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immediately upon filing pursuant to paragraph (b) of Rule 485
o
on pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a) (1) of Rule 485
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on pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
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this post-effective amendment designates a new effective date for a previously filed
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Title of Securities Being Registered: Interests in the Separate Account Under Pacific Value and
Pacific Value Select individual flexible premium deferred variable annuity contracts.
Pacific Value Select
is an individual flexible premium deferred variable annuity
contract issued by Pacific Life & Annuity Company
through Separate Account A of Pacific Life &
Annuity Company.
In this Prospectus,
you and your mean the Contract Owner or
Policyholder. Pacific Life & Annuity,
PL&A, we, us and our refer to
Pacific Life & Annuity Company. Pacific Life,
PL and administrator means Pacific Life Insurance
Company. Contract means a Pacific Value Select variable
annuity contract, unless we state otherwise.
This Prospectus
provides information you should know before buying a Contract.
Please read the Prospectus carefully, and keep it for future
reference.
Pacific
Life & Annuity Company will add a Credit Enhancement
to your Contract Value each time you make a Purchase Payment.
Some of the expenses for this Contract may be higher than the
expenses for an annuity without the Credit Enhancement.
The Variable
Investment Options available under this Contract invest in
portfolios of the following Funds:
AllianceBernstein Variable Products Series Fund, Inc.
American Century Variable Portfolios, Inc.
BlackRock Variable Series Funds, Inc.
Fidelity® Variable Insurance Products Funds
First Trust Variable Insurance Trust
Franklin Templeton Variable Insurance Products Trust
GE Investments Funds, Inc.
Janus Aspen Series
Lord Abbett Series Fund, Inc.
MFS® Variable Insurance Trust
PIMCO Variable Insurance Trust
Van Eck VIP Trust
You will find a
complete list of each Variable Investment Option on the next
page. This Contract also offers the following fixed Investment
Option:
FIXED OPTION DCA
Plus Fixed Option
You will find more
information about the Contract and Separate Account A in
the Statement of Additional Information (SAI) dated May 1,2013. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is considered to be part of this Prospectus
because it’s incorporated by reference. You will find a
table of contents for the SAI on page 84 of this
Prospectus. You can get a copy of the SAI without charge by
calling or writing to Pacific Life & Annuity Company
or you can visit our website at www.pacificlife.com. You can
also visit the SEC’s website at www.sec.gov, which contains
the SAI, material incorporated into this Prospectus by
reference, and other information about registrants that file
electronically with the SEC.
This Contract is not
available in all states. This Prospectus is not an offer in any
state or jurisdiction where we are not legally permitted to
offer the Contract.
The Contract is
described in detail in this Prospectus and its SAI. A Fund is
described in its Prospectus and its SAI. No one has the right to
describe the Contract or a Fund any differently than they have
been described in these documents.
You should be aware
that the SEC has not approved or disapproved of the securities
or passed upon the accuracy or adequacy of the disclosure in
this Prospectus. Any representation to the contrary is a
criminal offense.
This material is not
intended to be used, nor can it be used by any taxpayer, for the
purpose of avoiding U.S. federal, state or local tax penalties.
Pacific Life & Annuity Company, its distributors and
their respective representatives do not provide tax, accounting
or legal advice. Any taxpayer should seek advice based on the
taxpayer’s particular circumstances from an independent tax
advisor.
This Contract is
not a deposit or obligation of, or guaranteed or endorsed by,
any bank. It’s not federally insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board, or any
other government agency. Investment in a Contract involves risk,
including possible loss of principal.
VARIABLE
INVESTMENT OPTIONS
Pacific Select
Fund
Emerging Markets Debt
International Small-Cap
Mid-Cap Value
Equity Index
Small-Cap Index
Small-Cap Equity
American
Funds®
Asset Allocation
American
Funds®
Growth-Income
American
Funds®
Growth
Large-Cap Value
Technology
Floating Rate Loan
Global Absolute Return
Small-Cap Growth
Comstock
Growth LT
Focused 30
Health Sciences
International Value
Long/Short Large-Cap
International Large-Cap
Mid-Cap Growth
Real Estate
Small-Cap Value
Main
Street®
Core
Emerging Markets
Cash Management
High Yield Bond
Managed Bond
Inflation Managed
Pacific Dynamix – Conservative Growth
Pacific Dynamix – Moderate Growth
Pacific Dynamix – Growth
Portfolio Optimization Conservative
Portfolio Optimization Moderate-Conservative
Portfolio Optimization Moderate
Portfolio Optimization Growth
Portfolio Optimization Aggressive-Growth
Mid-Cap Equity
Dividend Growth
Short Duration Bond
Currency Strategies
Large-Cap Growth
Precious Metals
Diversified Bond
Inflation Protected
AIM Variable Insurance
Funds
(Invesco Variable Insurance Funds) Invesco V.I. Balanced-Risk Allocation Fund
Series II
AllianceBernstein Variable
Products Series Fund, Inc. AllianceBernstein VPS Balanced Wealth
Strategy Portfolio Class B
American Century Variable
Portfolios, Inc. American Century VP Mid Cap Value Class II
BlackRock Variable Series
Funds, Inc. BlackRock Global Allocation V.I. Fund
Class III
Fidelity®
Variable Insurance Products Funds Fidelity VIP
Contrafund®
Portfolio Service Class 2
Fidelity VIP
FundsManager®
60% Portfolio Service Class 2
First Trust Variable
Insurance Trust First Trust/Dow Jones Dividend & Income
Allocation Portfolio
Franklin Templeton Variable
Insurance Products Trust Franklin Rising Dividends Securities Fund
Class 2
Franklin Templeton VIP Founding Funds Allocation Fund
Class 4
Mutual Global Discovery Securities Fund Class 2
Templeton Global Bond Securities Fund Class 2
GE Investments Funds,
Inc. GE Investments Total Return Fund Class 3
Janus Aspen Series Janus Aspen Balanced Portfolio Service Shares
Lord Abbett Series Fund,
Inc. Lord Abbett Bond Debenture Portfolio Class VC
MFS®
Variable Insurance Trust MFS®
Total Return Series – Service Class
MFS®
Utilities Series – Service Class
PIMCO Variable Insurance
Trust PIMCO
CommodityRealReturn®
Strategy Portfolio – Advisor Class
PIMCO Global Multi-Asset Portfolio – Advisor Class
Van Eck VIP Trust Van Eck VIP Global Hard Assets Fund Class S
This overview tells
you some key things you should know about your Contract.
It’s designed as a summary only – please read
this Prospectus, your Contract and the Statement of Additional
Information (SAI) for more detailed information.
Rules about how
annuity contracts are described or administered are reflected in
your Contract and in Riders or Endorsements to your Contract.
This prospectus provides a description of the material rights
and obligations under the Contract. Your Contract (including any
riders and/or endorsements) represents the contractual agreement
between you and us. Any guarantees provided for under your
Contract or through optional riders are backed by our financial
strength and claims-paying ability. You must look to the
strength of the insurance company with regard to such
guarantees. Your financial advisor or financial advisor’s
firm is not responsible for any Contract guarantees.
Some of the Terms
used in this Prospectus may be new to you. You will find a
glossary of certain terms in the TERMS USED IN THIS
PROSPECTUS section.
Pacific Value
Select Basics
An annuity contract may be appropriate if you are looking for
retirement income or you want to meet other long-term financial
objectives. Discuss with your financial advisor whether a
variable annuity, optional benefits and which underlying
Investment Options are appropriate for you, taking into
consideration your age, income, net worth, tax status, insurance
needs, financial objectives, investment goals, liquidity needs,
time horizon, risk tolerance and other relevant information.
Together you can decide if a variable annuity is right for
you.
This Contract may not be the right one for you if you need to
withdraw money for short-term needs, because withdrawal charges
and tax penalties for early withdrawal may apply.
You should consider the Contract’s investment and income
benefits, as well as its costs.
The Contract is an annuity contract between you and PL&A.
Annuity contracts have two phases, the accumulation phase and
the annuitization phase. The two phases are discussed below.
This Contract is designed for long-term financial planning. It
allows you to invest money on a tax-deferred basis for
retirement or other goals, and/or to receive income in a variety
of ways, including a series of income payments for life or for a
specified period of years.
Non-Qualified and Qualified Contracts are available. You buy a
Qualified Contract under a qualified retirement or pension plan,
or some form of an individual retirement annuity or account
(IRA). It is important to know that IRAs and qualified plans are
already tax-deferred which means the tax deferral feature of a
variable annuity does not provide a benefit in addition to that
already offered by an IRA or qualified plan. An annuity contract
should only be used to fund an IRA or qualified plan to benefit
from the annuity’s features other than tax deferral.
The Contract is a variable annuity, which means that your
Contract Value fluctuates depending on the performance of the
Investment Options you choose. The Contract allows you to choose
how often you make Investments (“Purchase Payments”)
and how much you add each time, subject to certain limitations.
Your
Right to Cancel (“Free Look”)
During the Free Look period, you have the right to cancel your
Contract and return it with instructions to us or to your
financial advisor for a refund. The amount refunded may be more
or less than the Purchase Payments you have made, depending on
the type of Contract you purchased. You will find a complete
description of the Free Look period that applies to your
Contract on the Contract’s cover sheet or notice that
accompanies your Contract. The Free Look period ends
10 days after you receive your Contract. If you are
replacing another annuity contract or life insurance policy,
your Free Look period ends 60 days after you receive your
Contract.
For more information about the Right to Cancel (“Free
Look”) period see WITHDRAWALS – Right to
Cancel (“Free Look”).
The Accumulation
Phase
The Investment Options you choose and how they perform will
affect your Contract Value during the accumulation phase, as
well as the amount available to annuitize on the Annuity
Date.
4
The accumulation phase begins on your Contract Date and
continues until your Annuity Date. During the accumulation
phase, you can put money in your Contract by making Purchase
Payments subject to certain limitations, and choose Investment
Options in which to allocate them. You can also take money out
of your Contract by making a withdrawal.
Investments
(“Purchase Payments”)
Your initial Purchase Payment must be at least $10,000 for a
Non-Qualified Contract or a Qualified Contract. Additional
Purchase Payments must be at least $250 for a Non-Qualified
Contract and $50 for a Qualified Contract. Currently, we are not
enforcing the minimum initial Purchase Payment on Qualified
Contracts or the minimum additional Purchase Payment amounts on
Qualified and Non-Qualified Contracts, but we reserve the right
to enforce such minimums in the future.
If you purchase an optional rider, we reserve the right to
reject or restrict, at our discretion, any additional Purchase
Payments. If we decide to no longer accept Purchase Payments for
any Rider, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit rider that
you may own. We may reject or restrict additional Purchase
Payments to help protect our ability to provide the guarantees
under these riders.
For more information about Making Your Investments
(“Purchase Payments”) see PURCHASING YOUR
CONTRACT – Making Your Investments (“Purchase
Payments”)
Credit
Enhancement
We will add an amount called a Credit Enhancement to your
Contract Value each time you make a Purchase Payment.
For more information about the Credit Enhancement see
PURCHASING YOUR CONTRACT – Credit
Enhancements.
Investment
Options
Ask your financial advisor to help you choose the right
Investment Options for your goals and risk tolerance. Any
financial firm or financial advisor you engage to provide advice
and/or make transfers for you is not acting on our behalf. We
are not responsible for any investment decisions or allocations
you make, recommendations such financial advisors make or any
allocations or specific transfers they choose to make on your
behalf. Some broker-dealers may not allow or may limit the
amount you may allocate to certain Investment Options.
You can choose from a selection of Variable Investment Options
(also called Subaccounts), each of which invests in a
corresponding Fund Portfolio. The value of each Portfolio will
fluctuate with the value of the investments it holds, and
returns are not guaranteed.
The purchase of an optional living benefit rider may limit the
number of Investment Options that are otherwise available to you
under the Contract while a rider is in effect. See
“OPTIONAL LIVING BENEFIT RIDERS – General
Information – Investment Allocation
Requirements.
You can also choose any available fixed option that earns a
guaranteed rate of interest that will never be less than the
minimum guaranteed interest rate specified in your Contract.
We allocate your Purchase Payments to the Investment Options you
choose. Your Contract Value will fluctuate during the
accumulation phase depending on the Investment Options you have
chosen. You bear the investment risk of any Variable Investment
Options you choose.
For more information about the Investment Options and the
Investment Advisers see YOUR INVESTMENT
OPTIONS – Your Variable Investment Options.
Transferring
Among Investment Options
You can transfer among Investment Options any time, subject to
certain limitations, until your Annuity Date without paying any
current income tax. Transfers are limited to 25 for each
calendar year. Only 2 transfers per month may involve the
Invesco V.I. Balanced-Risk Allocation Fund, BlackRock
Global Allocation V.I. Fund, GE Investments Total Return
Fund, International Value, International Small-Cap,
International Large-Cap, Emerging Markets, Emerging Markets
Debt, First Trust/Dow Jones Dividend & Income
Allocation Portfolio, Fidelity VIP FundsManager 60% Portfolio,
Mutual Global Discovery Securities Fund, Templeton Global Bond
Securities Fund or PIMCO Global Multi-Asset Investment Options.
In addition, only 2 transfers into or out of each American Funds
(American Funds Asset Allocation, American Funds Growth or
American Funds Growth-Income), Global Absolute Return, Currency
Strategies, Precious Metals, Lord Abbett Bond Debenture
Portfolio, MFS Utilities Series, PIMCO CommodityRealReturn
Strategy Portfolio, or Van Eck Global Hard Assets Fund
Investment Option may occur in any calendar month. If you have
used all 25 transfers in a calendar year, you may make 1
additional transfer of all or a portion of your Variable Account
Value to the Cash Management Investment Option before the start
of the next calendar year. You can also make systematic
transfers by enrolling in our dollar cost averaging, portfolio
rebalancing or earnings
5
AN OVERVIEW OF
PACIFIC VALUE SELECT
sweep programs. Transfers made under these systematic transfer
programs or automatic quarterly rebalancing under the Custom
Model program are excluded from these limitations. Some
restrictions may apply to transfers to or from any fixed option.
For more information about transfers and transfer limitations
see HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED –
Transfers and Market-timing Restrictions.
Withdrawals
You can make full and partial withdrawals to supplement your
income or for other purposes. You can withdraw a certain amount
each year without paying a withdrawal charge, but any amount
withdrawn in excess of this amount may incur a withdrawal charge
on Purchase Payments that are less than 9 years old. Some
restrictions may apply to making partial withdrawals from any
fixed option.
In general, you may have to pay income taxes on withdrawals or
other distributions from your Contract. If you are under age
591/2,
a 10% federal tax penalty may also apply to taxable withdrawals.
For more information about withdrawals and withdrawal
minimums see WITHDRAWALS – Optional
Withdrawals.
The Annuitization
Phase
The annuitization phase of your Contract begins on your Annuity
Date. Generally, you can choose to surrender your Contract and
receive a single payment or you can annuitize your Contract and
receive a series of income payments over a fixed period or for
life.
You can choose fixed or variable annuity payments, or a
combination of both. You can choose monthly, quarterly,
semi-annual or annual payments. We will make the income payments
to you or your designated payee. The Owner is responsible for
any tax consequences of any annuity payments.
If you choose variable annuity payments, the amount of the
payments will fluctuate depending on the performance of the
Variable Investment Options you choose. After your Annuity Date,
if you choose variable annuity payments, you can exchange your
Subaccount Annuity Units among the Variable Investment Options
up to 4 times in any
12-month
period.
For more information about annuitization see
ANNUITIZATION and for annuity options available
under the Contract see ANNUITIZATION – Choosing
Your Annuity Option – Annuity Options.
The Death
Benefit
Generally, the Contract provides a death payout upon the first
death of an Owner or the death of the sole surviving Annuitant,
whichever occurs first, during the accumulation phase. Death
benefit proceeds are payable when we receive proof of death and
payment instructions In Proper Form. To whom we pay a death
benefit, and how we calculate the death benefit amount depends
on who dies first and the type of Contract you own.
For more information about the death benefit see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits.
Optional
Riders
Optional Riders are subject to availability (including state
availability) and may be discontinued for purchase at anytime
without prior notice. Before purchasing any optional Rider, make
sure you understand all of the terms and conditions and consult
with your financial advisor for advice on whether an optional
Rider is appropriate for you. We reserve the right to restrict
the purchase of an optional living benefit Rider to only
Contract issue in the future. Your election to purchase an
optional Rider must be received In Proper Form.
We reserve the right to reject or restrict, at our
discretion, any additional Purchase Payments. If we decide to no
longer accept Purchase Payments for any Rider, we will not
accept subsequent Purchase Payments for your Contract or any
other optional living benefit riders that you may own. We may
reject or restrict additional Purchase Payments to help protect
our ability to provide the guarantees under these riders. See
the Subsequent Purchase Payments subsection for any of the
optional living benefit riders in the OPTIONAL LIVING BENEFIT
RIDERS section for additional information.
Stepped-Up
Death Benefit
This optional Rider offers you the ability to lock in market
gains for your beneficiaries with a stepped-up death benefit,
which is the highest Contract Value on any previous Contract
Anniversary (prior to the Annuitant’s
81st birthday)
adjusted for additional Purchase Payments and withdrawals. You
can only buy this Rider when you buy your Contract.
For more information about the Stepped-Up Death Benefit see
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT
RIDERS – Stepped-Up Death Benefit.
6
Optional
Living Benefit Riders
Living benefit riders available through this Contract, for an
additional cost, are categorized as guaranteed minimum
withdrawal benefit or guaranteed minimum accumulation benefit
riders. The following is a list (which may change from time to
time) of riders currently available:
Guaranteed
Minimum Withdrawal Benefit
•
CoreIncome Advantage 4 Select (Single or Joint)
•
CoreIncome Advantage Select (Single or Joint)
•
Income Access Select
The guaranteed minimum withdrawal benefit riders focus on
providing an income stream for life or over a certain period
through withdrawals during the accumulation phase, if certain
conditions are met. The riders have the same basic structure
with differences in the percentage that may be withdrawn each
year, how long the withdrawals may last (for example, certain
number of years, for a single life or for joint lives), and what
age lifetime withdrawals may begin, if applicable. The riders
also offer the potential to lock in market gains on each
Contract Anniversary which may increase the annual amount you
may withdraw each year under the rider. The riders provide an
income stream regardless of market performance, even if your
Contract Value is reduced to zero.
Guaranteed
Minimum Accumulation Benefit
•
Guaranteed Protection Advantage 3 Select
The guaranteed minimum accumulation benefit rider focuses on
providing principal protection, if certain conditions are met.
If your Contract Value is less than the protected amount at the
end of a
10-year
term, we will make up the difference by making a one-time
addition to your Contract Value. The rider also offers the
potential to increase the protected amount by locking in any
Contract Value increases after a certain number of years. If you
lock in any Contract Value increases, the new protected amount
will equal your Contract Value and a new
10-year term
will begin.
Additional
Information Applicable to Optional Living Benefit
Riders
You can find more information about the costs associated with
the optional riders within the next few pages and in the
CHARGES, FEES AND DEDUCTIONS – Optional Rider
Charges section. You can find complete information about
each optional rider and its key features and benefits in the
OPTIONAL LIVING BENEFIT RIDERS section.
You may purchase an optional Rider on the Contract Date or on
any Contract Anniversary (if available). In addition, if you
purchase a Rider within 60 days after the Contract Date or,
if available, within 60 days after any Contract
Anniversary, the Rider Effective Date will be that Contract Date
or Contract Anniversary. Your election to purchase an optional
Rider must be received In Proper Form.
At initial purchase and during the entire time that you own an
optional living benefit Rider, you must invest your entire
Contract Value in an asset allocation program or in Investment
Options we make available for these Riders. The allocation
limitations associated with these Riders may limit the number of
Investment Options that are otherwise available to you under
your Contract. See OPTIONAL LIVING BENEFIT RIDERS –
General Information – Investment Allocation
Requirements. Failure to adhere to the Investment Allocation
Requirements may cause your Rider to terminate. We reserve
the right to add, remove or change asset allocation programs or
Investment Options we make available for these Riders at any
time. We may make such a change due to a fund reorganization,
fund substitution, to help protect our ability to provide the
guarantees under these riders, or otherwise.
Distributions made due to a request for partial annuitization,
divorce instructions or under Code Section 72(t)/72(q)
(substantially equal periodic payments) are treated as
withdrawals for Contract purposes and may adversely affect Rider
benefits.
Taking a withdrawal before a certain age or a withdrawal that is
greater than the annual withdrawal amount (“excess
withdrawal”) under a particular Rider may result in adverse
consequences such as a permanent reduction in Rider benefits or
the failure to receive lifetime withdrawals under a Rider. If
you would like to make an excess withdrawal and are uncertain
how an excess withdrawal will reduce your future guaranteed
withdrawal amounts, then you may contact us prior to requesting
the withdrawal to obtain a personalized, transaction specific
calculation showing the effect of the excess withdrawal.
Some optional riders allow for owner elected
Resets/Step-Ups.
If you elect to
Reset/Step-Up,
your election must be received, In Proper Form, within
60 days after the Contract Anniversary (“60 day
period”) on which the
Reset/Step-Up
is effective. We may, at our sole discretion, allow
Resets/Step-Ups
after the 60 day period. We reserve the right to refuse a
Reset/Step-Up
request after the 60 day period
7
AN OVERVIEW OF
PACIFIC VALUE SELECT
regardless of whether we may have allowed you or others to
Reset/Step-Up
in the past. Each Contract Anniversary starts a new 60 day
period in which a
Reset/Step-Up
may be elected.
Taking a loan while an optional living benefit Rider is in
effect will terminate your Rider. Work with your financial
advisor before taking a loan.
Work with your financial advisor to review the different
riders available for purchase, how they function, how the riders
differ from one another, and to understand all of the terms and
conditions of an optional rider prior to purchase.
8
Fees and
Expenses
This section of the
overview explains the fees and expenses that you will pay when
buying, owning and surrendering your Pacific Value Select
Contract.
Contract
Transaction Expenses
The following describes the transaction fees and expenses that
you may pay when you make withdrawals or surrender your
Contract. Expenses are fixed under the terms of your Contract.
Premium taxes and/or other taxes may also apply to your
Contract. We generally charge state premium taxes
and/or other
taxes when you annuitize your Contract, but there are other
times when we charge them to your Contract instead. Please see
your Contract for details.
• Maximum Withdrawal Charge (as a percentage of
Purchase Payments
withdrawn)1
“Age” of Payment in Years:
1
2
3
4
5
6
7
8
9 or more
Withdrawal Charge Percentage:
9%
9%
8%
7%
6%
5%
4%
2%
0%
Periodic
Expenses
The following describes the fees and expenses that you will pay
periodically during the time you own the Contract, not including
Portfolio fees and expenses.
• Annual
Fee2
$
30
Separate
Account A Annual Expenses
(as a
percentage of the average daily Variable Account
Value3):
Without
Stepped-Up
With
Stepped-Up
Death Benefit
Rider
Death Benefit
Rider
• Mortality and Expense Risk
Charge4
1.45%
1.45%
• Administrative
Fee4
0.15%
0.15%
• Stepped-Up
Death Benefit Rider
Charge4,5
N/A
0.20%
• Total Separate Account A Annual Expenses
1.60%
1.80%
Loan Expenses (interest on Contract Debt) (Loans are only
available with certain Qualified Contracts. See FEDERAL
TAX ISSUES – Qualified Contracts –
General Rules – Loans):
• Loan Interest Rate
(net)6
2.00%
Optional
Rider7
Annual Expenses:
Maximum Charge
Percentage
Guaranteed Minimum Withdrawal Benefit
CoreIncome Advantage 4 Select Charge
(Single)8
1.00%
CoreIncome Advantage 4 Select Charge
(Joint)8
1.50%
CoreIncome Advantage Select Charge
(Single)9
2.00%
CoreIncome Advantage Select Charge
(Joint)9
2.50%
Income Access Select
Charge10
2.75%
Guaranteed Minimum Accumulation Benefit
Guaranteed Protection Advantage 3 Select
Charge11
2.25%
9
AN OVERVIEW OF
PACIFIC VALUE SELECT
Current Charge
Maximum Charge
Percentage
Percentage
Guaranteed Minimum Withdrawal Benefit
CoreIncome Advantage Plus Charge
(Single)12
0.40%
1.20%
CoreIncome Advantage Plus Charge
(Joint)12
0.60%
1.50%
CoreIncome Advantage 5 Plus Charge
(Single)13
0.80%
1.50%
CoreIncome Advantage 5 Plus Charge
(Joint)13
1.35%
1.75%
CoreProtect Advantage
Charge14
1.00%
1.50%
Income Access
Charge15
If the Rider Effective Date is on or after October 1,2012
The
withdrawal charge may or may not apply or may be reduced under
certain circumstances. The age is measured from the date of each
Purchase Payment. For situations where a withdrawal charge may
not apply, see CHARGES, FEES AND DEDUCTIONS and see
WITHDRAWALS – Withdrawals Free of a
Withdrawal Charge for situations where the withdrawal charge
amount may be reduced.
2
We
deduct an Annual Fee on each Contract Anniversary up to your
Annuity Date and when you make a full withdrawal if the Contract
Value on these days is less than $50,000 after deducting any
outstanding loan and interest (your Net Contract Value). See
CHARGES, FEES AND DEDUCTIONS.
3
The
Variable Account Value is the value of your Variable Investment
Options on any Business Day.
4
This
is an annual rate and is assessed on a daily basis. The daily
rate is calculated by dividing the annual rate by 365.
5
If
you buy the
Stepped-Up
Death Benefit, we will add this charge to the Mortality and
Expense Risk Charge until your Annuity Date.
6
If
we process a loan on your Contract, we will charge you a gross
interest rate of 5.00% on your outstanding principal amount. We
will credit you the amount of 3.00% on any Contract Value
attributed to your Loan Account. The net amount of interest you
pay on your loan will be 2.00% annually. See FEDERAL TAX
ISSUES – Qualified Contracts – General
Rules – Loans.
7
Only
one guaranteed minimum withdrawal benefit rider may be owned or
in effect at the same time. Only one guaranteed minimum
accumulation benefit rider may be owned or in effect at the same
time.
8
If
you buy CoreIncome Advantage 4 Select (Single) or (Joint),
the annual charge is deducted from your Contract Value on a
quarterly basis. The quarterly charge is the charge percentage
in effect for you (divided by 4) multiplied by the Protected
Payment Base. The initial Protected Payment Base is equal to the
initial Purchase Payment if purchased at Contract issue or is
equal to the Contract Value if the Rider is purchased on a
Contract Anniversary. For a complete explanation of the
Protected Payment Base, see OPTIONAL LIVING BENEFIT
RIDERS – CoreIncome Advantage 4 Select
(Single) or (Joint). The quarterly amount deducted
may increase or decrease due to changes in your Protected
Payment Base and/or due to changes in the annual charge
percentage applied. Your Protected Payment Base may increase due
to additional Purchase Payments, decrease due to withdrawals or
also change due to Resets. We deduct the charge proportionately
from your Investment Options (excluding the DCA Plus Fixed
Option) every quarter following the Rider Effective Date, during
the term of the Rider and while the Rider is in effect, and when
the Rider is terminated. The charge may be waived under certain
circumstances. See CHARGES, FEES, AND DEDUCTIONS –
Optional Rider Charges.
9
If
you buy CoreIncome Advantage Select (Single) or (Joint), the
annual charge is deducted from your Contract Value on a
quarterly basis. The quarterly charge is the charge percentage
in effect for you (divided by 4) multiplied by the Protected
Payment Base. The initial Protected Payment Base is equal to the
initial Purchase Payment if purchased at Contract issue or is
equal to the Contract Value if the Rider is purchased on a
Contract Anniversary. For a complete explanation of the
Protected Payment Base, see OPTIONAL LIVING BENEFIT
RIDERS – CoreIncome Advantage Select (Single) or
(Joint). The quarterly amount deducted may increase or
decrease due to changes in your Protected Payment Base and/or
due to changes in the annual charge percentage applied. Your
Protected Payment Base may increase due to additional Purchase
Payments, decrease due to withdrawals or also change due to
Resets. We deduct the charge proportionately from your
Investment Options (excluding the DCA Plus Fixed Option) every
quarter following the Rider Effective Date, during the term of
the Rider and while the Rider is in effect, and when the Rider
is terminated. The charge may be waived under certain
circumstances. See CHARGES, FEES, AND DEDUCTIONS –
Optional Rider Charges.
10
If
you buy Income Access Select, the annual charge is deducted from
your Contract Value on a quarterly basis. The quarterly charge
is the charge percentage in effect for you (divided by 4)
multiplied by the Protected Payment Base. The initial Protected
Payment Base is equal to the initial Purchase Payment if
purchased at Contract issue or is equal to the Contract Value if
the Rider is purchased on a Contract Anniversary. For a complete
explanation of the Protected Payment Base, see OPTIONAL
LIVING BENEFIT RIDERS – Income Access Select. The
quarterly amount deducted may increase or decrease due to
changes in your Protected Payment Base and/or due to changes in
the annual charge percentage applied. Your Protected Payment
Base may increase due to additional Purchase Payments, decrease
due to withdrawals or also change due to Resets. We deduct the
charge proportionately from your Investment Options (excluding
the DCA Plus Fixed Option) every quarter following the Rider
Effective Date, during the term of the Rider and while the Rider
is in effect, and when the Rider is terminated. The charge may
be waived under certain circumstances. See CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges.
11
If
you buy Guaranteed Protection Advantage 3 Select, the annual
charge is deducted from your Contract Value on a quarterly
basis. The quarterly charge is the charge percentage in effect
for you (divided by 4) multiplied by the Guaranteed Protection
Amount. The initial Guaranteed Protection Amount is equal to the
initial Purchase Payment if purchased at Contract issue or is
equal to the Contract Value if the Rider is purchased on a
Contract Anniversary. For a complete explanation of the
Guaranteed Protection Amount, see OPTIONAL LIVING BENEFIT
RIDERS – Guaranteed Protection Advantage 3 Select.
The quarterly amount deducted may increase or decrease due to
changes in your Guaranteed Protection Amount and/or due to
changes in the annual charge percentage applied. Your Guaranteed
Protection Amount may increase due to additional Purchase
Payments made the first year of a Term, decrease due to
withdrawals or also change due to Step-Ups. We deduct the charge
proportionately from your Investment Options (excluding the DCA
Plus Fixed Option) every quarter following the Rider Effective
Date, during the term of the Rider and while the Rider is in
effect, and when the Rider is terminated. The charge may be
waived under certain circumstances. See CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges.
12
If
you purchased CoreIncome Advantage Plus (Single) or (Joint), the
annual charge is deducted from your Contract Value on a
quarterly basis. The quarterly charge is the current charge
percentage (divided by 4) multiplied by the Protected Payment
Base. The initial Protected Payment Base is equal to the initial
Purchase Payment if
10
purchased
at Contract issue or is equal to the Contract Value if the Rider
is purchased on a Contract Anniversary. For a complete
explanation of the Protected Payment Base, see APPENDIX
G. The quarterly amount deducted may increase or decrease
due to changes in your Protected Payment Base. Your Protected
Payment Base may increase due to additional Purchase Payments,
decrease due to withdrawals or also change due to Resets. We
deduct the charge proportionately from your Investment Options
(excluding the DCA Plus Fixed Option) every quarter following
the Rider Effective Date, during the term of the Rider and while
the Rider is in effect, and when the Rider is terminated. Under
the Single version, we will waive the annual charge if the Rider
terminates as a result of the death of an Owner or sole
surviving Annuitant, upon full annuitization of your Contract,
or if your Contract Value is zero. Under the Joint version, we
will waive the annual charge if the Rider terminates as a result
of the death of the surviving Designated Life, upon full
annuitization of your Contract, or if your Contract Value is
zero. Upon annuitization, the annual charge is only waived for
the quarter that annuitization occurs. If the Rider terminates
as a result of death, any annual charge deducted between the
date of death and the Notice Date will be prorated as applicable
to the date of death and added to the Contract Value on the
Notice Date. See CHARGES, FEES, AND DEDUCTIONS –
Optional Rider Charges.
13
If
you purchased CoreIncome Advantage 5 Plus (Single) or (Joint),
the annual charge is deducted from your Contract Value on a
quarterly basis. The quarterly charge is the current charge
percentage (divided by 4) multiplied by the Protected Payment
Base. The initial Protected Payment Base is equal to the initial
Purchase Payment if purchased at Contract issue or is equal to
the Contract Value if the Rider is purchased on a Contract
Anniversary. For a complete explanation of the Protected Payment
Base, see APPENDIX G. The quarterly amount deducted may
increase or decrease due to changes in your Protected Payment
Base. Your Protected Payment Base may increase due to additional
Purchase Payments, decrease due to withdrawals or also change
due to Resets. We deduct the charge proportionately from your
Investment Options (excluding the DCA Plus Fixed Option) every
quarter following the Rider Effective Date, during the term of
the Rider and while the Rider is in effect, and when the Rider
is terminated. Under the Single version, we will waive the
annual charge if the Rider terminates as a result of the death
of an Owner or sole surviving Annuitant, upon full annuitization
of your Contract, or if your Contract Value is zero. Under the
Joint version, we will waive the annual charge if the Rider
terminates as a result of the death of the surviving Designated
Life, upon full annuitization of your Contract, or if your
Contract Value is zero. Upon annuitization, the annual charge is
only waived for the quarter that annuitization occurs. If the
Rider terminates as a result of death, any annual charge
deducted between the date of death and the Notice Date will be
prorated as applicable to the date of death and added to the
Contract Value on the Notice Date. See CHARGES, FEES, AND
DEDUCTIONS – Optional Rider Charges.
14
If
you purchased CoreProtect Advantage, the annual charge is
deducted from your Contract Value on a quarterly basis. The
quarterly charge is the current charge percentage (divided by 4)
multiplied by the Protected Payment Base. The initial Protected
Payment Base is equal to the initial Purchase Payment if
purchased at Contract issue or is equal to the Contract Value if
the Rider is purchased on a Contract Anniversary. For a complete
explanation of the Protected Payment Base, see APPENDIX
G. The quarterly amount deducted may increase or decrease
due to changes in your Protected Payment Base. Your Protected
Payment Base may increase due to additional Purchase Payments,
increases to the Annual Credit Value or Highest Anniversary
Value, decrease due to withdrawals or also change due to Resets.
We deduct this charge proportionately from your Investment
Options (excluding the DCA Plus Fixed Option) every quarter
following the Rider Effective Date, during the term of the Rider
and while the Rider is in effect, and when the Rider is
terminated. We will waive the annual charge if the Rider
terminates as a result of the death of an Owner or sole
surviving Annuitant, upon full annuitization of your Contract or
if your Contract Value is zero. Upon annuitization, the annual
charge is only waived for the quarter that annuitization occurs.
If the Rider terminates as a result of death, any annual charge
deducted between the date of death and the Notice Date will be
prorated as applicable to the date of death and added to the
Contract Value on the Notice Date. See CHARGES, FEES, AND
DEDUCTIONS – Optional Rider Charges. CoreProtect
Advantage is no longer available for purchase.
15
If
you purchased Income Access, the annual charge is equal to the
current charge percentage multiplied by the Contract Value. The
charge is deducted from your Contract Value on an annual basis.
We deduct this charge proportionately from your Investment
Options on each Contract Anniversary following the Effective
Date of the Rider during the term of the Rider and while the
Rider is in effect, and when the Rider is terminated. Under the
terms and conditions of the Rider, the annual charge percentage
may change to the current charge percentage if an Automatic
Reset or Owner-Elected Reset occurs, but will never be more than
the maximum charge percentage. We will waive the annual charge
if the Rider terminates as a result of the death of an Owner or
sole surviving Annuitant or upon full annuitization of your
Contract. Upon annuitization, the annual charge is only waived
for the Contract Year that annuitization occurs. If the Rider
terminates as a result of death, any annual charge deducted
between the date of death and the Notice Date will be prorated
as applicable to the date of death and added to the Contract
Value on the Notice Date. See CHARGES, FEES, AND
DEDUCTIONS – Optional Rider Charges.
16
If
you purchased GPA 3, the annual charge is equal to the
current charge percentage multiplied by the Guaranteed
Protection Amount. The charge is deducted from your Contract
Value on an annual basis. The initial Guaranteed Protection
Amount is equal to the initial Purchase Payment if purchased at
Contract issue or is equal to Contract Value if the Rider is
purchased on a Contract Anniversary. For a complete explanation
of the Guaranteed Protection Amount, see APPENDIX G. We
deduct this charge proportionately from your Investment Options
on each Contract Anniversary following the Effective Date of the
Rider during the term of the Rider and while the Rider is in
effect, and when the Rider is terminated. Under the terms and
conditions of the Rider, the annual charge percentage may change
to the current charge percentage if a
Step-Up is
elected but will never be more than the maximum charge
percentage. We will waive the annual charge if the Rider
terminates as a result of the death of an Owner or sole
surviving Annuitant or upon full annuitization of your Contract.
Upon annuitization, the annual charge is only waived for the
Contract Year that annuitization occurs. If the Rider terminates
as a result of death, any annual charge deducted between the
date of death and the Notice Date will be prorated as applicable
to the date of death and added to the Contract Value on the
Notice Date. See CHARGES, FEES, AND DEDUCTIONS –
Optional Rider Charges.
11
AN OVERVIEW OF
PACIFIC VALUE SELECT
Total Annual Fund
Operating Expenses
For more about the underlying Funds see YOUR
INVESTMENT OPTIONS – Your Variable Investment
Options, and see each underlying Fund Prospectus.
This table shows the minimum and maximum total annual operating
expenses incurred by the Portfolios that you indirectly pay
during the time you own the Contract. This table shows the range
(minimum and maximum) of fees and expenses (including management
fees, shareholder servicing and/or distribution
(12b-1)
fees, and other expenses) charged by any of the Portfolios,
expressed as an annual percentage of average daily net assets.
The amounts are based on expenses paid in the year ended
December 31, 2012, adjusted to reflect anticipated changes
in fees and expenses, or, for new Portfolios, are based on
estimates for the current fiscal year.
Each Variable Account of the Separate Account purchases shares
of the corresponding Fund Portfolio at net asset value. The net
asset value reflects the investment advisory fees and other
expenses that are deducted from the assets of the Portfolio. The
advisory fees and other expenses are not fixed or specified
under the terms of the Contract, and they may vary from year to
year. These fees and expenses are described in each Fund
Prospectus.
