65
$
310
1.83
%
0.65
%
to
0.85
%
25.44
%
to
25.73
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
DWS
SMALL MID CAP VALUE VIP
2013
18
$
15.80
to
$
15.48
$
288
1.29
%
0.65
%
to
0.85
%
34.13
%
to
34.38
%
2012
27
$
11.78
to
$
11.52
$
303
1.10
%
0.65
%
to
0.85
%
12.73
%
to
13.05
%
2011
29
$
10.45
to
$
10.19
$
299
1.07
%
0.65
%
to
0.85
%
(6.86
)%
to
(6.68
)%
2010
27
$
11.22
to
$
10.92
$
290
1.33
%
0.65
%
to
0.85
%
22.07
%
to
22.28
%
2009
38
$
9.19
to
$
8.93
$
348
1.59
%
0.65
%
to
0.85
%
28.53
%
to
29.05
%
FEDERATED
FUND FOR US GOVERNMENT SECURITIES II
2013
84
$
18.98
to
$
11.65
$
1,511
2.93
%
0.65
%
to
0.85
%
(2.87
)%
to
(2.67
)%
2012
80
$
19.54
to
$
11.97
$
1,327
3.79
%
0.65
%
to
0.85
%
2.09
%
to
2.31
%
2011
97
$
19.14
to
$
11.70
$
1,560
3.76
%
0.65
%
to
0.85
%
4.88
%
to
5.03
%
2010
96
$
18.25
to
$
11.14
$
1,556
4.60
%
0.65
%
to
0.85
%
4.30
%
to
4.50
%
2009
133
$
17.50
to
$
10.66
$
2,060
4.97
%
0.65
%
to
0.85
%
4.35
%
to
4.51
%
FEDERATED
MANAGED TAIL RISK FUND II
2013
14
$
16.19
to
$
16.19
$
233
0.97
%
0.85
%
to
0.85
%
15.48
%
to
15.48
%
2012
14
$
14.02
to
$
14.02
$
202
0.54
%
0.85
%
to
0.85
%
9.19
%
to
9.19
%
2011
15
$
12.84
to
$
12.84
$
188
0.73
%
0.85
%
to
0.85
%
(6.07
)%
to
(6.07
)%
2010
15
$
13.67
to
$
13.67
$
211
2.01
%
0.85
%
to
0.85
%
12.06
%
to
12.06
%
2009
25
$
12.20
to
$
12.20
$
300
2.69
%
0.85
%
to
0.85
%
13.81
%
to
13.81
%
FEDERATED
MANAGED VOLATILITY FUND II
2013
3
$
20.47
to
$
20.47
$
69
3.04
%
0.85
%
to
0.85
%
20.70
%
to
20.70
%
2012
4
$
16.96
to
$
16.96
$
65
2.98
%
0.85
%
to
0.85
%
12.62
%
to
12.62
%
2011
4
$
15.06
to
$
15.06
$
62
3.83
%
0.85
%
to
0.85
%
3.86
%
to
3.86
%
2010
4
$
14.50
to
$
14.50
$
59
6.28
%
0.85
%
to
0.85
%
11.14
%
to
11.14
%
2009
7
$
13.05
to
$
13.05
$
88
6.17
%
0.85
%
to
0.85
%
27.19
%
to
27.19
%
FRANKLIN
SMALL CAP VALUE SECURITIES FUND
2013
17
$
16.08
to
$
16.26
$
276
1.31
%
0.65
%
to
0.85
%
35.13
%
to
35.27
%
2012
15
$
11.90
to
$
12.02
$
184
0.78
%
0.65
%
to
0.85
%
17.36
%
to
17.61
%
2011
22
$
10.14
to
$
10.22
$
221
0.70
%
0.65
%
to
0.85
%
(4.61
)%
to
(4.31
)%
2010
23
$
10.63
to
$
10.68
$
240
0.72
%
0.65
%
to
0.85
%
27.15
%
to
27.29
%
2009
31
$
8.36
to
$
8.39
$
257
1.19
%
0.65
%
to
0.85
%
28.02
%
to
28.48
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
INVESCO
V.I. CORE EQUITY FUND
2013
5
$
25.01
to
$
25.01
$
119
1.37
%
0.85
%
to
0.85
%
28.13
%
to
28.13
%
2012
7
$
19.52
to
$
19.52
$
131
0.82
%
0.85
%
to
0.85
%
12.96
%
to
12.96
%
2011
9
$
17.28
to
$
17.28
$
162
0.94
%
0.85
%
to
0.85
%
(0.92
)%
to
(0.92
)%
2010
10
$
17.44
to
$
17.44
$
177
0.93
%
0.85
%
to
0.85
%
8.62
%
to
8.62
%
2009
25
$
16.06
to
$
16.06
$
397
1.70
%
0.85
%
to
0.85
%
27.26
%
to
27.26
%
INVESCO
V.I. HIGH YIELD FUND
2013
4
$
20.76
to
$
20.76
$
83
5.00
%
0.85
%
to
0.85
%
6.08
%
to
6.08
%
2012
4
$
19.57
to
$
19.57
$
84
4.82
%
0.85
%
to
0.85
%
16.21
%
to
16.21
%
2011
5
$
16.84
to
$
16.84
$
80
6.86
%
0.85
%
to
0.85
%
0.12
%
to
0.12
%
2010
5
$
16.82
to
$
16.82
$
80
9.89
%
0.85
%
to
0.85
%
12.60
%
to
12.60
%
2009
6
$
14.94
to
$
14.94
$
85
8.18
%
0.85
%
to
0.85
%
51.52
%
to
51.52
%
INVESCO
V.I. INTERNATIONAL GROWTH FUND
2013
47
$
14.00
to
$
11.85
$
601
1.28
%
0.65
%
to
0.85
%
18.04
%
to
18.15
%
2012
62
$
11.86
to
$
10.03
$
685
1.66
%
0.65
%
to
0.85
%
14.48
%
to
14.89
%
2011
39
$
10.36
to
$
8.73
$
362
1.48
%
0.65
%
to
0.85
%
(7.50
)%
to
(7.42
)%
2010
35
$
11.20
to
$
9.43
$
362
2.66
%
0.65
%
to
0.85
%
11.92
%
to
12.13
%
2009
34
$
10.01
to
$
8.41
$
316
1.94
%
0.65
%
to
0.85
%
34.18
%
to
34.35
%
INVESCO
V.I. MID CAP CORE EQUITY FUND
(Effective
date 05/01/2009)
2013
3
$
18.42
to
$
18.60
$
62
0.66
%
0.65
%
to
0.85
%
27.74
%
to
28.01
%
2012
4
$
14.42
to
$
14.53
$
48
0.07
%
0.65
%
to
0.85
%
9.99
%
to
10.24
%
2011
0
*
$
13.11
to
$
13.11
$
6
0.08
%
0.85
%
to
0.85
%
(7.15
)%
to
(7.15
)%
2010
0
*
$
14.12
to
$
14.17
$
9
0.42
%
0.65
%
to
0.85
%
13.08
%
to
13.36
%
2009
0
*
$
12.49
to
$
12.49
$
5
1.23
%
0.85
%
to
0.85
%
24.90
%
to
24.90
%
INVESCO
V.I. SMALL CAP EQUITY FUND
(Effective
date 05/01/2009)
2013
3
$
23.56
to
$
23.56
$
79
0.01
%
0.85
%
to
0.85
%
36.34
%
to
36.34
%
2012
2
$
17.28
to
$
17.28
$
49
0.00
%
0.85
%
to
0.85
%
12.94
%
to
12.94
%
2011
4
$
15.30
to
$
15.30
$
57
0.00
%
0.85
%
to
0.85
%
(1.61
)%
to
(1.61
)%
2010
2
$
15.55
to
$
15.60
$
32
0.00
%
0.65
%
to
0.85
%
27.46
%
to
27.76
%
2009
1
$
12.20
to
$
12.21
$
10
0.16
%
0.65
%
to
0.85
%
22.00
%
to
22.10
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
NEUBERGER
BERMAN AMT MID CAP INTRINSIC VALUE PORTFOLIO
2013
1
$
14.53
to
$
14.53
$
17
0.80
%
0.85