Minimum
Maximum
Range of total annual portfolio operating expenses
before any waivers or expense reimbursements
[ ]
[ ]
Range of total annual portfolio operating expenses
after any waivers or expense reimbursements
[ ]
[ ]
To help limit Fund expenses, Fund advisers have contractually
agreed to reduce investment advisory fees or otherwise reimburse
certain Portfolios of their respective Funds which may reduce
the Portfolio’s expenses. The range of expenses in the
first row above does not include the effect of any waiver
and/or
expense reimbursement arrangement. The range of expenses in the
second row above includes the effect of Fund waiver
and/or
expense reimbursement arrangements that are in effect. The
waiver and/or reimbursement arrangements vary in length. There
can be no assurance that Fund expense waivers or reimbursements
will be extended beyond their current terms as outlined in each
Fund prospectus, and they may not cover certain expenses such as
extraordinary expenses. See each Fund prospectus for complete
information regarding annual operating expenses and any waivers
or reimbursements in effect for a particular Fund.
12
Examples
The following examples are intended to help you compare the cost
of investing in your Contract with the cost of investing in
other variable annuity contracts. The maximum amounts reflected
below include the maximum periodic Contract expenses, Contract
Transaction Expenses, Separate Account annual expenses and the
Portfolio with the highest fees and expenses for the year ended
December 31, 2012. The maximum amounts also include the
combination of optional Riders whose cumulative maximum charge
expenses totaled more than any other optional Rider combination.
The optional Riders included are Stepped-Up Death Benefit,
Income Access Select and Guaranteed Protection Advantage 3
Select. The minimum amounts reflected below include the minimum
periodic Contract expenses, Separate Account annual expenses and
the Portfolio with the lowest fees and expenses for the year
ended December 31, 2012. The minimum amounts do not include
any optional Riders.
The examples assume that you invest $10,000 in the Contract for
the time periods indicated. They also assume that your Purchase
Payment has a 5% return each year and assumes the maximum and
minimum fees and expenses of all of the Investment Options
available. Although your actual costs may be higher or lower,
based on these assumptions, your maximum and minimum costs would
be:
•
If you surrendered your Contract:
1 Year
3 Years
5 Years
10 Years
Maximum*
$1,486
$2,732
$3,864
$6,500
Minimum*
$1,015
$1,352
$1,627
$2,349
•
If you annuitized your Contract:
1 Year
3 Years
5 Years
10 Years
Maximum*
$1,486
$2,012
$3,324
$6,500
Minimum*
$1,015
$632
$1,087
$2,349
•
If you did not surrender or annuitize, but left the money in
your Contract:
1 Year
3 Years
5 Years
10 Years
Maximum*
$676
$2,012
$3,324
$6,500
Minimum*
$205
$632
$1,087
$2,349
*
In calculating the examples above,
we used the maximum and minimum total operating expenses of all
the Portfolios as shown in the Fees And Expenses section
of each Fund Prospectus. For more information on Contract fees
and expenses, see CHARGES, FEES AND DEDUCTIONS in this
Prospectus, and see each Fund Prospectus. See the FINANCIAL
HIGHLIGHTS section in this Prospectus for condensed
financial information about the Subaccounts.
Some broker-dealers may not allow or may limit the amount you
may allocate to certain Investment Options. Work with your
financial advisor to help you choose the right Investment
Options for your investment goals and risk tolerance.
You may choose among the different Variable Investment Options
and the DCA Plus Fixed Option.
Each Variable Investment Option invests in a separate Fund
Portfolio. For your convenience, the following chart summarizes
some basic data about each Portfolio. This chart is only a
summary. For more complete information on each Portfolio,
including a discussion of the Portfolio’s investment
techniques and the risks associated with its investments, see
the applicable Fund Prospectus. No assurance can be given that a
Portfolio will achieve its investment objective. YOU SHOULD READ
EACH FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
PACIFIC SELECT FUND
INVESTMENT GOAL
MANAGER
Emerging Markets Debt
Seeks to maximize total return consistent with prudent
investment management.
Ashmore Investment Management Limited
International Small-Cap
Seeks long-term growth of capital.
Batterymarch Financial Management, Inc.
Mid-Cap Value
Seeks long-term growth of capital.
BlackRock Capital Management, Inc.
Equity Index
Seeks investment results that correspond to the total return of
common stocks that are publicly traded in the U.S.
BlackRock Investment Management, LLC
Small-Cap Index
Seeks investment results that correspond to the total return of
an index of small-capitalization companies.
BlackRock Investment Management, LLC
Small-Cap Equity
Seeks long-term growth of capital.
Franklin Advisory Services, LLC &
BlackRock Investment Management, LLC
American Funds Asset Allocation
Seeks high total returns (including income and capital gains)
consistent with preservation of capital over the long-term.
Capital Research and Management Company
(adviser to the Master Asset Allocation
Fund)
American Funds
Growth-Income
Seeks long-term growth of capital and income.
Capital Research and Management Company
(adviser to the Master Growth-Income
Fund)
American Funds
Growth
Seeks long-term growth of capital.
Capital Research and Management Company
(adviser to the Master Growth Fund)
Large-Cap Value
Seeks long-term growth of capital; current income is of
secondary importance.
ClearBridge Advisors, LLC
Technology
Seeks long-term growth of capital.
Columbia Management Investment Advisers, LLC
Floating Rate Loan
Seeks a high level of current income.
Eaton Vance Management
Global Absolute Return
Seeks to provide total return.
Eaton Vance Management
Small-Cap Growth
Seeks capital appreciation; no consideration is given to income.
Fred Alger Management, Inc.
Comstock
Seeks long-term growth of capital.
Invesco Advisers, Inc.
Growth LT
Seeks long-term growth of capital.
Janus Capital Management LLC
Focused 30
Seeks long-term growth of capital.
Janus Capital Management LLC
Health Sciences
Seeks long-term growth of capital.
Jennison Associates LLC
International Value
Seeks long-term capital appreciation primarily through
investment in equity securities of corporations domiciled in
countries with developed economies and markets other than the
U.S. Current income from dividends and interest will not be an
important consideration.
J.P. Morgan Investment Management Inc.
Long/Short Large-Cap
Seeks above-average total returns.
J.P. Morgan Investment Management Inc.
14
PACIFIC
SELECT FUND
INVESTMENT
GOAL
MANAGER
International Large-Cap
Seeks long-term growth of capital.
MFS Investment Management
Mid-Cap Growth
Seeks long-term growth of capital.
Morgan Stanley Investment Management Inc.
Real Estate
Seeks current income and long-term capital appreciation.
Morgan Stanley Investment Management Inc.
Small-Cap Value
Seeks long-term growth of capital.
NFJ Investment Group LLC
Main Street Core
Seeks long-term growth of capital and income.
OppenheimerFunds, Inc.
Emerging Markets
Seeks long-term growth of capital.
OppenheimerFunds, Inc.
Cash Management
Seeks current income consistent with preservation of capital.
Pacific Asset Management
High Yield Bond
Seeks a high level of current income.
Pacific Asset Management
Managed Bond
Seeks to maximize total return consistent with prudent
investment management.
Pacific Investment Management Company LLC
Inflation Managed
Seeks to maximize total return consistent with prudent
investment management.
Pacific Investment Management Company LLC
Pacific Dynamix –
Conservative Growth
Seeks current income and moderate growth of capital.
Pacific Life Fund Advisors LLC
Pacific Dynamix –
Moderate Growth
Seeks long-term growth of capital and low to moderate income.
Pacific Life Fund Advisors LLC
Pacific Dynamix –
Growth
Seeks moderately high, long-term growth of capital with low,
current income.
Pacific Life Fund Advisors LLC
Portfolio Optimization Conservative
Seeks current income and preservation of capital.
Pacific Life Fund Advisors LLC
Portfolio Optimization Moderate-Conservative
Seeks current income and moderate growth of capital.
Pacific Life Fund Advisors LLC
Portfolio Optimization Moderate
Seeks long-term growth of capital and low to moderate income.
Pacific Life Fund Advisors LLC
Portfolio Optimization Growth
Seeks moderately high, long-term capital appreciation with low,
current income.
Pacific Life Fund Advisors LLC
Portfolio Optimization Aggressive-Growth
Seeks high, long-term capital appreciation.
Pacific Life Fund Advisors LLC
Mid-Cap Equity
Seeks capital appreciation.
Scout Investments, Inc.
Dividend Growth
Seeks long-term growth of capital.
T. Rowe Price Associates, Inc.
Short Duration Bond
Seeks current income; capital appreciation is of secondary
importance.
T. Rowe Price Associates, Inc.
Currency Strategies
Seeks to provide total return.
UBS Global Asset Management (Americas) Inc.
Large-Cap Growth
Seeks long-term growth of capital; current income is of
secondary importance.
BlackRock Investment Management, LLC
Precious Metals
Seeks long-term growth of capital.
Wells Capital Management Incorporated
Diversified Bond
Seeks to maximize total return consistent with prudent
investment management.
Western Asset Management Company
Inflation Protected
Seeks to maximize total return consistent with prudent
investment management.
Invesco V.I. Balanced-Risk Allocation Fund Series II
Total return with a low to moderate correlation to traditional
financial market indices.
Invesco Advisers, Inc.
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS
SERIES FUND, INC.
INVESTMENT GOAL
MANAGER
AllianceBernstein VPS
Balanced Wealth
Strategy Portfolio
Class B
Maximize total return consistent with the adviser’s
determination of reasonable risk.
AllianceBernstein L.P.
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
INVESTMENT GOAL
MANAGER
American Century
VP Mid Cap Value
Class II
Seeks long-term capital growth. Income is a secondary objective.
American Century Investment Management, Inc.
BLACKROCK VARIABLE
SERIES FUNDS, INC.
INVESTMENT GOAL
MANAGER
BlackRock Global
Allocation V.I. Fund
Class III
Seeks high total investment return.
BlackRock Advisors, LLC
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS
INVESTMENT GOAL
MANAGER
Fidelity VIP Contrafund
Portfolio Service Class 2
Seeks long-term capital appreciation.
Fidelity Management & Research Co., Inc.
Fidelity VIP FundsManager 60%
Portfolio Service Class 2
Seeks high total return.
Strategic Advisers, Inc.
FIRST TRUST
VARIABLE INSURANCE
TRUST
INVESTMENT GOAL
MANAGER
First Trust/Dow Jones
Dividend & Income
Allocation Portfolio
Seeks to provide total return by allocating among
dividend-paying stocks and investment grade bonds.
First Trust Advisors L.P.
16
FRANKLIN TEMPLETON
VARIABLE INSURANCE
PRODUCTS TRUST
INVESTMENT GOAL
MANAGER
Franklin Rising Dividends
Securities Fund Class 2
Seeks long-term capital appreciation. Preservation of capital,
while not a goal, is also an important consideration.
Franklin Advisory Services, LLC
Franklin Templeton VIP
Founding Funds
Allocation Fund
Class 4
Seeks capital appreciation, with income as a secondary goal.
Franklin Templeton Services, LLC serves as the Fund’s
administrator.
Mutual Global Discovery
Securities Fund Class 2
Seeks capital appreciation.
Franklin Mutual Advisers, LLC
Templeton Global Bond
Securities Fund Class 2
Seeks high current income, consistent with preservation of
capital. Capital appreciation is a secondary consideration.
Franklin Advisers, Inc.
GE INVESTMENTS
FUNDS, INC.
INVESTMENT GOAL
MANAGER
GE Investments Total Return Fund
Class 3
Highest total return, composed of current income and capital
appreciation, as is consistent with prudent investment risk.
GE Asset Management Incorporated
JANUS ASPEN SERIES
INVESTMENT GOAL
MANAGER
Janus Aspen Balanced
Portfolio Service Shares
Seeks long-term capital growth, consistent with preservation of
capital and balanced by current income.
Janus Capital Management LLC
LORD ABBETT
SERIES FUND, INC.
INVESTMENT GOAL
MANAGER
Lord Abbett Bond
Debenture Portfolio
Class VC
Seeks high current income and the opportunity for capital
appreciation to produce a high total return
Lord, Abbett & Co., LLC
MFS VARIABLE
INSURANCE TRUST
INVESTMENT GOAL
MANAGER
MFS Total Return Series –
Service Class
Seeks total return.
Massachusetts Financial Services Company
MFS Utilities Series –
Service Class
Seeks total return.
Massachusetts Financial Services Company
PIMCO VARIABLE
INSURANCE TRUST
INVESTMENT GOAL
MANAGER
PIMCO CommodityRealReturn
Strategy Portfolio –
Advisor Class
Seeks maximum real return, consistent with prudent investment
management.
Pacific Investment Management Company, LLC
PIMCO Global
Multi-Asset Portfolio – Advisor Class
Seeks total return which exceeds that of a blend of 60% MSCI
World Index/40% Barclays Capital U.S. Aggregate Index.
Pacific Investment Management Company, LLC
VAN ECK
VIP TRUST
INVESTMENT GOAL
MANAGER
Van Eck VIP Global
Hard Assets Fund
Class S
Seeks long-term capital appreciation by investing primarily in
hard asset securities. Income is a secondary consideration.
Van Eck Associates Corporation
17
The
Investment Advisers
Pacific Life Fund Advisors LLC (PLFA), a subsidiary of Pacific
Life Insurance Company, is the investment adviser for the
Pacific Select Fund. PLFA and the Pacific Select Fund’s
Board of Trustees oversee the management of all the Pacific
Select Fund’s Portfolios, and PLFA also manages certain
portfolios directly. PLFA also does business under the name
“Pacific Asset Management” and manages the Pacific
Select Fund’s Cash Management and High Yield Bond
Portfolios under that name.
AllianceBernstein L.P. is the investment adviser for the
AllianceBernstein Variable Products Series Fund, Inc.
American Century Investment Management, Inc. is the investment
adviser of the American Century Variable Portfolios, Inc.
The Fund’s investment manager is BlackRock Advisors, LLC
(“BlackRock”). The Fund’s sub-advisers are
BlackRock Investment Management, LLC and BlackRock International
Limited. Where applicable, the use of the term BlackRock also
refers to the Fund’s sub-advisers.
Strategic Advisers, Inc., an affiliate of Fidelity
Management & Research Company, is the investment
adviser for the Fidelity Variable Insurance Products Funds.
Fidelity Management & Research Company is the
investment adviser for the Fidelity VIP Contrafund Portfolio.
These portfolios are part of the Fidelity Variable Insurance
Products Funds.
First Trust Advisors L.P. is the investment advisor for the
First Trust Variable Insurance Trust.
Franklin Advisory Services, LLC is the investment adviser for
the Franklin Rising Dividends Securities Fund. Franklin
Templeton Services, LLC is the fund administrator for the
Franklin Templeton VIP Founding Funds Allocation Fund of the
Franklin Templeton Variable Insurance Products Trust. Franklin
Templeton Services, LLC is the fund administrator for the
Franklin Templeton VIP Founding Funds Allocation Fund. Franklin
Mutual Advisers, LLC is the investment adviser for the Mutual
Global Discovery Securities Fund. Franklin Advisers, Inc. is the
investment adviser for the Templeton Global Bond Securities
Fund. These Portfolios are part of the Franklin Templeton
Variable Insurance Products Trust.
GE Asset Management Incorporated is the investment adviser for
the GE Investments Funds, Inc.
Invesco Advisers, Inc. is the investment adviser for the AIM
Variable Insurance Funds (Invesco Variable Insurance Funds).
Janus Capital Management LLC is the investment adviser of the
Janus Aspen Series.
Lord, Abbett & Co. LLC is the investment adviser for
the Lord Abbett Series Fund, Inc.
Massachusetts Financial Services Company is the investment
adviser for the MFS Variable Insurance Trust.
Pacific Investment Management Company LLC is the investment
adviser for the PIMCO Variable Insurance Trust.
Van Eck Associates Corporation is the investment adviser of the
Van Eck VIP Trust.
The DCA Plus Fixed Option offers you a guaranteed minimum
interest rate on amounts that you allocate to this option. You
may only allocate Purchase Payments to the DCA Plus Fixed Option
(you cannot make transfers from other Investment Options to the
DCA Plus Fixed Option) and you may choose a Guarantee Term of up
to 24 months, depending on what Guarantee Terms we offer.
Please contact us for the Guarantee Terms currently available.
Any amount allocated to this option will be transferred monthly
(over the Guarantee Term) to one or more of the Variable
Investment Option(s) you selected. Amounts you allocate to this
option, and your earnings credited are held in our General
Account. For more detailed information about this option, see
THE GENERAL ACCOUNT.
To purchase a Contract, you must work with your financial
advisor to fill out an application and submit it along with your
initial Purchase Payment to Pacific Life & Annuity
Company at P.O. Box 2736, Omaha, Nebraska
68103-2736.
In those instances when we receive electronic transmission of
the information on the application from your financial
advisor’s broker-dealer firm and our administrative
procedures with your broker-dealer so provide, we consider the
application to be received on the Business Day we receive the
transmission. If your application and Purchase Payment are
complete when received, or once they have become complete, we
will issue your Contract within 2 Business Days. If some
information is missing from your application, we may delay
issuing your Contract while we obtain the missing information.
However, we will not hold your initial Purchase Payment for more
than 5 Business Days without your permission. In any case,
we will not hold your initial Purchase Payment after
20 Business Days.
You may also purchase a Contract by exchanging your existing
annuity. Call your financial advisor or call us at
(800) 748-6907
if you are interested in this option.
18
We reserve the right to reject any application or Purchase
Payment for any reason, subject to any applicable
nondiscrimination laws and to our own standards and guidelines.
On your application, you must provide us with a valid U.S. tax
identification number for federal and state tax reporting
purposes.
The maximum age of a Contract Owner/Annuitant, including Joint
Owners/Annuitants and Contingent Annuitants, for which a
Contract will be issued is 80. The Contract Owner’s age is
calculated as of his or her last birthday. If any Contract Owner
or any sole Annuitant named in the application for a Contract
dies and we are notified of the death before we issue the
Contract, then we will return the amount we received. If we are
not notified of the death and we issue the Contract, then the
application for the Contract
and/or any
Contract issued will be deemed cancelled and a refund will be
issued. The refund amount may be more or less than the initial
Purchase Payment received, or any other Purchase Payment we
received in connection with an exchange or transfer. The refund
will be the Contract Value based upon the next determined
Accumulated Unit Value (AUV) after we receive proof of death, In
Proper Form, of the Contract Owner or Annuitant, plus a refund
of any amount used to pay premium taxes
and/or any
other taxes, minus any Credit Enhancement. Any refund may
subject the refunded assets to probate.
Your initial Purchase Payment must be at least $10,000 for
Non-Qualified or Qualified Contracts. Currently, we are not
enforcing the minimum initial Purchase Payment on Qualified
Contracts but we reserve the right to enforce the minimum
initial Purchase Payment on Qualified Contracts in the future.
For Non-Qualified Contracts, if the entire minimum initial
Purchase Payment is not included when you submit your
application, you must submit a portion of the required Contract
minimum
and/or
establish a pre-authorized checking plan (PAC). A PAC allows you
to pay the remainder of the required initial Purchase Payment in
equal installments over the first Contract Year. Further
requirements for PAC are discussed in the PAC form.
You must obtain our consent before making an initial or
additional Purchase Payment that will bring your aggregate
Purchase Payments over $1,000,000.
Making
Additional Purchase Payments
If your Contract is Non-Qualified, you may choose to invest
additional amounts in your Contract at any time. If your
Contract is Qualified, the method of contribution and
contribution limits may be restricted by the Qualified Plan or
the Internal Revenue Code (“the Code”). Each
additional Purchase Payment must be at least $250 for
Non-Qualified Contracts and $50 for Qualified Contracts.
Currently, we are not enforcing the minimum additional Purchase
Payment amounts but we reserve the right to enforce the minimum
additional Purchase Payment amounts in the future. Additional
Purchase Payments will be allocated according to the
instructions we have on file unless we receive specific
allocation instructions.
If you purchase an optional rider, we reserve the right to
reject or restrict, at our discretion, any additional Purchase
Payments. If we decide to no longer accept Purchase Payments for
any Rider, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit rider that
you may own. We may reject or restrict additional Purchase
Payments to help protect our ability to provide the guarantees
under these riders.
Forms of
Purchase Payment
Your initial and additional Purchase Payments may be sent by
personal or bank check or by wire transfer. Purchase Payments
must be made in a form acceptable to us before we can process
it. Acceptable forms of Purchase Payments are:
•
personal checks or cashier’s checks drawn on a
U.S. bank,
•
money orders and traveler’s checks in single denominations
of more than $10,000 if they originate in a U.S. bank,
•
third party payments when there is a clear connection of the
third party to the underlying transaction, and
•
wire transfers that originate in U.S. banks.
We will not accept Purchase Payments in the following forms:
•
cash,
•
credit cards or checks drawn against a credit card account,
•
money orders or traveler’s checks in single denominations
of $10,000 or less,
•
starter checks,
•
home equity checks,
19
•
cashier’s checks, money orders, traveler’s checks or
personal checks drawn on non-U.S. banks, even if the
payment may be effected through a U.S. bank,
•
third party payments if there is not a clear connection of the
third party to the underlying transaction, and
•
wire transfers that originate from foreign bank accounts.
All unacceptable forms of Purchase Payments will be returned to
the payor along with a letter of explanation. We reserve the
right to reject or accept any form of payment. Any unacceptable
Purchase Payment incidentally invested may be returned and the
amount returned may be more or less than the amount submitted.
If you make Purchase Payments by check other than a
cashier’s check, your payment of any withdrawal proceeds
and any refund during the “Right to Cancel” period may
be delayed until we receive confirmation in our Annuities
administrative office that your check has cleared.
We will add a Credit Enhancement to your Contract Value at the
time each Purchase Payment is applied to the Contract. The
amount of a Credit Enhancement is determined as a percentage of
each Purchase Payment applied to the Contract. The Credit
Enhancement will be applied at the time the Purchase Payment is
effective. The Credit Enhancement will be allocated among
Investment Options in the same proportion as the applicable
Purchase Payment. Any Credit Enhancement added to your Contract
is not counted as a Purchase Payment and is not included when
determining the guarantees under any of the optional benefit
riders. Any calculations for determining a Reset/Step-Up are
based on Contract Value, which includes any Credit Enhancement.
See OPTIONAL LIVING BENEFIT RIDERS. Any Credit
Enhancement applied to the Contract is considered earnings for
tax purposes and will be treated as earnings when determining
withdrawal charges and the free withdrawal amount under your
Contract.
The Credit Enhancement with respect to each Purchase Payment
will be based on total Purchase Payments made into the Contract
less total withdrawals, including any withdrawal charges, from
the Contract as of the date the Purchase Payment is applied. The
Credit Enhancement as a percentage of the Purchase Payment is
set forth below:
Credit
Total Purchase Payments Less Total Withdrawals
Enhancement
Less than $100,000
4.0
%
$100,000 or more
5.0
%
During the first Contract Year, the Credit Enhancement
percentage of the most recent Purchase Payment will apply to all
prior Purchase Payments, if any. This will be accomplished by
applying an additional Credit Enhancement to the prior Purchase
Payments (if applicable) effective on the date of the most
recent Purchase Payment. In no event will these additional
Credit Enhancements be less than zero. We will allocate any
additional Credit Enhancements among Investment Options in the
same proportion as the most recent Purchase Payment.
Example: You make an initial Purchase Payment of
$75,000. The Credit Enhancement added to your Contract Value
will be $3,000 ($75,000 × 4%). If you made an
additional Purchase Payment of $50,000 before the end of your
first Contract Year, the total Purchase Payments made during the
first Contract Year would equal $125,000
($75,000 + $50,000). Since your total Purchase
Payments are $100,000 or more, a 5% Credit Enhancement will
apply. A Credit Enhancement of $2,500
($50,000 × 5%) will be added to your Contract
Value based on the additional Purchase Payment. In addition, we
will also add $750 ($75,000 × 1%) to your
Contract Value, on the date we receive the $50,000 Purchase
Payment, so that your initial Purchase Payment receives the 5%
(4% + 1%) Credit Enhancement. As a result, the total
Credit Enhancement added to your Contract Value for the Purchase
Payments made during the first Contract Year equals $6,250.
In the event that a Contract Owner or sole surviving Annuitant
dies before the Annuity Date, we may deduct from the death
benefit proceeds the unamortized amount of any Credit
Enhancement added to the Contract’s Variable Investment
Options during the
12-month
period prior to the date of death. The unamortized amount for
each Credit Enhancement will be determined on a proportional
basis for the period between the date of death and the first
year anniversary of the day the Credit Enhancement was added to
the Contract. The Contract Owner bears the investment risk on
any Credit Enhancement and therefore, if the value of such
Credit Enhancement declined, the death benefit proceeds could be
less than the proceeds would have been if there had been no
Credit Enhancement added to the Contract during such
12-month
period. The Credit Enhancement will not be deducted from the
death benefit proceeds if the Contract is continued through
spousal continuation. See DEATH BENEFITS AND OPTIONAL DEATH
BENEFIT RIDERS – Death benefits –
Spousal Continuation.
An Owner may be adversely affected because of the Credit
Enhancement. For example, the amount returned, if you exercise
your right to return the Contract during your Free Look period,
will be reduced by any Credit Enhancement added to the Contract.
The Contract Owner bears the investment risk on any Credit
Enhancement and, therefore, the amount returned could be less
than your Purchase Payment(s). See WITHDRAWALS –
Right to Cancel (“Free Look”).
You may allocate your Purchase Payments among any of the
available Investment Options. Allocations of your initial
Purchase Payment to the Investment Options you selected will be
effective on your Contract Date. Each additional Purchase
Payment will be allocated to the Investment Options according to
your allocation instructions in your application, or most recent
instructions, if any, subject to the terms described in
WITHDRAWALS – Right to Cancel (“Free
Look”). We reserve the right to require that your
allocation to any particular Investment Option must be at least
$500. We also reserve the right (with prior written notice) to
transfer any remaining Account Value that is not at least $500
to your other Investment Options on a pro rata basis relative to
your most recent allocation instructions.
If your Contract is issued in exchange for another annuity
contract or a life insurance policy, our administrative
procedures may vary.
The Custom Model program is only available for Contracts
issued before May 1, 2012 and for use with optional living
benefit riders with a Rider Effective Date before May 1,2012.
The Custom Model program allows you, with the help of your
financial advisor, to create your own asset allocation model
that will comply with the Investment Allocation Requirements for
certain optional living benefit Riders. (See OPTIONAL LIVING
BENEFIT RIDERS – General Information –
Investment Allocation Requirements.) You will create
your own model using the parameters listed below.
Parameters. To create your model, you may select
Investment Options from the 4 Categories
(Categories A, B, C and D) listed below. You must
allocate at least 25% into each of Categories A, B, and C.
You may not allocate more than 15% into any one Investment
Option within Category A, B, or C. Category D is
optional and you are not required to allocate any part of your
Purchase Payment or Contract Value to this Category. If you
choose to allocate your Purchase Payment or Contract Value to
Category D, you are allowed to allocate up to 25% into any
one Investment Option within Category D. Allocation
percentages among the Categories must total 100%. The percentage
allocation requirements only apply to your Variable Account
Value. The model you create will be automatically rebalanced on
a quarterly basis.
Example: Assume a $100,000 Purchase Payment.
Following the parameters and using the Investment Options listed
from the Categories below, you may allocate your Purchase
Payment as follows:
•
Category A – 15% to Diversified Bond, 10% to
Managed Bond and 5% to Cash Management,
•
Category B – 15% to Focused 30, 10% to Small-Cap
Index, 10% to Mid-Cap Growth, 5% to Large-Cap Growth and 5% to
Large-Cap Value, and
•
Category C – 10% to International Value, 10% to
International Large-Cap and 5% to Emerging Markets.
The total allocated is 100%: Category A = 30%,
Category B = 45% and
Category C = 25%. If you want to include all
4 Categories when creating your model, you could adjust
your allocation percentages in Categories A, B and C and
allocate up to 25% to any combination of the Investment Options
in Category D. Keep in mind that you may select any
Investment Option within a Category and the allocation
percentages among the Categories must total 100%.
Category A – Fixed Income Investment
Options
Cash Management
Diversified Bond
Emerging Markets Debt
Floating Rate Loan
High Yield Bond
Inflation Managed
Inflation Protected
Managed Bond
Short Duration Bond
Category B – Domestic Equity Investment
Options
American Funds Growth
American Funds
Growth-Income
Comstock
Dividend Growth
Equity Index
Focused 30
Growth LT
Large-Cap Growth
Large-Cap Value
Long/Short Large-Cap
Main Street Core
Mid-Cap Equity
Mid-Cap Growth
Mid-Cap Value
Small-Cap Equity
Small-Cap Growth
Small-Cap Index
Small-Cap Value
21
Category C – International Equity and
Sector Investment Options
First Trust/Dow Jones Dividend & Income Allocation
Portfolio
Franklin Templeton VIP Founding Funds
Allocation Fund
GE Investments Total Return Fund
Invesco V.I. Balanced-Risk Allocation Fund
MFS Total Return Series
Pacific Dynamix – Conservative Growth
Pacific Dynamix – Growth
Pacific Dynamix – Moderate Growth
PIMCO Global Multi-Asset Portfolio
Portfolio Optimization Aggressive-Growth
Portfolio Optimization Conservative
Portfolio Optimization Growth
Portfolio Optimization Moderate
Portfolio Optimization Moderate-Conservative
You may make transfers between Investment Options within a
particular Category or from one Category to another Category as
long as you follow the Custom Model parameters. Transfers made
will be subject to any transfer and market timing restrictions
(see HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED –
Transfers and Market-timing Restrictions). Subsequent
Purchase Payments will be allocated according to your current
model allocation instructions. Any withdrawals must be made on a
pro rata basis from each of the Investment Options you selected
for your model.
You may terminate your participation in the Custom Model program
at any time. However, if you own an optional living benefit
rider and do not allocate your entire Contract Value to another
asset allocation model or Investment Options we make available
for the Riders, your Rider will terminate. If you allocate any
subsequent Purchase Payment or Contract Value inconsistent with
the Custom Model parameters, make transfers between Investment
Options outside the Custom Model parameters, or do not make a
withdrawal on a pro rata basis, you will no longer be
participating in the Custom Model program and your Rider will
terminate. Work with your financial advisor and consider your
options before making any Investment Option transfers. Any
changes in the allocation percentages due to market performance
will not be a violation of the program, since the model you
created will automatically be rebalanced on a quarterly basis.
We are under no contractual obligation to continue this program
and have the right to terminate or change the Custom Model
program at any time.
Each time you allocate your Purchase Payment, and any Credit
Enhancement, to a Variable Investment Option, your Contract is
credited with a number of “Subaccount Units” in that
Subaccount. The number of Subaccount Units credited is equal to
the amount you have allocated to that Subaccount, including any
Credit Enhancement, divided by the “Unit Value” of one
Unit of that Subaccount.
Example: You allocate $600 to Subaccount A. At
the end of the Business Day on which your allocation is
effective, the value of one Unit in Subaccount A is $15. As
a result, 40 Subaccount Units are credited to your Contract
for your $600 ($600 / $15 = 40).
Your
Variable Account Value Will Change
After we credit your Contract with Subaccount Units, the value
of those Units will usually fluctuate. This means that, from
time to time, your Purchase Payments allocated to the Variable
Investment Options may be worth more or less than the original
Purchase Payments to which those amounts can be attributed.
Fluctuations in Subaccount Unit Value will not change the number
of Units credited to your Contract.
Subaccount Unit Values will vary in accordance with the
investment performance of the corresponding Portfolio. For
example, the value of Units in the Equity Index Subaccount will
change to reflect the performance of the Equity Index Portfolio
(including that Portfolio’s investment income, its capital
gains and losses, and its expenses). Subaccount Unit Values are
also adjusted to reflect the Administrative Fee and applicable
Risk Charge imposed on the Separate Account.
We calculate the value of all Subaccount Units on each Business
Day.
22
Calculating
Subaccount Unit Values
We calculate the Unit Value of the Subaccount Units in each
Variable Investment Option at the close of the New York Stock
Exchange which usually closes at 4:00 p.m. Eastern Time on
each Business Day. At the end of each Business Day, the Unit
Value for a Subaccount is equal to:
Y × Z
where
(Y)
=
the Unit Value for that Subaccount as of the end of the
preceding Business Day; and
(Z)
=
the Net Investment Factor for that Subaccount for the period (a
“valuation period”) between that Business Day and the
immediately preceding Business Day.
The “Net Investment Factor” for a Subaccount for any
valuation period is equal to:
(A ¸ B) − C
where
(A)
=
the “per share value of the assets” of that Subaccount
as of the end of that valuation period, which is equal to:
a + b + c
where
(a)
=
the net asset value per share of the corresponding Portfolio
shares held by that Subaccount as of the end of that valuation
period;
(b)
=
the per share amount of any dividend or capital gain
distributions made by each Fund for that Portfolio during that
valuation period; and
(c)
=
any per share charge (a negative number) or credit (a positive
number) for any income taxes and/or any other taxes or other
amounts set aside during that valuation period as a reserve for
any income and/or any other taxes which we determine to have
resulted from the operations of the Subaccount or Contract,
and/or any taxes attributable, directly or indirectly, to
Purchase Payments;
(B)
=
the net asset value per share of the corresponding Portfolio
shares held by the Subaccount as of the end of the preceding
valuation period; and
(C)
=
a factor that assesses against the Subaccount net assets for
each calendar day in the valuation period the basic Risk Charge
plus the Administrative Fee and any applicable increase in the
Risk Charge (see CHARGES, FEES AND DEDUCTIONS).
The Subaccount Unit Value may increase or decrease from one
valuation period to another.
Your initial Purchase Payment is effective on the day we issue
your Contract. Any additional Purchase Payment is effective on
the day we receive it In Proper Form. See ADDITIONAL
INFORMATION – Inquiries and Submitting Forms and
Requests.
The day your Purchase Payment is effective determines the Unit
Value at which Subaccount Units are attributed to your Contract.
In the case of transfers, withdrawals, or Credit Enhancements,
the effective day determines the Unit Value at which affected
Subaccount Units are debited and/or credited under your
Contract. That Unit Value is the value of the Subaccount Units
next calculated after your transaction is effective. Your
Variable Account Value begins to reflect the investment
performance results of your new allocations on the day after
your transaction is effective.
Transfers are allowed 30 days after the Contract Date.
Currently, we are not enforcing this restriction but we reserve
the right to enforce it in the future. Once your Purchase
Payments are allocated to the Investment Options you selected,
you may transfer your Account Value less Loan Account Value from
any Investment Option to any other Investment Option, except the
DCA Plus Fixed Option. Transfers are limited to 25 for each
calendar year. Only 2 transfers in any calendar month may
involve any of the following Investment Options:
Invesco V.I. Balanced-Risk Allocation Fund, BlackRock
Global Allocation V.I. Fund, GE Investments Total Return
Fund, International Value, International Small-Cap,
International Large-Cap, Emerging Markets, Emerging Markets
Debt, First Trust/Dow Jones Dividend & Income
Allocation Portfolio, Fidelity VIP FundsManager 60% Portfolio,
Mutual Global Discovery Securities Fund, Templeton Global Bond
Securities Fund, or PIMCO Global Multi-Asset. In addition, only
2 transfers into or out of each American Funds (American Funds
Asset Allocation, American Funds Growth or American Funds
Growth-Income), Global Absolute Return, Currency Strategies,
Precious Metals, Lord Abbett Bond Debenture, MFS Utilities,
PIMCO CommodityRealReturn Strategy, or Van Eck Global Hard
Assets Investment Option may occur in any calendar month.
Transfers to or from a Variable Investment Option cannot be made
before the seventh calendar day following the last transfer to
or from the same Variable Investment Option. If the seventh
calendar day is not a Business Day, then a transfer may not
occur until the next Business Day. The day of the last transfer
is not considered a calendar day for purposes of meeting this
requirement. For example, if you make a transfer into the Equity
Index Variable Investment Option on Monday, you may not make any
transfers to or from that Variable
23
Investment Option before the following Monday. Transfers to or
from the Cash Management Variable Investment Option are excluded
from this limitation.
For the purpose of applying the limitations, multiple transfers
that occur on the same day are considered 1 transfer. A
transfer of Account Value from the Loan Account back into your
Investment Options following a loan repayment is not considered
a transfer under these limitations. Transfers that occur as a
result of the DCA Plus program, the dollar cost averaging
program, the portfolio rebalancing program, the earnings sweep
program, approved corporate owned life insurance policy
rebalancing programs or automatic quarterly rebalancing under
the Custom Model program are excluded from these limitations.
Also, allocations of Purchase Payments are not subject to these
limitations.
If you have used all 25 transfers available to you in a
calendar year, you may no longer make transfers between the
Investment Options until the start of the next calendar year.
However, you may make 1 transfer of all or a portion of the
Account Value remaining in the Variable Investment Options into
the Cash Management Investment Option prior to the start of the
next calendar year.
There are no exceptions to the above transfer limitations in the
absence of an error by us, a substitution of Investment Options,
or reorganization of underlying Portfolios, or other
extraordinary circumstances.
If we deny a transfer request, we will notify your financial
advisor via telephone. If you (or your financial advisor)
request a transfer via telephone that exceeds the above
limitations, we will notify you (or your financial advisor)
immediately.
Certain restrictions apply to any available fixed option. See
THE GENERAL ACCOUNT. Transfer requests are generally
effective on the Business Day we receive them In Proper Form,
unless you request a systematic transfer program with a future
date.
We have the right, at our option (unless otherwise required by
law), to require certain minimums in the future in connection
with transfers. These may include a minimum transfer amount and
a minimum Account Value, if any, for the Investment Option from
which the transfer is made or to which the transfer is made. If
your transfer request results in your having a remaining Account
Value in an Investment Option that is less than $500 immediately
after such transfer, we may (with prior written notice) transfer
that Account Value to your other Investment Options on a pro
rata basis, relative to your most recent allocation instructions.
We reserve the right (unless otherwise required by law) to limit
the size of transfers, to restrict transfers, to require that
you submit any transfer requests in writing, to suspend
transfers, and to impose further limits on the number and
frequency of transfers you can make. We also reserve the right
to reject any transfer request. Any policy we may establish with
regard to the exercise of any of these rights will be applied
uniformly to all Contract Owners.
Market-timing
Restrictions
The Contract is not designed to serve as a vehicle for frequent
trading in response to short-term fluctuations in the market.
Accordingly, organizations or individuals that use market-timing
investment strategies and make frequent transfers should not
purchase the Contract. Such frequent trading can disrupt
management of the underlying Portfolios and raise expenses. The
transfer limitations set forth above are intended to reduce
frequent trading. In addition, we monitor certain large
transaction activity in an attempt to detect trading that may be
disruptive to the Portfolios. In the event transfer activity is
found to be disruptive, certain future transactions by such
Contract Owners, or by a financial advisor or other party acting
on behalf of one or more Contract Owners, will require
preclearance. Frequent trading and large transactions that are
disruptive to portfolio management can have an adverse effect on
Portfolio performance and therefore your Contract’s
performance. Such trading may also cause dilution in the value
of the Investment Options held by long-term Contract Owners.
While these issues can occur in connection with any of the
underlying Portfolios, Portfolios holding securities that are
subject to market pricing inefficiencies are more susceptible to
abuse. For example, Portfolios holding international securities
may be more susceptible to time-zone arbitrage which seeks to
take advantage of pricing discrepancies occurring between the
time of the closing of the market on which the security is
traded and the time of pricing of the Portfolios.
Our policies and procedures which limit the number and frequency
of transfers and which may impose preclearance requirements on
certain large transactions are applied uniformly to all Contract
Owners. However, there is a risk that these policies and
procedures will not detect all potentially disruptive activity
or will otherwise prove ineffective in whole or in part.
Further, we and our affiliates make available to our variable
annuity and variable life insurance Contract Owners underlying
funds not affiliated with us. We are unable to monitor or
restrict the trading activity with respect to shares of such
funds not sold in connection with our Contracts. In the event
the Board of Trustees/Directors of any underlying fund imposes a
redemption fee or trading (transfer) limitations, we will pass
them on to you.
We reserve the right to restrict, in our sole discretion and
without prior notice, transfers initiated by a market timing
organization or individual or other party authorized to give
transfer instructions on behalf of multiple Contract Owners.
Such restrictions could include:
•
not accepting transfer instructions from a financial advisor
acting on behalf of more than one Contract Owner, and
•
not accepting preauthorized transfer forms from market timers or
other entities acting on behalf of more than one Contract Owner
at a time.
24
We further reserve the right to impose, without prior notice,
restrictions on transfers that we determine, in our sole
discretion, will disadvantage or potentially hurt the rights or
interests of other Contract Owners; or to comply with any
applicable federal and state laws, rules and regulations.
Exchanges
of Annuity Units
Exchanges of Annuity Units in any Subaccount(s) to any other
Subaccount(s) after the Annuity Date are limited to 4 in any
12-month
period. For purposes of applying the limitations, multiple
exchanges that occur on the same day are considered 1 exchange.
See THE GENERAL ACCOUNT section in this Prospectus and
THE CONTRACTS AND THE SEPARATE ACCOUNT section in the SAI.
We offer 4 systematic transfer options: dollar cost
averaging, DCA Plus, portfolio rebalancing, and earnings sweep.
There is no charge for these options and transfers under these
options are not counted towards your total transfers in a
calendar year. However, they are subject to the same
requirements and restrictions as non-systematic transfers. You
can have only one DCA Plus, dollar cost averaging, or earnings
sweep program in effect at one time. Only portfolio rebalancing
is available after you annuitize.
Dollar
Cost Averaging
Dollar cost averaging is a method in which you buy securities in
a series of regular purchases instead of in a single purchase.
This allows you to average the securities’ prices over
time, and may permit a “smoothing” of abrupt peaks and
drops in price. Prior to your Annuity Date, you may use dollar
cost averaging to transfer amounts, over time, from any
Investment Option with an Account Value of at least $5,000 to
one or more Variable Investment Options. Each transfer must be
for at least $250. Currently, we are not enforcing the minimum
Account Value and/or transfer amounts but we reserve the right
to enforce such minimum amounts in the future. Detailed
information appears in the SAI.
DCA
Plus
DCA Plus provides a way to transfer amounts monthly from the DCA
Plus Fixed Option to one or more Variable Investment Option(s)
over a period of up to 24 months, depending on what
Guarantee Terms we offer. Please contact us for the Guarantee
Terms currently available. The initial minimum amount that you
may allocate to the DCA Plus Fixed Option is $5,000. The minimum
amount for subsequent Purchase Payments is $250. Currently, we
are not enforcing the initial or subsequent Purchase Payment
minimum amounts but we reserve the right to enforce such minimum
amounts in the future. Amounts allocated to the DCA Plus Fixed
Option are held in our General Account and receive interest at
rates declared periodically by us, but not less than the minimum
guaranteed interest rate specified in your Contract (the
“Guaranteed Interest Rate”). The DCA Plus program can
also be used with allowable Asset Allocation Models or allowable
Investment Options to qualify for certain optional benefit
riders offered under your Contract. See THE GENERAL
ACCOUNT.
Portfolio
Rebalancing
You may instruct us to maintain a specific balance of Variable
Investment Options under your Contract (e.g. 30% in
Subaccount A, 40% in Subaccount B, and 30% in
Subaccount C). Periodically, we will “rebalance”
your values in the elected Subaccounts to the percentages you
have specified. Rebalancing may result in transferring amounts
from a Subaccount earning a relatively higher return to one
earning a relatively lower return. You may choose to have
rebalances made quarterly, semi-annually or annually until your
Annuity Date. Only Variable Investment Options are available for
rebalancing. Detailed information appears in the SAI.
Earnings
Sweep
You may instruct us to make automatic periodic transfers of your
earnings from the Cash Management Subaccount to one or more
Variable Investment Options (other than the Cash Management
Subaccount). Detailed information appears in the SAI.
No front-end sales charge is imposed on any Purchase Payment
which means the entire amount of your Purchase Payment is
allocated to the Investment Options you selected. Your Purchase
Payments may, however, be subject to a withdrawal charge. This
charge may apply to amounts you withdraw under your Contract
prior to the Annuity Date, depending on the length of time each
Purchase Payment has been invested and on the amount you
withdraw. This amount is deducted proportionately among all
Investment Options from which the
25
withdrawal occurs. See the Choosing Your Annuity
Option – Annuity Options section for
withdrawal charges that may apply to redemptions after the
Annuity Date. No withdrawal charge is imposed on:
•
the free withdrawal amount (see WITHDRAWALS –
Withdrawals Free of a Withdrawal Charge),
•
death benefit proceeds, except as provided under the DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS –
Non-Natural Owner section for certain Non-Natural
Owners,
•
amounts converted after the
1st Contract
Anniversary to an Annuity Option (see
ANNUITIZATION – Choosing Your Annuity Option),
•
withdrawals by Owners to meet the minimum distribution rules for
Qualified Contracts as they apply to amounts held under the
Contract,
•
withdrawals after the
1st Contract
Anniversary, if the Owner or Annuitant has been diagnosed with a
medically determinable condition that results in a life
expectancy of 12 months or less and we are provided with
medical evidence In Proper Form, or
•
subject to medical evidence provided In Proper Form, after
90 days from the Contract Date, full or partial withdrawals
while the Owner or Annuitant has been confined to an accredited
nursing home for 30 days or longer.
The nursing home waiver applies only to withdrawals made while
the Owner or Annuitant is in a nursing home or within
90 days after the Owner or Annuitant leaves the nursing
home. In addition, the nursing home confinement period for which
you seek the waiver must begin after the Contract Date. In order
to use this waiver, you must submit with your withdrawal request
the following documents:
•
a physician’s note recommending the Owner or
Annuitant’s admittance to a nursing home,
•
an admittance form which shows the type of facility the Owner or
Annuitant entered, and
•
a bill from the nursing home which shows that the Owner or
Annuitant met the 30 day nursing home confinement
requirement.
An accredited nursing home is defined as a home or facility that:
•
is operating in accordance with the law of jurisdiction in which
it is located,
•
is primarily engaged in providing, in addition to room and
board, skilled nursing care under the supervision of a duly
licensed physician, and
•
provides continuous 24 hour a day nursing service by or
under the supervision of a registered nurse, and maintains a
daily record of the patient.
Transfers of all or part of your Account Value from one
Investment Option to another are not considered a withdrawal of
an amount from your Contract, so no withdrawal charge is imposed
at the time of transfer. See HOW YOUR INVESTMENTS ARE
ALLOCATED – Transfers and Market-timing
Restrictions and THE GENERAL ACCOUNT.
How the
Withdrawal Charge is Determined
The amount of the withdrawal charge depends on how long each
Purchase Payment was held under your Contract. Each Purchase
Payment you make is considered to have a certain
“age,” depending on the length of time since that
Purchase Payment was effective. A Purchase Payment is “one
year old” or has an “age of one” from the day it
is effective until the beginning of the day preceding your next
Contract Anniversary. Beginning on the day preceding that
Contract Anniversary, your Purchase Payment will have an
“age of two” and increases in age on the day preceding
each Contract Anniversary. When you withdraw an amount subject
to the withdrawal charge, the “age” of the Purchase
Payment you withdraw determines the level of withdrawal charge
as follows:
Withdrawal
Charge as a
Percentage of the
“Age” of Purchase Payment
Purchase Payment
in Years
Withdrawn
1
9
%
2
9
%
3
8
%
4
7
%
5
6
%
6
5
%
7
4
%
8
2
%
9 or more
0
%
We calculate your withdrawal charge by assuming your withdrawal
is applied to Purchase Payments first, in the order your
Purchase Payments were received and before any deductions for
other charges due or taxes are made. We also account for any
eligible Purchase
26
Payments that are still in the surrender charge period that may
be withdrawn without incurring a withdrawal charge (e.g.
free 10%). See WITHDRAWALS – Optional
Withdrawals – Withdrawals Free of a Withdrawal
Charge. The withdrawal charge will be deducted
proportionately among all Investment Options from which your
withdrawal occurs. Unless you specify otherwise, a partial
withdrawal amount requested will be processed as a
“gross” amount, which means that applicable charges
and taxes will be deducted from the requested amount. If a
partial withdrawal amount is requested to be a “net”
amount, applicable charges and taxes will be added to the
requested amount and the withdrawal charges and taxes will be
calculated on the grossed up amount.
Example: You make an initial Purchase Payment of
$10,000 in Contract Year 1 and make an additional Purchase
Payment of $7,000 in Contract Year 2. With Earnings, your
Contract Value in Contract Year 3 is $19,000. In Contract
Year 3 you make a withdrawal of $9,000. At this point,
total Purchase Payments equal $17,000, and the “age”
of the applicable Purchase Payments withdrawn is 3 Years.
10% of all Purchase Payments made ($1,700) may be withdrawn free
of a withdrawal charge per Contract Year. The amount of the
withdrawal charge applied would be $584
($9,000 − $1,700 = $7,300;
$7,300 × 8% = $584).
Contracts with a Credit Enhancement will have a longer surrender
charge period and the charges (including withdrawal charges)
under the Contract may be higher than other variable annuity
contracts we offer. We anticipate these Contracts, over the long
term, will be profitable for us. The amount of the Credit
Enhancement may, over time, be more than offset by the fees and
charges under the Contract. Consult with your financial advisor
to determine if this Contract is right for you.
The withdrawal charge is designed to reimburse us for sales
commissions and other expenses associated with the promotion and
solicitation of offers for the Contracts, although our actual
expenses may be greater or less than the withdrawal charge
amount. See ADDITIONAL INFORMATION – Distribution
Arrangements for information regarding commissions and other
amounts paid to broker-dealers in connection with Contract
distribution.
We assess a charge against the assets of each Subaccount to
compensate for certain mortality and expense risks that we
assume under the Contract (the “Risk Charge”). The
risk that an Annuitant will live longer (and therefore receive
more annuity payments) than we predict through our actuarial
calculations at the time the Contract is issued is
“mortality risk.” We also bear mortality risk in
connection with death benefit payable under the Contract. The
risk that the expense charges and fees under the Contract and
Separate Account are less than our actual administrative and
operating expenses is called “expense risk.”
This Risk Charge is assessed daily at an annual rate equal to
1.45% of each Subaccount’s assets.
The Risk Charge will stop at the Annuity Date if you select
fixed annuity payments. The base Risk Charge will continue after
the Annuity Date if you choose variable annuity payments, even
though we do not bear mortality risk if your Annuity Option is
Period Certain Only.
We will realize a gain if the Risk Charge exceeds our actual
cost of expenses and benefits, and will suffer a loss if such
actual costs exceed the Risk Charge. Any gain will become part
of our General Account. We may use it for any reason, including
covering sales and Credit Enhancement expenses on the Contracts.
Increase
in Risk Charge if an Optional Death Benefit Rider is
Purchased
We increase your Risk Charge by an annual rate equal to 0.20% of
each Subaccount’s assets if you purchase the Stepped-Up
Death Benefit. The total Risk Charge annual rate will be 1.65%
if the Stepped-Up Death Benefit is purchased. Any increase in
your Risk Charge will not continue after the Annuity Date. See
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS –
Death Benefits.
We charge an Administrative Fee as compensation for costs we
incur in operating the Separate Account, issuing and
administering the Contracts, including processing applications
and payments, and issuing reports to you and to regulatory
authorities.
The Administrative Fee is assessed daily at an annual rate equal
to 0.15% of the assets of each Subaccount. This rate is
guaranteed not to increase for the life of your Contract. A
correlation will not necessarily exist between the actual
administrative expenses attributable to a particular Contract
and the Administrative Fee paid in respect of that particular
Contract. The Administrative Fee will continue after the Annuity
Date if you choose any variable payout option. We do not intend
to realize a profit from this fee.
We will charge you an Annual Fee of $30 on each Contract
Anniversary prior to the Annuity Date, and at the time you
withdraw your entire Net Contract Value (on a pro rated basis
for that Contract Year) if your Net Contract Value is less than
$50,000 on that date. The fee is not imposed on amounts you
annuitize or on payment of death benefit proceeds. The fee
reimburses certain costs in administering the Contracts and the
Separate Account. We do not intend to realize a profit from this
fee. This fee is guaranteed not to increase for the life of your
Contract.
27
Your Annual Fee will be charged proportionately against your
Investment Options. Assessments against your Variable Investment
Options are made by debiting some of the Subaccount Units
previously credited to your Contract. That is, assessment of the
Annual Fee does not change the Unit Value for those Subaccounts.
Any portion of the Annual Fee we deduct from any of our fixed
options (if available under the Contract) will not be greater
than the annual interest credited in excess of that fixed
option’s minimum guaranteed interest rate.
The following disclosure applies to the CoreIncome Advantage
Select (Single), CoreIncome Advantage Select (Joint), CoreIncome
Advantage 4 Select (Single), CoreIncome Advantage 4
Select (Joint), Income Access Select and GPA 3 Select
riders.
If you purchase an optional Rider listed in the table below, we
will deduct an annual charge from your Investment Options,
excluding the DCA Plus Fixed Option, on a proportionate basis.
The applicable maximum annual charge percentage is based on the
10-Year
Treasury Rate (the monthly average as published by the Federal
Reserve which can be obtained at www.federalreserve.gov).
Prior to purchase, speak with your Financial Advisor or
contact us directly for the current annual charge percentage in
effect for a particular rider.
Maximum Annual Charge
Percentage Under the Rider
10-Year
10-Year
10-Year
Treasury Rate
Treasury Rate
Treasury Rate
Monthly
Monthly
Monthly
Average
Average
Average
To determine the amount to be
Less than
2.00% to
4.00% or
deducted, the percentage that
The Charge is
Rider Name
2.00%
3.99%
more
applies to you is multiplied by the:
deducted on each:
CoreIncome Advantage Select (Single)
2.00%
1.50%
1.00%
Protected Payment
Base1
Quarterly Rider Anniversary
CoreIncome Advantage Select (Joint)
2.50%
2.00%
1.50%
Protected Payment Base
Quarterly Rider Anniversary
CoreIncome Advantage 4 Select (Single)
1.00%
0.75%
0.50%
Protected Payment Base
Quarterly Rider Anniversary
CoreIncome Advantage 4 Select (Joint)
1.50%
1.25%
1.00%
Protected Payment Base
Quarterly Rider Anniversary
Income Access Select
2.75%
2.25%
1.50%
Protected Payment Base
Quarterly Rider Anniversary
GPA 3 Select
2.25%
2.00%
1.75%
Guaranteed Protection
Amount1
Quarterly Rider Anniversary
1
Protected
Payment Base or Guaranteed Protection Amount are defined, where
applicable, in the Rider Terms subsection for each rider
referenced above. See OPTIONAL LIVING BENEFIT RIDERS.
Generally, as economic factors improve, the annual charge
percentage may decrease and as economic factors decline, the
annual charge percentage may increase. The annual charge will
change based on current economic factors including interest
rates and equity market volatility but is subject to the maximum
annual charge percentage in the table above. We determine, at
our sole discretion, whether a change in the annual charge
percentage will occur subject to the maximum annual charge
percentage in the table above. This rider pricing structure is
intended to help us provide the guarantees under the riders.
Every 3 months, generally on or about February 1,
May 1, August 1 and November 1, we declare what
the annual charge percentage will be for the following
3 month period (e.g. May through July). For example, when
determining the annual charge percentage for May 1, we will
use the
10-Year
Treasury Rate monthly average for the month of March to see
which maximum annual charge is in effect, and then determine, at
our sole discretion, whether a change in the annual charge
percentage will occur. The annual charge percentage may be less
than the applicable maximum annual charge percentage shown in
the table above. See the hypothetical examples below.
If you purchase a rider, the charge is deducted every
3 months following your Rider Effective Date
(“Quarterly Rider Anniversary”) and your initial
annual charge percentage is guaranteed not to change until the
1st
Contract Anniversary after the Rider Effective Date. The charge
is deducted in arrears each Quarterly Rider Anniversary and will
be deducted while the Rider remains in effect and when the Rider
terminates.
Beginning on the
1st
Contract Anniversary after the Rider Effective Date, and on any
subsequent Contract Anniversary, we may change the annual charge
percentage. The annual charge percentage may increase or
decrease each Contract Anniversary. Any increase in the annual
charge percentage will not exceed 0.50% from the previous
Contract Year. The 0.50% limitation does not apply to any annual
charge percentage decreases which could be more than 0.50%. If a
change to your annual charge percentage is made, the new annual
charge percentage will remain the same until your next Contract
Anniversary. You will receive the applicable annual charge
percentage in effect for new issues of the same rider, subject
to the maximum annual charge and 0.50% increase limit.
28
Here are a few hypothetical examples using CoreIncome Advantage
Select (Single) to help you understand how the annual charge
percentage may change over time.
Example 1 – Purchasing a new
rider: The annual charge percentage in effect for
February 1st is
1.15% and the
10-Year
Treasury Rate is 2.10%. You purchase the Rider on
March 15th (your
Rider Effective Date). You will be charged 1.15% until your next
Contract Anniversary.
Example 2 – Increase in annual charge
percentage of less than 0.50% limit: The annual charge
percentage in effect for
February 1st of
the current year is now 1.40% and the
10-year
Treasury Rate is 1.90%. You purchased a rider on
March 15th and
it is now your first Contract Anniversary after the Rider
Effective Date. Your annual charge percentage was 1.15% for the
first year. Your new annual charge percentage will be 1.40%
until your next Contract Anniversary since that is the annual
charge percentage in effect for new issues of the same rider,
1.40% is less than the 2.00% maximum annual charge and your
charge increased by less than 0.50%.
Example 3 – Increase in annual charge
percentage subject to 0.50% limit: The annual charge
percentage in effect for
February 1st of
the current year is now 1.80% and the
10-year
Treasury Rate is 1.50%. You purchased a rider on
March 15th and
it is now your first Contract Anniversary after the Rider
Effective Date. Your annual charge percentage was 1.15% for the
first year. Your new annual charge percentage will be 1.65%
until your next Contract Anniversary because we cannot increase
your annual charge by more than 0.50% from the previous Contract
Year and 1.65% is less than the 2.00% maximum annual charge.
Example 4 – Decrease in annual charge
percentage: The annual charge percentage in effect for
February 1st of
the current year is now 0.60% and the
10-year
Treasury Rate is 3.10%. You purchased a rider on
March 15th and
it is now your first Contract Anniversary after the Rider
Effective Date. Your annual charge percentage was 1.15% for the
first year. Using the table above, since the
10-Year
Treasury Rate used is the “2.00% to 3.99%” breakpoint,
the maximum annual charge percentage that may be declared is
1.50%. Your new annual charge percentage will be 0.60% until
your next Contract Anniversary.
Should the
10-Year
Treasury Rate no longer be available, we will substitute the
10-Year
Treasury Rate (monthly average) with another measure for
determining the annual rider charge percentage. However, the
maximum fee percentages in the table provided in your rider will
not change as long as your rider remains in effect.
If your Rider terminates on a Quarterly Rider Anniversary (for
reasons other than death), the entire charge for the prior
quarter will be deducted on that Quarterly Rider Anniversary. If
your Rider terminates prior to a Quarterly Rider Anniversary, a
prorated charge will be deducted on the earlier of the day the
Contract terminates or the Quarterly Rider Anniversary
immediately following the day your Rider terminates. The charge
will be determined as of the day your Rider terminates.
If your Rider terminates as a result of the death of the
Designated Life (all Designated Lives for a Joint Life Rider) or
when the death benefit becomes payable under the Contract, any
annual charge deducted between the date of death and the Notice
Date will be prorated as applicable to the date of death and
added to the Contract Value on the Notice Date.
Once your Contract Value is zero, the rider annual charge will
no longer be deducted. In addition, we will waive the rider
charge for the quarter in which full annuitization of the
Contract occurs and the rider annual charge will no longer be
deducted.
The following disclosure applies to the CoreIncome Advantage
Plus (Single), CoreIncome Advantage Plus (Joint), CoreIncome
Advantage 5 Plus (Single), CoreIncome Advantage 5 Plus
(Joint), CoreProtect Advantage, Income Access and Guaranteed
Protection Advantage 3 riders.
If you purchase an optional Rider listed in the table below, we
will deduct an annual charge from your Investment Options
(excluding the DCA Plus Fixed Option if you own CoreIncome
Advantage Plus (Single or Joint), CoreIncome Advantage 5 Plus
(Single or Joint) or CoreProtect Advantage) on a proportionate
basis.
Depending on which Rider you own, the charge is deducted each
Contract Anniversary or every 3 months following the Rider
Effective Date (“Quarterly Rider Anniversary”). The
Rider charge will be deducted while the Rider remains in effect
and when the Rider terminates. The charge is deducted in arrears
each Contract Anniversary or Quarterly Rider Anniversary.
If your Rider charge is deducted each Contract Anniversary
and your Rider terminates on a Contract Anniversary, the
entire charge for the prior year will be deducted on that
anniversary. If the Rider terminates prior to a Contract
Anniversary, a prorated charge will be deducted on the earlier
of the day your Contract terminates or the Contract Anniversary
immediately following the day your Rider terminates. The charge
will be determined as of the day your Rider terminates.
If your Rider charge is deducted each Quarterly Rider
Anniversary and your Rider terminates on a Quarterly Rider
Anniversary, the entire charge for the prior quarter will be
deducted on that anniversary. If the Rider terminates prior to a
Quarterly Rider Anniversary, a prorated charge will be deducted
on the earlier of the day the Contract terminates or on the
Quarterly Rider Anniversary immediately following the day your
Rider terminates. The charge will be determined as of the day
your Rider terminates.
Any portion of the Rider’s charge we deduct from any fixed
option will not be greater than the annual interest credited in
excess of the minimum guaranteed interest rate specified in your
Contract. If you make a full withdrawal of the amount available
for withdrawal during a Contract Year, we will deduct the charge
from the final payment made to you.
29
An optional Rider annual charge percentage may change if a
Step-Up/Reset occurs under the Rider provisions. However, the
annual charge percentage will not exceed the maximum annual
charge percentage (indicated in the table below) for the
applicable Rider. You may elect to opt-out of a Reset and your
annual charge percentage will remain the same as it was before
the Reset. If an Automatic Reset or Owner-Elected Reset never
occurs, the annual charge percentage established on the Rider
Effective Date is guaranteed not to change. You can find more
information about Protected Payment Base, Step-Up/Reset,
Automatic Reset and Owner-Elected Reset for each applicable
rider in the OPTIONAL LIVING BENEFIT RIDERS section.
If you purchased CoreIncome
Advantage Plus (Single) and the Rider Effective Date is on or
after May 1, 2012 and before October 1, 2012, the
charge percentage is equal to 0.30% unless a Reset occurs.
2
If you purchased CoreIncome
Advantage Plus (Joint) and the Rider Effective Date is on or
after May 1, 2012 and before October 1, 2012, the
charge percentage is equal to 0.50% unless a Reset occurs.
3
If you purchased CoreIncome
Advantage 5 Plus (Single) and the Rider Effective Date is on or
after May 1, 2012 and before October 1, 2012, the
charge percentage is equal to 0.60% unless a Reset occurs.
4
If you purchased CoreIncome
Advantage 5 Plus (Joint) and the Rider Effective Date is on or
after May 1,2012 and before October 1, 2012, the
charge percentage is equal to 0.80% unless a Reset occurs. If
you purchased this Rider and the Rider Effective Date is on or
after October 1, 2012 and before February 1, 2013, the charge
percentage is equal to 1.00% unless a Reset occurs.
5
If you purchased CoreProtect
Advantage and the Rider Effective Date is before May 1,2012, the charge percentage is equal to 0.85% unless a Reset
occurs. If you purchased this Rider and the Rider Effective Date
is on or after May 1, 2012 and before October 1, 2012,
the charge percentage is equal to 0.95% unless a Reset occurs.
6
If you purchased GPA 3 and the
Rider Effective Date is before May 1, 2012, the charge
percentage is equal to 0.95% unless a Step-Up occurs.
See Mortality and Expense Risk Charge for the Stepped-Up
Death Benefit charge information.
A tax may be imposed on your Purchase Payments (“premium
tax”) at the time your Purchase Payment is made, at the
time of a partial or full withdrawal, at the time any death
benefit proceeds are paid, at annuitization or at such other
time as taxes may be imposed. Currently, the state of
New York does not impose premium taxes on the sale of this
type of product. However, future changes in facts or state law
may require premium tax charges. Tax rates ranging from 0% to
3.5% are currently in effect, but may also change in the future.
If we pay any premium taxes attributable to Purchase Payments,
we will impose a similar charge against your Contract Value. We
normally will charge you when you annuitize some or all of your
Contract Value. We reserve the right to impose this charge for
applicable premium taxes and/or other taxes when you make a full
or partial withdrawal, at the time any death benefit proceeds
are paid, or when those taxes are incurred. For these purposes,
“premium taxes” include any state or local premium or
retaliatory taxes and any federal, state or local income,
excise, business or any other type of tax (or component thereof)
measured by or based upon, directly or indirectly, the amount of
Purchase Payments we have received. We currently base this
charge on your Contract Value, but we reserve the right to base
this charge on the transaction amount, the aggregate amount of
Purchase Payments we receive under your Contract, or any other
amount, that in our sole discretion we deem appropriately
reimburses us for premium taxes paid on this Contract.
We may also charge the Separate Account or your Contract Value
for taxes attributable to the Separate Account or the Contract,
including income taxes attributable to the Separate Account or
to our operations with respect to the Contract, or taxes
attributable, directly or indirectly, to Purchase Payments. Any
such charge deducted from the Contract Value will be deducted on
a proportionate
30
basis. See HOW YOUR PURCHASE PAYMENTS ARE
ALLOCATED – Investing in Variable Investment
Options – Calculating Subaccount Unit
Values to see how such charges are deducted from the
Separate Account. Currently, we do not impose any such
charges.
We may agree to waive or reduce charges under our Contracts, in
situations where selling and/or maintenance costs associated
with the Contracts are reduced, such as the sale of several
Contracts to the same Contract Owner(s), sales of large
Contracts, sales of Contracts in connection with a group or
sponsored arrangement or mass transactions over multiple
Contracts.
We will only waive or reduce such charges on any Contract where
expenses associated with the sale or distribution of the
Contract and/or costs associated with administering and
maintaining the Contract are reduced. We reserve the right to
terminate waiver and reduced charge programs at any time,
including for issued Contracts.
Your Variable Account Value reflects advisory fees and other
expenses incurred by the various Fund Portfolios, net of any
applicable reductions and/or reimbursements. These fees and
expenses may vary. Each Fund is governed by its own Board of
Trustees, and your Contract does not fix or specify the level of
expenses of any Portfolio. A Fund’s fees and expenses are
described in detail in the applicable Fund Prospectus and SAI.
Some Investment Options available to you are “fund of
funds”. A fund of funds portfolio is a fund that invests in
other funds in addition to other investments that the portfolio
may make. Expenses of fund of funds Investment Options may be
higher than non fund of funds Investment Options due to the two
tiered level of expenses. See the Fund prospectuses for detailed
portfolio expenses and other information before investing.
When you submit your Contract application, you must choose a
sole Annuitant or Joint Annuitants. If you are buying a
Qualified Contract, you must be the sole Annuitant. If you are
buying a Non-Qualified Contract you may choose yourself and/or
another person as Annuitant. Whether you have a sole or Joint
Annuitants, you may choose a Contingent Annuitant. The
Contingent Annuitant will not have any Contract benefits,
including death benefit proceeds, until becoming the sole
surviving Annuitant. You will not be able to add or change a
sole or Joint Annuitant after your Contract is issued. However,
if you are buying a Qualified Contract, you may add a Joint
Annuitant on the Annuity Date. You will be able to add or change
a Contingent Annuitant until your Annuity Date or the death of
your sole Annuitant or both Joint Annuitants, whichever occurs
first. However, once your Contingent Annuitant has become the
Annuitant under your Contract, no additional Contingent
Annuitant may be named. No Annuitant (Primary, Joint or
Contingent) may be named upon or after reaching his or her
81st birthday.
We reserve the right to require proof of age or survival of the
Annuitant(s).
Annuitization occurs on the Annuity Date when you convert your
Contract from the accumulation phase to the annuitization
(income) phase. You may choose both your Annuity Date and your
Annuity Option. At the Annuity Date, you may elect to annuitize
some or all of your Net Contract Value, less any applicable
charge for premium taxes and/or other taxes, (the
“Conversion Amount”), as long as such Conversion
Amount annuitized is at least $2,000. We will send the annuity
payments to the payee that you designate.
If you annuitize only a portion of this available Contract
Value, you may have the remainder distributed, less any Contract
Debt, any applicable charge for premium taxes and/or other
taxes, any applicable withdrawal charge, any Annual Fee, and any
applicable optional Rider charge. This option of distribution
may or may not be available, or may be available only for
certain types of contracts. Any such distribution will be made
to you in a single sum if the remaining Conversion Amount is
less than $2,000 on your Annuity Date. Distributions under your
Contract may have tax consequences. You should consult a
qualified tax adviser for information on full or partial
annuitization.
If you annuitize only a portion of your Net Contract Value on
your Annuity Date, you may, at that time, have the option to
elect not to have the remainder of your Contract Value
distributed, but instead to continue your Contract with that
remaining Contract Value (a “continuing Contract”). If
this option is available, you would then choose a second Annuity
Date for your continuing Contract, and all references in this
Prospectus to your “Annuity Date” would, in connection
with your continuing Contract, be deemed to refer to that second
Annuity Date. The second Annuity Date may not be later than the
date specified in the Choosing Your Annuity Date section
of this Prospectus. This option may not be available, or may be
available only for certain types of Contracts. You should be
aware that some or all of the payments received before the
second Annuity Date may be fully taxable. If you annuitize a
portion of your Net Contract Value for a period certain of at
least 10 years or for the life or life expectancy of the
annuitant(s), the annuitized portion will be treated as
31
a separate Contract for the purpose of determining the taxable
amount of the payments. We recommend that you contact a
qualified tax adviser for more information if you are interested
in this option.
You should choose your Annuity Date when you submit your
application or we will apply a default Annuity Date to your
Contract. You may change your Annuity Date by notifying us, In
Proper Form, at least ten Business Days prior to the earlier of
your current Annuity Date or your new Annuity Date. Your Annuity
Date cannot be earlier than your first Contract Anniversary.
Adverse federal tax consequences may result if you choose an
Annuity Date that is prior to an Owner’s attained
age 591/2.
See FEDERAL TAX ISSUES.
If you have a sole Annuitant, your Annuity Date must occur on or
before the later of the sole Annuitant’s
90th birthday
or the
10th
Contract Anniversary. If you have Joint Annuitants, your Annuity
Date must occur on or before the later of your younger Joint
Annuitant’s
90th
birthday or the
10th
Contract Anniversary. Different requirements may apply as
required by the Code. We may, at our sole discretion, allow
you to extend your Annuity Date. We reserve the right, at any
time, to not offer any extension to your Annuity Date regardless
of whether we may have granted any extensions to you or to any
others in the past. Some Broker/Dealers may not allow their
clients to extend the Annuity Date beyond age 95.
If your Contract is a Qualified Contract, you may also be
subject to additional restrictions. In order to meet the Code
minimum distribution rules, your Required Minimum Distributions
(RMDs) may begin earlier than your Annuity Date. For instance,
under Section 401 of the Code (for Qualified Plans) and
Section 408 of the Code (for IRAs), the entire interest
under the Contract must be distributed to the Owner/Annuitant
not later than the Owner/Annuitant’s Required Beginning
Date (“RBD”), or distributions over the life of the
Owner/Annuitant (or the Owner/Annuitant and his or her
Beneficiary) must begin no later than the RBD. For more
information see FEDERAL TAX ISSUES.
If you have a Non-Qualified Contract and you do not choose an
Annuity Date when you submit your application, your Annuity Date
will be the later of your Annuitant’s
90th birthday
or the
10th
Contract Anniversary. In the case of Joint Annuitants, your
Annuity Date will be the later of the younger Joint
Annuitant’s
90th birthday
or the
10th
Contract Anniversary. If you have a Qualified Contract and you
do not choose an Annuity Date when you submit your application,
your Annuity Date will be the later of your Annuitant’s
90th
birthday or the
10th
Contract Anniversary. Certain Qualified Contracts may require
distributions to occur at an earlier age.
If you have not specified an Annuity Option or do not instruct
us otherwise, at your Annuity Date your Net Contract Value, less
any charges for premium taxes and/or other taxes, will be
annuitized (if this net amount is at least $2,000) as follows:
•
the net amount from a fixed option will be converted into fixed
annuity payments, and
•
the net amount from your Variable Account Value will be
converted into variable annuity payments directed to the
Subaccounts proportionate to your Account Value in each.
Additionally:
•
If you have a Non-Qualified Contract, your default Annuity
Option will be Life with a ten year Period Certain.
•
If you have a Qualified Contract, your default Annuity Option
will be Life with a five year Period Certain (seven year
Period Certain if annuitization occurs prior to age 99)
or a shorter period certain as may be required by federal
regulation. If you are married, different requirements may
apply. Please contact your plan administrator for further
information, if applicable.
•
If the net amount is less than $2,000, the entire amount will be
distributed in one lump sum.
You should carefully review the Annuity Options with a qualified
tax adviser, and, for Qualified Contracts, reference should be
made to the terms of the particular plan and the requirements of
the Code for pertinent limitations regarding annuity payments,
Required Minimum Distributions (“RMDs”), and other
matters.
You may make 3 basic decisions about your annuity payments.
First, you may choose whether you want those payments to be a
fixed-dollar amount and/or a variable-dollar amount. Second, you
may choose the form of annuity payments (see Annuity
Options below). Third, you may decide how often you want
annuity payments to be made (the “frequency” of the
payments). You may not change these selections after the Annuity
Date.
32
Fixed and
Variable Payment Options
You may choose fixed annuity payments based on a fixed rate and
the Annuity 2000 Mortality Table with the ages set back
10 years, variable annuity payments that vary with the
investment results of the Subaccounts you select, or you may
choose both, converting one portion of the net amount you
annuitize into fixed annuity payments and another portion into
variable annuity payments.
If you select fixed annuity payments, each periodic annuity
payment received will be equal to the initial annuity payment,
unless you select a Joint and Survivor Life annuity with reduced
survivor payments when the Primary Annuitant dies. Any net
amount you convert to fixed annuity payments will be held in our
General Account (but not under any fixed option).
If you select variable annuity payments, you may choose as many
Variable Investment Options as you wish. The amount of the
periodic annuity payments will vary with the investment results
of the Variable Investment Options selected and may be more or
less than a fixed payment option. After the Annuity Date,
Annuity Units may be exchanged among available Variable
Investment Options up to 4 times in any 12 month
period. How your Contract converts into variable annuity
payments is explained in more detail in THE CONTRACTS AND THE
SEPARATE ACCOUNT section in the SAI.
Annuity
Options
Four Annuity Options are currently available under the Contract,
although additional options may become available in the future.
For other Annuity Options see OPTIONAL LIVING BENEFIT
RIDERS.
1.
Life Only. Periodic payments are made to the
designated payee during the Annuitant’s lifetime. Payments
stop when the Annuitant dies.
2.
Life with Period Certain. Periodic payments are made
to the designated payee during the Annuitant’s lifetime,
with payments guaranteed for a specified period. You may choose
to have payments guaranteed from 7 through 30 years (in
full years only). The guaranteed period may be limited on
Qualified Contracts based on your life expectancy.
If a Life with Period Certain annuity option provides for
payments of the same amount for different Periods Certain at
some ages, we will assume that your selection was for the
longest Period Certain available for your age.
3.
Joint and Survivor Life. Periodic payments are made
to the designated payee during the lifetime of the Primary
Annuitant. After the death of the Primary Annuitant, periodic
payments will continue to be made during the lifetime of the
secondary Annuitant named in the election. You may choose to
have the payments during the lifetime of the surviving secondary
Annuitant equal 50%,
662/3%
or 100% of the original amount payable during the lifetime of
the Primary Annuitant (you must make this election when you
choose your Annuity Option). If you elect a reduced payment
based on the life of the secondary Annuitant, fixed annuity
payments will be equal to 50% or
662/3%
of the original fixed payment payable during the lifetime of the
Primary Annuitant; variable annuity payments will be determined
using 50% or
662/3%,
as applicable, of the number of Annuity Units for each
Subaccount credited to the Contract as of the date of death of
the Primary Annuitant. Payments stop when both Annuitants have
died.
4.
Period Certain Only. Periodic payments are made to
the designated payee, guaranteed for a specified period. You may
choose to have payments guaranteed from 10 through 30 years
(in full years only). Additional guaranteed time periods may
become available in the future. Before you annuitize your
Contract, please contact us for additional guaranteed time
period options that may be available. The guaranteed period
may be limited on Qualified Contracts based on your life
expectancy.
Periodic payment amounts will differ based on the Annuity Option
selected. Generally, the longer the possible payment period, the
lower the payment amount.
Additionally, if variable payments are elected under Annuity
Options 2 and 4, you may redeem all remaining guaranteed
variable payments after the Annuity Date. Also, under
Option 4, partial redemptions of remaining guaranteed
variable payments after the Annuity Date are available. If
you elect to redeem all remaining guaranteed variable payments
in a single sum, we will not make any additional annuity
payments during the Annuitant’s lifetime or the remaining
guaranteed period after the redemption. The amount available
upon full redemption would be the present value of any remaining
guaranteed payments at the assumed investment return. Any
applicable withdrawal charge will be deducted from the present
value as if you made a full withdrawal, or if applicable, a
partial withdrawal. For purposes of calculating the withdrawal
charge and Free Withdrawal amount, it will be assumed that the
Contract was never converted to provide annuity payments and any
prior annuity payments in that Contract Year will be treated as
if they were partial withdrawals from the Contract (see
CHARGES, FEES AND DEDUCTIONS – Withdrawal
Charge).