%
to
0.85
%
35.54
%
to
35.54
%
2012
2
$
10.72
to
$
10.72
$
18
0.34
%
0.85
%
to
0.85
%
14.41
%
to
14.41
%
2011
2
$
9.37
to
$
9.37
$
21
0.38
%
0.85
%
to
0.85
%
(7.50
)%
to
(7.50
)%
2010
3
$
10.13
to
$
10.13
$
27
0.34
%
0.85
%
to
0.85
%
24.94
%
to
24.94
%
2009
3
$
8.11
to
$
8.11
$
23
0.98
%
0.85
%
to
0.85
%
45.08
%
to
45.08
%
NVIT
MID CAP INDEX FUND
2013
20
$
26.95
to
$
16.03
$
446
0.89
%
0.65
%
to
0.85
%
31.66
%
to
31.93
%
2012
20
$
20.47
to
$
12.15
$
349
0.94
%
0.65
%
to
0.85
%
16.31
%
to
16.49
%
2011
20
$
17.60
to
$
10.43
$
298
0.67
%
0.65
%
to
0.85
%
(3.51
)%
to
(3.25
)%
2010
19
$
18.24
to
$
10.78
$
301
1.00
%
0.65
%
to
0.85
%
24.80
%
to
25.06
%
2009
22
$
14.62
to
$
8.62
$
286
0.64
%
0.65
%
to
0.85
%
35.37
%
to
35.75
%
OPPENHEIMER
GLOBAL SECURITIES FUND/VA
2013
45
$
26.69
to
$
13.80
$
1,156
1.37
%
0.65
%
to
0.85
%
26.25
%
to
26.49
%
2012
55
$
21.14
to
$
10.91
$
1,091
2.13
%
0.65
%
to
0.85
%
20.18
%
to
20.42
%
2011
59
$
17.59
to
$
9.06
$
1,011
1.24
%
0.65
%
to
0.85
%
(9.05
)%
to
(8.85
)%
2010
59
$
19.34
to
$
9.94
$
1,140
1.51
%
0.65
%
to
0.85
%
14.99
%
to
15.18
%
2009
74
$
16.82
to
$
8.63
$
1,226
2.08
%
0.65
%
to
0.85
%
38.55
%
to
(13.70
)%
OPPENHEIMER
INTERNATIONAL GROWTH FUND/VA
(Effective
date 05/01/2008)
2013
15
$
12.96
to
$
13.11
$
201
1.43
%
0.65
%
to
0.85
%
24.74
%
to
25.10
%
2012
8
$
10.39
to
$
10.48
$
80
1.46
%
0.65
%
to
0.85
%
21.24
%
to
21.44
%
2011
8
$
8.57
to
$
8.63
$
65
0.95
%
0.65
%
to
0.85
%
(7.95
)%
to
(7.80
)%
2010
7
$
9.31
to
$
9.36
$
69
1.07
%
0.65
%
to
0.85
%
13.81
%
to
14.01
%
2009
11
$
8.18
to
$
8.21
$
94
1.34
%
0.65
%
to
0.85
%
37.94
%
to
38.45
%
PIMCO
VIT HIGH YIELD PORTFOLIO
2013
138
$
19.22
to
$
14.52
$
2,546
5.45
%
0.65
%
to
0.85
%
4.80
%
to
5.07
%
2012
156
$
18.34
to
$
13.82
$
2,736
5.73
%
0.65
%
to
0.85
%
13.35
%
to
13.56
%
2011
101
$
16.18
to
$
12.17
$
1,549
6.92
%
0.65
%
to
0.85
%
2.47
%
to
2.70
%
2010
157
$
15.79
to
$
11.85
$
2,414
7.25
%
0.65
%
to
0.85
%
13.50
%
to
13.72
%
2009
163
$
13.91
to
$
10.42
$
2,227
8.38
%
0.65
%
to
0.85
%
39.10
%
to
39.30
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
PIMCO
VIT LOW DURATION PORTFOLIO
2013
304
$
13.29
to
$
12.02
$
3,890
1.45
%
0.65
%
to
0.85
%
(0.97
)%
to
(0.83
)%
2012
252
$
13.42
to
$
12.12
$
3,247
1.90
%
0.65
%
to
0.85
%
4.93
%
to
5.21
%
2011
243
$
12.79
to
$
11.52
$
2,995
1.68
%
0.65
%
to
0.85
%
0.24
%
to
0.44
%
2010
233
$
12.76
to
$
11.47
$
2,889
1.64
%
0.65
%
to
0.85
%
4.42
%
to
4.56
%
2009
172
$
12.22
to
$
10.97
$
2,073
3.34
%
0.65
%
to
0.85
%
12.32
%
to
12.63
%
PIMCO
VIT TOTAL RETURN PORTFOLIO
2013
382
$
15.27
to
$
13.35
$
5,665
2.20
%
0.65
%
to
0.85
%
(2.74
)%
to
(2.55
)%
2012
415
$
15.70
to
$
13.70
$
6,298
2.57
%
0.65
%
to
0.85
%
8.65
%
to
8.82
%
2011
420
$
14.45
to
$
12.59
$
5,898
2.62
%
0.65
%
to
0.85
%
2.70
%
to
2.94
%
2010
422
$
14.07
to
$
12.23
$
5,795
2.41
%
0.65
%
to
0.85
%
7.20
%
to
7.47
%
2009
409
$
13.12
to
$
11.38
$
5,298
5.01
%
0.65
%
to
0.85
%
13.01
%
to
13.23
%
PIONEER
EMERGING MARKETS VCT PORTFOLIO
(Effective
date 05/01/2008)
2013
1
$
7.11
to
$
7.11
$
5
0.92
%
0.85
%
to
0.85
%
(3.00
)%
to
(3.00
)%
2012
1
$
7.33
to
$
7.33
$
5
0.21
%
0.85
%
to
0.85
%
10.73
%
to
10.73
%
2011
1
$
6.62
to
$
6.62
$
5
0.00
%
0.85
%
to
0.85
%
(24.26
)%
to
(24.26
)%
2010
1
$
8.74
to
$
8.79
$
6
0.03
%
0.65
%
to
0.85
%
14.55
%
to
14.90
%
2009
9
$
7.63
to
$
7.65
$
71
0.86
%
0.65
%
to
0.85
%
72.62
%
to
73.08
%
PIONEER
FUND VCT PORTFOLIO
2013
15
$
18.74
to
$
13.19
$
226
1.26
%
0.65
%
to
0.85
%
32.16
%
to
32.43
%
2012
15
$
14.18
to
$
9.96
$
181
1.53
%
0.65
%
to
0.85
%
9.33
%
to
9.57
%
2011
21
$
12.97
to
$
9.09
$
213
1.62
%
0.65
%
to
0.85
%
(5.12
)%
to
(4.92
)%
2010
17
$
13.67
to
$
9.56
$
193
1.34
%
0.65
%
to
0.85
%
15.05
%
to
15.18
%
2009
22
$
11.88
to
$
8.30
$
214
1.51
%
0.65
%
to
0.85
%
24.14
%
to
(17.00
)%
PIONEER
GROWTH OPPORTUNITIES VCT PORTFOLIO
2013
8
$
22.39
to
$
17.62
$
174
0.00
%
0.65
%
to
0.85
%
41.26
%
to
41.53
%
2012
9
$
15.85
to
$
15.85
$
146
0.00
%
0.85
%
to
0.85
%
6.09
%
to
6.09
%
2011
10
$
14.94
to
$
14.94
$
146
0.00
%
0.85
%
to
0.85
%
(3.05
)%
to
(3.05
)%
2010
11
$
15.41
to
$
15.41
$
163
0.00
%
0.85
%
to
0.85
%
19.18
%
to
19.18
%
2009
7
$
12.93
to
$
12.93
$
84
0.00
%
0.85
%
to
0.85
%
43.35
%
to
43.35
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
PIONEER
MID CAP VALUE VCT PORTFOLIO
2013
8
$
14.29
to
$
13.54
$
120
0.70
%
0.65
%
to
0.85
%
31.58
%
to
31.84
%
2012
8
$
10.82
to
$
10.82
$
90
0.81
%
0.85
%
to
0.85
%
9.85
%
to
9.85
%
2011
9
$
9.85
to
$
9.85
$
94
0.75
%
0.85
%
to
0.85
%
(6.62
)%
to
(6.62
)%