For example, assume that a Contract was issued with a single
investment of $10,000 and in Contract Year 2 the Owner
elects to receive variable annuity payments under Annuity
Option 4. In Contract Year 3, the Owner elects to make
a partial redemption of $5,000. The withdrawal charge as a
percentage of the Purchase Payments with an age of 3 years
is 8%. Assuming the Free Withdrawal amount immediately prior to
the partial redemption is $200, the withdrawal charge for the
partial redemption will be
$384 (($5,000 − $200) × 8% = $384).
No withdrawal charge will be imposed on a redemption if:
•
the Annuity Option is elected as the form of payments of death
benefit proceeds, or
33
•
the Annuitant dies before the period certain has ended and the
Beneficiary requests a redemption of the variable annuity
payments.
Full or partial redemptions of remaining guaranteed variable
payments are explained in more detail in the SAI under THE
CONTRACTS AND THE SEPARATE ACCOUNT.
If the Annuitant dies before the guaranteed payments under
Annuity Options 2 and 4 are completed, we will pay the
remainder of the guaranteed payments to the first person among
the following who is (1) living; or (2) an entity or
corporation entitled to receive the remainder of the guaranteed
payments:
•
the Owner;
•
the Joint Owner;
•
the Beneficiary; or
•
the Contingent Beneficiary.
If none are living (or if there is no entity or corporation
entitled to receive the remainder of the guaranteed payments),
we will pay the remainder of the guaranteed payments to the
Owner’s estate.
If the Owner dies on or after the Annuity Date, but payments
have not yet been completed, then distributions of the remaining
amounts payable under the Contract must be made at least as
rapidly as the method of distribution that was being used at the
date of the Owner’s death. All of the Owner’s rights
granted by the Contract will be assumed by the first among the
following who is (1) living; or (2) an entity or
corporation entitled to assume the Owner’s rights granted
by the Contract:
•
the Joint Owner;
•
the Beneficiary; or
•
the Contingent Beneficiary.
If none are living (or if there is no entity or corporation
entitled to assume the Owner’s rights granted by the
Contract), all of the Owner’s rights granted by the
Contract will be assumed by the Owner’s estate.
For Qualified Contracts, please refer to the Choosing Your
Annuity Date section in this Prospectus. If your Contract
was issued in connection with a Qualified Plan subject to
Title I of the Employee Retirement Income Security Act of
1974 (“ERISA”), your spouse’s consent may be
required when you seek any distribution under your Contract,
unless your Annuity Option is Joint and Survivor Life with
survivor payments of at least 50%, and your spouse is your Joint
Annuitant.
You may choose to have annuity payments made monthly, quarterly,
semi-annually, or annually. The variable payment amount will be
determined in each period on the date corresponding to your
Annuity Date, and payment will be made on the next Business Day.
Your initial annuity payment must be at least $20. Depending on
the net amount you annuitize, this requirement may limit your
options regarding the period and/or frequency of annuity
payments.
Amount of
the First Payment
Your Contract contains tables that we use to determine the
amount of the first annuity payment under your Contract, taking
into consideration the annuitized portion of your Net Contract
Value at the Annuity Date. This amount will vary, depending on
the annuity period and payment frequency you select. This amount
will be larger in the case of shorter Period Certain annuities
and smaller for longer Period Certain annuities. Similarly, this
amount will be greater for a Life Only annuity than for a Joint
and Survivor Life annuity, because we will expect to make
payments for a shorter period of time on a Life Only annuity. If
you do not choose the Period Certain Only annuity, this amount
will also vary depending on the age of the Annuitant(s) on the
Annuity Date and, for some Contracts, the sex of the
Annuitant(s).
For fixed annuity payments, the guaranteed income factors in our
tables are based on an annual interest rate of 1.5% and the
Annuity 2000 Mortality Table with the ages set back
10 years. If you elect a fixed annuity, fixed annuity
payments will be based on the periodic income factors in effect
for your Contract on the Annuity Date which are at least the
guaranteed income factors under the Contract.
For variable annuity payments, the tables are based on an
assumed annual investment return of 4% and the Annuity 2000
Mortality Table with the ages set back 10 years. If you
elect a variable annuity, your initial variable annuity payment
will be based on the applicable variable annuity income factors
in effect for your Contract on the Annuity Date which are at
least the variable annuity income factors under the Contract.
You may choose any other annuity option we may offer on the
option’s effective date. A higher assumed investment
34
return would mean a larger first variable annuity payment, but
subsequent payments would increase only when actual net
investment performance exceeds the higher assumed rate and would
fall when actual net investment performance is less than the
higher assumed rate. A lower assumed rate would mean a smaller
first payment and a more favorable threshold for increases and
decreases. If the actual net investment performance is a
constant 4% annually, annuity payments will be level. The
assumed investment return is explained in more detail in the SAI
under THE CONTRACTS AND THE SEPARATE ACCOUNT.
Death benefit proceeds may be payable before the Annuity Date on
proof of the sole surviving Annuitant’s death or of any
Contract Owner while the Contract is in force. Any death benefit
payable will be calculated on the “Notice Date”, which
is the day on which we receive, In Proper Form, proof of death
and instructions regarding payment of death benefit proceeds. If
a Contract has multiple Beneficiaries, death benefit proceeds
will be calculated when we first receive proof of death and
instructions, In Proper Form, from any Beneficiary. The death
benefit proceeds still remaining to be paid to other
Beneficiaries will fluctuate with the performance of the
underlying Investment Options.
Death
Benefit Proceeds
Death benefit proceeds will be payable on the Notice Date. Such
proceeds will be reduced by any charge for premium taxes and/or
other taxes, and any Contract Debt. Currently, unless the death
benefit is payable as a result of the death of an Owner who is
not an Annuitant, the death benefit proceeds payable on the
Notice Date will not be less than the aggregate Purchase
Payments less adjustment for withdrawals, reduced by any charges
for premium taxes and/or other taxes, and any Contract Debt. The
death benefit proceeds may be payable in a single sum, as an
Annuity Option available under the Contract, towards the
purchase of any other Annuity Option we then offer, or in any
other manner permitted by the IRS and approved by us. The
Owner’s spouse may continue the Contract (see Death
Benefits – Spousal Continuation). In
addition, there may be legal requirements that limit the
recipient’s Annuity Options and the timing of any payments.
A recipient should consult a qualified tax adviser before making
a death benefit election.
The death benefit proceeds will be paid to the first among the
following who is (1) living; or (2) an entity or
corporation entitled to receive the death benefit proceeds, in
the following order:
•
Owner,
•
Joint Owner,
•
Beneficiary, or
•
Contingent Beneficiary.
If none are living (or if there is no entity or corporation
entitled to receive the death benefit proceeds), the proceeds
will be payable to the Owner’s Estate.
Death
Benefit Amount
The Death Benefit Amount as of any Business Day before the
Annuity Date is equal to the greater of:
•
your Contract Value as of that day, or
•
your aggregate Purchase Payments reduced by an amount for each
withdrawal, which is calculated by multiplying the aggregate
Purchase Payments received before each withdrawal by the ratio
of the amount of the withdrawal, including any withdrawal
charge, to the Contract Value immediately prior to each
withdrawal. The reduction made, when the Contract Value is
less than aggregate Purchase Payments made into the Contract,
may be greater than the actual amount withdrawn.
We calculate the Death Benefit Amount as of the Notice Date and
the death benefit will be paid in accordance with the Death
Benefit Proceeds section above.
See APPENDIX F: DEATH BENEFIT AMOUNT AND STEPPED-UP
DEATH BENEFIT SAMPLE CALCULATIONS.
Spousal
Continuation
Generally, a sole designated recipient who is the Owner’s
spouse may elect to become the Owner (and sole Annuitant if the
deceased Owner had been the Annuitant) and continue the Contract
until the earliest of the spouse’s death, the death of the
Annuitant, or the Annuity Date, except in the case of a
Qualified Contract issued under section 403 of the Code.
The spousal continuation election must be made by the fifth
anniversary of the death of the Contract Owner for Non-Qualified
Contracts, or by December 31 of the calendar year in which
the fifth anniversary of the Contract Owner’s death falls
for Qualified Contracts. On the Notice Date, if the surviving
spouse is
35
deemed to have continued the Contract, we will set the Contract
Value equal to the death benefit proceeds (which will not
include any Credit Enhancement recapture) that would have been
payable to the spouse as the deemed Beneficiary/designated
recipient of the death benefit proceeds.
This “Add-In Amount” is the difference between the
Contract Value and the death benefit proceeds that would have
been payable. The Add-In Amount will be added to the Contract
Value on the Notice Date. There will not be an adjustment to the
Contract Value if the Contract Value is equal to or greater than
the death benefit proceeds as of the Notice Date. The Add-In
Amount will be allocated among Investment Options in accordance
with the current allocation instructions for the Contract and
may be, under certain circumstances, considered earnings. The
Add-In Amount is not treated as a new Purchase Payment.
A Joint Owner who is the designated recipient, but not the
Owner’s spouse, may not continue the Contract. Under IRS
Guidelines, once a surviving spouse continues the Contract, the
Contract may not be continued again in the event the surviving
spouse remarries. If you have purchased an optional living
benefit Rider, please refer to the Rider attached to your
Contract to determine how any guaranteed amounts may be affected
when a surviving spouse continues the Contract.
Example: On the Notice Date, the Owner’s
surviving spouse elects to continue the Contract. On that date,
the death benefit proceeds were $100,000 and the Contract Value
was $85,000. Since the surviving spouse elected to continue the
Contract in lieu of receiving the death benefit proceeds, we
will increase the Contract Value by an Add-In Amount of $15,000
($100,000 − $85,000 = $15,000). If the Contract Value on
the Notice Date was $100,000 or higher, then nothing would be
added to the Contract Value.
The continuing spouse is subject to the same fees, charges and
expenses applicable to the deceased Owner of the Contract.
Death of
Annuitant
If a sole surviving Annuitant dies before the Annuity Date, the
amount of the death benefit will be equal to the Death
Benefit Amount as of the Notice Date and will be paid in
accordance with the Death Benefit Proceeds section.
If there is more than one Annuitant and an Annuitant who is not
an Owner dies, no death benefit proceeds will be payable. The
designated sole Annuitant will then be the first living person
in the following order:
•
a surviving Joint Annuitant, or
•
a surviving Contingent Annuitant.
Death of
Owner
The amount of the death benefit will be the Death Benefit
Amount as of the Notice Date and will be paid in accordance
with the Death Benefit Proceeds section if:
•
a Contract Owner who is an Annuitant dies before the Annuity
Date, or
•
a Contract Owner, who is not an Annuitant, and the Annuitant die
simultaneously.
If a Contract Owner who is not an Annuitant dies before the
Annuity Date, the death benefit proceeds will be equal to your
Contract Value as of the Notice Date and will be paid in
accordance with the Death Benefit Proceeds section and in
accordance with the federal income tax distribution at death
rules discussed in the FEDERAL TAX ISSUES section.
Non-Natural
Owner
If you are a Non-Natural Owner of a Contract other than a
Contract issued under a Qualified Plan as defined in
Section 401 or 403 of the Code, the Primary Annuitant will
be treated as the Owner of the Contract for purposes of the
Non-Qualified Contract Distribution Rules. If there are
Joint or Contingent Annuitants, the death benefit proceeds will
be payable on proof of death of the first annuitant. If there is
a change in the Primary Annuitant prior to the Annuity Date,
such change will be treated as the death of the Owner (however,
under the terms of your Contract, you cannot change the Primary
Annuitant). The Death Benefit Amount will be: (a) the
Contract Value, if the Non-Natural Owner elects to maintain the
Contract and reinvest the Contract Value into the contract in
the same amount as immediately prior to the distribution; or
(b) the Contract Value, less any Annual Fee, withdrawal
charge and charges for premium taxes and/or other taxes, if the
Non-Natural Owner elects a cash distribution and will be paid in
accordance with the Death Benefits Proceeds section and
in accordance with the federal income tax distribution at death
rules discussed in the FEDERAL TAX ISSUES section.
Non-Qualified
Contract Distribution Rules
The Contract is intended to comply with all applicable
provisions of Code Section 72(s) and any successor
provision, as deemed necessary by us to qualify the Contract as
an annuity contract for federal income tax purposes. If an Owner
of a Non-Qualified Contract dies before the Annuity Date,
distribution of the death benefit proceeds must begin within
1 year after the Owner’s death or complete
distribution within 5 years after the Owner’s death.
In order to satisfy this requirement, the designated recipient
must receive a final lump
36
sum payment by the
5th anniversary
of the Contract Owner’s death, or elect to receive an
annuity for life or over a period that does not exceed the life
expectancy of the designated recipient with annuity payments
that start within 1 year after the Owner’s death or,
if permitted by the IRS, elect to receive a systematic
distribution over a period not exceeding the beneficiary’s
life expectancy using a method that would be acceptable for
purposes of calculating the minimum distribution required under
section 401(a)(9) of the Code. If an election to receive an
annuity is not made within 60 days of our receipt of proof,
In Proper Form, of the Owner’s death or, if earlier,
60 days (or shorter period as we permit) prior to the
1st anniversary
of the Owner’s death, the option to receive annuity
payments is no longer available. If a Non-Qualified Contract has
Joint Owners, this requirement applies to the first Contract
Owner to die.
The Owner may designate that the Beneficiary will receive death
benefit proceeds through annuity payments for life or life with
Period Certain. The Owner must designate the payment method in
writing in a form acceptable to us. The Owner may revoke the
designation only in writing and only in a form acceptable to us.
Once the Owner dies, the Beneficiary cannot revoke or modify the
Owner’s designation.
Qualified
Contract Distribution Rules
Under Internal Revenue Service regulations and our
administrative procedures, if the Contract is owned under a
Qualified Plan pursuant to Sections 401, 403 or
Sections 408, or 408A of the Code and the Annuitant dies
before the Required Beginning Date, the payment of any death
benefit proceeds must be made to the designated recipient in
accordance with one of two rules. One rule generally requires
the death benefit proceeds to commence distribution by
December 31 of the calendar year following the calendar
year of the Annuitant’s death and continue over the life of
his or her Beneficiary (the “life expectancy method”).
The second rule requires distribution of the entire death
benefit proceeds no later than December 31 of the calendar
year in which the
5th anniversary
of the Annuitant’s death falls (the “five-year
rule”).
However, the life expectancy method and the five-year rule are
modified if the sole primary Beneficiary is a surviving spouse.
If the surviving spouse elects not to do an eligible rollover to
an IRA or another existing eligible plan in his or her name,
then he or she will be subject to the five-year rule. However,
the surviving spouse may waive the five-year requirement and
elect to take distributions over his or her life expectancy. If
the surviving spouse elects to defer the commencement of
required distributions beyond the
1st anniversary
of the Annuitant’s death, the surviving spouse may defer
required distributions until the later of:
•
December 31 of the year following the year the Annuitant
died, or
•
December 31 of the year in which the deceased Annuitant
would have turned
701/2.
You are responsible for monitoring distributions that must be
taken to meet IRS guidelines.
If the Annuitant dies after the commencement of RMDs (except in
the case of a Roth IRA when RMDs do not apply) but before the
Annuitant’s entire interest in the Contract (other than a
Roth IRA) has been distributed, the remaining interest in
the Contract must be distributed to the designated recipient at
least as rapidly as under the distribution method in effect at
the time of the Annuitant’s death.
This optional Rider offers you the ability to lock in market
gains for your beneficiaries with a
stepped-up
death benefit, which is the highest Contract Value on any
previous Contract Anniversary (prior to the Annuitant’s
81st birthday)
increased by the amount of additional Purchase Payments and
decreased by withdrawals that you make.
Purchasing
the Rider
You may purchase this optional Rider at the time your
application is completed. You may not purchase this Rider after
the Contract Date. This Rider may only be purchased if the age
of each Annuitant is 75 or younger on the Contract Date.
How the
Rider Works
If you purchase this Rider at the time your application is
completed, upon the death of the sole surviving Annuitant (first
Annuitant for Non-Natural Owners), or the first Owner who is
also an Annuitant, prior to the Annuity Date, the death benefit
proceeds will be equal to the greater of (a) or
(b) below:
(a)
the Death Benefit Amount as of the Notice Date.
The Death Benefit Amount as of any day before the Annuity Date
is equal to the greater of:
•
your Contract Value as of that day, or
•
your aggregate Purchase Payments reduced by an amount for each
withdrawal, which is calculated by multiplying the aggregate
Purchase Payments received before each withdrawal by the ratio
of the amount of the withdrawal, including any withdrawal
charge, to the Contract Value immediately prior to each
withdrawal. The reduction made, when the Contract
37
Value is less than aggregate Purchase Payments made into the
Contract, may be greater than the actual amount withdrawn.
(b)
the Guaranteed Minimum Death Benefit Amount as of the Notice
Date.
The actual Guaranteed Minimum Death Benefit Amount is calculated
only when death benefit proceeds become payable as a result of
the death of the sole surviving Annuitant (first Annuitant for
Non-Natural Owners), or the first death of an Owner who is also
an Annuitant, prior to the Annuity Date and is determined as
follows:
First we calculate what the Death Benefit Amount would have been
as of your first Contract Anniversary and each subsequent
Contract Anniversary that occurs while the Annuitant is living
and before the Annuitant reaches his or her
81st birthday
(each of these Contract Anniversaries is a “Milestone
Date”).
We then adjust the Death Benefit Amount for each Milestone Date
by:
•
adding the aggregate amount of any Purchase Payments received by
us since the Milestone Date, and
•
subtracting an amount for each withdrawal that has occurred
since that Milestone Date, which is calculated by multiplying
the Death Benefit Amount before the withdrawal by the ratio of
the amount of each withdrawal that has occurred since that
Milestone Date, including any withdrawal charge, to the Contract
Value immediately prior to the withdrawal. The reduction
made, when the Contract Value is less than aggregate Purchase
Payments made into the Contract, may be greater than the actual
amount withdrawn.
The highest of these adjusted Death Benefit Amounts for each
Milestone Date, as of the Notice Date, is your Guaranteed
Minimum Death Benefit Amount if you purchase this Rider.
Calculation of any actual Guaranteed Minimum Death Benefit
Amount is only made once death benefit proceeds become payable
under your Contract.
Any death benefit paid under this Rider will be paid in
accordance with the Death Benefit Proceeds section above.
See APPENDIX F: DEATH BENEFIT AMOUNT AND STEPPED-UP
DEATH BENEFIT SAMPLE CALCULATIONS.
Termination
The Rider will remain in effect until the earlier of:
•
the date a full withdrawal of the amount available for
withdrawal is made under the Contract,
•
the date death benefit proceeds become payable under the
Contract,
•
the date the Contract is terminated in accordance with the
provisions of the Contract, or
You may, on or prior to your Annuity Date, withdraw all or a
portion of the amount available under your Contract while the
Annuitant is living and your Contract is in force. You may
surrender your Contract and make a full withdrawal at any time.
If you surrender your Contract it will be terminated as of the
Effective Date of the withdrawal. Beginning 30 days after
your Contract Date, you also may make partial withdrawals from
your Investment Options at any time. Currently, we are not
requiring the
30-day
waiting period on partial withdrawals, but we reserve the right
to require a
30-day
waiting period on partial withdrawals in the future. You may
request to withdraw a specific dollar amount or a specific
percentage of an Account Value or your Net Contract Value. You
may choose to make your withdrawal from specified Investment
Options. If you do not specify Investment Options, your
withdrawal will be made from all of your Investment Options
proportionately.
Each partial withdrawal must be for $500 or more. Pre-authorized
partial withdrawals must be at least $250, except for
pre-authorized withdrawals distributed by Electronic Funds
Transfer (EFT), which must be at least $100. If your partial
withdrawal from an Investment Option would leave a remaining
Account Value in that Investment Option of less than $500, we
also reserve the right, at our option and with prior written
notice, to transfer that remaining amount to your other
Investment Options on a proportionate basis relative to your
most recent allocation instructions.
If your partial withdrawal leaves you with a Net Contract Value
of less than $1,000, or if your partial withdrawal request is
for an amount exceeding the amount available for withdrawal, as
described in the Amount Available for Withdrawal section
below, we have the right, at our option, to terminate your
Contract and send you the withdrawal proceeds. However, we will
not terminate your Contract if you own
38
an optional withdrawal benefit rider and a partial withdrawal
reduces the Net Contract Value to an amount less than $1,000.
Partial withdrawals from any fixed option in any Contract Year
may be subject to restrictions.
See THE GENERAL ACCOUNT.
Distributions made due to divorce instructions or under Code
Section 72(t)/72(q) (substantially equal periodic payments)
are treated as withdrawals for Contract purposes and may result
in a withdrawal charge assessment.
Amount
Available for Withdrawal
The amount available for withdrawal is your Net Contract Value
(Contract Value less Contract Debt) at the end of the Business
Day on which your withdrawal request is effective, less any
applicable Annual Fee, optional Rider Charges, withdrawal
charge, and any charge for premium taxes and/or other taxes. The
amount we send to you (your “withdrawal proceeds”)
will also reflect any required or requested federal and state
income tax withholding. See FEDERAL TAX ISSUES and THE
GENERAL ACCOUNT. If you own optional Riders, taking a
withdrawal before a certain age or a withdrawal that is greater
than the allowed annual withdrawal amount under a Rider, may
result in adverse consequences such as a reduction in Rider
benefits or the failure to receive lifetime withdrawals under
the Rider.
You assume investment risk on Purchase Payments in the
Subaccounts. As a result, the amount available to you for
withdrawal from any Subaccount may be more or less than the
total Purchase Payments you have allocated to that Subaccount.
Withdrawals
Free of a Withdrawal Charge
Subject to the amount available for withdrawal provisions as
described above, during a Contract Year you may withdraw amounts
up to your “eligible Purchase Payments” without
incurring a withdrawal charge. Eligible Purchase Payments
include 10% of all Purchase Payments that have an
“age” of less than 9 years, plus 100% of all
remaining Purchase Payments that have an “age” of
9 years or more. For purposes of determining the free
withdrawal amounts, withdrawal of mandatory required minimums
from certain Qualified Plans are included within the
calculations. Any portion of your eligible Purchase Payments not
withdrawn during a Contract Year may not be carried over to the
next Contract Year.
Example: You make an initial Purchase Payment of
$10,000 in Contract Year 1, and make additional Purchase
Payments of $1,000 and $6,000 in Contract Year 2. With
Earnings (Credit Enhancements included), your Contract Value in
Contract Year 3 is $19,000. In Contract Year 3, you
may withdraw $1,700 free of the withdrawal charge (your total
Purchase Payments were $17,000, so 10% of that equals $1,700).
After this withdrawal, your Contract Value is $17,300. In
Contract Year 4, you may withdraw another $1,700 (10% of
the total Purchase Payments of $17,000) free of any withdrawal
charge.
The free 10% may also apply to redemptions made after the
Annuity Date. See ANNUITIZATION – Choosing Your
Annuity Option – Annuity Options for Free
Withdrawal amounts that apply to redemptions after the Annuity
Date.
Qualified Contracts have special restrictions on withdrawals.
For purposes of determining the free withdrawal amounts,
withdrawal of mandatory required minimums from certain Qualified
Contracts are included within the calculations. For additional
information, see Special Restrictions Under Qualified
Plans below. For those Contracts issued to a Charitable
Remainder Trust (CRT), the amount available for withdrawal free
of withdrawal charges during a Contract Year includes all
eligible Purchase Payments plus all earnings even if all
Purchase Payments have not been deemed withdrawn.
Pre-Authorized
Withdrawals
If your Contract Value is at least $5,000, you may select the
pre-authorized withdrawal option, and you may choose monthly,
quarterly, semi-annual or annual withdrawals. Currently, we are
not enforcing the minimum Contract Value amount but we reserve
the right to enforce the minimum amount in the future. Each
withdrawal must be for at least $250, except for withdrawals
distributed by Electronic Funds Transfer (EFT), which must be at
least $100. Each pre-authorized withdrawal is subject to federal
income tax on its taxable portion and may be subject to a tax
penalty of 10% if you have not reached
age 591/2.
Pre-authorized withdrawals cannot be used to continue the
Contract beyond the Annuity Date. See FEDERAL TAX ISSUES
and THE GENERAL ACCOUNT. Additional information and
options are set forth in the SAI.
Special
Requirements for Full Withdrawals and Payments to Third Party
Payees
Instructions for a full withdrawal and surrender of your
Contract In Proper Form includes, among other things, a return
of the original Contract or a lost contract affidavit. For your
convenience, our Withdrawal Request form includes a lost
contract affidavit for your use in providing us with your full
withdrawal and surrender instructions. If you wish to have a
full or partial withdrawal check made payable to a third-party
payee, you must provide complete instructions and an original
signature is required on the Withdrawal Request form or your
withdrawal request instructions. If you wish to withdraw the
entire amount available under your Contract, you must either
return your Contract to us or sign and submit a Withdrawal
Request form or a Lost Contract Affidavit if no Withdrawal
Request form is completed.
39
Special
Restrictions Under Qualified Plans
Qualified Plans may have additional rules regarding withdrawals
from a Contract purchased under such a Plan. In general, if your
Contract was issued under certain Qualified Plans, you may
not withdraw amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in
Section 402(g)(3)(A) of the Code) or to transfers from a
custodial account (as defined in Section 403(b)(7) of the
Code) except in cases of your:
•
severance from employment,
•
death,
•
disability as defined in Section 72(m)(7) of the Code,
•
reaching age
591/2,
or
•
hardship as defined for purposes of Section 401 of the Code.
These limitations do not affect certain rollovers or exchanges
between Qualified Plans, and do not apply to rollovers from
these Qualified Plans to an individual retirement account or
individual retirement annuity. In the case of a
403(b) plan, these limitations do not apply to certain
salary reduction contributions made, and investment results
earned, prior to dates specified in the Code.
Hardship withdrawals under the exception provided above are
restricted to amounts attributable to salary reduction
contributions, and do not include investment results. This
additional restriction does not apply to salary reduction
contributions made, or investment results earned, prior to dates
specified in the Code.
Certain distributions, including rollovers, may be subject to
mandatory withholding of 20% for federal income tax and to a tax
penalty of 10% if the distribution is not transferred directly
to the trustee of another Qualified Plan, or to the custodian of
an individual retirement account or issuer of an individual
retirement annuity. See FEDERAL TAX ISSUES. Distributions
may also trigger withholding for state income taxes. The tax and
ERISA rules relating to withdrawals from Contracts issued to
Qualified Plans are complex. We are not the administrator of any
Qualified Plan. You should consult your qualified tax adviser
and/or your Plan Administrator before you withdraw any portion
of your Contract Value.
Effective
Date of Withdrawal Requests
Withdrawal requests are normally effective on the Business Day
we receive them In Proper Form. If you make Purchase Payments by
check and submit a withdrawal request immediately afterwards,
payment of your withdrawal proceeds may be delayed until we
receive confirmation in our Annuities administrative office that
your check has cleared.
All withdrawals, including pre-authorized withdrawals, will
generally have federal income tax consequences, which could
include tax penalties. You should consult with a qualified
tax adviser before making any withdrawal or selecting the
pre-authorized withdrawal option. See FEDERAL TAX
ISSUES.
You may return your Contract for cancellation and a refund
during your Free Look period. Your Free Look period is usually
the 10-day
period beginning on the day you receive your Contract. If you
are replacing another annuity contract or life insurance policy,
the Free Look period ends 60 days after you receive your
Contract.
The amount of your refund may be more or less than the Purchase
Payments you have made. If you return your Contract, it will be
cancelled as of the date we receive your Contract. You will then
receive a refund of your Contract Value, based upon the next
determined Accumulated Unit Value (AUV) after we receive your
Contract for cancellation, plus a refund of any amount that may
have been deducted as Contract fees and charges, minus any
Credit Enhancement applied to the Contract as described in
PURCHASING YOUR CONTRACT – Credit Enhancements.
You bear the investment risk on any Credit Enhancement added to
the Contract.
If your Contract was issued as an IRA and you return your
Contract within 7 days after you receive it, we will return
the greater of your Purchase Payments (less any withdrawals
made) or the Contract Value (less any Credit Enhancement).
Your Purchase Payments are allocated to the Investment Options
you indicated on your application, unless otherwise required by
state law. If state law requires that your Purchase Payments
must be allocated to Investment Options different than you
requested, we will comply with state requirements. At the end of
the Free Look period, we will allocate your Purchase Payments
(and any Credit Enhancement) based on your allocation
instructions.
You will find a complete description of the Free Look period and
amount to be refunded that applies to your Contract on the
Contract’s cover page.
Optional Riders are subject to availability (including state
availability) and may be discontinued for purchase at anytime
without prior notice. Before purchasing any optional Rider, make
sure you understand all of the terms and conditions and consult
with your financial advisor for advice on whether an optional
Rider is appropriate for you. We reserve the right to restrict
the purchase of an optional living benefit Rider to only
Contract issue in the future. Your election to purchase an
optional Rider must be received In Proper Form.
We reserve the right to reject or restrict, at our
discretion, any additional Purchase Payments. If we decide to no
longer accept Purchase Payments for any Rider, we will not
accept subsequent Purchase Payments for your Contract or any
other optional living benefit riders that you may own. We may
reject or restrict additional Purchase Payments to help protect
our ability to provide the guarantees under these riders. See
the Subsequent Purchase Payments subsection of the riders
for additional information.
Living benefit riders available through this Contract, for an
additional cost, are categorized as guaranteed minimum
withdrawal benefit or guaranteed minimum accumulation benefit
riders. The following is a list (which may change from time to
time) of riders currently available:
Guaranteed
Minimum Withdrawal Benefit
•
CoreIncome Advantage 4 Select (Single or Joint)
•
CoreIncome Advantage Select (Single or Joint)
•
Income Access Select
The guaranteed minimum withdrawal benefit riders focus on
providing an income stream for life or over a certain period
through withdrawals during the accumulation phase, if certain
conditions are met. The riders have the same basic structure
with differences in the percentage that may be withdrawn each
year, how long the withdrawals may last (for example, certain
number of years, for a single life or for joint lives), and what
age lifetime withdrawals may begin, if applicable. The riders
also offer the potential to lock in market gains on each
Contract Anniversary which may increase the annual amount you
may withdraw each year under the rider. The riders provide an
income stream regardless of market performance, even if your
Contract Value is reduced to zero.
Guaranteed
Minimum Accumulation Benefit
•
Guaranteed Protection Advantage 3 Select
The guaranteed minimum accumulation benefit rider focuses on
providing principal protection, if certain conditions are met.
If your Contract Value is less than the protected amount at the
end of a
10-year
term, we will make up the difference by making a one-time
addition to your Contract Value. The rider also offers the
potential to increase the protected amount by locking in any
Contract Value increases after a certain number of years. If you
lock in any Contract Value increases, the new protected amount
will equal your Contract Value and a new
10-year term
will begin.
You can find complete information about each optional rider
and its key features and benefits below.
You may purchase an optional Rider on the Contract Date or on
any Contract Anniversary (if available). In addition, if you
purchase a Rider within 60 days after the Contract Date or,
if available, within 60 days after any Contract
Anniversary, the Rider Effective Date will be that Contract Date
or Contract Anniversary. Your election to purchase an optional
Rider must be received In Proper Form.
Distributions made due to a request for partial annuitization,
divorce instructions or under Code Section 72(t)/72(q)
(substantially equal periodic payments) are treated as
withdrawals for Contract purposes and may adversely affect Rider
benefits.
Taking a withdrawal before a certain age or a withdrawal that is
greater than the annual withdrawal amount (“excess
withdrawal”) under a particular Rider may result in adverse
consequences such as a permanent reduction in Rider benefits or
the failure to receive lifetime withdrawals under a Rider. If
you would like to make an excess withdrawal and are uncertain
how an excess withdrawal will reduce your future guaranteed
withdrawal amounts, then you may contact us prior to requesting
the withdrawal to obtain a personalized, transaction specific
calculation showing the effect of the excess withdrawal.
Some optional riders allow for owner elected
Resets/Step-Ups.
If you elect to
Reset/Step-Up,
your election must be received, In Proper Form, within
60 days after the Contract Anniversary (“60 day
period”) on which the
Reset/Step-Up
is effective. We may, at our sole discretion, allow
Resets/Step-Ups
after the 60 day period. We reserve the right to refuse a
Reset/Step-Up
request after the 60 day period regardless of whether we
may have allowed you or others to
Reset/Step-Up
in the past. Each Contract Anniversary starts a new 60 day
period in which a
Reset/Step-Up
may be elected.
Some broker/dealers may limit their clients from purchasing some
optional Riders based upon the client’s age or other
factors. You should work with your financial advisor to decide
whether an optional Rider is appropriate for you.
41
Taking a loan while an optional living benefit Rider is in
effect will terminate your Rider. Work with your financial
advisor before taking a loan.
Work with your financial advisor to review the different
riders available for purchase, how they function, how the riders
differ from one another, and to understand all of the terms and
conditions of an optional rider prior to purchase.
Investment
Allocation Requirements
At initial purchase and during the entire time that you own an
optional living benefit Rider, you must allocate your entire
Contract Value to an asset allocation program or Investment
Options we make available for these Riders. You may allocate
your Contract Value according to the following requirements:
•
100% to one allowable Asset Allocation Model, OR
•
100% among allowable Investment Options.
You may also use the DCA Plus program to transfer amounts to an
Asset Allocation Model or among the Investment Options listed
below. Currently, the allowable Asset Allocation Models and
Investment Options are as follows:
First Trust/Dow Jones Dividend & Income Allocation Portfolio
Franklin Templeton VIP Founding Funds Allocation Fund1
GE Investments Total Return Fund
Invesco V.I. Balanced-Risk Allocation Fund
Janus Aspen Balanced Portfolio
MFS Total Return Series
Pacific Dynamix – Conservative Growth
Pacific Dynamix – Moderate Growth
Pacific Dynamix – Growth1
Portfolio Optimization Conservative
Portfolio Optimization Moderate-Conservative
Portfolio Optimization Moderate
Portfolio Optimization Growth1
PIMCO Global Multi-Asset Portfolio
1
Only available for optional living
benefit riders with a Rider Effective Date before May 1,2012.
You may transfer your entire Contract Value between an allowable
Asset Allocation Model and allowable Investment Options, between
allowable Asset Allocation Models or between allowable
Investment Options, subject to certain transfer limitations and
availability. See HOW YOUR PURCHASE PAYMENTS ARE
ALLOCATED – Transfers and Market-timing Restrictions.
Keep in mind that you must allocate your entire
Contract Value to either one allowable Asset Allocation
Model or among the allowable Investment Options. If you
do not allocate your entire Purchase Payment or Contract
Value according to the requirements above, your Rider will
terminate.
Allowable Asset Allocation Models – Custom
Model. You may also make transfers between the
Investment Options available under the Custom Model program as
long as you follow the Custom Model parameters. However, if you
make transfers, subsequent Purchase Payments or change the
allocation percentages within your Custom Model and they do not
comply with the Custom Model parameters, you will no longer be
participating in the Custom Model program and your Rider will
terminate. See HOW YOUR PURCHASE PAYMENTS ARE
ALLOCATED – Custom Model for information about the
program.
Allowable Investment Options. You may allocate your
entire Contract Value among any of the allowable Investment
Options listed in the table above.
By adding an optional living benefit Rider to your Contract, you
agree to the above referenced investment allocation requirements
for the entire period that you own a Rider. These requirements
may limit the number of Investment Options that are otherwise
available to you under your Contract. We reserve the right to
add, remove or change allowable asset allocation programs or
allowable Investment Options at any time. We may make such a
change due to a fund reorganization, fund substitution, to help
protect our ability to provide the guarantees under these
riders, or otherwise. If such a change is required, we will
provide you with reasonable notice (generally 90 calendar
days unless we are required to give less notice) prior to the
effective date of such change to allow you to reallocate your
Contract Value to maintain your rider benefits. If you do not
reallocate your Contract Value your rider will terminate.
We will send you written notice in the event any transaction
made by you will involuntarily cause the Rider to terminate for
failure to invest according to the investment allocation
requirements. However, you will have 30 calendar days after the
date of our written notice
42
(“30 day period”), to instruct us to take appropriate
corrective action to continue participation in an allowable
asset allocation program or allowable Investment Options to
continue the Rider.
Asset allocation does not guarantee future results, ensure a
profit, or protect against losses. The investment allocation
requirements 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
optional living benefit riders.
Multiple
Rider Ownership
Only one guaranteed minimum withdrawal benefit rider may be
owned or in effect at the same time. Only one guaranteed minimum
accumulation benefit rider may be owned or in effect at the same
time.
Withdrawal
Benefit Rider Exchanges
Subject to availability, you may elect to exchange among the
following withdrawal benefit Riders:
FROM
TO
WHEN
Income Access Select
CoreIncome Advantage Select (Single) or (Joint)
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage 4 Select (Single)
Income Access Select
CoreIncome Advantage Select (Single) or (Joint)
CoreIncome Advantage 4 Select (Joint)
On any Contract Anniversary.
CoreIncome Advantage 4 Select (Joint)
Income Access Select
CoreIncome Advantage Select (Single) or (Joint)
CoreIncome Advantage 4 Select (Single)
On any Contract Anniversary.
CoreIncome Advantage Select (Single)
Income Access Select
CoreIncome Advantage Select (Joint)
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage Select (Joint)
Income Access Select
CoreIncome Advantage Select (Single)
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
Income Access
Income Access Select
CoreIncome Advantage Select (Single) or (Joint)
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage Plus (Single) or (Joint)
Income Access Select
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage Select (Single) or (Joint)
On any Contract Anniversary beginning with the
5th Contract
Anniversary measured from the Contract issue date.
CoreIncome Advantage 5 Plus (Single) or (Joint)
Income Access Select
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage Select (Single) or (Joint)
On any Contract Anniversary beginning with the
5th Contract
Anniversary measured from the Contract issue date.
CoreProtect Advantage
Income Access Select
CoreIncome Advantage 4 Select (Single) or (Joint)
On any Contract Anniversary.
CoreIncome Advantage Select (Single) or (Joint)
On any Contract Anniversary beginning with the
5th Contract
Anniversary measured from the Contract issue date.
When you elect an exchange, you are terminating your existing
Rider and purchasing a new Rider. The Initial Protected Payment
Base and Remaining Protected Balance (if applicable) under the
new Rider will be equal to the Contract Value on that Contract
Anniversary. Generally, if your Contract Value is lower than
the Protected Payment Base under your existing Rider, your
election to exchange from one rider to another may result in a
reduction in the Protected Payment Base, Protected Payment
Amount, any applicable Remaining Protected Balance and any
Annual Credit that may be applied. In other words, your existing
protected balances will not carryover to the new Rider. If you
elect an exchange, you will be subject to the charge and the
terms and conditions for the new Rider in effect at the time of
the exchange. Only one exchange may be elected each Contract
Year. In addition, there are withdrawal percentages, annual
credit percentages, and lifetime income age requirements that
differ between the Riders listed above. Work with your financial
advisor prior to electing an exchange.
43
Accumulation
Benefit Rider Exchanges
Subject to availability, you may elect to exchange among the
following accumulation benefit Riders:
FROM
TO
WHEN
Guaranteed Protection Advantage 3 (GPA 3)
Guaranteed Protection Advantage 3 Select
On any Contract Anniversary.
When you elect an exchange, you are terminating your existing
Rider and purchasing a new Rider. The initial Guaranteed
Protection Amount under the new Rider will be equal to the
Contract Value on that Contract Anniversary. Generally, if
your Contract Value is lower than the Guaranteed Protection
Amount under your existing Rider, your election to exchange from
one rider to another may result in a reduction in the Guaranteed
Protection Amount. In other words, your existing Guaranteed
Protection Amount will not carryover to the new Rider. If you
elect an exchange, you will be subject to the charge and the
terms and conditions for the new Rider in effect at the time of
the exchange. Only one exchange may be elected each Contract
Year. In addition, there are Step-Up eligibility requirements
that differ between the Riders listed above. Work with your
financial advisor prior to electing an exchange.
Optional
Riders Not Available for Purchase
The CoreIncome Advantage Plus (Single), CoreIncome Advantage
Plus (Joint), CoreIncome Advantage 5 Plus (Single),
CoreIncome Advantage 5 Plus (Joint), CoreProtect Advantage,
Income Access and Guaranteed Protection Advantage 3
(GPA 3) Riders are no longer available for purchase. If you
purchased one of these Riders, you will find more information
about the Rider in APPENDIX G: OPTIONAL RIDERS NOT
AVAILABLE FOR PURCHASE.
(This Rider is called the Guaranteed Withdrawal Benefit XII
Rider – Single Life in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Protected Payment Base is $1,000,000 or greater.
You may purchase this optional Rider on the Contract Date or on
any Contract Anniversary provided that on the Rider Effective
Date:
•
the Designated Life is 85 years of age or younger,
•
the Owner and Annuitant is the same person (except for
Non-Natural Owners),
•
the Contract is not issued as an Inherited IRA, Inherited Roth
IRA, or Inherited TSA, and
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements.
Joint Owners may not purchase this Rider.
Rider
Terms
Annual RMD Amount – The amount required to be
distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions.
Designated Life – The person upon whose life
the benefits of this Rider are based. The Owner/Annuitant (or
youngest Annuitant in the case of a Non-Natural Owner) will be
the Designated Life. The Designated Life cannot be changed; if a
change occurs this Rider will terminate.
Early Withdrawal – Any withdrawal that occurs
before the Designated Life is
591/2 years
of age.
Excess Withdrawal – Any withdrawal (except an
RMD Withdrawal) that occurs after the Designated Life is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum amount
that can be withdrawn under this Rider without reducing the
Protected Payment Base. If the Designated Life is
591/2 years
of age or older, the Protected Payment Amount is equal to 4% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 4% of the Protected Payment Base computed on that
date. If the Designated Life is younger than
591/2 years
of age, the Protected Payment Amount is equal to zero (0);
however, once the Designated Life reaches
age 591/2,
the Protected Payment Amount will equal 4% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial
44
Purchase Payment, if the Rider Effective Date is on the Contract
Date, or the Contract Value, if the Rider Effective Date is on a
Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets in the Reset of Protected Payment
Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets of the
Protected Payment Base to an amount equal to 100% of the
Contract Value. Once the Rider is purchased, you cannot request
a termination of the Rider (see the Termination
subsection of this Rider for more information).
If the Designated Life is
591/2 years
of age or older, the Protected Payment Amount is 4% of the
Protected Payment Base. If the Designated Life is younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset will increase the Protected Payment Base to the Contract
Value on the Reset Date. A withdrawal that is less than or equal
to the Protected Payment Amount will not change the Protected
Payment Base. If a withdrawal is greater than the Protected
Payment Amount and the Contract Value (less the Protected
Payment Amount) is lower than the Protected Payment Base at the
time of withdrawal, the Protected Payment Base will be reduced
by an amount that is greater than the excess amount withdrawn.
For withdrawals that are greater than the Protected Payment
Amount, see the Withdrawal of Protected Payment Amount
subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the Designated Life is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 4% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in APPENDIX A
for a numerical example of the adjustments to the Protected
Payment Base as a result of an Excess Withdrawal.) If a
withdrawal is greater than the Protected Payment Amount and the
Contract Value (less the Protected Payment Amount) is lower than
the Protected Payment Base, the Protected Payment Base will be
reduced by an amount that is greater than the excess amount
withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See example
5 in APPENDIX A for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Early Withdrawal.
45
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on the previous year-end fair
market value of this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
We reserve the right to modify or eliminate the treatment of
RMD Withdrawals under this Rider if there is any change to the
Internal Revenue Code or IRS rules relating to required minimum
distributions, including the issuance of relevant IRS guidance.
If we exercise this right, we will provide notice to the
Owner.
See example 6 in APPENDIX A for numerical examples that
describe what occurs when only withdrawals of the Annual RMD
Amount are made during a Contract Year and when withdrawals of
the Annual RMD Amount plus other non-RMD Withdrawals are made
during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the Designated Life is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees, or
otherwise), the Rider will terminate.
If the Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
If the Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
date of death of the Designated Life or when a death benefit
becomes payable under the Contract,
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit (amount
will be zero).
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is at least $1.00 less than the Contract Value on that
Contract Anniversary.
Subsequent
Purchase Payments
If we accept additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, we reserve the
right to reject or restrict, at our discretion, any additional
Purchase Payments. If we decide to no longer accept Purchase
Payments, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit riders that
you may own while this Rider remains in effect.
46
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
•
the Life Only fixed annual payment amount based on the terms of
your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates upon the death of the Designated Life or
when a death benefit becomes payable under the Contract,
whichever occurs first. If the surviving spouse continues the
Contract, the surviving spouse may re-purchase this Rider (if
available) on any Contract Anniversary. The existing protected
balances will not carry over to the new Rider and will be based
on the Contract Value at time of re-purchase. Any Rider
re-purchases are subject to the Rider terms and conditions at
the time of re-purchase.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of the Designated Life or when a death
benefit becomes payable under the Contract,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day we are notified of an ownership change of a
Non-Qualified Contract (excluding ownership changes to or from
certain trusts or adding or removing the Owner’s spouse),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the Designated
Life is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
Hypothetical sample calculations are in the attached APPENDIX
A. The examples are based on certain hypothetical
assumptions and are for example purposes only. These examples
are not intended to serve as projections of future investment
returns.
(This Rider is called the Guaranteed Withdrawal Benefit XII
Rider – Joint Life in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Protected Payment Base is $1,000,000 or greater.
You may purchase this optional Rider on the Contract Date or on
any Contract Anniversary if you meet the following eligibility
requirements:
•
the Contract is issued as:
•
Non-Qualified Contract (this Rider is not available if the Owner
is a trust or other entity), or
47
•
Qualified Contract under Code Section 408(a), 408(k), 408A,
408(p) or 403(b), except for Inherited IRAs, Inherited Roth
IRAs, Inherited TSAs, 401(a), 401(k), Individual(k), Keogh, or
457 plan.
•
both Designated Lives are 85 years or younger
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements,
•
the Contract must be structured so that upon the death of one
Designated Life, the surviving Designated Life may retain or
assume ownership of the Contract, and
•
any Owner/Annuitant is a Designated Life (except for custodial
owned IRA or TSA Contracts).
For purposes of meeting the eligibility requirements, Designated
Lives must be any one of the following:
•
a sole Owner with the Owner’s Spouse designated as the sole
primary Beneficiary,
•
Joint Owners, where the Owners are each other’s Spouses, or
•
if the Contract is issued as a custodial owned IRA or TSA, the
beneficial owner must be the Annuitant and the Annuitant’s
Spouse must be designated as the sole primary Beneficiary under
the Contract. The custodian, under a custodial owned IRA or TSA,
for the benefit of the beneficial owner, may be designated as
sole primary Beneficiary provided that the Spouse of the
beneficial owner is the sole primary Beneficiary of the
custodial account.
If this Rider is added on a Contract Anniversary, naming your
Spouse as the Beneficiary to meet eligibility requirements will
not be considered a change of Annuitant on the Contract.
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions.
Designated Lives (each a “Designated
Life”) – Designated Lives must be natural
persons who are each other’s spouses on the Rider Effective
Date. Designated Lives will remain unchanged while this Rider is
in effect.
To be eligible for lifetime benefits, the Designated Life must:
•
be the Owner (or Annuitant, in the case of a custodial owned IRA
or TSA), or
•
remain the Spouse of the other Designated Life and be the first
in line of succession, as determined under the Contract, for
payment of any death benefit.
Early Withdrawal – Any withdrawal that
occurs before the youngest Designated Life is
591/2 years
of age.
Excess Withdrawal – Any withdrawal (except
an RMD Withdrawal) that occurs after the youngest Designated
Life is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum
amount that can be withdrawn under this Rider without reducing
the Protected Payment Base. If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is equal to 4% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 4% of the Protected Payment Base computed on that
date. If the youngest Designated Life is younger than
591/2 years
of age, the Protected Payment Amount is equal to zero (0).
However, once the youngest Designated Life reaches
age 591/2,
the Protected Payment Amount will equal 4% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
youngest Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
Spouse – The Owner’s spouse who is
treated as the Owner’s spouse pursuant to federal law. If
the Contract is a custodial owned IRA or TSA, the
Annuitant’s spouse who is treated as the Annuitant’s
spouse pursuant to federal law.
Surviving Spouse – The surviving spouse of
a deceased Owner (or Annuitant in the case of a custodial owned
IRA or TSA).
48
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets in the Reset of Protected Payment
Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets of the
Protected Payment Base to an amount equal to 100% of the
Contract Value. Once the Rider is purchased, you cannot request
a termination of the Rider (see the Termination
subsection of this Rider for more information).
If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is 4% of the
Protected Payment Base. If the youngest Designated Life is
younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset will increase the Protected Payment Base to the Contract
Value on the Reset Date. A withdrawal that is less than or equal
to the Protected Payment Amount will not change the Protected
Payment Base. If a withdrawal is greater than the Protected
Payment Amount and the Contract Value (less the Protected
Payment Amount) is lower than the Protected Payment Base at the
time of withdrawal, the Protected Payment Base will be reduced
by an amount that is greater than the excess amount withdrawn.
For withdrawals that are greater than the Protected Payment
Amount, see the Withdrawal of Protected Payment Amount
subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the youngest Designated Life is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 4% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in
APPENDIX A for a numerical example of the adjustments to
the Protected Payment Base as a result of an Excess Withdrawal.)
If a withdrawal is greater than the Protected Payment Amount and
the Contract Value (less the Protected Payment Amount) is lower
than the Protected Payment Base, the Protected Payment Base will
be reduced by an amount that is greater than the excess amount
withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See example
5 in APPENDIX A for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions,
49
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on the previous year-end fair
market value of this Contract only,
•
the youngest Designated Life is
age 591/2
or older, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
We reserve the right to modify or eliminate the treatment of
RMD Withdrawals under this Rider if there is any change to the
Internal Revenue Code or IRS rules relating to required minimum
distributions, including the issuance of relevant IRS guidance.
If we exercise this right, we will provide notice to the
Owner.
See example 6 in APPENDIX A for numerical examples that
describe what occurs when only withdrawals of the Annual RMD
Amount are made during a Contract Year and when withdrawals of
the Annual RMD Amount plus other non-RMD Withdrawals are made
during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the youngest Designated Life is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees, or
otherwise), the Rider will terminate.
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
death of all Designated Lives eligible for lifetime benefits,
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit (amount
will be zero).
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is at least $1.00 less than the Contract Value on that
Contract Anniversary.
Subsequent
Purchase Payments
If we accept additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, we reserve the
right to reject or restrict, at our discretion, any additional
Purchase Payments. If we decide to no longer accept Purchase
Payments, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit riders that
you may own while this Rider remains in effect.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only or Joint Life Only
fixed annuity option is chosen, the annuity payments will be
equal to the greater of:
•
the Life Only or Joint Life Only fixed annual payment amount
based on the terms of your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider
50
will not be used in determining any annuity payments. Work with
your financial advisor to determine if you should annuitize your
Contract before the maximum Annuity Date or stay in the
accumulation phase and continue to take withdrawals under the
Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies and the Surviving Spouse (who is also a
Designated Life eligible for lifetime benefits) elects to
continue the Contract in accordance with its terms, the
Surviving Spouse may continue to take withdrawals of the
Protected Payment Amount under this Rider, until the Rider
terminates.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Ownership
and Beneficiary Changes
Changes to the Contract Owner, Annuitant
and/or
Beneficiary designations and changes in marital status,
including a dissolution of marriage, may adversely affect the
benefits of this Rider. A particular change may make a
Designated Life ineligible to receive lifetime income benefits
under this Rider. As a result, the Rider may remain in effect
and you may pay for benefits that you will not receive. You
are strongly advised to work with your financial advisor and
consider your options prior to making any Owner, Annuitant
and/or
Beneficiary changes to your Contract.
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of all Designated Lives eligible for
lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and a Surviving Spouse who chooses to continue the
Contract is not a Designated Life eligible for lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and the Contract is not continued by a Surviving
Spouse who is a Designated Life eligible for lifetime benefits,
•
if both Designated Lives are Joint Owners and there is a change
in marital status, the Rider will terminate upon the death of
the first Designated Life who is a Contract Owner,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day that neither Designated Life is an Owner (or Annuitant,
in the case of a custodial owned IRA or TSA),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the youngest
Designated Life is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
Hypothetical sample calculations are in the attached APPENDIX
A. The examples are based on certain hypothetical
assumptions and are for example purposes only. These examples
are not intended to serve as projections of future investment
returns.
(This Rider is called the Guaranteed Withdrawal Benefit X
Rider - Single Life in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Protected Payment Base is $1,000,000 or greater.
51
You may purchase this optional Rider on the Contract Date or on
any Contract Anniversary provided that on the Rider Effective
Date:
•
the Designated Life is 85 years of age or younger,
•
the Owner and Annuitant is the same person (except for
Non-Natural Owners),
•
the Contract is not issued as an Inherited IRA, Inherited Roth
IRA, or Inherited TSA, and
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements.
Joint Owners may not purchase this Rider.
Rider
Terms
Annual RMD Amount – The amount required to be
distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions.
Designated Life – The person upon whose life
the benefits of this Rider are based. The Owner/Annuitant (or
youngest Annuitant in the case of a Non-Natural Owner) will be
the Designated Life. The Designated Life cannot be changed; if a
change occurs this Rider will terminate.
Early Withdrawal – Any withdrawal that occurs
before the Designated Life is 65 years of age.
Excess Withdrawal – Any withdrawal (except an
RMD Withdrawal) that occurs after the Designated Life is
age 65 or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum amount
that can be withdrawn under this Rider without reducing the
Protected Payment Base. If the Designated Life is 65 years
of age or older, the Protected Payment Amount is equal to 5% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 5% of the Protected Payment Base computed on that
date. If the Designated Life is younger than 65 years of
age, the Protected Payment Amount is equal to zero (0);
however, once the Designated Life reaches age 65, the
Protected Payment Amount will equal 5% of the Protected Payment
Base and will be reset each Contract Anniversary. The initial
Protected Payment Amount will depend upon the age of the
Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets in the Reset of Protected Payment
Base subsection below.
How the
Rider Works
Beginning at age 65, this Rider guarantees you can withdraw up
to the Protected Payment Amount, regardless of market
performance, until the Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets of the
Protected Payment Base to an amount equal to 100% of the
Contract Value. Once the Rider is purchased, you cannot request
a termination of the Rider (see the Termination
subsection of this Rider for more information).
If the Designated Life is 65 years of age or older, the
Protected Payment Amount is 5% of the Protected Payment Base. If
the Designated Life is younger than 65 years of age, the
Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset will increase the Protected Payment Base to the Contract
Value on the Reset Date. A withdrawal that is less than or equal
to the Protected Payment Amount will not change the Protected
Payment Base. If a withdrawal is greater than the Protected
Payment Amount and the Contract Value (less the Protected
Payment Amount) is lower than the Protected Payment Base at the
time of withdrawal, the Protected Payment Base will be reduced
by an amount that is greater than the excess amount withdrawn.
For withdrawals that are greater than the Protected Payment
Amount, see the Withdrawal of Protected Payment Amount
subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other
52
fees, charges and deductions, if applicable, as withdrawals
otherwise made under the provisions of the Contract. Withdrawals
under this Rider are not annuity payouts. Annuity payouts
generally receive a more favorable tax treatment than other
withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the Designated Life is 65 years of age or older, you
may withdraw up to the Protected Payment Amount each Contract
Year, regardless of market performance, until the Rider
terminates. The Protected Payment Amount will be reduced by the
amount withdrawn during the Contract Year and will be reset each
Contract Anniversary to 5% of the Protected Payment Base. Any
portion of the Protected Payment Amount not withdrawn during a
Contract Year may not be carried over to the next Contract Year.
If a withdrawal does not exceed the Protected Payment Amount
immediately prior to that withdrawal, the Protected Payment Base
will remain unchanged.
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in APPENDIX B
for a numerical example of the adjustments to the Protected
Payment Base as a result of an Excess Withdrawal.) If a
withdrawal is greater than the Protected Payment Amount and the
Contract Value (less the Protected Payment Amount) is lower than
the Protected Payment Base, the Protected Payment Base will be
reduced by an amount that is greater than the excess amount
withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See example
5 in APPENDIX B for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on the previous year-end fair
market value of this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
We reserve the right to modify or eliminate the treatment of
RMD Withdrawals under this Rider if there is any change to the
Internal Revenue Code or IRS rules relating to required minimum
distributions, including the issuance of relevant IRS guidance.
If we exercise this right, we will provide notice to the
Owner.
See example 6 in APPENDIX B for numerical examples that
describe what occurs when only withdrawals of the Annual RMD
Amount are made during a Contract Year and when withdrawals of
the Annual RMD Amount plus other non-RMD Withdrawals are made
during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the Designated Life is younger than age 65 when the
Contract Value is zero (due to withdrawals, fees, or otherwise),
the Rider will terminate.
If the Designated Life is age 65 or older and the Contract
Value was reduced to zero by a withdrawal that exceeds the
Protected Payment Amount, the Rider will terminate.
53
If the Designated Life is age 65 or older and the Contract
Value was reduced to zero by a withdrawal (including an RMD
Withdrawal) that did not exceed the Protected Payment Amount,
the following will apply:
•
the Protected Payment Amount will be paid each year until the
date of death of the Designated Life or when a death benefit
becomes payable under the Contract,
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit (amount
will be zero).
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is at least $1.00 less than the Contract Value on that
Contract Anniversary.
Subsequent
Purchase Payments
If we accept additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, we reserve the
right to reject or restrict, at our discretion, any additional
Purchase Payments. If we decide to no longer accept Purchase
Payments, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit riders that
you may own while this Rider remains in effect.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
•
the Life Only fixed annual payment amount based on the terms of
your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates upon the death of the Designated Life or
when a death benefit becomes payable under the Contract,
whichever occurs first. If the surviving spouse continues the
Contract, the surviving spouse may re-purchase this Rider (if
available) on any Contract Anniversary. The existing protected
balances will not carry over to the new Rider and will be based
on the Contract Value at time of re-purchase. Any Rider
re-purchases are subject to the Rider terms and conditions at
the time of re-purchase.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of the Designated Life or when a death
benefit becomes payable under the Contract,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
54
•
the day we are notified of an ownership change of a
Non-Qualified Contract (excluding ownership changes to or from
certain trusts or adding or removing the Owner’s spouse),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the Designated
Life is younger than age 65.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
Hypothetical sample calculations are in the attached APPENDIX
B. The examples are based on certain hypothetical
assumptions and are for example purposes only. These examples
are not intended to serve as projections of future investment
returns.
(This Rider is called the Guaranteed Withdrawal Benefit X
Rider – Joint Life in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Protected Payment Base is $1,000,000 or greater.
You may purchase this optional Rider on the Contract Date or on
any Contract Anniversary if you meet the following eligibility
requirements:
•
the Contract is issued as:
•
Non-Qualified Contract (this Rider is not available if the Owner
is a trust or other entity), or
•
Qualified Contract under Code Section 408(a), 408(k), 408A,
408(p) or 403(b), except for Inherited IRAs, Inherited Roth
IRAs, Inherited TSAs, 401(a), 401(k), Individual(k), Keogh, or
457 plan.
•
both Designated Lives are 85 years or younger,
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements,
•
the Contract must be structured so that upon the death of one
Designated Life, the surviving Designated Life may retain or
assume ownership of the Contract, and
•
any Owner/Annuitant is a Designated Life (except for custodial
owned IRA or TSA Contracts).
For purposes of meeting the eligibility requirements, Designated
Lives must be any one of the following:
•
a sole Owner with the Owner’s Spouse designated as the sole
primary Beneficiary,
•
Joint Owners, where the Owners are each other’s Spouses, or
•
if the Contract is issued as a custodial owned IRA or TSA, the
beneficial owner must be the Annuitant and the Annuitant’s
Spouse must be designated as the sole primary Beneficiary under
the Contract. The custodian, under a custodial owned IRA or TSA,
for the benefit of the beneficial owner, may be designated as
sole primary Beneficiary provided that the Spouse of the
beneficial owner is the sole primary Beneficiary of the
custodial account.
If this Rider is added on a Contract Anniversary, naming your
Spouse as the Beneficiary to meet eligibility requirements will
not be considered a change of Annuitant on the Contract.
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions.
Designated Lives (each a “Designated
Life”) – Designated Lives must be natural
persons who are each other’s spouses on the Rider Effective
Date. Designated Lives will remain unchanged while this Rider is
in effect.
55
To be eligible for lifetime benefits, the Designated Life must:
•
be the Owner (or Annuitant, in the case of a custodial owned IRA
or TSA), or
•
remain the Spouse of the other Designated Life and be the first
in line of succession, as determined under the Contract, for
payment of any death benefit.
Early Withdrawal – Any withdrawal that
occurs before the youngest Designated Life is 65 years of
age.
Excess Withdrawal – Any withdrawal (except
an RMD Withdrawal) that occurs after the youngest Designated
Life is age 65 or older and exceeds the Protected Payment
Amount.
Protected Payment Amount – The maximum
amount that can be withdrawn under this Rider without reducing
the Protected Payment Base. If the youngest Designated Life is
65 years of age or older, the Protected Payment Amount is
equal to 4.5% of the Protected Payment Base, less cumulative
withdrawals during that Contract Year and will be reset on each
Contract Anniversary to 4.5% of the Protected Payment Base
computed on that date. If the youngest Designated Life is
younger than 65 years of age, the Protected Payment Amount
is equal to zero (0). However, once the youngest Designated
Life reaches age 65, the Protected Payment Amount will
equal 4.5% of the Protected Payment Base and will be reset each
Contract Anniversary. The initial Protected Payment Amount will
depend upon the age of the youngest Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
Spouse – The Owner’s spouse who is
treated as the Owner’s spouse pursuant to federal law. If
the Contract is a custodial owned IRA or TSA, the
Annuitant’s spouse who is treated as the Annuitant’s
spouse pursuant to federal law.
Surviving Spouse – The surviving spouse of
a deceased Owner (or Annuitant in the case of a custodial owned
IRA or TSA).
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets in the Reset of Protected Payment
Base subsection below.
How the
Rider Works
Beginning at age 65, this Rider guarantees you can withdraw up
to the Protected Payment Amount, regardless of market
performance, until the Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets of the
Protected Payment Base to an amount equal to 100% of the
Contract Value. Once the Rider is purchased, you cannot request
a termination of the Rider (see the Termination
subsection of this Rider for more information).
If the youngest Designated Life is 65 years of age or
older, the Protected Payment Amount is 4.5% of the Protected
Payment Base. If the youngest Designated Life is younger than
65 years of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset will increase the Protected Payment Base to the Contract
Value on the Reset Date. A withdrawal that is less than or equal
to the Protected Payment Amount will not change the Protected
Payment Base. If a withdrawal is greater than the Protected
Payment Amount and the Contract Value (less the Protected
Payment Amount) is lower than the Protected Payment Base at the
time of withdrawal, the Protected Payment Base will be reduced
by an amount that is greater than the excess amount withdrawn.
For withdrawals that are greater than the Protected Payment
Amount, see the Withdrawal of Protected Payment Amount
subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
56
Withdrawal
of Protected Payment Amount
When the youngest Designated Life is 65 years of age or
older, you may withdraw up to the Protected Payment Amount each
Contract Year, regardless of market performance, until the Rider
terminates. The Protected Payment Amount will be reduced by the
amount withdrawn during the Contract Year and will be reset each
Contract Anniversary to 4.5% of the Protected Payment Base. Any
portion of the Protected Payment Amount not withdrawn during a
Contract Year may not be carried over to the next Contract Year.
If a withdrawal does not exceed the Protected Payment Amount
immediately prior to that withdrawal, the Protected Payment Base
will remain unchanged.
Withdrawals Exceeding the Protected Payment
Amount. If a withdrawal (except an RMD Withdrawal)
exceeds the Protected Payment Amount immediately prior to that
withdrawal, we will (immediately following the withdrawal)
reduce the Protected Payment Base on a proportionate basis for
the amount in excess of the Protected Payment Amount. (See
example 4 in APPENDIX C for a numerical example of
the adjustments to the Protected Payment Base as a result of an
Excess Withdrawal.) If a withdrawal is greater than the
Protected Payment Amount and the Contract Value (less the
Protected Payment Amount) is lower than the Protected Payment
Base, the Protected Payment Base will be reduced by an amount
that is greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See example
5 in APPENDIX C for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on the previous year-end fair
market value of this Contract only,
•
the youngest Designated Life is age 65 or older, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
We reserve the right to modify or eliminate the treatment of
RMD Withdrawals under this Rider if there is any change to the
Internal Revenue Code or IRS rules relating to required minimum
distributions, including the issuance of relevant IRS guidance.
If we exercise this right, we will provide notice to the
Owner.
See example 6 in APPENDIX C for numerical examples
that describe what occurs when only withdrawals of the Annual
RMD Amount are made during a Contract Year and when withdrawals
of the Annual RMD Amount plus other non-RMD Withdrawals are made
during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the youngest Designated Life is younger than age 65 when
the Contract Value is zero (due to withdrawals, fees, or
otherwise), the Rider will terminate.
If the youngest Designated Life is age 65 or older and the
Contract Value was reduced to zero by a withdrawal that exceeds
the Protected Payment Amount, the Rider will terminate.
If the youngest Designated Life is age 65 or older and the
Contract Value was reduced to zero by a withdrawal (including an
RMD Withdrawal) that did not exceed the Protected Payment
Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
death of all Designated Lives eligible for lifetime benefits,
57
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit (amount
will be zero).
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is at least $1.00 less than the Contract Value on that
Contract Anniversary.
Subsequent
Purchase Payments
If we accept additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, we reserve the
right to reject or restrict, at our discretion, any additional
Purchase Payments. If we decide to no longer accept Purchase
Payments, we will not accept subsequent Purchase Payments for
your Contract or any other optional living benefit riders that
you may own while this Rider remains in effect.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only or Joint Life Only
fixed annuity option is chosen, the annuity payments will be
equal to the greater of:
•
the Life Only or Joint Life Only fixed annual payment amount
based on the terms of your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies and the Surviving Spouse (who is also a
Designated Life eligible for lifetime benefits) elects to
continue the Contract in accordance with its terms, the
Surviving Spouse may continue to take withdrawals of the
Protected Payment Amount under this Rider, until the Rider
terminates.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Ownership
and Beneficiary Changes
Changes to the Contract Owner, Annuitant
and/or
Beneficiary designations and changes in marital status,
including a dissolution of marriage, may adversely affect the
benefits of this Rider. A particular change may make a
Designated Life ineligible to receive lifetime income benefits
under this Rider. As a result, the Rider may remain in effect
and you may pay for benefits that you will not receive. You
are strongly advised to work with your financial advisor and
consider your options prior to making any Owner, Annuitant
and/or
Beneficiary changes to your Contract.
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of all Designated Lives eligible for
lifetime benefits,
58
•
upon the death of the first Designated Life, if a death benefit
is payable and a Surviving Spouse who chooses to continue the
Contract is not a Designated Life eligible for lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and the Contract is not continued by a Surviving
Spouse who is a Designated Life eligible for lifetime benefits,
•
if both Designated Lives are Joint Owners and there is a change
in marital status, the Rider will terminate upon the death of
the first Designated Life who is a Contract Owner,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day that neither Designated Life is an Owner (or Annuitant,
in the case of a custodial owned IRA or TSA),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the youngest
Designated Life is younger than age 65.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
Hypothetical sample calculations are in the attached
APPENDIX C. The examples are based on certain
hypothetical assumptions and are for example purposes only.
These examples are not intended to serve as projections of
future investment returns.
(This Rider is called the Guaranteed Withdrawal
Benefit XIII Rider in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Protected Payment Base is $1,000,000 or greater.
You may purchase this optional Rider on the Contract Date or on
any Contract Anniversary provided that on the Rider Effective
Date:
•
the age of each Owner and Annuitant is 85 years or younger,
•
the Contract is not issued as an Inherited IRA, Inherited Roth
IRA or Inherited TSA, and
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements.
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions.
Protected Payment Amount – The maximum
amount that can be withdrawn each Contract Year under this Rider
without reducing the Protected Payment Base. The Protected
Payment Amount on any day after the Rider Effective Date is
equal to 7% of the Protected Payment Base as of that day, less
cumulative withdrawals during that Contract Year and will be
reset on each Contract Anniversary to 7% of the Protected
Payment Base computed on that date. The initial Protected
Payment Amount on the Rider Effective Date is equal to 7% of the
initial Protected Payment Base.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Remaining Protected Balance – The amount
available for future withdrawals made under this Rider. The
initial Remaining Protected Balance is equal to the initial
Purchase Payment, if the Rider Effective Date is on the Contract
Date, or the Contract Value, if the Rider Effective Date is on a
Contract Anniversary.
Reset Date – Any Contract Anniversary
after the Rider Effective Date on which an Automatic Reset or an
Owner-Elected Reset occurs.
59
Rider Effective Date – The date the
guarantees and charges for the Rider become effective. If the
Rider is purchased within 60 days of the Contract Date, the
Rider Effective Date is the Contract Date. If the Rider is
purchased within 60 days of a Contract Anniversary, the
Rider Effective Date is the date of that Contract Anniversary.
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets and Owner-Elected Resets in the Reset
of Protected Payment Base subsection below.
How the
Rider Works
This Rider allows for withdrawals up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. This Rider does not provide lifetime
withdrawal benefits. Beginning with the 1st anniversary of the
Rider Effective Date or most recent Reset Date, whichever is
later, the Rider provides for Automatic Annual Resets or
Owner-Elected Resets of the Protected Payment Base and Remaining
Protected Balance to an amount equal to 100% of the Contract
Value. Once the Rider is purchased, you cannot request a
termination of the Rider (see the Termination subsection
of this Rider for more information).
The Protected Payment Base and Remaining Protected Balance may
change over time. An Automatic Reset or Owner-Elected Reset will
increase or decrease the Protected Payment Base and Remaining
Protected Balance depending on the Contract Value on the Reset
Date. A withdrawal that is less than or equal to the Protected
Payment Amount will reduce the Remaining Protected Balance by
the amount of the withdrawal and will not change the Protected
Payment Base. If a withdrawal is greater than the Protected
Payment Amount and the Contract Value (less the Protected
Payment Amount) is lower than the Protected Payment Base, both
the Protected Payment Base and Remaining Protected Balance will
be reduced by an amount that is greater than the excess amount
withdrawn. For withdrawals that are greater than the Protected
Payment Amount, see the Withdrawal of Protected Payment
Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under the Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including a
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event
(e.g. reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
While the Rider is in effect, you may make cumulative
withdrawals up to the Protected Payment Amount each Contract
Year, regardless of market performance, until the Remaining
Protected Balance equals zero or until the Rider terminates. Any
portion of the Protected Payment Amount not withdrawn during a
Contract Year may not be carried over to the next Contract Year.
Under your Contract, you may withdraw more than the Protected
Payment Amount each Contract Year. However, withdrawals of
more than the Protected Payment Amount in a Contract Year will
cause an immediate adjustment to the Remaining Protected
Balance, the Protected Payment Base, and the Protected Payment
Amount.
If a withdrawal does not exceed the Protected Payment Amount
immediately prior to that withdrawal, the Protected Payment Base
will remain unchanged. The Remaining Protected Balance will
decrease by the withdrawal amount immediately following the
withdrawal.
Withdrawals Exceeding the Protected Payment
Amount. If a withdrawal (except an RMD Withdrawal)
exceeds the Protected Payment Amount immediately prior to that
withdrawal, we will (immediately following the withdrawal)
reduce the Protected Payment Base on a proportionate basis for
the amount in excess of the Protected Payment Amount. We will
reduce the Remaining Protected Balance either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount. (See
example 4 in APPENDIX D for a numerical example
of the adjustments to the Protected Payment Base and Remaining
Protected Balance as a result of an excess withdrawal.) If a
withdrawal is greater than the Protected Payment Amount and the
Contract Value (less the Protected Payment Amount) is lower than
the Protected Payment Base, both the Protected Payment Base and
Remaining Protected Balance will be reduced by an amount that is
greater than the excess amount withdrawn.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
60
Depletion
of Contract Value
If the Contract Value was reduced to zero by a withdrawal
(including an RMD Withdrawal) that did not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the following will apply:
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency, as elected
by you, but no less frequently than annually, until the
Remaining Protected Balance is reduced to zero,
•
no additional Purchase Payments will be accepted under the
Contract,
•
any Remaining Protected Balance will not be available for
payment in a lump sum or may not be applied to provide payments
under an Annuity Option, and
•
the Contract will cease to provide any death benefit (amount
will be zero).
If the Contract Value is reduced to zero by a withdrawal that
exceeds the Protected Payment Amount, the Rider will terminate.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on the previous year-end fair
market value of this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
Immediately following an RMD Withdrawal, the Remaining Protected
Balance will decrease by the RMD Withdrawal amount.
If the Contract Value is reduced to zero, RMD Withdrawals will
cease and any Remaining Protected Balance will be paid under a
series of pre-authorized withdrawals in accordance with the
terms of the Rider.
We reserve the right to modify or eliminate the treatment of
RMD Withdrawals under this Rider if there is any change to the
Internal Revenue Code or IRS rules relating to required minimum
distributions, including the issuance of relevant IRS guidance.
If we exercise this right, we will provide notice to the
Owner.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Reset of
Protected Payment Base and Remaining Protected Balance
Regardless of which Reset option is used, on and after each
Reset Date, the provisions of this Rider shall apply in the same
manner as they applied when the Rider was originally issued. The
limitations and restrictions on Purchase Payments and
withdrawals, the deduction of Rider charges and any future Reset
options available on and after the Reset Date, will again apply
and will be measured from that Reset Date. A Reset occurs when
the Protected Payment Base and Remaining Protected Balance are
changed to an amount equal to the Contract Value as of the Reset
Date.
Automatic Reset. On each Contract Anniversary while
this Rider is in effect and before the Annuity Date, we will
automatically Reset the Protected Payment Base and Remaining
Protected Balance to an amount equal to 100% of the Contract
Value, if the Protected Payment Base is at least $1.00 less than
the Contract Value on that Contract Anniversary.
Owner-Elected Resets (Non-Automatic). On any
Contract Anniversary beginning with the
1st
Contract Anniversary, measured from the Rider Effective Date or
the most recent Reset Date, whichever is later, you may elect to
Reset the Remaining Protected Balance and Protected Payment Base
to an amount equal to 100% of the Contract Value.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the Reset is effective. The Reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base, Remaining Protected Balance and Protected Payment
Amount. Generally, the reduction will occur when your
Contract Value is less than the Protected Payment Base as of the
Contract Anniversary you elected the reset. You are strongly
advised to work with your financial advisor prior to electing an
Owner-Elected Reset. We will provide you with written
confirmation of your election.
61
Subsequent
Purchase Payments
If we accept additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base and
Remaining Protected Balance by the amount of the Purchase
Payments. However, we reserve the right to reject or restrict,
at our discretion, any additional Purchase Payments. If we
decide to no longer accept Purchase Payments, we will not accept
subsequent Purchase Payments for your Contract or any other
optional living benefit riders that you may own while this Rider
remains in effect.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates when a death benefit becomes payable under
the Contract. If the surviving spouse continues the Contract,
the surviving spouse may continue to take withdrawals of the
Protected Payment Amount under this Rider, until the Remaining
Protected Balance is reduced to zero (0). The surviving
spouse may elect any of the reset options available under this
Rider for subsequent Contract Anniversaries.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract and Rider (see
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS –
Death Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically end on
the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the day the Remaining Protected Balance is reduced to zero,
•
the day we are notified of an ownership change of a
Non-Qualified Contract (excluding ownership changes to or from
certain trusts or adding or removing the Owner’s spouse),
•
when a death benefit becomes payable under the Contract (except
as provided under the Continuation of Rider if Surviving
Spouse Continues Contract subsection),
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date, or
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the contract
Value is reduced to zero.
Sample
Calculations
Hypothetical sample calculations are in the attached
APPENDIX D. The examples provided are based on
certain hypothetical assumptions and are for example purposes
only. These examples are not intended to serve as projections
of future investment returns.
(This Rider is called the Guaranteed Minimum Accumulation
Benefit Rider in the Contract’s Rider.)
Purchasing
the Rider
Prior to purchase, you must obtain our approval if your
initial Guaranteed Protection Amount is $1,000,000 or
greater.
You may purchase the optional Rider on the Contract Date or on
any subsequent Contract Anniversary if:
•
the age of any Owner and Annuitant on the date of purchase is
the lesser of:
•
85 years or younger, or
•
at least 10 years younger than the maximum annuitization
age specified in your Contract,
•
the Rider Effective Date is at least 10 years before your
selected Annuity Date, and
•
you allocate your entire Contract Value according to the
Investment Allocation Requirements.
62
How the
Rider Works
The Rider will remain in effect, unless otherwise terminated,
for a
10-year period
(the “Term”) beginning on the Effective Date of the
Rider.
On the last day of the Term, we will add an additional amount to
your Contract Value if, on that day, the Contract Value is less
than the Guaranteed Protection Amount. The additional amount
will be equal to the difference between the Contract Value on
the last day of the Term and the Guaranteed Protection Amount.