2010
15
$
10.58
to
$
9.97
$
166
0.90
%
0.65
%
to
0.85
%
16.86
%
to
17.16
%
2009
21
$
9.05
to
$
8.51
$
187
0.67
%
0.65
%
to
0.85
%
24.14
%
to
(14.90
)%
PRUDENTIAL
SERIES FUND EQUITY PORTFOLIO
2013
9
$
16.37
to
$
20.77
$
157
0.00
%
0.65
%
to
0.85
%
31.91
%
to
32.12
%
2012
22
$
12.41
to
$
15.72
$
283
0.23
%
0.65
%
to
0.85
%
12.21
%
to
12.45
%
2011
24
$
11.06
to
$
13.98
$
267
0.16
%
0.65
%
to
0.85
%
(4.66
)%
to
(4.44
)%
2010
24
$
11.60
to
$
14.63
$
280
0.18
%
0.65
%
to
0.85
%
10.57
%
to
10.75
%
2009
6
$
10.49
to
$
10.49
$
66
0.89
%
0.85
%
to
0.85
%
36.41
%
to
36.41
%
PRUDENTIAL
SERIES FUND NATURAL RESOURCES PORTFOLIO
(Effective
date 05/01/2009)
2013
5
$
15.21
to
$
15.36
$
75
0.00
%
0.65
%
to
0.85
%
8.88
%
to
9.01
%
2012
7
$
13.97
to
$
14.09
$
94
0.00
%
0.65
%
to
0.85
%
(3.72
)%
to
(3.56
)%
2011
4
$
14.51
to
$
14.61
$
56
0.00
%
0.65
%
to
0.85
%
(20.06
)%
to
(19.86
)%
2010
1
$
18.15
to
$
18.23
$
20
0.06
%
0.65
%
to
0.85
%
26.30
%
to
26.69
%
2009
1
$
14.37
to
$
14.39
$
10
0.00
%
0.65
%
to
0.85
%
43.70
%
to
43.90
%
PUTNAM
VT AMERICAN GOVERNMENT INCOME FUND
(Effective
date 04/30/2010)
2013
0
*
$
10.86
to
$
10.86
$
3
1.31
%
0.65
%
to
0.65
%
(1.09
)%
to
(1.09
)%
2012
0
*
$
11.00
to
$
11.00
$
3
1.65
%
0.65
%
to
0.65
%
1.20
%
to
1.20
%
2011
4
$
10.84
to
$
10.87
$
39
0.00
%
0.65
%
to
0.85
%
5.96
%
to
6.05
%
PUTNAM
VT EQUITY INCOME FUND
(Effective
date 04/30/2010)
2013
12
$
16.65
to
$
16.77
$
199
1.34
%
0.65
%
to
0.85
%
31.31
%
to
31.53
%
2012
6
$
12.75
to
$
12.75
$
79
2.13
%
0.65
%
to
0.65
%
18.60
%
to
18.60
%
2011
6
$
10.75
to
$
10.75
$
59
0.00
%
0.65
%
to
0.65
%
1.22
%
to
1.22
%
PUTNAM
VT GLOBAL HEALTH CARE FUND
(Effective
date 05/02/2011)
2013
14
$
14.60
to
$
14.68
$
210
0.64
%
0.65
%
to
0.85
%
40.52
%
to
40.75
%
2012
6
$
10.43
to
$
10.43
$
66
1.19
%
0.65
%
to
0.65
%
21.56
%
to
21.56
%
2011
6
$
8.57
to
$
8.58
$
53
0.00
%
0.65
%
to
0.85
%
(14.30
)%
to
(14.20
)%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
ROYCE
CAPITAL FUND - SMALL-CAP PORTFOLIO
(Effective
date 05/01/2009)
2013
15
$
22.15
to
$
22.36
$
327
0.80
%
0.65
%
to
0.85
%
33.27
%
to
33.57
%
2012
23
$
16.62
to
$
16.74
$
390
0.03
%
0.65
%
to
0.85
%
11.32
%
to
11.53
%
2011
25
$
14.93
to
$
15.01
$
369
0.28
%
0.65
%
to
0.85
%
(4.42
)%
to
(4.21
)%
2010
27
$
15.62
to
$
15.67
$
424
0.19
%
0.65
%
to
0.85
%
19.24
%
to
19.53
%
2009
12
$
13.10
to
$
13.11
$
157
0.00
%
0.65
%
to
0.85
%
31.00
%
to
31.10
%
SCHWAB
MARKETTRACK GROWTH PORTFOLIO II
2013
36
$
24.29
to
$
13.29
$
721
1.71
%
0.65
%
to
0.85
%
22.55
%
to
22.71
%
2012
39
$
19.82
to
$
10.83
$
645
2.45
%
0.65
%
to
0.85
%
12.49
%
to
12.70
%
2011
40
$
17.62
to
$
9.61
$
606
1.69
%
0.65
%
to
0.85
%
(1.84
)%
to
(1.64
)%
2010
44
$
17.95
to
$
9.77
$
655
2.46
%
0.65
%
to
0.85
%
12.64
%
to
12.95
%
2009
39
$
15.94
to
$
8.65
$
568
2.76
%
0.65
%
to
0.85
%
22.99
%
to
(13.50
)%
SCHWAB
MONEY MARKET PORTFOLIO
2013
450
$
12.85
to
$
9.77
$
5,259
0.01
%
0.65
%
to
0.85
%
(0.85
)%
to
(0.61
)%
2012
642
$
12.96
to
$
9.83
$
7,702
0.01
%
0.65
%
to
0.85
%
(0.84
)%
to
(0.61
)%
2011
641
$
13.07
to
$
9.89
$
8,035
0.01
%
0.65
%
to
0.85
%
(0.83
)%
to
(0.70
)%
2010
550
$
13.18
to
$
9.96
$
6,620
0.01
%
0.65
%
to
0.85
%
(0.81
)%
to
(0.60
)%
2009
498
$
13.29
to
$
10.02
$
6,473
0.11
%
0.65
%
to
0.85
%
(0.75
)%
to
(0.50
)%
SCHWAB
S&P 500 INDEX PORTFOLIO
2013
488
$
24.89
to
$
14.28
$
10,459
1.64
%
0.65
%
to
0.85
%
30.93
%
to
31.25
%
2012
462
$
19.01
to
$
10.88
$
7,801
1.66
%
0.65
%
to
0.85
%
14.73
%
to
14.89
%
2011
440
$
16.57
to
$
9.47
$
6,569
1.78
%
0.65
%
to
0.85
%
1.04
%
to
1.28
%
2010
382
$
16.40
to
$
9.35
$
6,029
1.96
%
0.65
%
to
0.85
%
13.72
%
to
13.89
%
2009
425
$
14.42
to
$
8.21
$
5,979
2.86
%
0.65
%
to
0.85
%
25.07
%
to
25.34
%
SENTINEL
VARIABLE PRODUCTS BOND FUND
(Effective
date 05/01/2009)
2013
7
$
12.47
to
$
12.59
$
88
1.81
%
0.65
%
to
0.85
%
(1.19
)%
to
(0.94
)%
2012
16
$
12.62
to
$
12.71
$
213
2.87
%
0.65
%
to
0.85
%
5.61
%
to
5.83
%
2011
13
$
11.95
to
$
12.01
$
157
3.51
%
0.65
%
to
0.85
%
6.22
%
to
6.38
%
2010
6
$
11.25
to
$
11.29
$
74
4.19
%
0.65
%
to
0.85
%
6.42
%
to
6.61
%
2009
1
$
10.57
to
$
10.57
$
12
9.66
%
0.85
%
to
0.85
%
5.70
%
to
5.70
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
SENTINEL
VARIABLE PRODUCTS COMMON STOCK FUND
(Effective
date 05/01/2009)
2013
16
$
21.87
to
$
22.08
$
351
2.11
%
0.65
%
to
0.85
%
30.65
%
to
30.88
%
2012
13
$
16.74
to
$
16.87
$
208
1.75
%
0.65
%
to
0.85
%
14.11
%
to
14.37
%
2011
13
$
14.67
to
$
14.75
$
187
1.64
%
0.65
%
to
0.85
%
1.24
%
to
1.44
%
2010
8
$
14.49
to
$
14.49
$
112
2.31
%
0.85