The additional amount added to the Contract Value will be
considered earnings and allocated to your Investment Options
according to your most recent allocation instructions.
Additional Purchase Payments that are not part of the Guaranteed
Protection Amount (Purchase Payments made after the first year
of a Term and not included in a
Step-Up)
will not be included in the benefit calculation at the end of
Term.
The Guaranteed Protection Amount is equal to (a) plus
(b) minus (c) as indicated below:
(a)
is the Contract Value at the start of the Term,
(b)
is the amount of each subsequent Purchase Payment received
during the first year of the Term, and
(c)
is a pro rata adjustment for withdrawals made from the Contract
during the Term. The adjustment for each withdrawal is
calculated by multiplying the Guaranteed Protection Amount prior
to the withdrawal by the ratio of the amount of the withdrawal,
including any applicable withdrawal charges, premium taxes,
and/or other taxes, to the Contract Value immediately prior to
the withdrawal.
For purposes of determining the Contract Value at the start of
the Term, if the Effective Date of the Rider is the Contract
Date, the Contract Value is equal to the initial Purchase
Payment. If the Effective Date of the Rider is a Contract
Anniversary, the Contract Value is equal to the Contract Value
on that Contract Anniversary. Any subsequent Purchase Payments
received after the first year of a Term are not included in the
Guaranteed Protection Amount.
If, on the last day of the Term, the Contract is annuitized, or
a death benefit becomes payable under the Contract, or a full
withdrawal is made, the Contract Value will reflect any
additional amount owed under the Rider before the payment of any
annuity or death benefits, or full withdrawal. No additional
amount will be made if the Contract Value on the last day of the
Term is greater than or equal to the Guaranteed Protection
Amount.
Optional
Step-Up in
the Guaranteed Protection Amount
On any Contract Anniversary beginning with the
3rd anniversary
of the Effective Date of this Rider and before the Annuity Date,
you may elect to increase
(“Step-Up”)
your Guaranteed Protection Amount.
If you elect the optional
Step-Up, the
following conditions will apply:
•
your election of a
Step-Up must
be received, In Proper Form, within 60 days after the
Contract Anniversary on which the
Step-Up is
effective,
•
the Guaranteed Protection Amount will be equal to your Contract
Value as of the Effective Date of the
Step-Up
(“Step-Up
Date”),
•
a new
10-year Term
will begin as of the
Step-Up
Date, and
•
you may not elect another
Step-Up
until on or after the
3rd anniversary
of the latest
Step-Up Date.
We will not permit a
Step-Up if
the new
10-year Term
will extend beyond the Annuity Date.
Subsequent
Purchase Payments
We reserve the right to reject or restrict, at our discretion,
any additional Purchase Payments. If we decide to no longer
accept Purchase Payments, we will not accept subsequent Purchase
Payments for your Contract or any other optional living benefit
riders that you may own while this Rider remains in effect.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates when a death benefit becomes payable under
the Contract. If the surviving spouse continues the Contract,
then the provisions of the Rider will continue until the end of
the Term.
Termination
The Rider will automatically terminate at the end of the Term,
or, if earlier on:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
63
•
the day we receive notification from the Owner to terminate the
Rider,
•
the date a full withdrawal of the amount available for
withdrawal is made under the Contract,
•
the day we are notified of an ownership change of a
Non-Qualified Contract (excluding ownership changes to or from
certain trusts or adding or removing the Owner’s spouse),
•
when a death benefit becomes payable under the Contract (except
as provided under the Continuation of Rider if Surviving
Spouse Continues Contract subsection),
•
the date the Contract is terminated according to the provisions
of the Contract, or
•
the Annuity Date.
If your request to terminate the Rider is received at our
Service Center within 60 days after a Contract Anniversary,
the Rider will terminate on that Contract Anniversary. If your
request to terminate the Rider is received at our Service Center
more than 60 days after a Contract Anniversary, the Rider
will terminate the day we receive the request.
If the Rider is terminated, you must wait until a Contract
Anniversary that is at least 1 year from the Effective Date
of the termination before the Rider may be purchased again (if
available).
Sample
Calculations
Hypothetical sample calculations are in the attached
APPENDIX E. The examples are based on certain
hypothetical assumptions and are for example purposes only.
These examples are not intended to serve as projections of
future investment returns.
PL&A is a life insurance company based in Arizona. Our
operations include life insurance, annuity and institutional
products and various other insurance products and services. At
the end of 2012, we had total statutory assets of
$[ ] million.
PL&A is authorized to conduct life insurance and annuity
business in Arizona, New York and certain other states. Our
executive office is located at 700 Newport Center Drive,
Newport Beach, California92660.
PL&A was incorporated in 1982 under the name of Pacific
Financial Life Insurance Company. We merged with Pacific
Financial Life Insurance Company of Arizona and assumed the PM
Group Life Insurance Company in transferring domicile from
California to Arizona, which was completed in 1990. On
January 1, 1999, we changed our name to our current name,
Pacific Life & Annuity Company.
Our affiliate, Pacific Select Distributors, Inc. (PSD), serves
as the principal underwriter (distributor) for the Contracts.
PSD is located at 700 Newport Center Drive, Newport Beach,
California92660. We and PSD enter into selling agreements with
broker-dealers, whose financial advisors are authorized by state
insurance departments to sell the Contracts.
We may provide you with reports of our ratings both as an
insurance company and as to our claims-paying ability with
respect to our General Account assets.
Pacific Life Insurance Company administers the policies sold
under this Prospectus. At the end of 2012, Pacific Life had
$[ ] billion of individual
life insurance and total admitted assets of approximately
$[ ] billion. Pacific
Life’s executive office is located at 700 Newport
Center Drive, Newport Beach, California92660.
Separate Account A was established on January 25, 1999
as a separate account of ours, and is registered with the SEC
under the Investment Company Act of 1940 (the
“1940 Act”), as a type of investment company
called a “unit investment trust.”
Obligations arising under your Contract are our general
corporate obligations. We are also the legal owner of the assets
in the Separate Account. Assets of the Separate Account
attributed to the reserves and other liabilities under the
Contract and other contracts issued by us that are supported by
the Separate Account may not be charged with liabilities arising
from any of our other business; any income, gain or loss
(whether or not realized) from the assets of the Separate
Account are credited to or charged against the Separate Account
without regard to our other income, gain or loss.
We may invest money in the Separate Account in order to commence
its operations and for other purposes, but not to support
contracts other than variable annuity contracts. A portion of
the Separate Account’s assets may include accumulations of
charges we make against
64
the Separate Account and investment results of assets so
accumulated. These additional assets are ours and we may
transfer them to our General Account at any time; however,
before making any such transfer, we will consider any possible
adverse impact the transfer might have on the Separate Account.
Subject to applicable law, we reserve the right to transfer our
assets in the Separate Account to our General Account.
The Separate Account may not be the sole investor in the Funds.
Investment in a Fund by other separate accounts in connection
with variable annuity and variable life insurance contracts may
create conflicts. See the accompanying Prospectus and the SAI
for the Funds for more information.
The table below is designed to help you understand how the
Variable Investment Options have performed. It shows the value
of a Subaccount Unit at the beginning and end of each period, as
well as the number of Subaccount Units at the end of each
period. A Subaccount Unit is also called an Accumulation
Unit.
You should read the table in conjunction with the financial
statements for Separate Account A, which are included in its
annual report dated as of December 31, 2012.
With Stepped-Up
With Standard Death Benefit
Death Benefit Rider
Number of
Number of
Subaccount
Subaccount
AUV at
AUV
Units
AUV at
AUV
Units
Beginning
at End
Outstanding
Beginning
at End
Outstanding
of Year
of Year
at End of Year
of Year
of Year
at End of Year
Emerging Markets Debt
2012
International
Small-Cap1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Mid-Cap
Value1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Equity Index
2012
$10.81
N/A
10/20/2011-12/31/2011
$10.44
$10.81
381
N/A
N/A
N/A
Small-Cap
Index1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Small-Cap Equity
2012
$11.27
N/A
10/20/2011-12/31/2011
$10.53
$11.27
2,542
N/A
N/A
N/A
American
Funds®
Asset Allocation
2012
$10.49
N/A
10/06/2011-12/31/2011
$9.90
$10.49
5,059
N/A
N/A
N/A
American
Funds®
Growth-Income1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
American
Funds®
Growth
2012
$10.11
N/A
12/01/2011-12/31/2011
$10.25
$10.11
56
N/A
N/A
N/A
Large-Cap
Value1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Technology1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Floating Rate
Loan1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Global Absolute Return
2012
Small-Cap
Growth1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Comstock1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Growth
LT1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Focused
301
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Health Sciences
2012
$10.94
N/A
11/14/2011-12/31/2011
$10.28
$10.94
3,488
N/A
N/A
N/A
International
Value1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
66
With Stepped-Up
With Standard Death Benefit
Death Benefit Rider
Number of
Number of
Subaccount
Subaccount
AUV at
AUV
Units
AUV at
AUV
Units
Beginning
at End
Outstanding
Beginning
at End
Outstanding
of Year
of Year
at End of Year
of Year
of Year
at End of Year
Long/Short
Large-Cap1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
International Large-Cap
2012
$10.06
N/A
10/20/2011-12/31/2011
$10.23
$10.06
144
N/A
N/A
N/A
Mid-Cap
Growth1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Real Estate
2012
$10.71
N/A
10/20/2011-12/31/2011
$9.87
$10.71
1,773
N/A
N/A
N/A
Small-Cap Value
2012
$10.62
N/A
11/14/2011-12/31/2011
$10.56
$10.62
3,473
N/A
N/A
N/A
Main
Street®
Core1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Emerging Markets
2012
$9.30
N/A
10/20/2011-12/31/2011
$9.46
$9.30
2,037
N/A
N/A
N/A
Cash Management
2012
$9.95
N/A
09/29/2011-12/31/2011
$9.99
$9.95
635
N/A
N/A
N/A
High Yield Bond
2012
$10.33
N/A
10/20/2011-12/31/2011
$10.01
$10.33
79
N/A
N/A
N/A
Managed Bond
2012
$9.98
N/A
12/01/2011-12/31/2011
$9.84
$9.98
18
N/A
N/A
N/A
Inflation Managed
2012
$10.03
N/A
10/06/2011-12/31/2011
$9.85
$10.03
281
N/A
N/A
N/A
Pacific Dynamix – Conservative
Growth1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Pacific Dynamix – Moderate Growth
2012
$10.31
N/A
11/10/2011-12/31/2011
$10.25
$10.31
217
N/A
N/A
N/A
Pacific
Dynamix – Growth1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Portfolio Optimization Conservative
2012
$10.16
$10.15
10/24/2011-12/31/2011
$10.08
$10.16
2,603
$10.15
$10.15
575
Portfolio Optimization Moderate-Conservative
2012
$10.21
$10.20
10/17/2011-12/31/2011
$10.22
$10.21
2,543
$9.99
$10.20
2,226
Portfolio Optimization Moderate
2012
$10.28
$10.27
11/28/2011-12/31/2011
$10.31
$10.28
34,629
$9.98
$10.27
6,726
Portfolio Optimization Growth
2012
N/A
$10.35
09/16/2011-12/31/2011
N/A
N/A
N/A
$10.26
$10.35
27,142
Portfolio Optimization Aggressive-Growth
2012
N/A
$10.42
11/30/2011-12/31/2011
N/A
N/A
N/A
$10.45
$10.42
2,687
Mid-Cap
Equity1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Dividend Growth
2012
$10.90
N/A
11/14/2011-12/31/2011
$10.81
$10.90
2,546
N/A
N/A
N/A
67
With Stepped-Up
With Standard Death Benefit
Death Benefit Rider
Number of
Number of
Subaccount
Subaccount
AUV at
AUV
Units
AUV at
AUV
Units
Beginning
at End
Outstanding
Beginning
at End
Outstanding
of Year
of Year
at End of Year
of Year
of Year
at End of Year
Short Duration
Bond1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Currency Strategies
2012
Large-Cap
Growth1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Precious Metals
2012
Diversified
Bond1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Inflation
Protected1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
Invesco V.I. Balanced-Risk Allocation Fund Series II
2012
$9.93
N/A
10/06/2011-12/31/2011
$9.51
$9.93
5,765
N/A
N/A
N/A
AllianceBernstein VPS Balanced Wealth Strategy Portfolio
Class B
2012
$10.17
N/A
10/27/2011-12/31/2011
$10.55
$10.17
2,736
N/A
N/A
N/A
BlackRock Global Allocation V.I. Fund Class III
2012
$9.87
N/A
10/06/2011-12/31/2011
$9.62
$9.87
11,689
N/A
N/A
N/A
Fidelity VIP
FundsManager®
60% Portfolio Service Class 2
2012
First Trust/Dow Jones Dividend & Income Allocation
Portfolio
2012
Franklin Templeton VIP Founding Funds Allocation Fund
Class 4
2012
$10.52
N/A
11/28/2011-12/31/2011
$10.07
$10.52
1,446
N/A
N/A
N/A
GE Investments Total Return Fund Class 3
2012
$10.21
N/A
10/24/2011-12/31/2011
$10.31
$10.21
5,093
N/A
N/A
N/A
MFS®
Total Return Series – Service
Class1
2012
N/A
N/A
2011
N/A
N/A
N/A
N/A
N/A
N/A
PIMCO Global Multi-Asset Portfolio – Advisor
Class
2012
$9.64
N/A
10/06/2011-12/31/2011
$9.61
$9.64
7,904
N/A
N/A
N/A
1
As of December 31, 2011, this
Subaccount has not commenced operations.
The following summary of federal income tax issues is based
on our understanding of current tax laws and regulations, which
may be changed by legislative, judicial or administrative
action. The summary is general in nature and is not intended as
tax advice. Moreover, it does not consider any applicable
foreign, state or local tax laws. We do not make any guarantee
regarding the tax status, federal, foreign, state or local, of
any Contract or any transaction involving the Contracts.
Accordingly, you should consult a qualified tax adviser for
complete information and advice before purchasing a Contract.
Additional tax information is included in the SAI.
Diversification
Requirements and Investor Control
Section 817(h) of the Code provides that the investments
underlying a variable annuity must satisfy certain
diversification requirements in order for the contract to be
treated as an annuity contract and qualify for tax deferral. We
believe the underlying Variable Investment Options for the
contract meet these requirements. Details on these
diversification requirements appear in the Fund SAIs.
In addition, for a variable annuity contract to qualify for tax
deferral, assets in the separate accounts supporting the
contract must be considered to be owned by the insurance company
and not by the contract owner. Under current U.S. tax law, if a
contract owner has excessive control over the investments made
by a separate account, or the underlying fund, the contract
owner will be taxed currently on income and gains from the
account or fund. In other words, in such a case of investor
control the contract owner would not derive the tax benefits
normally associated with variable annuities. For more
information regarding investor control, please refer to the
contract SAI.
Section 72 of the Code governs the taxation of annuities in
general, and we designed the Contracts to meet the requirements
of Section 72 of the Code. We believe that, under current
law, the Contract will be treated as an annuity for federal
income tax purposes if the Contract Owner is a natural person or
an agent for a natural person, and that we (as the issuing
insurance company), and not the Contract Owner(s), will be
treated as the owner of the investments underlying the Contract.
Accordingly, no tax should be payable by you as a Contract Owner
as a result of any increase in Contract Value until you receive
money under your Contract. You should, however, consider how
amounts will be taxed when you do receive them. The following
discussion assumes that your Contract will be treated as an
annuity for federal income tax purposes.
These general rules apply to Non-Qualified Contracts. As
discussed below, however, tax rules may differ for Qualified
Contracts and you should consult a qualified tax adviser if you
are purchasing a Qualified Contract.
Taxes
Payable
A Contract Owner is not taxed on the increases in the value of a
Contract until an amount is received or deemed to be received.
An amount could be received or deemed to be received, for
example, if there is a partial distribution, a lump sum
distribution, an Annuity payment or a material change in the
Contract or if any portion of the Contract is pledged or
assigned. See the Addition of Optional Rider or Material
Change to Contract section below. Increases in Contract
Value that are received or deemed to be received are taxable to
the Contract Owner as ordinary income. Distributions of net
investment income or capital gains that each Subaccount receives
from its corresponding Portfolio are automatically reinvested in
such Portfolio unless we, on behalf of the Separate Account,
elect otherwise. As noted above, you will be subject to federal
income taxes on the investment income from your Contract only
when it is distributed to you.
Beginning in 2013, any taxable distribution of the investment
income from your Contract may also be subject to a net
investment income tax of 3.8%. This tax applies to various
investment income such as interest, dividends, royalties,
payments from annuities, and the disposition of property, but
only to the extent a married taxpayer’s modified adjusted
gross income exceeds $250,000 ($200,000 if single). Please
speak to your tax advisor about this new tax.
Non-Natural
Persons as Owners
If a contract is not owned or held by a natural person or as
agent for a natural person, the contract generally will not be
treated as an “annuity” for tax purposes, meaning that
the contract owner will be subject to current tax on annual
increases in Contract Value at ordinary income rates unless some
other exception applies. Certain entities, such as some trusts,
may be deemed to be acting as agents for natural persons.
Corporations, including S corps, C corps, LLCs,
partnerships and FLPs, and tax exempt entities are non-natural
persons that will not be deemed to be acting as agents for
natural persons.
Addition
of Optional Rider or Material Change to Contract
The addition of a rider to the Contract, or a material change in
the Contract’s provisions, such as a change in Contract
ownership or an assignment of the Contract, could cause it to be
considered newly issued or entered into for tax purposes, and
thus could cause a taxable event or the Contract to lose certain
grandfathered tax status. Please contact your tax adviser for
more information.
69
Taxes
Payable on Withdrawals Prior to the Annuity Date
Amounts you withdraw before annuitization, including amounts
withdrawn from your Contract Value in connection with partial
withdrawals for payment of any charges and fees, will be treated
first as taxable income to the extent that your Contract Value
exceeds the aggregate of your Purchase Payments reduced by
non-taxable amounts previously received (investment in the
Contract), and then as non-taxable recovery of your Purchase
Payments. Therefore, you include in your gross income the
smaller of: a) the amount of the partial withdrawal, or
b) the amount by which your Contract Value immediately
before you receive the distribution exceeds your investment in
the Contract at that time.
If at the time of a partial withdrawal your Contract Value does
not exceed your investment in the Contract, then the withdrawal
will not be includable in gross income and will simply reduce
your investment in the Contract. Exceptions to this rule are
distributions in full discharge of your Contract (a full
surrender) or distributions from contracts issued and
investments made before August 14, 1982.
The assignment or pledge of (or agreement to assign or pledge)
the value of the Contract for a loan will be treated as a
withdrawal subject to these rules. You should consult your tax
adviser for additional information regarding taking a partial or
a full distribution from your Contract.
Multiple
Contracts (Aggregation Rule)
Multiple Non-Qualified Contracts that are issued after
October 21, 1988, by us or our affiliates to the same Owner
during the same calendar year are treated as one Contract for
purposes of determining the taxation of distributions (the
amount includible in gross income under Code Section 72(e))
prior to the Annuity Date from any of the Contracts. A Contract
received in a tax-free exchange under Code Section 1035 may
be treated as a new Contract for this purpose. For Contracts
subject to the Aggregation Rule, the values of the Contracts and
the investments in the Contracts should be added together to
determine the taxation under Code Section 72(e).
Withdrawals will be treated first as withdrawals of income until
all of the income from all such Contracts is withdrawn. The
Treasury Department has specific authority under Code
Section 72(e)(11) to issue regulations to prevent the
avoidance of the income-out-first rules for withdrawals prior to
the Annuity Date through the serial purchase of Contracts or
otherwise. As of the date of this Prospectus there are no
regulations interpreting these aggregation provisions.
10% Tax
Penalty Applicable to Certain Withdrawals and Annuity
Payments
The Code provides that the taxable portion of a withdrawal or
other distribution may be subject to a tax penalty equal to 10%
of that taxable portion unless the withdrawal is:
•
made on or after the date you reach
age 591/2,
•
made by a Beneficiary after your death,
•
attributable to your becoming disabled,
•
any payment made under an immediate annuity,
•
attributable to an investment in the Contract made prior to
August 14, 1982, or
•
any distribution that is a part of a series of substantially
equal periodic payments (Code Section 72(q) payments) made
(at least annually) over your life (or life expectancy) or the
joint lives (or life expectancies) of you and your designated
beneficiary.
Additional exceptions may apply to certain Qualified Contracts
(see Taxes Payable on Annuity Payments and the
applicable Qualified Contracts).
Taxes
Payable on Optional Rider Charges
It is our understanding that the charges relating to any
optional death benefit rider are not subject to current taxation
and we will not report them as such. However, the IRS may
determine that these charges should be treated as partial
withdrawals subject to current taxation to the extent of any
gain and, if applicable, the 10% tax penalty. We reserve the
right to report any optional death benefit rider charges as
partial withdrawals if we believe that we would be expected to
report them in accordance with IRS regulations.
Distributions
After the Annuity Date
After you annuitize, a portion of each annuity payment you
receive under a Contract generally will be treated as a partial
recovery of Investments (as used here, “Investments”
means the aggregate Purchase Payments less any amounts that were
previously received under the Contract but not included in
income) and will not be taxable. (In certain circumstances,
subsequent modifications to an initially-established payment
pattern may result in the imposition of a tax penalty.) The
remainder of each annuity payment will be taxed as ordinary
income. However, after the full amount of aggregate Investments
has been recovered, the full amount of each annuity payment will
be taxed as ordinary income. Exactly how an annuity payment is
divided into taxable and non-taxable portions depends on the
70
period over which annuity payments are expected to be received,
which in turn is governed by the form of annuity selected and,
where a lifetime annuity is chosen, by the life expectancy of
the Annuitant(s) or payee(s). Such a payment may also be subject
to a tax penalty if taken prior to age
591/2.
For periodic (annuity) payments, we will default your state tax
withholding (as applicable) based upon the marital status and
allowance(s) provided for your federal taxes or, if no
withholding instructions are provided, we will default to either
a married person with 3 exemptions or your resident state’s
prescribed withholding default (if applicable). Please consult
with a tax advisor for additional information, including whether
your resident state has a specific version of the W-4P form that
should be submitted to us with state-specific income tax
information.
Same-Sex
Spouses
Pursuant to Section 3 of the federal Defense of Marriage
Act (“DOMA”), same-sex marriages currently are not
recognized for purposes of federal law. Therefore, the favorable
income-deferral options afforded by federal tax law to an
opposite-sex spouse under Internal Revenue Code
sections 72(s) and 401(a)(9) are currently NOT available to
a same-sex spouse. Same-sex spouses who own or are considering
the purchase of annuity products that provide benefits based
upon status as a spouse should consult a tax advisor. To the
extent that an annuity contract or certificate accords to
spouses other rights or benefits that are not affected by DOMA,
same-sex spouses remain entitled to such rights or benefits to
the same extent as any annuity holder’s spouse.
Distributions
to Beneficiary After Contract Owner’s Death
Generally, the same tax rules apply to amounts received by the
Beneficiary as those that apply to the Contract Owner, except
that the early withdrawal tax penalty does not apply. Thus, any
annuity payments or lump sum withdrawal will be divided into
taxable and non-taxable portions.
If death occurs after the Annuity Date, but before the
expiration of a period certain option, the Beneficiary will
recover the balance of the Investments as payments are made and
may be allowed a deduction on the final tax return for the
unrecovered Investments. A lump sum payment taken by the
Beneficiary in lieu of remaining monthly annuity payments is not
considered an annuity payment for tax purposes. The portion of
any lump sum payment to a Beneficiary in excess of aggregate
unrecovered Investments would be subject to income tax.
Contract
Owner’s Estate
Generally, any amount payable to a Beneficiary after the
Contract Owner’s death, whether before or after the Annuity
Date, will be included in the estate of the Contract Owner for
federal estate tax purposes. If the inclusion of the value of
the Contract triggers a federal estate tax to be paid, the
Beneficiary may be able to use a deduction called Income in
Respect of Decedent (IRD) in calculating the income taxes
payable upon receipt of the death benefit proceeds. In addition,
designation of a non-spouse Beneficiary who either is
371/2
or more years younger than a Contract Owner or is a grandchild
of a Contract Owner may have Generation Skipping Transfer Tax
(GSTT) consequences under section 2601 of the Code. You
should consult with a qualified tax advisor if you have
questions about federal estate tax, IRD, or GSTT.
Gifts of
Annuity Contracts
Generally, gifts of Non-Qualified Contracts prior to the annuity
start date will trigger tax reporting to the donor on the gain
on the Contract, with the donee getting a stepped-up basis for
the amount included in the donor’s income. The 10% early
withdrawal tax penalty and gift tax also may be applicable. This
provision does not apply to transfers between spouses or
incident to a divorce, or transfers to and from a trust acting
as agent for the Owner or the Owner’s spouse.
Tax
Withholding for Non-Qualified Contracts
Unless you elect to the contrary, any amounts you receive under
your Contract that are attributable to investment income will be
subject to withholding to meet federal income tax obligations.
For nonperiodic distributions, you will have the option to
provide us with withholding information at the time of your
withdrawal request. If you do not provide us with withholding
information, we will generally withhold 10% of the taxable
distribution amount and remit it to the IRS. For periodic
(annuity) payments, the rate of withholding will be determined
on the basis of the withholding information you provide to us.
If you do not provide us with withholding information, we are
required to determine the Federal income tax withholding, from
every annuity payment, as if you are a married person with 3
exemptions. State and local withholding may apply different
defaults and will be determined by applicable law.
Please call us at
(800) 748-6907
with any questions about the required withholding information.
71
Tax
Withholding for
Non-resident
Aliens or Non U.S. Persons
Taxable distributions to Contract Owners who are non-resident
aliens or other non U.S. persons are generally subject to
U.S. federal income tax withholding at a 30% rate, unless a
lower treaty rate applies. Prospective foreign owners are
advised to consult with a tax advisor regarding the U.S., state
and foreign tax treatment of a Contract.
Exchanges
of Non-Qualified Contracts (1035 Exchanges)
You may make your initial or an additional Purchase Payment
through an exchange of an existing annuity contract or endowment
life insurance contract pursuant to Section 1035 of the
Code (a 1035 exchange). The exchange can be effected by
completing the Transfer/Exchange form, indicating in the
appropriate section of the form that you are making a
1035 exchange and submitting any applicable
Regulation 60 paperwork. The form is available by calling
your financial advisor or by calling us at
(800) 748-6907.
Once completed, the form should be mailed to us. If you are
making an initial Purchase Payment, a completed Contract
application should also be attached.
In general terms, Section 1035 of the Code provides that no
gain or loss is recognized when you exchange one annuity or life
insurance contract for another annuity contract. Transactions
under Section 1035, however, may be subject to special
rules and may require special procedures and record keeping,
particularly if the exchanged annuity contract was issued prior
to August 14, 1982. You should consult your tax adviser
prior to effecting a 1035 exchange.
Partial
1035 Exchanges
A partial exchange is the direct transfer of only a portion of
an existing annuity’s Contract Value to a new annuity
contract.
Rev. Proc. 2011-38
significantly eased the restrictions on partial transfers
adopted by
Rev. Proc. 2008-24.
Under
Rev. Proc. 2011-38,
the 12 month period is reduced to 180 days, so that a
partial exchange will be treated as tax-free under Code
Section 1035 if there are no distributions, from either
annuity, within 180 days of the partial 1035 exchange.
In addition, annuity payments that satisfy the newly enacted
partial annuitization rule of Code Section 72(a)(2) will
not be treated as a distribution from either the old or new
contract.
Rev. Proc. 2011-38
also replaces
Rev. Proc. 2008-24’s
automatic characterization of a transfer as a distribution
taxable under Code Section 72(e) if it did not qualify as a
tax-free exchange under Code Section 1035 with an analysis
by the IRS, using general tax principles, to determine the
substance, and thus the treatment of, the transaction. Rev.
Proc.
2011-38
applies to partial exchanges on or after October 24,2011. Rev. Proc.
2008-24
applies to partial exchanges that were effective before
October 24, 2011.
You should consult your tax adviser prior to effecting a
partial 1035 exchange.
In general, in the case of Non-Qualified Contracts, if you are
an individual and expect to accumulate your Contract Value over
a relatively long period of time without making significant
withdrawals, there may be federal income tax advantages in
purchasing such a Contract. This is because any increase in
Contract Value is not subject to current taxation. Income taxes
are deferred until the money is withdrawn, at which point
taxation occurs only on the gain from the investment in the
Contract. With income taxes deferred, you may accumulate more
money over the long term through a variable annuity than you may
through non-tax-deferred investments. The advantage may be
greater if you decide to liquidate your Contract Value in the
form of monthly annuity payments after your retirement, or if
your tax rate is lower at that time than during the period that
you held the Contract, or both.
When withdrawals or distributions are taken from the variable
annuity, the gain is taxed as ordinary income. This may be a
potential disadvantage because money that had been invested in
other types of assets may qualify for a more favorable federal
tax rate. For example, in 2011 the tax rate applicable both to
the sale of capital gain assets held more than 1 year and
to the receipt of qualifying dividends by individuals is
generally 15% (0% for lower-income individuals). In contrast, an
ordinary income tax rate of up to 35% applies to taxable
withdrawals on distributions from a variable annuity in 2011.
Also, withdrawals or distributions taken from a variable annuity
prior to attaining age
591/2
may be subject to a tax penalty equal to 10% of the taxable
portion, although exceptions to the tax penalty may apply.
An owner of a variable annuity cannot deduct or offset losses on
transfers to or from Subaccounts, or at the time of any partial
withdrawals. If you surrender your Contract and your Net
Contract Value is less than the aggregate of your investments in
the Contract (reduced by any previous non-taxable
distributions), there may be a deductible ordinary income loss,
although the deduction may be limited. Consult with your tax
adviser regarding the impact of federal income taxes on your
specific situation.
Although the Separate Account is registered as an investment
company, it is not a separate taxpayer for purposes of the Code.
The earnings of the Separate Account are taxed as part of our
operations. No charge is made against the Separate Account for
our federal income taxes (excluding the charge for premium
taxes), but we will review, periodically, the question of
charges to the Separate Account or your Contract for such taxes.
Such a charge may be made in future years for any federal income
taxes that would be attributable to the
72
Separate Account or to our operations with respect to your
Contract, or attributable, directly or indirectly, to
investments in your Contract.
Under current law, we may incur state and local taxes (in
addition to premium taxes) in several states. At present, these
taxes are not significant and they are not charged against the
Contract or the Separate Account. If there is a material change
in applicable state or local tax laws, the imposition of any
such taxes upon us that are attributable to the Separate Account
or to our operations with respect to your Contract may result in
a corresponding charge against the Separate Account or your
Contract.
Given the uncertainty of future changes in applicable federal,
state or local tax laws, we cannot appropriately describe the
effect a tax law change may have on taxes that would be
attributable to the Separate Account or your Contract.
The Contracts are available to a variety of Qualified Plans and
IRAs. Tax restrictions and consequences for Contracts under each
type of Qualified Plan and IRAs differ from each other and from
those for Non-Qualified Contracts. No attempt is made herein to
provide more than general information about the use of the
Contract with the various types of Qualified Plans and IRAs.
Participants under such Qualified Plans, as well as Contract
Owners, Annuitants and Beneficiaries, are cautioned that the
rights of any person to any benefits under such Qualified Plans
may be subject to the terms and conditions of the Plans
themselves or limited by applicable law, regardless of the terms
and conditions of the Contract issued in connection therewith.
Tax
Deferral
It is important to know that Qualified Plans such as 401(k)s, as
well as IRAs, are already tax-deferred. Therefore, an annuity
contract should be used to fund an IRA or Qualified Plan to
benefit from the annuity’s features other than tax
deferral. Other benefits of using a variable annuity to fund a
Qualified Plan or an IRA include the lifetime income options,
guaranteed death benefit options and the ability to transfer
among Investment Options without sales or withdrawal charges.
You should consider if the Contract is a suitable investment if
you are investing through a Qualified Plan or IRA.
Taxes
Payable
Generally, amounts received from Qualified Contracts are taxed
as ordinary income under Section 72, to the extent that
they are not treated as a tax free recovery of contributions.
Different rules apply for Roth IRAs. Consult your tax advisor
before requesting a distribution from a Qualified Contract.
10% Tax
Penalty for Early Withdrawals
Generally, distributions from IRAs and Qualified Plans that
occur before you attain
age 591/2
are subject to a 10% tax penalty imposed on the amount of the
distribution that is includable in gross income, with certain
exceptions. These exceptions include distributions:
•
made to a beneficiary after the owner’s/participant’s
death,
•
attributable to the owner/participant becoming disabled under
Section 72(m)(7),
•
that are part of a series of substantially equal periodic
payments (also referred to as SEPPs or 72(t) payments) made
(at least annually) over your life (or life expectancy) or the
joint lives (or joint life expectancies) of you and your
designated beneficiary,
•
for certain higher education expenses (IRAs only),
•
used to pay for certain health insurance premiums or medical
expenses (IRAs only),
•
for costs related to the purchase of your first home (IRAs
only), and
•
(except for IRAs) made to an employee after separation from
service after reaching age 55 (or age 50 in the case
of a qualified public safety employee).
Tax
Withholding for Qualified Contracts
Distributions from a Contract under a Qualified Plan (not
including an individual retirement annuity subject to Code
Section 408 or Code Section 408A) to an employee,
surviving spouse, or former spouse who is an alternate payee
under a qualified domestic relations order, in the form of a
lump sum settlement or periodic annuity payments for a fixed
period of fewer than 10 years are subject to mandatory
income tax withholding of 20% of the taxable amount of the
distribution, unless:
•
the distributee directs the transfer of such amounts in cash to
another Qualified Plan or a traditional IRA, or
•
the payment is a minimum distribution required under the Code.
73
The taxable amount is the amount of the distribution less the
amount allocable to after-tax contributions. All other types of
taxable distributions are subject to withholding unless the
distributee elects not to have withholding apply.
For periodic (annuity) payments, the rate of withholding will be
determined on the basis of the withholding information you
provide to us. If you do not provide us with withholding
information, we are required to determine the Federal income tax
withholding, from every annuity payment, as if you are a married
person with 3 exemptions. State and local withholding may
apply different defaults and will be determined by applicable
law.
IRAs and
Other Qualified Contracts with Optional Benefit Riders
As of the date of this Prospectus, there are special
considerations for purchases of any optional living or death
benefit riders. IRS regulations state that Individual Retirement
Accounts (IRAs) may generally not invest in life insurance
contracts. We believe that these regulations do not prohibit the
optional living or death benefit riders from being added to your
Contract if it is issued as a Traditional IRA, Roth IRA, SEP IRA
or SIMPLE IRA. However, the law is unclear and it is possible
that a Contract that has optional living or death benefit riders
and is issued as a Traditional IRA, Roth IRA, SEP IRA or SIMPLE
IRA could be disqualified and may result in increased taxes to
the Owner.
Similarly, section 401 plans, section 403(b) annuities
and IRAs (but not Roth IRAs) can only offer incidental
death benefits. The Internal Revenue Service (IRS) could
take the position that the enhanced death benefits provided by
optional benefit riders are not incidental. In addition, to the
extent that the optional benefit riders alter the timing or the
amount of the payment of distributions under a Qualified
Contract, the riders cannot be paid out in violation of the
minimum distribution rules of the Code.
It is our understanding that the charges relating to the
optional benefit riders are not subject to current taxation and
we will not report them as such. However, the IRS may determine
that these charges should be treated as partial withdrawals
subject to current income taxation to the extent of any gain
and, if applicable, the 10% tax penalty. We reserve the right to
report the rider charges as partial withdrawals if we believe
that we would be expected to report them in accordance with IRS
regulations.
Required
Minimum Distributions
The regulations provide that you cannot keep assets in Qualified
Plans or IRAs indefinitely. Eventually they are required to be
distributed; at that time (the Required Beginning Date (RBD)),
Required Minimum Distributions (RMDs) are the amount that must
be distributed each year.
Under Section 401 of the Code (for Qualified Plans) and
Section 408 of the Code (for IRAs), the entire interest
under the Contract must be distributed to the Owner/Annuitant no
later than the Owner/Annuitant’s RBD, or distributions over
the life of the Owner/Annuitant (or the Owner/Annuitant and his
beneficiary) must begin no later than the RBD.
The RBD for distributions from a Qualified Contract maintained
for an IRA under Section 408 of the Code is generally
April 1 of the calendar year following the year in which
the Owner/Annuitant reaches
age 701/2.
The RBD for a Qualified Contract maintained for a qualified
retirement or pension plan under Section 401 of the Code or
a Section 403(b) annuity is April 1 of the calendar
year following the later of the year in which the
Owner/Annuitant reaches
age 701/2,
or, if the plan so provides, the year in which the
Owner/Annuitant retires. There is no RBD for a Roth IRA
maintained pursuant to Section 408A of the Code.
The IRS requires that all IRA holders and Qualified Plan
Participants (with one exception discussed below) use the
Uniform Lifetime Table to calculate their RMDs.
The Uniform Lifetime Table is based on a joint life expectancy
and uses the IRA owner’s actual age and assumes that the
beneficiary is 10 years younger than the IRA owner. Note
that under these Final Regulations, the IRA owner does not need
to actually have a named beneficiary when they turn
age 701/2.
The exception noted above is for an IRA owner who has a spouse,
who is more than 10 years younger, as the sole beneficiary
on the IRA. In that situation, the spouse’s actual age (and
life expectancy) will be used in the joint life calculation.
If the Owner/Annuitant dies prior to his RBD or complete
distribution from the Qualified Contract, the remainder shall be
distributed as provided in the “Qualified Contract
Distribution Rules” section of this Prospectus. For
non-spouse beneficiaries, life expectancy is initially computed
by use of the Single Life Table of the Final Regulations
(Regulation
Section 1.401(a)(9)-9).
Subsequent life expectancy shall be calculated by reducing the
life expectancy of the Beneficiary by one in each following
calendar year.
The method of distribution selected must comply with the minimum
distribution rules of Code Section 401(a)(9), and the
applicable Regulations thereunder.
Actuarial
Value
In accordance with recent changes in laws and regulations, RMDs
and Roth IRA conversions may be calculated based on the sum of
the contract value and the actuarial value of any additional
death benefits and benefits from optional riders that you have
purchased under
74
the Contract. As a result, RMDs and taxes due on Roth IRA
Conversions may be larger than if the calculation were based on
the contract value only, which may in turn result in an earlier
(but not before the required beginning date) distribution under
the Contract and an increased amount of taxable income
distributed to the contract owner, and a reduction of death
benefits and the benefits of any optional riders.
RMDs and
Annuity Options
Under the Final Regulations, for retirement plans that qualify
under Section 401 or 408 of the Code, the period elected
for receipt of RMDs as annuity payments under Annuity
Options 2 and 4 generally may be:
•
no longer than the joint life expectancy of the Annuitant and
Beneficiary in the year that the Annuitant reaches
age 701/2,
and
•
must be shorter than such joint life expectancy if the
Beneficiary is not the Annuitant’s spouse and is more than
10 years younger than the Annuitant.
Under Annuity Option 3, if the Beneficiary is not the
Annuitant’s spouse and is more than 10 years younger
than the Annuitant, the
662/3%
and 100% elections specified below may not be available. The
restrictions on options for retirement plans that qualify under
Sections 401 and 408 also apply to a retirement plan that
qualifies under Section 403(b) with respect to amounts that
accrued after December 31, 1986.
Loans
Certain Owners of Qualified Contracts may borrow against their
Contracts. Otherwise loans from us are not permitted. You may
request a loan from us, using your Contract Value as your only
security if yours is a Qualified Contract that is:
•
not subject to Title 1 of ERISA,
•
issued under Section 403(b) of the Code, and
•
issued under a Plan that permits Loans (a “Loan Eligible
Plan”).
You may have only one loan outstanding at any time. The minimum
loan amount is $1,000. Your Contract Debt at the effective date
of your loan may not exceed the lesser of:
•
50% of the amount available for withdrawal under this Contract
(see WITHDRAWALS – Optional Withdrawals –
Amount Available for Withdrawal), or
•
$50,000 less your highest outstanding Contract Debt during the
12-month
period immediately preceding the effective date of your loan.
If your request for a loan is processed, you will be charged
interest on your Contract Debt at a fixed annual rate equal to
5%. The amount held in the Loan Account to secure your loan will
earn a return equal to an annual rate of 3%. The net amount of
interest you pay on your loan will be 2.00% annually.
Interest charges accrue on your Contract Debt daily, beginning
on the effective date of your loan. Interest earned on the Loan
Account Value accrues daily beginning on the day following the
effective date of the loan, and those earnings will be
transferred once a year to your Investment Options in accordance
with your most recent allocation instructions. Your loan,
including principal and accrued interest, generally must be
repaid in quarterly installments and loan repayments are not
considered Purchase Payments. For more information about loans,
including the consequences of loans, loan procedures, loan terms
and repayment terms, see the SAI.
Taking a loan while an optional living benefit Rider is in
effect will terminate your Rider. Work with your financial
advisor before taking a loan.
We may change these loan provisions to reflect changes in the
Code or interpretations thereof. We urge you to consult with
a qualified tax adviser prior to effecting any loan transaction
under your Contract.
The following is only a general discussion about types of
IRAs and Qualified Plans for which the Contracts are available.
We are not the administrator of any Qualified Plan. The plan
administrator and/or custodian, whichever is applicable, (but
not us) is responsible for all Plan administrative duties
including, but not limited to, notification of distribution
options, disbursement of Plan benefits, handling any processing
and administration of Qualified Plan loans, compliance
regulatory requirements and federal and state tax reporting of
income/distributions from the Plan to Plan participants and, if
applicable, Beneficiaries of Plan participants and IRA
contributions from Plan participants. Our administrative duties
are limited to administration of the Contract and any
disbursements of any Contract benefits to the Owner, Annuitant,
or Beneficiary of the Contract, as applicable. Our tax reporting
responsibility is limited to federal and state tax reporting of
income/distributions to the applicable payee and IRA
contributions from the Owner of a
75
Contract, as recorded on our books and records. The
Qualified Plan (the plan administrator or the custodian) is
required to provide us with information regarding individuals
with signatory authority on the Contract(s) owned. If you are
purchasing a Qualified Contract, you should consult with your
plan administrator and/or a qualified tax adviser. You should
also consult with a qualified tax adviser and/or plan
administrator before you withdraw any portion of your Contract
Value.
Individual
Retirement Annuities (“IRAs”)
In addition to “traditional” IRAs established under
Code 408, there are SEP IRAs under Code
Section 408(k), Roth IRAs governed by Code
Section 408A and SIMPLE IRAs established under Code
Section 408(p). Also, Qualified Plans under
Section 401 or 403(b) of the Code that include after-tax
employee contributions may be treated as deemed IRAs subject to
the same rules and limitations as traditional IRAs.
Contributions to each of these types of IRAs are subject to
differing limitations. The following is a very general
description of each type of IRA and other Qualified Plans.
Traditional
IRAs
Traditional IRAs are subject to limitations on the amount that
may be contributed each year, the persons who may be eligible to
contribute, when rollovers are available and when distributions
must commence. Depending upon the circumstances of the
individual, contributions to a traditional IRA may be made on a
deductible or non-deductible basis.
Annual contributions are generally allowed for persons who have
not attained
age 701/2
and who have compensation (as defined by the IRS) of at least
the contribution amount. Distributions of minimum amounts
specified by the Code must commence by April 1 of the
calendar year following the calendar year in which you attain
age 701/2.
Failure to make mandatory minimum distributions may result in
imposition of a 50% tax penalty on any difference between the
required distribution amount and the amount actually
distributed. Additional distribution rules apply after your
death.
You (or your surviving spouse if you die) may rollover funds
(such as proceeds from existing insurance policies, annuity
contracts or securities) from certain existing Qualified Plans
into your traditional IRA if those funds are in cash. This will
require you to liquidate any value accumulated under the
existing Qualified Plan. Mandatory withholding of 20% may apply
to any rollover distribution from your existing Qualified Plan
if the distribution is not transferred directly to your
traditional IRA. To avoid this withholding you should have cash
transferred directly from the insurance company or plan trustee
to your traditional IRA.
SIMPLE
IRAs
The Savings Incentive Match Plan for Employees of Small
Employers (“SIMPLE Plan”) is a type of IRA established
under Code Section 408(p)(2). Depending upon the SIMPLE
Plan, employers may make plan contributions into a SIMPLE IRA
established by each participant of the SIMPLE Plan. Like other
IRAs, a 10% tax penalty is imposed on certain distributions that
occur before an employee attains
age 591/2.
In addition, the tax penalty is increased to 25% for amounts
received or rolled to another IRA or Qualified Plan during the
2-year
period beginning on the date an employee first participated in a
qualified salary reduction arrangement pursuant to a SIMPLE Plan
maintained by their employer. Contributions to a SIMPLE IRA will
generally include employee salary deferral contributions and
employer contributions. Distributions from a SIMPLE IRA may be
transferred to another SIMPLE IRA tax free or may be eligible
for tax free rollover to a traditional IRA, a 403(b) or other
Qualified Plan after the required
2-year
period.
SEP-IRAs
A Simplified Employee Pension (SEP) is an employer sponsored
retirement plan under which employers are allowed to make
contributions toward their employees’ retirement, as well
as their own retirement (if the employer is self-employed). A
SEP is a type of IRA established under Code Section 408(k).
Under a SEP, a separate IRA account called a SEP-IRA is set up
by or for each eligible employee and the employer makes the
contribution to the account. Like other IRAs, a 10% tax penalty
is imposed on certain distributions that occur before an
employee attains
age 591/2.
Roth
IRAs
Section 408A of the Code permits eligible individuals to
establish a Roth IRA. Contributions to a Roth IRA are not
deductible, but withdrawals of amounts contributed and the
earnings thereon that meet certain requirements are not subject
to federal income tax. In general, Roth IRAs are subject to
limitations on the amount that may be contributed and the
persons who may be eligible to contribute and are subject to
certain required distribution rules on the death of the Contract
Owner. Unlike a traditional IRA, Roth IRAs are not subject to
minimum required distribution rules during the Contract
Owner’s lifetime. Generally, however, the amount remaining
in a Roth IRA must be distributed by the end of the fifth year
after the death of the Contract Owner/Annuitant or distributed
over the life expectancy of the Designated Beneficiary. The
owner of a traditional IRA may convert a traditional IRA into a
Roth IRA under certain circumstances. The conversion of a
traditional IRA to a Roth IRA will subject the amount of the
converted traditional IRA to federal income tax. Anyone
considering the purchase of a Qualified Contract as a Roth IRA
or a “conversion” Roth IRA should consult with a
qualified tax adviser.
76
In accordance with recent changes in laws and regulations, at
the time of either a full or partial conversion from a
Traditional IRA annuity to a Roth IRA annuity, the determination
of the amount to be reported as income will be based on the
annuity contract’s “fair market value”, which
will include all front-end loads and other non-recurring charges
assessed in the 12 months immediately preceding the
conversion, and the actuarial present value of any additional
contract benefits.
Tax
Sheltered Annuities (“TSAs”)
Employees of certain tax-exempt organizations, such as public
schools or hospitals, may defer compensation through an eligible
plan under Code Section 403(b). Salary deferral amounts
received from employers for these employees are excludable from
the employees’ gross income (subject to maximum
contribution limits). Distributions under these Contracts must
comply with certain limitations as to timing, or result in tax
penalties. Distributions from amounts contributed to a TSA
pursuant to a salary reduction arrangement, may be made from a
TSA only upon attaining
age 591/2,
severance from employment, death, disability, or financial
hardship. Section 403(b) annuity distributions can be
rolled over to other Qualified Plans in a manner similar to
those permitted by Qualified Plans that are maintained pursuant
to Section 401 of the Code.
In accordance with Code Section 403(b) and final
regulations published on July 26, 2007 (“Final
Regulations”), as of January 1, 2009, we are required
to provide information regarding contributions, loans,
withdrawals, and hardship distributions from your Contract to
your 403(b) employer or an agent of your
403(b) employer, upon request. In addition, prior to
processing your request for certain transactions, we are
required to verify certain information about you with your
403(b) employer (or if applicable, former
403(b) employer) which may include obtaining authorization
from either your employer or your employer’s third party
administrator.
401(k) Plans;
Pension and Profit-Sharing Plans
Qualified Plans may be established by an employer for certain
eligible employees under Section 401 of the Code. These
plans may be 401(k) plans, profit-sharing plans, or other
pension or retirement plans. Contributions to these plans are
subject to limitations. Rollover to other eligible plans may be
available. Please consult your Qualified Plans Summary Plan
description for more information.
We are the legal owner of the shares of the Portfolios held by
the Subaccounts. We may vote on any matter voted on at
shareholders’ meetings of the Funds. However, our current
interpretation of applicable law requires us to vote the number
of shares attributable to your Variable Account Value (your
“voting interest”) in accordance with your directions.
We will pass proxy materials on to you so that you have an
opportunity to give us voting instructions for your voting
interest. You may provide your instructions by proxy or in
person at the shareholders’ meeting. If there are shares of
a Portfolio held by a Subaccount for which we do not
receive timely voting instructions, we will vote those shares in
the same proportion as all other shares of that Portfolio held
by that Subaccount for which we have received timely
voting instructions. If we do not receive any voting
instructions for the shares in a Separate Account, we will vote
the shares in that Separate Account in the same proportion as
the total votes for all of our separate accounts for which
we’ve received timely instructions. If we hold shares of a
Portfolio in our General Account, we will vote such shares in
the same proportion as the total votes cast for all of our
separate accounts, including Separate Account A. We will vote
shares of any Portfolio held by our non-insurance affiliates in
the same proportion as the total votes for all separate accounts
of ours and our insurance affiliates. As a result of
proportional voting, the votes cast by a small number of
Contract Owners may determine the outcome of a vote.
We may elect, in the future, to vote shares of the Portfolios
held in Separate Account A in our own right if we are permitted
to do so through a change in applicable federal securities laws
or regulations, or in their interpretation.
The number of Portfolio shares that form the basis for your
voting interest is determined as of the record date set by the
Board of Trustees of the Fund. It is equal to:
•
your Contract Value allocated to the Subaccount corresponding to
that Portfolio, divided by
•
the net asset value per share of that Portfolio.
Fractional votes will be counted. We reserve the right, if
required or permitted by a change in federal regulations or
their interpretation, to amend how we calculate your voting
interest.
After your Annuity Date, if you have selected a variable
annuity, the voting rights under your Contract will continue
during the payout period of your annuity, but the number of
shares that form the basis for your voting interest, as
described above, will decrease throughout the payout period.
Transfer of Contract ownership may involve federal income tax
and/or gift tax consequences; you should consult a qualified tax
adviser before effecting such a transfer. A change to or from
joint Contract ownership is considered a transfer of ownership.
If your Contract is Non-Qualified, you may change Contract
ownership at any time while the Annuitant is living and prior to
your Annuity Date. You may name a different Owner or add or
remove a Joint Owner. A Contract cannot name more than two
Contract Owners at any time. Any newly-named Contract Owners,
including Joint Owners, must be under the age of 81 at the time
of change or addition. The Contract Owner(s) may make all
decisions regarding the Contract, including making allocation
decisions and exercising voting rights. Transactions under a
Contract with Joint Owners require approval from both Owners.
If your Contract is Qualified under Code Section 401, the
Qualified Plan must be the sole Owner of the Contract and the
ownership cannot be changed unless and until a triggering event
has been met under the terms of the Qualified Plan. Upon such
event, the ownership can only be changed to the Annuitant. If
your Contract is Qualified under Code Sections 408 and
403(b), you must be the sole Owner of the Contract and no
changes can be made.
Annuitant
and Contingent or Joint Annuitant
Your sole Annuitant cannot be changed, and Joint Annuitants
cannot be added or changed, once your Contract is issued.
Certain changes may be permitted in connection with Contingent
Annuitants. See ANNUITIZATION – Selecting Your
Annuitant. There may be limited exceptions for certain
Qualified Contracts.
Beneficiaries
Your Beneficiary is the person(s) or entity who may receive
death benefit proceeds under your Contract or any remaining
annuity payments after the Annuity Date if the Annuitant or
Owner dies. See the DEATH BENEFITS AND OPTIONAL DEATH BENEFIT
RIDERS section for additional information regarding death
benefit payouts. You may change or remove your Beneficiary or
add Beneficiaries at any time prior to the death of the
Annuitant or Owner, as applicable. Any change or addition will
generally take effect only when we receive all necessary
documents, In Proper Form, and we record the change or addition.
Any change or addition will not affect any payment made or any
other action taken by us before the change or addition was
received and recorded. Under our administrative procedures, a
signature guarantee and/or other verification of identity or
authenticity may be required when processing a claim payable to
a Beneficiary.
Spousal consent may be required to change an IRA Beneficiary. If
you are considering removing a spouse as a Beneficiary, it is
recommended that you consult your legal or tax advisor regarding
any applicable state or federal laws prior to requesting the
change. If you have named your Beneficiary irrevocably, you will
need to obtain that Beneficiary’s consent before making any
changes. Qualified Contracts may have additional restrictions on
naming and changing Beneficiaries. If your Contract was issued
in connection with a Qualified Plan subject to Title I of
ERISA, contact your Plan Administrator for details. We require
that Contracts issued under Code Section 401 name the Plan
as Beneficiary. If you leave no surviving Beneficiary or
Contingent Beneficiary, your estate may receive any death
benefit proceeds under your Contract.
If, in the judgment of our management, continued investment by
Separate Account A in one or more of the Portfolios becomes
unsuitable or unavailable, we may seek to alter the Variable
Investment Options available under the Contracts. We do not
expect that a Portfolio will become unsuitable, but
unsuitability issues could arise due to changes in investment
policies, market conditions, tax laws, or due to marketing or
other reasons.
Alterations of Variable Investment Options may take differing
forms. We reserve the right to substitute shares of any
Portfolio that were already purchased under any Contract (or
shares that were to be purchased in the future under a Contract)
with shares of another Portfolio, shares of another investment
company or series of another investment company, or another
investment vehicle. Required approvals of the SEC and the
Insurance Superintendent of the State of New York will be
obtained before any such substitutions are effected, and you
will be notified of any planned substitution.
We may add new Subaccounts to Separate Account A and any new
Subaccounts may invest in Portfolios of a Fund or in other
investment vehicles. Availability of any new Subaccounts to
existing Contract Owners will be determined at our discretion.
We will notify you, and will comply with the filing or other
procedures established by the Insurance Superintendent of the
State of New York, to the extent required by applicable law. We
also reserve the right, after receiving any required regulatory
approvals, to do any of the following:
•
cease offering any Subaccount;
•
add or change designated investment companies or their
portfolios, or other investment vehicles;
78
•
add, delete or make substitutions for the securities and other
assets that are held or purchased by the Separate Account or any
Variable Account;
•
permit conversion or exchanges between portfolios and/or classes
of contracts on the basis of Owners’ requests;
•
add, remove or combine Variable Accounts;
•
combine the assets of any Variable Account with any other of our
separate accounts or of any of our affiliates;
•
register or deregister Separate Account A or any Variable
Account under the 1940 Act;
•
operate any Variable Account as a managed investment company
under the 1940 Act, or any other form permitted by law;
•
run any Variable Account under the direction of a committee,
board, or other group;
•
restrict or eliminate any voting rights of Owners with respect
to any Variable Account or other persons who have voting rights
as to any Variable Account;
•
make any changes required by the 1940 Act or other federal
securities laws;
•
make any changes necessary to maintain the status of the
Contracts as annuities under the Code;
•
make other changes required under federal or state law relating
to annuities;
If you are submitting a Purchase Payment or other payment by
mail, please send it, along with your application if you are
submitting one, to the following address or to the address
indicated on your Contract specification pages, if different:
If you are using an overnight delivery service to send payments,
please send them to the following address or to the address
indicated on your Contract specification pages, if different:
The effective date of certain notices or of instructions is
determined by the date and time on which we receive the notice
or instructions In Proper Form. In those instances when we
receive electronic transmission of the information on the
application from your financial advisor’s broker-dealer
firm and our administrative procedures with your broker-dealer
so provide, we consider the application to be received on the
Business Day we receive the transmission. If the address on your
Contract specification pages is different and our administrative
procedures with your broker-dealer so provide, in those
instances when information regarding your Purchase Payment is
electronically transmitted to us by the broker-dealer, we will
consider the Purchase Payment to be received by us on the
Business Day we receive the transmission of the information.
Please call us if you or your financial advisor have any
questions regarding which address you should use.
We reserve the right to process any Purchase Payment received at
an incorrect address when it is received at either the address
indicated in your Contract specification pages or the
appropriate address indicated in the Prospectus.
Purchase Payments after your initial Purchase Payment, loan
requests, transfer requests, loan repayments and withdrawal
requests we receive before the close of the New York Stock
Exchange, which usually closes at 4:00 p.m. Eastern time,
will normally be effective at the end of the same Business Day
that we receive them In Proper Form unless the transaction or
event is scheduled to occur on another day. Generally, whenever
you submit any other form, notice or request, your instructions
will be effective on the next Business Day after we receive them
In Proper Form unless the transaction or event is scheduled to
occur on another day. We may also require, among other
79
things, a signature guarantee or other verification of
authenticity. We do not generally require a signature guarantee
unless it appears that your signature may have changed over time
or the signature does not appear to be yours; or an executed
application or confirmation of application, as applicable, In
Proper Form is not received by us; or, to protect you or us.
Requests regarding death benefit proceeds must be accompanied by
both proof of death and instructions regarding payment In Proper
Form. You should call your financial advisor or us if you have
questions regarding the required form of a request.
You are automatically entitled to make certain transactions by
telephone or, to the extent available, electronically. You may
also authorize other people to make certain transaction requests
by telephone or, to the extent available, electronically by
sending us instructions in writing in a form acceptable to us.
We cannot guarantee that you or any other person you authorize
will always be able to reach us to complete a telephone or
electronic transaction; for example, all telephone lines may be
busy or access to our website may be unavailable during certain
periods, such as periods of substantial market fluctuations or
other drastic economic or market change, or telephones or the
Internet may be out of service or unavailable during severe
weather conditions or other emergencies. Under these
circumstances, you should submit your request in writing (or
other form acceptable to us). Transaction instructions we
receive by telephone or electronically before the close of the
New York Stock Exchange, which usually closes at 4:00 p.m.
Eastern time, on any Business Day will usually be effective at
the end of that day, and we will provide you confirmation of
each telephone or electronic transaction.
We have established procedures reasonably designed to confirm
that instructions communicated by telephone or electronically
are genuine. These procedures may require any person requesting
a telephone or electronic transaction to provide certain
personal identification upon our request. We may also record all
or part of any telephone conversation with respect to
transaction instructions. We reserve the right to deny any
transaction request made by telephone or electronically. You are
authorizing us to accept and to act upon instructions received
by telephone or electronically with respect to your Contract,
and you agree that, so long as we comply with our procedures,
neither we, any of our affiliates, nor any Fund, or any of their
directors, trustees, officers, employees or agents will be
liable for any loss, liability, cost or expense (including
attorneys’ fees) in connection with requests that we
believe to be genuine. This policy means that so long as we
comply with our procedures, you will bear the risk of loss
arising out of the telephone or electronic transaction
privileges of your Contract. If a Contract has Joint Owners,
each Owner may individually make telephone and/or electronic
transaction requests.
Subject to availability, you may authorize us to provide
prospectuses, prospectus supplements, annual and semi-annual
reports, annual statements, quarterly statements and immediate
confirmations, proxy solicitation, privacy notice and other
notices and documentation in electronic format when available
instead of receiving paper copies of these documents by
U.S. mail. You may enroll in this service by so indicating
on the application, via our Internet website, or by sending us
instructions in writing in a form acceptable to us to receive
such documents electronically. Not all contract documentation
and notifications may be currently available in electronic
format. You will continue to receive paper copies of any
documents and notifications not available in electronic format
by U.S. mail. In addition, you will continue to receive
paper copies of annual statements if required by state or
federal law. By enrolling in this service, you consent to
receive in electronic format any documents added in the future.
For jointly owned contracts, both owners are consenting to
receive information electronically. Documents will be available
on our Internet website. As documents become available, we will
notify you of this by sending you an
e-mail
message that will include instructions on how to retrieve the
document. You must have ready access to a computer with Internet
access, an active
e-mail
account to receive this information electronically, and the
ability to read and retain it. You may access and print all
documents provided through this service.
If you plan on enrolling in this service, or are currently
enrolled, please note that:
•
We impose no additional charge for electronic delivery, although
your Internet provider may charge for Internet access.
•
You must provide a current
e-mail
address and notify us promptly when your
e-mail
address changes.
•
You must update any
e-mail
filters that may prevent you from receiving
e-mail
notifications from us.
•
You may request a paper copy of the information at any time for
no charge, even though you consented to electronic delivery, or
if you decide to revoke your consent.
•
For jointly owned contracts, both owners are consenting that the
primary owner will receive information electronically. (Only the
primary owner will receive
e-mail
notices.)
•
Electronic delivery will be cancelled if
e-mails are
returned undeliverable.
•
This consent will remain in effect until you revoke it.
80
We are not required to deliver this information electronically
and may discontinue electronic delivery in whole or in part at
any time. If you are currently enrolled in this service, please
call
(800) 748-6907
if you would like to revoke your consent, wish to receive a
paper copy of the information above, or need to update your
e-mail
address.
For withdrawals, including exchanges under Code
Section 1035 and other Qualified transfers, from the
Variable Investment Options or for death benefit payments
attributable to your Variable Account Value, we will normally
send the proceeds within 7 calendar days after your request
is effective or after the Notice Date, as the case may be. We
will normally effect periodic annuity payments on the day that
corresponds to the Annuity Date and will make payment on the
following day. Payments or transfers may be suspended for a
longer period under certain extraordinary circumstances. These
include: a closing of the New York Stock Exchange other than on
a regular holiday or weekend; a trading restriction imposed by
the SEC; or an emergency declared by the SEC. Amounts withdrawn
or transferred from any
fixed-rate
General Account Investment Option may be delayed for up to six
months after the request is effective. See THE GENERAL
ACCOUNT for more details.
Confirmations will be sent out for unscheduled Purchase Payments
and transfers, loans, loan repayments, unscheduled partial
withdrawals, a full withdrawal, optional living benefit rider
Automatic or Owner Elected Resets/Step-Ups, and on payment of
any death benefit proceeds. Periodically, we will send you a
statement that provides certain information pertinent to your
Contract. These statements disclose Contract Value, Subaccount
values, any fixed option values, fees and charges applied to
your Contract Value, transactions made and specific Contract
data that apply to your Contract. Confirmations of your
transactions under the pre-authorized checking plan, dollar cost
averaging, earnings sweep, portfolio rebalancing, and
pre-authorized withdrawal options will appear on your quarterly
account statements. Your fourth-quarter statement will contain
annual information about your Contract Value and transactions.
You may also access these statements online.
If you suspect an error on a confirmation or quarterly
statement, you must notify us in writing as soon as possible to
ensure proper accounting to your Contract. When you write, tell
us your name, contract number and a description of the suspected
error. We assume transactions are accurate unless you notify us
otherwise within 30 days of receiving the transaction
confirmation or, if the transaction is first confirmed on the
quarterly statement, within 30 days of receiving the
quarterly statement. All transactions are deemed final and may
not be changed after the applicable 30 day period.
You will also be sent an annual report for the Separate Account
and the Funds and a list of the securities held in each
Portfolio of the Funds, as required by the 1940 Act; or
more frequently if required by law.
Contract Owner Mailings. To help reduce expenses,
environmental waste and the volume of mail you receive, only one
copy of Contract Owner documents (such as the prospectus,
supplements, announcements, and each annual and semi-annual
report) may be mailed to Contract Owners who share the same
household address (Householding). If you are already
participating, you may opt out by contacting us. Please allow
30 calendar days for regular delivery to resume. You may
also elect to participate in Householding by writing to us. The
current documents are available on our website any time or an
individual copy of any of these documents may be
requested – see the last page of this Prospectus for
more information.
PSD, a broker-dealer and an affiliate of ours, pays various
forms of sales compensation to broker-dealers (including other
affiliates) that solicit applications for the Contracts. PSD
also may reimburse other expenses associated with the promotion
and solicitation of applications for the Contracts.
We offer the Contracts for sale through broker-dealers that have
entered into selling agreements with PSD. Broker-dealers sell
the Contracts through their financial advisors. PSD pays
compensation to broker-dealers for the promotion and sale of the
Contracts. The individual financial advisor who sells you a
Contract typically will receive a portion of the compensation,
under the financial advisor’s own arrangement with his or
her broker-dealer. Broker-dealers may receive aggregate
commissions of up to 7.10% of your aggregate Purchase Payments.
Under certain circumstances where PSD pays lower initial
commissions, certain broker-dealers that solicit applications
for Contracts may be paid an ongoing persistency trail
commission (sometimes called a residual) which will take into
account, among other things, the Account Value and the length of
time Purchase Payments have been held under a Contract. A trail
commission is not anticipated to exceed 1.25%, on an annual
basis, of the Account Value considered in connection with the
trail commission.
We may also provide compensation to broker-dealers for providing
ongoing service in relation to Contracts that have already been
purchased.
81
Additional
Compensation and Revenue Sharing
To the extent permitted by SEC and FINRA rules and other
applicable laws and regulations, selling broker-dealers may
receive additional payments in the form of cash, other special
compensation or reimbursement of expenses, sometimes called
“revenue sharing”. These additional compensation or
reimbursement arrangements may include, for example, payments in
connection with the firm’s “due diligence”
examination of the contracts, payments for providing conferences
or seminars, sales or training programs for invited financial
advisors and other employees, payments for travel expenses,
including lodging, incurred by financial advisors and other
employees for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding the
Contracts, and payments to assist a firm in connection with its
administrative systems, operations and marketing expenses and/or
other events or activities sponsored by the firms. Subject to
applicable FINRA rules and other applicable laws and
regulations, PSD and its affiliates may contribute to, as well
as sponsor, various educational programs, sales contests and/or
promotions in which participating firms and their salespersons
may receive prizes such as merchandise, cash, or other awards.
Such additional compensation may give us greater access to
financial advisors of the broker-dealers that receive such
compensation or may otherwise influence the way that a
broker-dealer and financial advisor market the Contracts.
These arrangements may not be applicable to all firms, and the
terms of such arrangements may differ between firms. We provide
additional information on special compensation or reimbursement
arrangements involving selling firms and other financial
institutions in the Statement of Additional Information, which
is available upon request. Any such compensation will not result
in any additional direct charge to you by us.
The compensation and other benefits provided by PSD or its
affiliates may be more or less than the overall compensation on
similar or other products. This may influence your financial
advisor or broker-dealer to present this Contract over other
investment vehicles available in the marketplace. You may ask
your financial advisor about these differing and divergent
interests, how he/she is personally compensated and how his/her
broker-dealer is compensated for soliciting applications for the
Contract.
We have entered into services agreements with certain Funds, or
Fund affiliates, which pay us for administrative and other
services, including, but not limited to, certain communications
and support services. The fees are based on an annual percentage
of average daily net assets of certain Fund portfolios purchased
by us at Contract Owner’s instructions. Currently, the fees
received do not exceed an annual percentage of 0.30% and each
Fund (or Fund affiliate) may not pay the same annual percentage
(some may pay significantly less). Because we receive such fees,
we may be subject to competing interests in making these Funds
available as Investment Options under the Contracts.
AllianceBernstein Investments, Inc. pays us for each
AllianceBernstein Variable Products Series Fund, Inc. portfolio
(Class B) held by our separate accounts. American Century
Services, LLC pays us for each American Century Variable
Portfolios, Inc. portfolio (Class II) held by our separate
accounts. BlackRock Distributors, Inc. pays us for each
BlackRock Variable Series Funds, Inc. portfolio (Class III)
held by our separate accounts. Fidelity Distributors Corporation
pays us for each Fidelity Variable Insurance Products Fund
portfolio (Service Class 2) held by our separate accounts.
First Trust Variable Insurance Trust and First Trust Advisors
L.P. pay us for each First Trust Variable Insurance Trust
portfolio held by our separate accounts. Franklin Templeton
Services, LLC pays us for each Franklin Templeton Variable
Insurance Products Trust portfolio (Class 4) held by our
separate accounts. Invesco Advisers, Inc. and its affiliates pay
us for each AIM Variable Insurance Funds (Invesco Variable
Insurance Funds) portfolio (Series II) held by our separate
accounts. Janus Capital Management LLC, pays us for each Janus
Aspen Series portfolio (Service Class) held by our separate
accounts. Lord Abbett Series Fund, Inc. pays us for each Lord
Abbett Series Fund, Inc. portfolio (Class VC) held by our
separate accounts. Massachusetts Financial Services Company pays
us for each MFS Variable Insurance Trust portfolio (Service
Class) held by our separate accounts. Pacific Investment
Management Company LLC pays us for each PIMCO Variable Insurance
Trust portfolio (Advisor Class) held by our separate accounts.
GE Investments Funds, Inc. pays us for each GE Investments
Funds, Inc. portfolio (Class 3) held by our separate
accounts. Van Eck Securities Corporation, pays us for each Van
Eck VIP Trust portfolio (Class S) held by our separate
accounts.
PSD shall pay American Funds Distributors, Inc. at a rate of
0.16% of Purchase Payments up to $1.5 billion, 0.14% on
Purchase Payments on the next $1.5 billion and 0.10% on
Purchase Payments made in excess, attributable to the Master
Funds for certain marketing assistance.
The term “replacement” has a special meaning in the
life insurance industry and is described more fully below.
Before you make your purchase decision, we want you to
understand how a replacement may impact your existing plan of
insurance.
A policy “replacement” occurs when a new policy or
contract is purchased and, in connection with the sale, an
existing policy or contract is surrendered, lapsed, forfeited,
assigned to the replacing insurer, otherwise terminated, or used
in a financed purchase. A “financed purchase” occurs
when the purchase of a new life insurance policy or annuity
contract involves the use of funds obtained from the values of
an existing life insurance policy or annuity contract through
withdrawal, surrender or loan.
82
There are circumstances in which replacing your existing life
insurance policy or annuity contract can benefit you. As a
general rule, however, replacement is not in your best interest.
Accordingly, you should make a careful comparison of the costs
and benefits of your existing policy or contract and the
proposed policy or contract to determine whether replacement is
in your best interest.
Reinstatements
If we are the issuer of a Contract that is being replaced, we
will reinstate the original Contract within 60 days of the
date of delivery of the replacing contract if the Owner decides
to keep the original Contract and:
•
we receive written proof that the replacing contract has been
cancelled, including the date of cancellation, and
•
the replacing insurer processes a check and forwards it to us.
The original Contract will be reinstated with its original
provisions and the amount of the check will be credited to the
Contract on the date that it is received. If a withdrawal charge
was applied at the time the Contract was replaced, the
withdrawal charge amount will be credited to the Contract.
The statements of assets and liabilities of Separate
Account A as of December 31, 2012, the related
statements of operations for the year or period then ended, and
the statements of changes in net assets and financial highlights
for each of the periods presented are incorporated by reference
in the Statement of Additional Information from the Annual
Report of Separate Account A dated December 31, 2012.
PL&A’s statements of financial condition as of
December 31, 2012 and 2011, and the related statements of
operations, stockholder’s equity and cash flows for each of
the three years in the period ended December 31, 2012 are
contained in the Statement of Additional Information.
Rule
12h-7 Representation
In reliance on the exemption provided by
Rule 12h-7
of the Securities Exchange Act of 1934
(“34 Act”), we do not intend to file periodic
reports as required under the 34 Act.
All amounts allocated to any fixed option become part of our
General Account. We have contracted with Pacific Life to
manage our General Account assets, subject to investment
policies, objectives, directions, and guidelines established by
our Board. You will not share in the investment experience of
General Account assets. Unlike the Separate Account, the General
Account is subject to liabilities arising from any of our other
business. Any guarantees provided for under the contract or
through optional riders are backed by our financial strength and
claims-paying ability. You must look to the strength of the
insurance company with regard to such guarantees.
Because of exemptive and exclusionary provisions, interests in
the General Account under the Contract are not registered under
the Securities Act of 1933, as amended, and the General Account
has not been registered as an investment company under the 1940
Act. Any interest you have in a fixed option is not subject to
these Acts, and we have been advised that the SEC staff has not
reviewed disclosure in this Prospectus relating to any fixed
option. This disclosure may, however, be subject to certain
provisions of federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
Guarantee
Terms
When you allocate any portion of your Purchase Payments or
Contract Value to any fixed option, we guarantee you an interest
rate (a “Guaranteed Interest Rate”) for a specified
period of time (a “Guarantee Term”) of up to
24 months, depending on what Guarantee Terms we offer.
Please contact us for the Guarantee Terms currently available.
Guarantee Terms will be offered at our discretion.
Guaranteed Interest Rates for any fixed option may be changed
periodically for new allocations. Your allocation will receive
the Guaranteed Interest Rate in effect for that fixed option on
the effective date of your allocation. All Guaranteed Interest
Rates will credit interest daily at a rate that compounds over
one year to equal the annual effective rate. The Guaranteed
Interest Rate on your fixed option will remain in effect for the
Guarantee Term and will never be less than the minimum
guaranteed interest rate specified in your Contract.
Withdrawals
and Transfers
Prior to the Annuity Date, you may withdraw or transfer amounts
from any fixed option to one or more of the other Variable
Investment Options. No partial withdrawal or transfer may be
made from a fixed option within 30 days of the Contract
Date. Currently, we are not
83
requiring the
30-day
waiting period on partial withdrawals and transfers, but we
reserve the right to require the
30-day
waiting period on partial withdrawals and transfers in the
future. If your withdrawal leaves you with a Net Contract Value
of less than $1,000, we have the right, at our option, to
terminate your Contract and send you the withdrawal proceeds.
However, we will not terminate your Contract if you own an
optional withdrawal benefit rider and a partial withdrawal
reduces the Net Contract Value to an amount less than $1,000.
Amounts transferred or withdrawn from any fixed option may be
delayed, as described under ADDITIONAL
INFORMATION – Timing of Payments and Transactions.
Any amount delayed, so long as it is held under a fixed option,
will continue to earn interest at the Guaranteed Interest Rate
then in effect until that Guarantee Term has ended, and the
minimum guaranteed interest rate specified in your Contract
thereafter.
Before your Annuity Date, you can allocate all or some of your
Purchase Payments to the DCA Plus Fixed Option. The initial
minimum amount that you may allocate to the DCA Plus Fixed
Option is $5,000. Currently, we are not enforcing the minimum
amount you may allocate to the DCA Plus Fixed Option but we
reserve the right to enforce the minimum amount in the future.
You may not transfer any amount to the DCA Plus Fixed Option
from any other Investment Option. All Purchase Payments
allocated to the DCA Plus Fixed Option will earn interest at the
then current Guaranteed Interest Rate declared by us.
The DCA Plus Fixed Option Value on any Business Day is the DCA
Plus Fixed Option Value on the prior Business Day, increased by
any additions to the DCA Plus Fixed Option on that day as a
result of any:
•
interest, plus
•
Purchase Payments received by us then allocated to the DCA Plus
Fixed Option, plus
•
any additional amounts allocated to the DCA Plus Fixed Option,
including Credit Enhancements if applicable,
and decreased by any deductions from the DCA Plus Fixed Option
on that day as a result of any;
•
transfers, including transfers to the Loan Account,
•
withdrawals, including any applicable withdrawal charges,
•
amounts applied to provide an annuity,
•
charges for premium taxes and/or other taxes,
•
annual fees,
•
proportionate reductions for annual charges for expenses
relating to optional benefit riders attached to the Contract, and
•
reduced by any Credit Enhancement as described in PURCHASING
YOUR CONTRACT – Credit Enhancements.
The DCA Plus program will automatically terminate at the end of
your DCA Plus Guarantee Term, or upon the earliest of:
•
the date death benefit proceeds become payable under the
Contract,
•
the date you transfer the entire amount from the DCA Plus Fixed
Option to another Investment Option,
•
the date the Contract is terminated, or
•
the Annuity Date.
At the end of the DCA Plus program, upon receipt of an
additional Purchase Payment that satisfies our minimum
allocation requirements, you may request, In Proper Form, a new
DCA Plus program.
We reserve the right to change the terms and conditions of the
DCA Plus program, but not a DCA Plus program you already have in
effect.
Guarantee
Terms
You can choose a Guarantee Term of up to 24 months,
depending on what Guarantee Terms we offer. Please contact us
for the Guarantee Terms currently available. The day that the
first Purchase Payment allocation is made to the DCA Plus Fixed
Option will begin your Guarantee Term. Monthly transfers will
occur on the same day of each month thereafter to the Variable
Investment Options that you selected. The amount transferred
each month is equal to your DCA Plus Fixed Option Value on that
day divided by the remaining number of monthly transfers in the
Guarantee Term.
Example: On May 1, you submit a $10,000
Purchase Payment entirely to the DCA Plus Fixed Option at a then
current Guaranteed Interest Rate of 5.00% with a Guarantee Term
of 6 months. On June 1, the value of the DCA Plus
Fixed Option is $10,041.52. On June 1, a transfer equal to
$1,673.59
($10,041.52 / 6)
will be made according to your DCA Plus transfer instructions.