%
to
0.85
%
14.97
%
to
14.97
%
2009
0
*
$
12.60
to
$
12.60
$
2
2.60
%
0.85
%
to
0.85
%
26.00
%
to
26.00
%
SENTINEL
VARIABLE PRODUCTS SMALL COMPANY FUND
(Effective
date 05/01/2009)
2013
4
$
23.34
to
$
23.56
$
94
0.13
%
0.65
%
to
0.85
%
33.60
%
to
33.86
%
2012
4
$
17.60
to
$
17.60
$
66
0.45
%
0.65
%
to
0.65
%
10.69
%
to
10.69
%
2011
4
$
15.90
to
$
15.90
$
64
0.00
%
0.65
%
to
0.65
%
2.38
%
to
2.38
%
2010
4
$
15.48
to
$
15.53
$
61
0.05
%
0.65
%
to
0.85
%
22.66
%
to
22.96
%
2009
4
$
12.62
to
$
12.63
$
44
0.42
%
0.65
%
to
0.85
%
26.20
%
to
26.30
%
TEMPLETON
FOREIGN SECURITIES FUND
(Effective
date 04/30/2010)
2013
20
$
13.68
to
$
13.78
$
278
2.36
%
0.65
%
to
0.85
%
21.93
%
to
22.16
%
2012
8
$
11.22
to
$
11.28
$
90
3.10
%
0.65
%
to
0.85
%
17.24
%
to
17.50
%
2011
7
$
9.60
to
$
9.60
$
64
1.54
%
0.65
%
to
0.65
%
(11.28
)%
to
(11.28
)%
2010
6
$
10.80
to
$
10.82
$
63
1.66
%
0.65
%
to
0.85
%
8.00
%
to
8.20
%
THIRD
AVENUE VALUE PORTFOLIO
2013
13
$
10.30
to
$
11.02
$
149
3.48
%
0.65
%
to
0.85
%
17.98
%
to
18.24
%
2012
23
$
8.73
to
$
9.32
$
208
0.68
%
0.65
%
to
0.85
%
26.16
%
to
26.46
%
2011
38
$
6.92
to
$
7.37
$
278
1.77
%
0.65
%
to
0.85
%
(21.90
)%
to
(21.76
)%
2010
44
$
8.86
to
$
9.42
$
408
3.86
%
0.65
%
to
0.85
%
13.06
%
to
13.22
%
2009
66
$
7.84
to
$
8.32
$
522
0.00
%
0.65
%
to
0.85
%
44.12
%
to
44.70
%
TOUCHSTONE
VST MID CAP GROWTH FUND
(Effective
date 05/01/2009)
2013
4
$
22.12
to
$
22.33
$
87
0.00
%
0.65
%
to
0.85
%
33.66
%
to
33.95
%
2012
3
$
16.67
to
$
16.67
$
50
0.00
%
0.65
%
to
0.65
%
19.16
%
to
19.16
%
UNIVERSAL
INSTITUTIONAL FUND U.S. REAL ESTATE PORTFOLIO
2013
27
$
36.10
to
$
36.10
$
991
1.06
%
0.85
%
to
0.85
%
1.21
%
to
1.21
%
2012
31
$
35.67
to
$
35.67
$
1,126
0.88
%
0.85
%
to
0.85
%
14.84
%
to
14.84
%
2011
32
$
31.06
to
$
31.06
$
1,014
0.87
%
0.85
%
to
0.85
%
5.04
%
to
5.04
%
2010
35
$
29.57
to
$
29.57
$
1,061
2.15
%
0.85
%
to
0.85
%
28.85
%
to
28.85
%
2009
38
$
22.95
to
$
22.95
$
877
3.16
%
0.85
%
to
0.85
%
27.29
%
to
27.29
%
(Continued)
VARIABLE
ANNUITY-1 SERIES ACCOUNT OF
GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY OF NEW YORK
FINANCIAL
HIGHLIGHTS
At December 31
For the year or period ended December 31
Units
Net Assets
Investment
Expense Ratio
INVESTMENT
DIVISIONS
(000s)
Unit Fair Value
(000s)
Income Ratio
lowest to highest
Total Return
(a)
(b)
(a)
(b)
VAN
ECK VIP GLOBAL BOND FUND
(Effective
date 05/01/2009)
2013
57
$
11.59
to
$
11.70
$
657
2.51
%
0.65
%
to
0.85
%
(9.95
)%
to
(9.72
)%
2012
67
$
12.87
to
$
12.96
$
867
2.10
%
0.65
%
to
0.85
%
4.72
%
to
4.85
%
2011
63
$
12.29
to
$
12.36
$
776
6.97
%
0.65
%
to
0.85
%
7.15
%
to
7.48
%
2010
53
$
11.47
to
$
11.50
$
609
1.56
%
0.65
%
to
0.85
%
5.33
%
to
5.50
%
2009
17
$
10.89
to
$
10.90
$
179
0.00
%
0.65
%
to
0.85
%
8.90
%
to
9.00
%
VAN
ECK VIP GLOBAL HARD ASSETS FUND
(Effective
date 05/01/2009)
2013
24
$
15.90
to
$
16.05
$
378
0.50
%
0.65
%
to
0.85
%
9.35
%
to
9.56
%
2012
21
$
14.54
to
$
14.65
$
305
0.66
%
0.65
%
to
0.85
%
2.25
%
to
2.45
%
2011
18
$
14.22
to
$
14.30
$
255
1.03
%
0.65
%
to
0.85
%
(17.42
)%
to
(17.25
)%
2010
15
$
17.22
to
$
17.28
$
265
0.19
%
0.65
%
to
0.85
%
27.56
%
to
27.91
%
WELLS
FARGO ADVANTAGE VT DISCOVERY FUND
(Effective
date 05/01/2008)
2013
3
$
18.67
to
$
18.88
$
50
0.00
%
0.65
%
to
0.85
%
42.63
%
to
42.92
%
2012
3
$
13.09
to
$
13.21
$
44
0.00
%
0.65
%
to
0.85
%
16.67
%
to
16.90
%
2011
3
$
11.22
to
$
11.30
$
34
0.00
%
0.65
%
to
0.85
%
(0.36
)%
to
(0.18
)%
2010
4
$
11.26
to
$
11.32
$
45
0.00
%
0.65
%
to
0.85
%
34.37
%
to
34.60
%
2009
3
$
8.38
to
$
8.41
$
29
0.00
%
0.65
%
to
0.85
%
39.20
%
to
39.47
%
WELLS
FARGO ADVANTAGE VT OPPORTUNITY FUND
2013
6
$
16.34
to
$
15.05
$
112
0.19
%
0.65
%
to
0.85
%
29.58
%
to
29.74
%
2012
10
$
12.61
to
$
11.60
$
136
0.08
%
0.65
%
to
0.85
%
14.53
%
to
14.85
%
2011
17
$
11.01
to
$
10.10
$
201
0.14
%
0.65
%
to
0.85
%
(6.30
)%
to
(6.13
)%
2010
17
$
11.75
to
$
10.76
$
211
0.78
%
0.65
%
to
0.85
%
22.69
%
to
22.97
%
2009
21
$
9.58
to
$
8.75
$
199
0.00
%
0.65
%
to
0.85
%
46.48
%
to
(12.50
)%
WELLS
FARGO ADVANTAGE VT SMALL CAP VALUE FUND
2013
12
$
18.09
to
$
18.09
$
217
0.70
%
0.85
%
to
0.85
%
13.77
%
to
13.77
%
2012
12
$
15.90
to
$
15.90
$
197
0.85
%
0.85
%
to
0.85
%
13.01
%
to
13.01
%
2011
13
$
14.07
to
$
14.07
$
177
0.67
%
0.85
%
to
0.85
%
(8.04
)%
to
(8.04
)%
2010
13
$
15.30
to
$
15.30
$
194
1.48
%
0.85
%
to
0.85
%
16.26
%
to
16.26
%
2009
13
$
13.16
to
$
13.16
$
176
1.26
%
0.85
%
to
0.85
%
58.75
%
to
16.26
%
(Concluded)
*
The Investment Division has units that round to less than 1,000 units.
(a)
The amounts in these columns are associated with the highest Expense Ratio.
(b)
The amounts in these columns are associated with the lowest Expense Ratio.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)
Financial Statements
The balance sheets of Great-West Life & Annuity Insurance Company of New York ("GWL&A NY") and subsidiaries as of December 31, 2013 and 2012, and the related statements of income, stockholder's
equity and cash flows for each of the three years in the period ended December 31, 2013, and the statements of assets and liabilities of each of the investment divisions which comprise Variable Annuity-1 Series Account of GWL&A NY (the "Series Account") as of December 31, 2013, and the related statements of operations, and changes in net assets and the financial highlights for each of the periods presented, are filed herewith.
(b)
Exhibits
(1)
Certified
copy of resolution of Board of Directors of GWL&A NY establishing Registrant is incorporated by reference to Registrant’s initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289).
(2)
Not applicable.
(3)
Underwriting Agreement between Depositor and GWFS Equities, Inc. (formerly, BenefitsCorp Equities,
Inc.) is incorporated by reference to Registrant’s Post-Effective Amendment No. 9 to the Registration Statement on Form N-4 filed on April 25, 2003 (File No. 333-25289).
Participation Agreement with AIM Variable Insurance Fund (formerly INVESCO Variable Investment Funds, Inc.) is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289); amendment to Participation Agreement with AIM Variable Insurance Fund is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24,
2008 (File No. 333-147743).
(8)(b)
Participation Agreement with Alger American Fund is incorporated by reference to Registrant’s Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289); amendment to Participation Agreement with Alger American Fund is incorporated by reference to Registrant’s Post-Effective Amendment No. 7 to the Registration Statement on Form N-4 filed on April
15, 2002 (File No. 333-25289); amendment to Participation Agreement is incorporated by
reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on December 21, 2011 (File No. 333-177070).
(8)(c)
Participation Agreement with Alliance Bernstein Variable Products Series Fund, Inc. is incorporated by reference to Registrant's
Post-Effective Amendment No. 12 to the Registration Statement on Form N-4 filed on March 31, 2004 (File No. 333-25289); form of amendment to Participation Agreement with Alliance Bernstein Variable Products Series Fund, Inc. is incorporated by reference to the Registrant's Post-Effective Amendment No. 15 to the Registration Statement, filed on April 29, 2005 (File No. 333-25289); amendment to Participation Agreement with Alliance Bernstein Variable Products Series Fund, Inc. is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4
filed on April 24, 2008 (File No. 333-147743).
(8)(d)
Participation Agreement with American Century Variable Portfolios (formerly, TCI Portfolios, Inc.) is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289); amendment to Participation Agreement with American Century Variable Portfolios is incorporated
by reference to Registrant's Post-Effective Amendment No. 7 to the Registration Statement on Form N-4 filed on April 15, 2002 (File No. 333-25289); amendment to Participation Agreement with American Century Variable Portfolios is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendment to Participation Agreement with American Century Variable Portfolios is incorporated by reference to Registrant’s Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 filed
on April 16, 2010 (File No. 333-147743).
(8)(e)
Participation Agreement with Delaware VIP Trust is incorporated by reference to Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-4 filed on March 31, 2004 (File No. 333-25289); form of amendment to Participation Agreement with Delaware VIP Trust is incorporated by reference to the
Registrant's Post-Effective Amendment No. 15 to the Registration Statement, filed on April 29, 2005 (File No. 333-25289); amendment to Participation Agreement with Delaware VIP Trust is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendment to Participation Agreement is incorporated by reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on December 21, 2011
(File No. 333-177070).
(8)(f)
Participation Agreement with Dreyfus Variable Investment Fund is incorporated by reference to Registrant's Post-Effective Amendment No. 9 to the Registration Statement on Form N-4 filed on April 25, 2003 (File No. 333-25289); amendment to Participation Agreement with Dreyfus Variable Investment Fund is incorporated by reference to Registrant’s Pre-Effective Amendment to the Registration
Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendment to Participation Agreement with Dreyfus Variable Investment Fund is incorporated by reference to Registrant’s Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 filed on April 16, 2010 (File No. 333-147743).
(8)(g)
Participation Agreement with DWS Variable Series II (formerly, Scudder Variable Life Investment Fund)
is incorporated by reference to Registrant's Post-Effective Amendment No. 9 to the Registration Statement on Form N-4 filed on April 25, 2003 (File No. 333-25289); form of amendment to Participation Agreement is incorporated by reference to the Registrant's Post-Effective Amendment No. 15 to the Registration Statement, filed on April 29, 2005 (File No. 333-25289); amendment to Participation Agreement with DWS Variable Series II is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4 filed on April 24, 2008 (File No. 333-147743).
Participation
Agreement with Franklin Templeton Variable Insurance Products Trust is incorporated
by reference to Registrant’s amended Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendments to Participation Agreement with Franklin Templeton Variable Insurance Products Trust are incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(j)
Participation
Agreement with Janus Aspen Series (Institutional Class Shares) is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289); amendment to Participation Agreement with Janus Aspen Series is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendment to Participation Agreement with Janus Aspen Series is incorporated by reference to Registrant’s Post-Effective
Amendment No. 1 on Form N-4 filed on April 21, 2009 (File No. 333-147743); amendment to Participation Agreement is incorporated by reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on December 21, 2011 (File No. 333-177070).
(8)(k)
Participation Agreement with Baron Capital Fund Trust (now known as Lincoln Variable Insurance Products
Trust) (with respect to Capital Asset Fund) is incorporated by reference to Registrant’s Post-Effective Amendment No. 9 to the Registration Statement on Form N-4 filed on April 25, 2003 (File No. 333-25289). Participation Agreement with Lincoln Variable Insurance Products Trust is incorporated by reference to Registrant’s Post-Effective Amendment No. 1 on Form N-4 filed on April 21, 2009 (File No. 333-147743).
(8)(l)
Participation
Agreement with Nationwide Variable Insurance Trust (formerly Gartmore Variable Insurance Trust) is incorporated by reference to Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-4 filed on March 31, 2004 (File No. 333-25289); amendment to Participation Agreement with Nationwide Variable Insurance Trust is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(m)
Participation
Agreement with Neuberger Berman Advisers Management Trust is incorporated by reference to Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on N-4 filed on April 27, 2006 (File No. 333-130820); amendment to Participation Agreement with Neuberger Berman Adviser Management Trust is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(n)
Participation
Agreement with Oppenheimer Variable Account Funds is incorporated by reference to Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-4 filed on March 31, 2004 (File No. 333-25289); form of amendment to Participation Agreement with Oppenheimer Variable Account Funds is incorporated by reference to the Registrant's Post-Effective Amendment No. 15 to the Registration Statement, filed on April 29, 2005 (File No. 333-25289).
(8)(o)
Participation
Agreement with PIMCO Variable Insurance Trust is incorporated by reference to Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-4 filed on March 31, 2004 (File No. 333-25289); form of amendment to Participation Agreement with PIMCO Variable Insurance Trust is incorporated by reference to the Registrant's Post-Effective Amendment No. 15 to the Registration Statement, filed on April 29, 2005 (File No. 333-25289); amendment to Participation Agreement with PIMCO Variable Insurance Trust is incorporated by reference
to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743); amendment to Participation Agreement is incorporated by reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on December 21, 2011 (File No. 333-177070).
(8)(p)
Participation Agreement with Pioneer Variable
Contracts Trust (formerly, SAFECO Resource Trust) is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289) amendment to Participation Agreement with Pioneer Variable Contracts Trust is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(q)
Participation
Agreement with Schwab Annuity Portfolios is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997 (File No. 333-25289); amendment to Participation Agreement with Schwab Annuity Portfolios is incorporated by reference to Registrant's Post-Effective Amendment No. 7 to the Registration Statement on Form N-4 filed on April 15, 2002 (File No. 333-25289); amendment to Participation Agreement with Schwab Annuity Portfolios is incorporated by reference to Registrant’s Pre-Effective Amendment No.
1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(r)
Participation Agreement with Seligman Portfolios, Inc. is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(s)
Participation
Agreement with Third Avenue Value Portfolio is incorporated by reference to Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on N-4 filed on April 27, 2006 (File No. 333-130820); form of amendment to Participation Agreement with Third Avenue Value Portfolio is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
(8)(t)
Participation
Agreement with Van Kampen Life Investments Trust is incorporated by reference to Registrant’s initial Registration Statement on Form N-4 filed on January 3, 2006 (File No. 333-130820); amendment to Participation Agreement with Van Kampen Life Investments Trust is incorporated by reference to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed on April 24, 2008 (File No. 333-147743).
Participation Agreement with MFS Variable Insurance Trust is incorporated by reference to Post-Effective Amendment No. 39 to the Registration Statement filed by FutureFunds Series Account on Form N-4 on May 27, 2008 (File No. 811-03972). Amended
and Restated Participation Agreement with MFS Variable Insurance Trust and MFS Variable Insurance Trust II is incorporated by reference to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549).
(8)(w)
Participation Agreement with Prudential Series Fund is incorporated by reference to Registrant's Initial Registration Statement on Form N-4 filed on April 16, 1997
(File No. 333-25289); amendment to Participation Agreement with Prudential Series Fund is incorporated by reference to Registrant’s Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 filed on April 16, 2010 (File No. 333-147743).
(8)(x)
Participation Agreement with Van Eck Worldwide Insurance Trust is incorporated by reference to Registrant’s Post-Effective Amendment No. 1 on Form N-4 filed
on April 21, 2009 (File No. 333-147743); amendment to Participation Agreement with Van Eck Worldwide Insurance Trust is incorporated by reference to Registrant’s Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 filed on April 16, 2010 (File No. 333-147743).
(8)(y)
Participation Agreement with Columbia Funds Variable Insurance Trust is incorporated
by reference to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549); Participation Agreement with Columbia Funds Variable Insurance Trust I is incorporated by reference to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549).
(8)(z)
Participation
Agreement with JPMorgan Insurance Trust is incorporated by reference to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549).
Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account
on Form N-4 on April 16, 2010 (File No. 811-07549). Amendment to Participation Agreement with PIMCO is incorporated by reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed December 19, 2011 (File No. 333-176926).
(8)(bb)
Participation Agreement with Sentinel Variable Products Trust is incorporated by reference
to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549).
(8)(cc)
Participation Agreement with Touchstone Variable Series Trust is incorporated by reference to Post-Effective Amendment No. 43 to the Registration Statement filed by Variable Annuity-1 Series Account on Form N-4 on April 16, 2010 (File No. 811-07549).
Form of Participation Agreement with Putnam Variable Trust and amendment thereto is incorporated by reference to Variable Annuity-2 Series Account’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, filed December 30, 2011 (File No. 333-176926).
Power
Corporation of Canada, 751 Victoria Square, Montreal, Quebec, Canada H2Y 2J3.
Item 26. <u>Persons controlled by or under common control with the Depositor or Registrant as of 12/31/13
</u>
The Registrant is a separate account of Great-West Life & Annuity Insurance Company of New York, a stock life insurance company incorporated under the laws of the State of New York (“Depositor”). The Depositor is an indirect subsidiary of Power Corporation of Canada. An organizational chart for Power Corporation of Canada is set forth below.
The following sets out the ownership, based on votes attached to the outstanding voting shares, of Power Corporation of Canada:
The Desmarais Family Residuary Trust
99.999% - Pansolo Holding Inc.
100% - 3876357 Canada Inc.
100% - 3439496 Canada Inc.
100% - Capucines Investments Corporation
32%
- Nordex Inc. (68% also owned directly by the Desmarais Family Residuary Trust)
94.9% - Gelco Enterprises Ltd. (5.1% also owned directly by the Desmarais Family Residuary Trust)
53.60% - Power Corporation of Canada
The total voting rights of Power Corporation of Canada (PCC) controlled directly and indirectly by the Desmarais Family Residuary Trust are as follows. There are issued and outstanding as of December 31, 2013 411,399,721 Subordinate Voting Shares (SVS) of PCC carrying one vote per share and 48,854,772 Participating Preferred Shares (PPS) carrying 10 votes per share; hence the total voting rights are 899,947,441.
Pansolo Holding Inc. owns directly 15,216,033
SVS and 367,692 PPS, entitling Pansolo Holding Inc. directly to an aggregate percentage of voting rights of 18,892,953 or 2.1 % of the total voting rights attached to the shares of PCC. Pansolo Holding Inc. wholly owns 3876357 Canada Inc., 3439496 Canada Inc. and Capucines Investments Corporation which respectively own 40,686,080 SVS, 3,236,279 SVS, 3,125,000 SVS of PCC, representing respectively 4.52 %, 0.36%, 0.35 % of the aggregate voting rights of PCC.
Gelco Entreprises Ltd owns directly 48,235,700 PPS, representing 53.60% of the aggregate voting rights of PCC (PPS (10 votes) and SVS (1 vote)). Hence, the total voting rights of PCC under the direct and indirect control of the Desmarais Family Residuary Trust is approximately 61.10%; note that this is not the equity percentage.
The
Desmarais Family Residuary Trust also owns 1,561,750 SVS of PCC.
II.
OWNERSHIP BY POWER CORPORATION OF CANADA
Power Corporation of Canada has a 10% or greater voting interest in the following entities:
A. Great-West Life & Annuity Insurance Company Group of Companies (U.S. insurance)
Power Corporation of Canada
100.0%
- 171263 Canada Inc.
65.78% - Power Financial Corporation
67.0% - Great-West Lifeco Inc.
100.0% - Great-West Financial (Canada) Inc.
100.0% - Great-West Financial (Nova Scotia) Co.
100.0% - Great-West Lifeco U.S. Inc.
100.0% - GWL&A Financial Inc.
60.0% - Great-West Life & Annuity Insurance Capital (Nova Scotia) Co.
60.0% - Great-West Life & Annuity Insurance Capital (Nova Scotia) Co. II
60.0% - Great-West Life & Annuity Insurance Capital, LLC
60.0% - Great-West Life
& Annuity Insurance Capital, LLC II
100.0% - Great-West Life & Annuity Insurance Company (Fed ID # 84-0467907 - NAIC # 68322, CO)
100.0% - Great-West Life & Annuity Insurance Company of New York (Fed ID # 13-2690792 - NAIC # 79359, NY)
100.0% - Advised Assets Group, LLC
100.0% - GWFS Equities, Inc.
100.0% - Great-West Life & Annuity Insurance Company of South Carolina 100.0% - Emjay Corporation
100.0% - FASCore, LLC
50.0% - Westkin Properties Ltd.
65.17% - Great-West Funds,
Inc.
100.0% - Great-West Capital Management, LLC
100.0% - Great-West Trust Company, LLC
100.0% - Lottery Receivables Company One LLC
100.0% - LR Company II, L.L.C.
100.0% - Singer Collateral Trust IV
100.0% - Singer Collateral Trust V
B. Putnam Investments Group of Companies (Mutual Funds)
30.0% - Kelowna Central Park Phase II Properties Ltd.
30.0% - Trop Beau Developments Limited
100.0%
- 4298098 Canada Inc.
100.0% - GWLC Holdings Inc.
100% - GLC Reinsurance Corporation
100.0% - 389288 B.C. Ltd.
100.0% - Quadrus Investment Services Ltd.
35.0% - The Walmer Road Limited Partnership
100.0% - 177545 Canada Limited
100.0% - Lonlife Financial Services Limited
88.0% - Neighborhood Dental Services Ltd.
00.0% - Quadrus Distribution Services Ltd.
100.0% - Toronto College Park Ltd.
25.0% - High Park Bayview Limited Partnership
30.0%
- KS Village (Millstream) Inc.
100.0% - London Life Financial Corporation
89.4% - London Reinsurance Group, Inc. (10.6% owned by London Life Insurance Company)
100.0% - London Life & General Reinsurance Co. Ltd. (1 share held by London Life & Casualty Reinsurance Corporation and 20,099,999 shares held by London Reinsurance Group Inc.)
100.0% - London Life & Casualty Reinsurance Corporation
100.0% - Trabaja Reinsurance Company Ltd.
100.0% - London Life and Casualty (Barbados) Corporation
100.0% - LRG (US), Inc.
100.0% - London Life International Reinsurance Corporation
100.0%
- London Life Reinsurance Company (Fed ID # 23-2044256 – NAIC # 76694, PA)
75.0% - Vaudreuil Shopping Centres Limited
30.0% - Saskatoon West Shopping Centres Limited
75.0% - 2331777 Ontario Ltd.
75.0% - 2344701 Ontario Ltd.
75.0% - 2356720 Ontario Ltd.
75.0% - 0977221 B.C. Ltd.
100.0% - Canada Life Financial Corporation
100.0% - The Canada Life Assurance Company (Fed ID # 38-0397420, NAIC # 80659, MI)
100.0% - Canada Life Brasil LTDA
100.0%
- Canada Life Capital Corporation, Inc.
100.0% - Canada Life International Holdings, Limited
100.0% - Canada Life International Services Limited
100.0% - Canada Life International, Limited
100.0% - CLI Institutional Limited
100.0% - Canada Life Irish Holding Company, Limited
100.0% - Setanta Asset Management Limited
50.0% - Setanta Asset Management Funds Public Limited Company
100.0% - Canada Life Group Services Limited
100.0% - Canada Life Europe Investment Limited
78.67%
- Canada Life Assurance Europe Limited
100.0% - Canada Life Europe Management Services, Limited
21.33% - Canada Life Assurance Europe Limited
100.0% - Canada Life International Re, Limited
100.0% - Canada Life Reinsurance International, Ltd.
100.0% - Canada Life Reinsurance, Ltd.
100.0% - The Canada Life Group (U.K.), Limited
100.0% - Canada Life Pension Managers & Trustees, Limited
100.0% - Canada Life Asset Management Limited
100.0% - Canada Life
European Real Estate Limited
100% - Hotel Operations (Walsall) Limited
100.0% - Hotel Operations (Cardiff) Limited
100.0% - Canada Life Trustee Services (U.K.), Limited
100.0% - CLFIS (U.K.), Limited
100.0% - Canada Life, Limited
100.0% - Canada Life Assurance (Ireland), Limited
50.0% - Setanta Asset Management Funds Public Limited Company
100.0% - Canada Life (U.K.), Limited
100.0% - Albany Life Assurance Company, Limited
100.0% - Canada Life Management (U.K.), Limited
100.0%
- Canada Life Services (U.K.), Limited
100.0% - Canada Life Fund Managers (U.K.), Limited
100.0% - Canada Life Group Services (U.K.), Limited
100.0% - Canada Life Holdings (U.K.), Limited
100.0% - Canada Life Irish Operations, Limited
100.0% - Canada Life Ireland Holdings, Limited.
100.0% - Irish Life Group Limited
100.0% - Irish Progressive Services International Ltd
As of the date this Registration Statement was filed, there were no owners of Contracts offered by means of the prospectus contained herein. The Depositor, through the Registrant, issues other contracts by means of other prospectuses.
Item 28. Indemnification
Provisions
exist under the laws of the State of New York and the Bylaws of GWL&A NY whereby GWL&A NY may indemnify a director, officer, or controlling person of GWL&A NY against liabilities arising under the Securities Act of 1933. The following excerpts contain the substance of these provisions:
New York Corporate Code
Section 721. Nonexclusivity of statutory provisions for indemnification of directors and officers.
The indemnification and advancement of expenses granted pursuant to, or provided by, this article shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification or advancement of expenses may be entitled, whether contained in the certificate
of incorporation or the by-laws or, when authorized by such certificate of incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled. Nothing contained in this article shall affect any rights to indemnification to which corporate personnel other than directors and officers may be entitled by contract or otherwise under law.
Section 722. >Authorization
for indemnification of directors and officers.
(a) A corporation may indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the corporation served in any capacity at the request of the corporation, by reason of the fact that he, his testator or intestate, was a director or officer of the corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful.
(b) The termination of any such civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such director or officer did not act, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation or that he had reasonable cause to believe that his conduct was unlawful.
(c) A corporation may indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he, his testator or intestate, is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in connection with the defense or settlement of such action, or in connection with an appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation, except that no indemnification under this paragraph shall be made in respect of (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper.
(d) For the purpose of this section, a corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to applicable law shall be considered fines; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to
the best interests of the corporation.
Section 723. Payment of indemnification other than by court award.
(a) A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in section 722 shall be entitled to indemnification as authorized in such section.
(b) Except as provided in paragraph (a), any indemnification under section 722 or otherwise permitted by section 721, unless ordered by a court under section 724 (Indemnification of directors and officers by a court), shall be made by the corporation, only if authorized in the specific case:
(1)
By the board acting by a quorum consisting of directors who are not parties to such action or proceeding upon a finding that the director or officer has met the standard of conduct set forth in section 722 or established pursuant to section 721, as the case may be, or,
(2) If a quorum under subparagraph (1) is not obtainable or, even if obtainable, a quorum of disinterested directors so directs; (A) By the board upon the opinion in writing of independent legal counsel that indemnification is proper in the circumstances because the applicable standard of conduct set forth in such sections has been met by such director or officer, or (B) By the shareholders upon a finding that the director or officer has met the applicable standard of conduct set forth in such sections.
(c) Expenses incurred
in defending a civil or criminal action or proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount as, and to the extent, required by paragraph (a) of section 725.
Section 724. Indemnification of directors and officers by a court.
(a) Notwithstanding the failure of a corporation to provide indemnification, and despite any contrary resolution of the board or of the shareholders in the specific case under section 723 (Payment of indemnification other than by court award), indemnification shall be awarded by a court to the extent authorized under section
722 (Authorization for indemnification of directors and officers), and paragraph (a) of section 723. Application therefore may be made, in every case, either:
(1) In the civil action or proceeding in which the expenses were incurred or other amounts were paid, or
(2) To the supreme court in a separate proceeding, in which case the application shall set forth the disposition of any previous application made to any court for the same or similar relief and also reasonable cause for the failure to make application for such relief in the action or proceeding in which the expenses were incurred or other amounts were paid.
(b) The application shall be made in such manner and form as may be required by
the applicable rules of court or, in the absence thereof, by direction of a court to which it is made. Such application shall be upon notice to the corporation. The court may also direct that notice be given at the expense of the corporation to the shareholders and such other persons as it may designate in such manner as it may require.
(c) Where indemnification is sought by judicial action, the court may allow a person such reasonable expenses, including attorneys' fees, during the pendency of the litigation as are necessary in connection with his defense therein, if the court shall find that the defendant has by his pleadings or during the course of the litigation raised genuine issues of fact or law.
Section 725. Other provisions affecting indemnification of directors and officers.
(a)
All expenses incurred in defending a civil or criminal action or proceeding which are advanced by the corporation under paragraph (c) of section 723 (Payment of indemnification other than by court award) or allowed by a court under paragraph (c) of section 724 (Indemnification of directors and officers by a court) shall be repaid in case the person receiving such advancement or allowance is ultimately found, under the procedure set forth in this article, not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced by the corporation or allowed by the court exceed the indemnification to which he is entitled.
(b) No indemnification, advancement or allowance shall be made under this article in any circumstance where it appears:
(1) That
the indemnification would be inconsistent with the law of the jurisdiction of incorporation of a foreign corporation which prohibits or otherwise limits such indemnification;
(2) That the indemnification would be inconsistent with a provision of the certificate of incorporation, a by-law, a resolution of the board or of the shareholders, an agreement or other proper corporate action, in effect at the time of the accrual of the alleged cause of action asserted in the threatened or pending action or proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(3) If there has been a settlement approved by the court, that the indemnification would be inconsistent with any condition with respect to indemnification expressly
imposed by the court in approving the settlement.
(c) If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholders, the corporation shall, not later than the next annual meeting of shareholders unless such meeting is held within three months from the date of such payment, and,
in any event, within fifteen months from the date of such payment, mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation.
(d)
If any action with respect to indemnification of directors and officers is taken by way of amendment of the by-laws, resolution of directors, or by agreement, then the corporation shall, not later than the next annual meeting of shareholders, unless such meeting is held within three months from the date of such action, and, in any event, within fifteen months from the date of such action, mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the action taken.
(e) Any notification required to be made pursuant to the foregoing paragraph (c) or (d) of this section by any domestic mutual insurer shall be satisfied by compliance with the corresponding provisions of section one thousand two hundred sixteen of the insurance law.
(f)
The provisions of this article relating to indemnification of directors and officers and insurance therefore shall apply to domestic corporations and foreign corporations doing business in this state, except as provided in section 1320 (Exemption from certain provisions).
Section 726. Insurance for indemnification of directors and officers.
(a) Subject to paragraph (b), a corporation shall have power to purchase and maintain insurance:
(1) To indemnify the corporation for any obligation which it incurs as a result of the indemnification of directors and officers under the provisions of this article, and
(2)
To indemnify directors and officers in instances in which they may be indemnified by the corporation under the provisions of this article, and
(3) To indemnify directors and officers in instances in which they may not otherwise be indemnified by the corporation under the provisions of this article provided the contract of insurance covering such directors and officers provides, in a manner acceptable to the superintendent of insurance, for a retention amount and for co-insurance.
(b) No insurance under paragraph (a) may provide for any payment, other than cost of defense, to or on behalf of any director or officer:
(1) if a judgment or other final adjudication adverse to the insured director or
officer establishes that his acts of active and deliberate dishonesty were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled, or
(2) in relation to any risk the insurance of which is prohibited under the insurance law of this state.
(c) Insurance under any or all subparagraphs of paragraph (a) may be included in a single contract or supplement thereto. Retrospective rated contracts are prohibited.
(d) The corporation shall, within the time and to the persons provided in paragraph (c) of section 725 (Other provisions affecting indemnification of directors or officers), mail a statement
in respect of any insurance it has purchased or renewed under this section, specifying the insurance carrier, date of the contract, cost of the insurance, corporate positions insured, and a statement explaining all sums, not previously reported in a statement to shareholders, paid under any indemnification insurance contract.
(e) This section is the public policy of this state to spread the risk of corporate management,
notwithstanding any other general or special law of this state or of any other jurisdiction including the federal government.
Bylaws of GWL&A NY
ARTICLE
II, SECTION 11. <u>Indemnification of Directors</u>. The corporation may, by resolution of the Board of Directors, indemnify and save harmless out of the funds of the corporation to the extent permitted by applicable law, any Director, Officer, or employee of the corporation or any member or officer of any Committee, and his or her heirs, executors, and administrators, from and against all claims, liabilities, costs, charges, and expenses whatsoever that any such Director, Officer, employee, or any such member or officer sustains or incurs in or about any action, suit, or proceeding that is brought, commenced, or prosecuted against him or her for or in respect of any act, deed, matter, or thing whatsoever, made, done, or permitted by him or her in or about the execution of the duties of his or her office or employment with the corporation, in or about the execution of
his or her duties as a Director or Officer of another company which he or she so serves at the request and on behalf of the corporation, or in or about the execution of his or her duties as a member or officer of any such Committee, and all other claims, liabilities, costs, charges, and expenses that he or she sustains or incurs, in or about or in relation to any such duties or the affairs of the corporation, the affairs of such other company which he or she so serves or the affairs of such Committee, except such claims, liabilities, costs, charges, or expenses as are occasioned by acts or omissions which were in bad faith, involved intentional misconduct, a violation of the New York Insurance Law or a knowing violation of any other law or which resulted in such person personally gaining in fact a financial profit or other advantage to which he or she was not entitled. The corporation may, by resolution of the Board of Directors, indemnify and save harmless out of the
funds of the corporation to the extent permitted by applicable law, any Director, Officer, or employee of any subsidiary corporation of the corporation on the same basis and within the same constraints as described in the preceding sentence. No payment of indemnification shall be made unless notice has been filed with the Superintendent of Insurance pursuant to Section 1216 of the New York Insurance Law.
Item 29. Principal Underwriter
(a) GWFS Equities, Inc. ("GWFS") is the distributor of securities of the Registrant. In addition to the Registrant, GWFS also serves as distributor or principal underwriter for Great-West Funds, Inc. (formerly Maxim Series Fund, Inc.), an open-end management investment
company, Variable Annuity-1 Series Account of Great-West Life & Annuity Insurance Company (“GWL&A”), Maxim Series Account of GWL&A, FutureFunds Series Account of GWL&A, COLI VUL-2 Series Account of GWL&A, COLI VUL-4 Series Account of GWL&A, Variable Annuity-2 Series Account of GWL&A, Trillium Variable Annuity Account of GWL&A, Prestige Variable Life Account of GWL&A, COLI VUL-2 Series Account of Great-West Life & Annuity Insurance Company of New York (“GWL&A NY”), Variable Annuity-2 Series Account of GWL&A NY and COLI VUL-4 Series Account of GWL&A NY.
(b) Directors and Officers of GWFS
Name
Principal
Business Address
Position and Office with Underwriter
C.P. Nelson
(1)
Chairman, President and Chief Executive Officer
R.K. Shaw
(1)
Director and Executive Vice President
W.S. Harmon
(1)
Director and Senior Vice President
S.A. Bendrick
(1)
Director
and Vice President
B.P. Neese
(1)
Director and Vice President
M.R. Edwards
(1)
Senior Vice President
R.J. Laeyendecker
(1)
Senior Vice President
B.A. Byrne
(1)
Senior Vice President,
Legal, Chief Compliance Officer and Secretary
(c) Commissions and other compensation received by Principal Underwriter during Registrant's last fiscal year:
Name of Principal Underwriter
Net Underwriting Discounts and Commissions
Compensation on Redemption
Brokerage
Commissions
Compensation
GWFS
-0-
-0-
-0-
-0-
Item
30. Location of Accounts and Records
All accounts, books, or other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder are maintained by the Registrant through Great-West Life & Annuity Insurance Company, 8515 East Orchard Road, Greenwood Village, Colorado80111.
Item 31. Management Services
Not
Applicable.
Item 32. Undertakings
(a)
Registrant undertakes to file a post-effective amendment to this Registration Statement as frequently as is necessary to ensure that the audited financial statements in the Registration Statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted.
(b)
Registrant
undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information.
(c)
Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this form promptly upon written or oral request.
(d)
Great-West
Life & Annuity Insurance Company of New York represents the fees and charges deducted under the Contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by Great-West Life & Annuity Insurance Company of New York.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has caused this Registration Statement to be signed on its behalf, in the City of Greenwood Village, and State of Colorado, on this 22nd day of May, 2014.
President, Chief Executive Officer and Principal Financial Officer
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