Your remaining DCA Plus
84
Fixed Option Value after the transfer is $8,367.93. On
July 1, your DCA Plus Fixed Option has now increased to
$8,401.56. We will transfer $1,680.31
($8,401.56 / 5)
to the Variable Investment Options, leaving a remaining value of
$6,721.25 in the DCA Plus Fixed Option.
During the Guarantee Term, you can allocate all or a part of any
additional Purchase Payments to the DCA Plus Fixed Option.
Additional allocations must be at least $250. Each additional
allocation will be transferred to the Variable Investment
Options you select over the remaining Guarantee Term. Transfers
will be made from the DCA Plus Fixed Option Value attributed to
the oldest Investment allocation and each subsequent Purchase
Payment in the order received.
Example: (using the previous example): On
July 15, an additional $5,000 is allocated to the DCA Plus
Option at a Guaranteed Interest Rate of 4.00%. On August 1,
your DCA Plus Fixed Option Value has increased to $11,758.30. An
amount equal to $2,939.58
($11,758.30 / 4)
is transferred from the DCA Plus Fixed Option to the Variable
Investment Options. The remaining DCA Plus Fixed Option Value is
$8,818.72.
Transfers
DCA Plus transfers must be made on a monthly basis to the
Variable Investment Options. No transfers to the DCA Plus Fixed
Option may be made at any time. You cannot choose to transfer
other than monthly. Unless otherwise instructed, any additional
Purchase Payment we receive during a Guarantee Term will be
allocated to the Investment Options, including the DCA Plus
Fixed Option if so indicated, according to your most recent
allocation instructions.
If the Owner dies while transfers are being made from the DCA
Plus Fixed Option and the surviving spouse of the deceased Owner
elects to continue the Contract in accordance with its terms,
transfers will continue to be made from the DCA Plus Fixed
Option to the selected Variable Investment Options, until the
Guarantee Term ends.
DCA Plus Fixed Option interest is compounded annually and
credited to your Contract daily. The Guaranteed Interest Rate is
credited on a declining balance as money is transferred from the
DCA Plus Fixed Option to the selected Variable Investment
Options. The equivalent annual rate reflects the amount of
interest that will be transferred to selected Variable
Investment Options over the entire Guarantee Term divided by the
amount originally invested in the DCA Plus Fixed Option.
Example: On May 1, you submit a $10,000
Purchase Payment entirely to the DCA Plus Fixed Option at a then
current Guaranteed Interest Rate of 4.00% with a Guarantee Term
of 12 months. Over the entire Guarantee Term, $215.40 of
interest is transferred to the selected Variable Investment
Options. The equivalent annual rate will equal 2.15% during the
Guarantee Term.
Some of the terms
we’ve used in this Prospectus may be new to you.
We’ve identified them in the Prospectus by capitalizing the
first letter of each word. You will find an explanation of what
they mean below.
If you have any
questions, please ask your financial advisor or call us at
(800) 748-6907.
Account
Value –
The amount of your Contract Value allocated to a specified
Variable Investment Option or any fixed option.
Annual
Fee –
A $30 fee charged each year on your Contract Anniversary and at
the time of a full withdrawal (on a pro rated basis for that
Contract year), if your Net Contract Value is less than $50,000
on that date.
Annuitant –
A person on whose life annuity payments may be determined. An
Annuitant’s life may also be used to determine certain
increases in death benefits, and to determine the Annuity Date.
A Contract may name a single (“sole”) Annuitant or two
(“Joint”) Annuitants, and may also name a
“Contingent” Annuitant. If you name Joint Annuitants
or a Contingent Annuitant, “the Annuitant” means the
sole surviving Annuitant, unless otherwise stated.
Annuity
Date –
The date specified in your Contract, or the date you later
elect, if any, for the start of annuity payments if the
Annuitant (or Joint Annuitants) is (or are) still living and
your Contract is in force; or if earlier, the date that annuity
payments actually begin.
Annuity
Option –
Any one of the income options available for a series of payments
after your Annuity Date.
Beneficiary –
A person who may have a right to receive the death benefit
payable upon the death of the Annuitant or a Contract Owner
prior to the Annuity Date, or may have a right to receive
remaining guaranteed annuity payments, if any, if the Annuitant
dies after the Annuity Date.
Business
Day –
Any day on which the value of an amount invested in a Variable
Investment Option is required to be determined, which currently
includes each day that the New York Stock Exchange is open for
trading and our administrative offices are open. The New York
Stock Exchange and our administrative offices are closed on
weekends and on the following holidays: New Year’s Day,
Martin Luther King Jr. Day, President’s Day, Good Friday,
Memorial Day, July Fourth, Labor Day, Thanksgiving Day and
Christmas Day, and the Friday before New Year’s Day, July
Fourth or Christmas Day if that holiday falls on a Saturday, the
Monday following New Year’s Day, July Fourth or Christmas
Day if that holiday falls on a Sunday, unless unusual business
conditions exist, such as the ending of a monthly or yearly
accounting period. In this Prospectus, “day” or
“date” means Business Day unless otherwise specified.
If any transaction or event called for under a Contract is
scheduled to occur on a day that is not a Business Day, such
transaction or event will be deemed to occur on the next
following Business Day unless otherwise specified. Any
systematic pre-authorized transaction scheduled to occur on
December 30 or December 31 where that day is not a
Business Day will be deemed an order for the last Business Day
of the calendar year and will be calculated using the applicable
Subaccount Unit Value at the close of that Business Day. Special
circumstances such as leap years and months with fewer than
31 days are discussed in the SAI.
Code –
The Internal Revenue Code of 1986, as amended.
Contingent
Annuitant –
A person, if named in your Contract, who will become your sole
surviving Annuitant if your existing sole Annuitant (or both
Joint Annuitants) should die before your Annuity Date.
Contract
Anniversary –
The same date, in each subsequent year, as your Contract Date.
Contract
Date –
The date we issue your Contract. Contract Years, Contract
Anniversaries, Contract Semi-Annual Periods, Contract Quarters
and Contract Months are measured from this date.
Contract
Debt –
As of the end of any given Business Day, the principal amount
you have outstanding on any loan under your Contract, plus any
accrued and unpaid interest. Loans are only available on certain
Qualified Contracts.
Contract Owner,
Owner, Policyholder, you, or
your –
Generally, a person who purchases a Contract and makes the
Investments. A Contract Owner has all rights in the Contract,
including the right to make withdrawals, designate and change
beneficiaries, transfer amounts among Investment Options, and
designate an Annuity Option. If your Contract names Joint
Owners, both Joint Owners are Contract Owners and share all such
rights.
Contract
Value –
As of the end of any Business Day, the sum of your Variable
Account Value, any fixed option value, the value of any other
Investment Option added to the Contract by Rider or Endorsement,
and any Loan Account Value. The Contract Value includes any
Credit Enhancement applied to your Contract.
Contract
Year –
A year that starts on the Contract Date or on a Contract
Anniversary.
Credit
Enhancement –
An amount we add to your Contract Value at the time a Purchase
Payment is applied. Each Credit Enhancement will be counted as
Earnings under your Contract.
DCA Plus Fixed
Option –
If you allocate all or part of your Purchase Payments to the DCA
Plus Fixed Option, such amounts are held in our General Account
and receive interest at rates declared periodically (the
“Guaranteed Interest Rate”), but not less than the
minimum guaranteed interest rate specified in your Contract.
This fixed option may be used for dollar cost averaging up to a
24 month period. Please contact us for the Guarantee Terms
currently available.
DCA Plus Fixed
Option
Value –
The aggregate amount of your Contract Value allocated to the DCA
Plus Fixed Option.
Earnings –
As of the end of any Business Day, your Earnings equal your
Contract Value less your aggregate Purchase Payments, which are
reduced by withdrawals of prior Investments.
Fund –
A registered open-end management investment company;
collectively refers to Pacific Select Fund, AIM Variable
Insurance Funds (Invesco Variable Insurance Funds),
AllianceBernstein Variable Products Series Fund, Inc., American
Century Variable Portfolios, Inc., BlackRock Variable Series
Funds, Inc., Fidelity Variable Insurance Products Fund, First
Trust Variable Insurance Trust, Franklin Templeton Variable
Insurance Products Trust, GE Investments Funds, Janus Aspen
Series, Lord Abbett Series Fund, MFS Variable Insurance Trust,
PIMCO Variable Insurance Trust, and/or Van Eck VIP Trust.
General
Account –
Our General Account consists of all of our assets other than
those assets allocated to Separate Account A or to any of
our other separate accounts.
Guaranteed
Interest
Rate –
The interest rate guaranteed at the time of allocation (or
rollover) for the Guarantee Term on amounts allocated to a fixed
option. All Guaranteed Interest Rates are expressed as annual
rates and interest is accrued daily. The rate will not be less
than the minimum guaranteed interest rate specified in your
Contract.
Guarantee
Term –
The period during which an amount you allocate to any available
fixed option earns interest at a Guaranteed Interest Rate.
In Proper
Form –
This is the standard we apply when we determine whether an
instruction is satisfactory to us. An instruction (in writing or
by other means that we accept (e.g. via telephone or
electronic submission)) is considered to be in proper form if it
is received at our Service Center in a manner that is
satisfactory to us, such that is sufficiently complete and clear
so that we do not have to exercise any discretion to follow the
instruction, including any information and supporting legal
documentation necessary to effect the transaction. Any forms
that we provide will identify any necessary supporting
documentation. We may, in our sole discretion, determine whether
any particular transaction request is in proper form, and we
reserve the right to change or waive any in proper form
requirements at any time.
Investment
(“Purchase
Payment”) –
An amount paid to us by or on behalf of a Contract Owner as
consideration for the benefits provided under the
86
Contract.
A Credit Enhancement is not considered a Purchase Payment or
Investment as defined in your Contract.
Investment
Option –
A Subaccount, any fixed option or any other Investment Option
added to the Contract by Rider or Endorsement.
Joint
Annuitant –
If your Contract is a Non-Qualified Contract, you may name two
Annuitants, called “Joint Annuitants,” in your
application for your Contract. Special restrictions apply for
Qualified Contracts.
Loan
Account –
The account in which the amount equal to the principal amount of
a loan and any interest accrued is held to secure any Contract
Debt.
Loan Account
Value –
The amount, including any interest accrued, held in the Loan
Account to secure any Contract Debt.
Net Contract
Value –
Your Contract Value less Contract Debt.
Non-Natural
Owner –
A corporation, trust or other entity that is not a (natural)
person.
Non-Qualified
Contract –
A Contract other than a Qualified Contract.
Policyholder –
The Contract Owner.
Portfolio –
A separate portfolio of a Fund in which a Subaccount invests its
assets.
Primary
Annuitant –
The individual that is named in your Contract, the events in the
life of whom are of primary importance in affecting the timing
or amount of the payout under the Contract.
Purchase Payment
(“Investment”) –
An amount paid to us by or on behalf of a Contract Owner as
consideration for the benefits provided under the Contract. A
Credit Enhancement is not considered a Purchase Payment or
Investment as defined in your Contract.
Qualified
Contract –
A Contract that qualifies under the Code as an individual
retirement annuity or account (IRA), or form thereof, or a
Contract purchased by a Qualified Plan, qualifying for special
tax treatment under the Code.
Qualified
Plan –
A retirement plan that receives favorable tax treatment under
Section 401, 403, 408 or 408A of the Code.
SEC –
Securities and Exchange Commission.
Separate Account
A (the “Separate
Account”) –
A separate account of ours registered as a unit investment trust
under the Investment Company Act of 1940, as amended (the
“1940 Act”).
Subaccount –
An investment division of the Separate Account. Each Subaccount
invests its assets in shares of a corresponding Portfolio.
Subaccount
Annuity
Unit –
Subaccount Annuity Units (or “Annuity Units”) are used
to measure variation in variable annuity payments. To the extent
you elect to convert all or some of your Contract Value into
variable annuity payments, the amount of each annuity payment
(after the first payment) will vary with the value and number of
Annuity Units in each Subaccount attributed to any variable
annuity payments. At annuitization (after any applicable premium
taxes and/or other taxes are paid), the amount annuitized to a
variable annuity determines the amount of your first variable
annuity payment and the number of Annuity Units credited to your
annuity in each Subaccount. The value of Subaccount Annuity
Units, like the value of Subaccount Units, is expected to
fluctuate daily, as described in the definition of Unit Value.
Subaccount
Unit –
Before your Annuity Date, each time you allocate an amount to a
Subaccount, your Contract is credited with a number of
Subaccount Units in that Subaccount. These Units are used for
accounting purposes to measure your Account Value in that
Subaccount. The value of Subaccount Units is expected to
fluctuate daily, as described in the definition of Unit Value.
Unit
Value –
The value of a Subaccount Unit (“Subaccount Unit
Value”) or Subaccount Annuity Unit (“Subaccount
Annuity Unit Value”). Unit Value of any Subaccount is
subject to change on any Business Day in much the same way that
the value of a mutual fund share changes each day. The
fluctuations in value reflect the investment results, expenses
of and charges against the Portfolio in which the Subaccount
invests its assets. Fluctuations also reflect charges against
the Separate Account. Changes in Subaccount Annuity Unit Values
also reflect an additional factor that adjusts Subaccount
Annuity Unit Values to offset our Annuity Option Table’s
implicit assumption of an annual investment return of 4%. The
effect of this assumed investment return is explained in detail
in the SAI. Unit Value of a Subaccount Unit or Subaccount
Annuity Unit on any Business Day is measured as of the close of
the New York Stock Exchange on that Business Day, which usually
closes at 4:00 p.m., Eastern time, although it occasionally
closes earlier.
Variable Account
Value –
The aggregate amount of your Contract Value allocated to all
Subaccounts.
Variable
Investment
Option –
A Subaccount (also called a Variable Account).
Redemptions of Remaining Guaranteed Variable Payments Under
Options 2 and 4
Corresponding Dates
Age and Sex of Annuitant
Systematic Transfer Programs
Pre-Authorized Withdrawals
More on Federal Tax Issues
Safekeeping of Assets
FINANCIAL STATEMENTS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND INDEPENDENT
AUDITORS
You can receive a copy of the Pacific Value Select SAI
without charge by calling us at
(800) 748-6907
or you can visit our website at www.pacificlife.com to download
a copy.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
Any Credit Enhancement added to your Contract is not counted as
a Purchase Payment and is not included when determining the
guarantees under any of the optional living benefit riders. Any
calculations for determining a Reset/Step-Up are based on
Contract Value, which includes any Credit Enhancement. There may
be minor differences in the calculations due to rounding.
These examples are not intended to serve as projections of
future investment returns nor are they a reflection of how your
Contract will actually perform.
The examples apply to CoreIncome Advantage 4 Select
(Single) and (Joint) unless otherwise noted below.
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 64 years old.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment
Base = $4,000
Example #2 – Subsequent
Purchase Payment.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Automatic Reset at Beginning of Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Protected Payment Base is
increased by the Purchase Payment amount to $200,000
($100,000 + $100,000). The Protected Payment Amount
after the Purchase Payment is equal to $8,000 (4% of the
Protected Payment Base after the Purchase Payment).
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This resets the Protected
Payment Base to $207,000 and the Protected Payment Amount to
$8,280 (4% × $207,000).
In addition to Purchase Payments, the Contract Value is further
subject to increases and/or decreases during each Contract Year
as a result of charges, fees and other deductions, and increases
and/or decreases in the investment performance of the Variable
Account.
89
Example #3 – Withdrawal
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal equal to or less than the Protected Payment Amount
is taken during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Activity
$5,000
$216,490
(after $5,000 withdrawal)
$207,000
$3,280
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$216,490
$207,000
$8,280
Year 3 Contract Anniversary
(After Automatic Reset)
$216,490
$216,490
$8,660
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This reset increases the
Protected Payment Base to $207,000 and the Protected Payment
Amount to $8,280 (4% × $207,000).
Because the $5,000 withdrawal during Contract Year 2 did
not exceed the $8,280 Protected Payment Amount immediately prior
to the withdrawal, the Protected Payment Base remains unchanged.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 3 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value (see
balances at Year 3 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
after the automatic reset at the Year 3 Contract
Anniversary is equal to $8,660 (4% of the reset Protected
Payment Base).
Example #4 –
Withdrawal Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $195,000.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
90
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Activity
$30,000
$165,000
(after $30,000 withdrawal)
$182,926
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$192,000
$182,926
$7,317
Year 3 Contract Anniversary
(After Automatic Reset)
$192,000
$192,000
$7,680
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $30,000 withdrawal during Contract Year 2 exceeds
the $8,280 Protected Payment Amount immediately prior to the
withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the excess withdrawal amount, which is the
total withdrawal amount less the Protected Payment Amount:
$30,000 − $8,280 = $21,720.
Second, determine the reduction percentage by dividing the
excess withdrawal amount computed above by the difference
between the Contract Value and the Protected Payment Amount
immediately before the withdrawal:
$21,720 ¸ ($195,000 − $8,280) = 0.1163
or 11.63%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the percentage computed above:
$207,000 − ($207,000 × 11.63%) = $182,926.
The Protected Payment Amount immediately after the withdrawal is
equal to $0. This amount is determined by multiplying the
Protected Payment Base before the withdrawal by 4% and then
subtracting all of the withdrawals made during that Contract
Year:
(4% × $207,000) − $30,000 = -$21,720
or $0, since the Protected Payment Amount can’t be less
than zero.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an automatic reset occurs that increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value on that date. (Compare the balances at
Year 3 Contract Anniversary Prior to and After Automatic
Reset).
Example #5 –
Early Withdrawal.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is
561/2 years
old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2, 3
and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$0
Activity
$100,000
$210,000
$200,000
$0
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$0
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$0
Activity
$25,000
$196,490
(after $25,000 withdrawal)
$182,000
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$196,490
$182,000
$0
Year 3 Contract Anniversary
(After Automatic Reset)
$196,490
$196,490
$0
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$205,000
$196,490
$0
Year 4 Contract Anniversary
(After Automatic Reset)
$205,000
$205,000
$8,200
91
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $25,000 withdrawal during Contract Year 2
exceeds the $0 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the early withdrawal amount. The early
withdrawal amount is the total withdrawal amount of $25,000.
Second, determine the reduction percentage by dividing the early
withdrawal amount determined by the Contract Value prior to the
withdrawal:
$25,000 ¸
$221,490 = 0.1129 or 11.29%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the greater of (a) the total withdrawal amount ($25,000)
and (b) the reduction percentage ($207,000 ×
11.29%) = $23,370. Since $25,000 is greater than $23,370,
the new Protected Payment Base is computed by subtracting
$25,000 from the prior Protected Payment Base:
$207,000 − $25,000 = $182,000.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an Automatic Reset occurs which increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value (compare balances at Year 3 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount remains at $0 since the
Designated Life has not reached
age 591/2.
At Year 4 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary,
an Automatic Reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value
(compare balances at Year 4 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount is set to $8,200
(4% × $205,000) since the Designated Life reached
age 591/2.
Example #6 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base. The Annual RMD Amount is based on the
entire interest of your Contract as of the previous year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$100,000
$4,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,125
05/01/2007
$100,000
$4,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,125
09/15/2007
$1,875
$100,000
$250
12/15/2007
$1,875
$100,000
$0
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
05/01/2008
$100,000
$4,000
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. In addition, each contract year the
Protected Payment Amount is reduced by the amount of each
withdrawal until the Protected Payment Amount is zero.
92
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$0
$100,000
$4,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,125
04/01/2007
$2,000
$100,000
$125
05/01/2007
$100,000
$4,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,125
09/15/2007
$1,875
$100,000
$250
11/15/2007
$4,000
$95,820
$0
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $4,000 there was no
adjustment to the Protected Payment Base. On
5/1/07, the
Protected Payment Amount was re-calculated (4% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($4,000). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($250), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $95,820.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Protected Payment Amount = $250
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount of $250. The Protected Payment Base will be
reduced based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $3,750 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $250 = $3,750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount);
the calculation is based on the Contract Value and the Protected
Payment Amount values immediately before the excess withdrawal.
Numerically, the ratio is 4.18%
($3,750 ¸ ($90,000 − $250);
$3,750 ¸ $89,750 = 0.0418
or 4.18%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$95,820 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 4.18%);
$100,000 × 95.82% = $95,820).
Example #7 – Lifetime
Income.
This example applies to CoreIncome Advantage 4 Select
(Single) only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 4% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset is assumed during the life of the Rider.
•
Death occurs during Contract Year 26 after the $4,000
withdrawal was made.
93
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$4,000
$96,489
$100,000
$4,000
2
$4,000
$92,410
$100,000
$4,000
3
$4,000
$88,543
$100,000
$4,000
4
$4,000
$84,627
$100,000
$4,000
5
$4,000
$80,662
$100,000
$4,000
6
$4,000
$76,648
$100,000
$4,000
7
$4,000
$72,583
$100,000
$4,000
8
$4,000
$68,467
$100,000
$4,000
9
$4,000
$64,299
$100,000
$4,000
10
$4,000
$60,078
$100,000
$4,000
11
$4,000
$55,805
$100,000
$4,000
12
$4,000
$51,478
$100,000
$4,000
13
$4,000
$47,096
$100,000
$4,000
14
$4,000
$42,660
$100,000
$4,000
15
$4,000
$38,168
$100,000
$4,000
16
$4,000
$33,619
$100,000
$4,000
17
$4,000
$29,013
$100,000
$4,000
18
$4,000
$24,349
$100,000
$4,000
19
$4,000
$19,626
$100,000
$4,000
20
$4,000
$14,844
$100,000
$4,000
21
$4,000
$10,002
$100,000
$4,000
22
$4,000
$5,099
$100,000
$4,000
23
$4,000
$0
$100,000
$4,000
24
$4,000
$0
$100,000
$4,000
25
$4,000
$0
$100,000
$4,000
26
$4,000
$0
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment
Base = $4,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($4,000), the Protected Payment Base remains unchanged.
Withdrawals of 4% of the Protected Payment Base will continue to
be paid each year (even after the Contract Value has been
reduced to zero) until the date of death of the Designated Life
or when a death benefit becomes payable under the Contract.
Example #8 –
Lifetime Income.
This example applies to CoreIncome Advantage 4 Select
(Joint) only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
All Designated Lives are 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 4% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset is assumed during the life of the Rider.
•
All Designated Lives remain eligible for lifetime income
benefits while the Rider is in effect.
•
Surviving Spouse continues Contract upon the death of the first
Designated Life.
•
Surviving Spouse dies during Contract Year 26 after the
$4,000 withdrawal was made.
94
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$4,000
$96,489
$100,000
$4,000
2
$4,000
$92,410
$100,000
$4,000
3
$4,000
$88,543
$100,000
$4,000
4
$4,000
$84,627
$100,000
$4,000
5
$4,000
$80,662
$100,000
$4,000
6
$4,000
$76,648
$100,000
$4,000
7
$4,000
$72,583
$100,000
$4,000
8
$4,000
$68,467
$100,000
$4,000
9
$4,000
$64,299
$100,000
$4,000
10
$4,000
$60,078
$100,000
$4,000
11
$4,000
$55,805
$100,000
$4,000
12
$4,000
$51,478
$100,000
$4,000
13
$4,000
$47,096
$100,000
$4,000
Activity (Death of first
Designated Life)
14
$4,000
$42,660
$100,000
$4,000
15
$4,000
$38,168
$100,000
$4,000
16
$4,000
$33,619
$100,000
$4,000
17
$4,000
$29,013
$100,000
$4,000
18
$4,000
$24,349
$100,000
$4,000
19
$4,000
$19,626
$100,000
$4,000
20
$4,000
$14,844
$100,000
$4,000
21
$4,000
$10,002
$100,000
$4,000
22
$4,000
$5,099
$100,000
$4,000
23
$4,000
$0
$100,000
$4,000
24
$4,000
$0
$100,000
$4,000
25
$4,000
$0
$100,000
$4,000
26
$4,000
$0
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment Base = $4,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($4,000), the Protected Payment Base remains unchanged.
During Contract Year 13, the death of the first Designated Life
occurred. Withdrawals of the Protected Payment Amount (4% of the
Protected Payment Base) will continue to be paid each year (even
after the Contract Value was reduced to zero) until the Rider
terminates.
If there was a change in Owner, Beneficiary or marital status
prior to the death of the first Designated Life that resulted in
the surviving Designated Life (spouse) to become ineligible for
lifetime income benefits, then the lifetime income benefits
under the Rider would not continue for the surviving Designated
Life and the Rider would terminate upon the death of the first
Designated Life.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
Any Credit Enhancement added to your Contract is not counted as
a Purchase Payment and is not included when determining the
guarantees under any of the optional living benefit riders. Any
calculations for determining a Reset/Step-Up are based on
Contract Value, which includes any Credit Enhancement. There may
be minor differences in the calculations due to rounding.
These examples are not intended to serve as projections of
future investment returns nor are they a reflection of how your
Contract will actually perform.
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Example #2 – Subsequent
Purchase Payment.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Automatic Reset at Beginning of Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Protected Payment Base is
increased by the Purchase Payment amount to $200,000
($100,000 + $100,000). The Protected Payment Amount
after the Purchase Payment is equal to $10,000 (5% of the
Protected Payment Base after the Purchase Payment).
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This resets the Protected
Payment Base to $207,000 and the Protected Payment Amount to
$10,350 (5% × $207,000).
In addition to Purchase Payments, the Contract Value is further
subject to increases and/or decreases during each Contract Year
as a result of charges, fees and other deductions, and increases
and/or decreases in the investment performance of the Variable
Account.
96
Example #3 – Withdrawal
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal lower than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Activity
$5,000
$216,490
(after $5,000 withdrawal)
$207,000
$5,350
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$216,490
$207,000
$10,350
Year 3 Contract Anniversary
(After Automatic Reset)
$216,490
$216,490
$10,825
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This reset increases the
Protected Payment Base to $207,000 and the Protected Payment
Amount to $10,350 (5% × $207,000).
Because the $5,000 withdrawal during Contract Year 2 did
not exceed the $10,350 Protected Payment Amount immediately
prior to the withdrawal, the Protected Payment Base remains
unchanged.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 3 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value (see
balances at Year 3 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
after the automatic reset at the Year 3 Contract
Anniversary is equal to $10,825 (5% of the reset Protected
Payment Base).
Example #4 –
Withdrawal Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $195,000.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
97
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Activity
$30,000
$165,000
(after $30,000 withdrawal)
$184,975
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$192,000
$184,975
$9,249
Year 3 Contract Anniversary
(After Automatic Reset)
$192,000
$192,000
$9,600
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $30,000 withdrawal during Contract Year 2
exceeds the $10,350 Protected Payment Amount immediately prior
to the withdrawal, the Protected Payment Base immediately after
the withdrawal will be reduced based on the following
calculation:
First, determine the excess withdrawal amount, which is the
total withdrawal amount less the Protected Payment Amount:
$30,000 − $10,350 = $19,650.
Second, determine the reduction percentage by dividing the
excess withdrawal amount computed above by the difference
between the Contract Value and the Protected Payment Amount
immediately before the withdrawal:
$19,650 ¸
($195,000 − $10,350) = 0.1064 or 10.64%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the percentage computed above: $207,000 −
($207,000 × 10.64%) = $184,975.
The Protected Payment Amount immediately after the withdrawal is
equal to $0. This amount is determined by multiplying the
Protected Payment Base before the withdrawal by 5% and then
subtracting all of the withdrawals made during that Contract
Year:
(5% × $207,000) − $30,000 = -$19,650
or $0, since the Protected Payment Amount can’t be less
than zero.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an automatic reset occurs that increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value on that date. (Compare the balances at
Year 3 Contract Anniversary Prior to and After Automatic
Reset).
Example #5 –
Early Withdrawal.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 62 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2, 3
and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$0
Activity
$100,000
$210,000
$200,000
$0
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$0
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$0
Activity
$25,000
$196,490
(after $25,000 withdrawal)
$182,000
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$196,490
$182,000
$0
Year 3 Contract Anniversary
(After Automatic Reset)
$196,490
$196,490
$0
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$205,000
$196,490
$0
Year 4 Contract Anniversary
(After Automatic Reset)
$205,000
$205,000
$10,250
98
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $25,000 withdrawal during Contract Year 2
exceeds the $0 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the early withdrawal amount. The early
withdrawal amount is the total withdrawal amount of $25,000.
Second, determine the reduction percentage by dividing the early
withdrawal amount determined by the Contract Value prior to the
withdrawal:
$25,000 ¸
$221,490 = 0.1129 or 11.29%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the greater of (a) the total withdrawal amount ($25,000)
and (b) the reduction percentage ($207,000 ×
11.29%) = $23,370. Since $25,000 is greater than $23,370,
the new Protected Payment Base is computed by subtracting
$25,000 from the prior Protected Payment Base:
$207,000 − $25,000 = $182,000.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an Automatic Reset occurs which increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value (compare balances at Year 3 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount remains at $0 since the
Designated Life has not reached age 65.
At Year 4 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary,
an Automatic Reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value
(compare balances at Year 4 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount is set to $10,250
(5% × $205,000) since the Designated Life reached
age 65.
Example #6 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base. The Annual RMD Amount is based on the
entire interest of your Contract as of the previous year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$100,000
$5,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
05/01/2007
$100,000
$5,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
09/15/2007
$1,875
$100,000
$1,250
12/15/2007
$1,875
$100,000
$0
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
05/01/2008
$100,000
$5,000
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. In addition, each contract year the
Protected Payment Amount is reduced by the amount of each
withdrawal until the Protected Payment Amount is zero.
99
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$0
$100,000
$5,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
04/01/2007
$2,000
$100,000
$1,125
05/01/2007
$100,000
$5,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
09/15/2007
$1,875
$100,000
$1,250
11/15/2007
$4,000
$96,900
$0
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $5,000 there was no
adjustment to the Protected Payment Base. On
5/1/07, the
Protected Payment Amount was re-calculated (5% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($5,000). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($1,250), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $96,900.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Protected Payment Amount = $1,250
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount of $1,250. The Protected Payment Base will be
reduced based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $2,750 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $1,250 = $2,750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount);
the calculation is based on the Contract Value and the Protected
Payment Amount values immediately before the excess withdrawal.
Numerically, the ratio is 3.10%
($2,750 ¸ ($90,000 − $1,250);
$2,750 ¸ $88,750 = 0.0310
or 3.10%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$96,900 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 3.10%);
$100,000 × 96.90% = $96,900).
Example #7 – Lifetime
Income.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 5% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset is assumed during the life of the Rider.
•
Death occurred during Contract Year 26 after the $5,000
withdrawal was made.
100
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$5,000
$96,489
$100,000
$5,000
2
$5,000
$92,410
$100,000
$5,000
3
$5,000
$88,543
$100,000
$5,000
4
$5,000
$84,627
$100,000
$5,000
5
$5,000
$80,662
$100,000
$5,000
6
$5,000
$76,648
$100,000
$5,000
7
$5,000
$72,583
$100,000
$5,000
8
$5,000
$68,467
$100,000
$5,000
9
$5,000
$64,299
$100,000
$5,000
10
$5,000
$60,078
$100,000
$5,000
11
$5,000
$55,805
$100,000
$5,000
12
$5,000
$51,478
$100,000
$5,000
13
$5,000
$47,096
$100,000
$5,000
14
$5,000
$42,660
$100,000
$5,000
15
$5,000
$38,168
$100,000
$5,000
16
$5,000
$33,619
$100,000
$5,000
17
$5,000
$29,013
$100,000
$5,000
18
$5,000
$24,349
$100,000
$5,000
19
$5,000
$19,626
$100,000
$5,000
20
$5,000
$14,844
$100,000
$5,000
21
$5,000
$10,002
$100,000
$5,000
22
$5,000
$5,099
$100,000
$5,000
23
$5,000
$0
$100,000
$5,000
24
$5,000
$0
$100,000
$5,000
25
$5,000
$0
$100,000
$5,000
26
$5,000
$0
$100,000
$5,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($5,000), the Protected Payment Base remains unchanged.
Withdrawals of 5% of the Protected Payment Base will continue to
be paid each year (even after the Contract Value has been
reduced to zero) until the date of death of the Designated Life
or when a death benefit becomes payable under the Contract.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
Any Credit Enhancement added to your Contract is not counted as
a Purchase Payment and is not included when determining the
guarantees under any of the optional living benefit riders. Any
calculations for determining a Reset/Step-Up are based on
Contract Value, which includes any Credit Enhancement. There may
be minor differences in the calculations due to rounding.
These examples are not intended to serve as projections of
future investment returns nor are they a reflection of how your
Contract will actually perform.
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,500
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 4.5% of Protected Payment
Base = $4,500
Example #2 – Subsequent
Purchase Payment.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Automatic Reset at Beginning of Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,500
Activity
$100,000
$210,000
$200,000
$9,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$9,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$9,315
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Protected Payment Base is
increased by the Purchase Payment amount to $200,000
($100,000 + $100,000). The Protected Payment Amount
after the Purchase Payment is equal to $9,000 (4.5% of the
Protected Payment Base after the Purchase Payment).
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This resets the Protected
Payment Base to $207,000 and the Protected Payment Amount to
$9,315 (4.5% × $207,000).
In addition to Purchase Payments, the Contract Value is further
subject to increases and/or decreases during each Contract Year
as a result of charges, fees and other deductions, and increases
and/or decreases in the investment performance of the Variable
Account.
102
Example #3 – Withdrawal
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal lower than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,500
Activity
$100,000
$210,000
$200,000
$9,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$9,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$9,315
Activity
$5,000
$216,490
(after $5,000 withdrawal)
$207,000
$4,315
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$216,490
$207,000
$9,315
Year 3 Contract Anniversary
(After Automatic Reset)
$216,490
$216,490
$9,742
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This reset increases the
Protected Payment Base to $207,000 and the Protected Payment
Amount to $9,315 (4.5% × $207,000).
Because the $5,000 withdrawal during Contract Year 2 did
not exceed the $9,315 Protected Payment Amount immediately prior
to the withdrawal, the Protected Payment Base remains unchanged.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 3 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value (see
balances at Year 3 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
after the automatic reset at the Year 3 Contract
Anniversary is equal to $9,742 (4.5% of the reset Protected
Payment Base).
Example #4 –
Withdrawal Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 65 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $195,000.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
103
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,500
Activity
$100,000
$210,000
$200,000
$9,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$9,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$9,315
Activity
$30,000
$165,000
(after $30,000 withdrawal)
$183,940
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$192,000
$183,940
$8,277
Year 3 Contract Anniversary
(After Automatic Reset)
$192,000
$192,000
$8,640
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $30,000 withdrawal during Contract Year 2
exceeds the $9,315 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the excess withdrawal amount, which is the
total withdrawal amount less the Protected Payment Amount:
$30,000 − $9,315 = $20,685.
Second, determine the reduction percentage by dividing the
excess withdrawal amount computed above by the difference
between the Contract Value and the Protected Payment Amount
immediately before the withdrawal:
$20,685 ¸ ($195,000 −
$9,315) = 0.1114 or 11.14%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the percentage computed above: $207,000 −
($207,000 × 11.14%) = $183,940.
The Protected Payment Amount immediately after the withdrawal is
equal to $0. This amount is determined by multiplying the
Protected Payment Base before the withdrawal by 4.5% and then
subtracting all of the withdrawals made during that Contract
Year:
(4.5% × $207,000) − $30,000 = -$20,685
or $0, since the Protected Payment Amount can’t be less
than zero.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an automatic reset occurs that increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value on that date. (Compare the balances at
Year 3 Contract Anniversary Prior to and After Automatic
Reset).
Example #5 –
Early Withdrawal.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Designated Life is 62 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2, 3
and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$0
Activity
$100,000
$210,000
$200,000
$0
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$0
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$0
Activity
$25,000
$196,490
(after $25,000 withdrawal)
$182,000
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$196,490
$182,000
$0
Year 3 Contract Anniversary
(After Automatic Reset)
$196,490
$196,490
$0
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$205,000
$196,490
$0
Year 4 Contract Anniversary
(After Automatic Reset)
$205,000
$205,000
$9,225
104
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $25,000 withdrawal during Contract Year 2
exceeds the $0 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the early withdrawal amount. The early
withdrawal amount is the total withdrawal amount of $25,000.
Second, determine the reduction percentage by dividing the early
withdrawal amount determined by the Contract Value prior to the
withdrawal:
$25,000 ¸
$221,490 = 0.1129 or 11.29%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the greater of (a) the total withdrawal amount ($25,000)
and (b) the reduction percentage ($207,000 ×
11.29%) = $23,370. Since $25,000 is greater than $23,370,
the new Protected Payment Base is computed by subtracting
$25,000 from the prior Protected Payment Base:
$207,000 − $25,000 = $182,000.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an Automatic Reset occurs which increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value (compare balances at Year 3 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount remains at $0 since the
Designated Life has not reached age 65.
At Year 4 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary,
an Automatic Reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value
(compare balances at Year 4 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount is set to $9,225
(4.5% × $205,000) since the Designated Life
reached age 65.
Example #6 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base. The Annual RMD Amount is based on the
entire interest of your Contract as of the previous year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$100,000
$4,500
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,625
05/01/2007
$100,000
$4,500
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,625
09/15/2007
$1,875
$100,000
$750
12/15/2007
$1,875
$100,000
$0
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
05/01/2008
$100,000
$4,500
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. In addition, each contract year the
Protected Payment Amount is reduced by the amount of each
withdrawal until the Protected Payment Amount is zero.
105
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$0
$100,000
$4,500
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,625
04/01/2007
$2,000
$100,000
$625
05/01/2007
$100,000
$4,500
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,625
09/15/2007
$1,875
$100,000
$750
11/15/2007
$4,000
$96,360
$0
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $4,500 there was no
adjustment to the Protected Payment Base. On
5/1/07, the
Protected Payment Amount was re-calculated (4.5% of the
Protected Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($4,500). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($750), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $96,360.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Protected Payment Amount = $750
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount of $750. The Protected Payment Base will be
reduced based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $3,250 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $750 = $3,250).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount);
the calculation is based on the Contract Value and the Protected
Payment Amount values immediately before the excess withdrawal.
Numerically, the ratio is
3.64% ($3,250 ¸ ($90,000 −
$750);
$3,250 ¸ $89,250 =
0.0364 or 3.64%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$96,360 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 3.64%);
$100,000 × 96.36% = $96,360).
Example #7 – Lifetime
Income.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
All Designated Lives are 65 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 4.5% of the Protected Payment Base
are taken each Contract Year.
•
No Automatic Reset is assumed during the life of the Rider.
•
All Designated Lives remain eligible for lifetime income
benefits while the Rider is in effect.
106
•
Surviving Spouse continues Contract upon the death of the first
Designated Life.
•
Surviving Spouse died during Contract Year 26 after the
$4,500 withdrawal was made.
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$4,500
$96,489
$100,000
$4,500
2
$4,500
$92,410
$100,000
$4,500
3
$4,500
$88,543
$100,000
$4,500
4
$4,500
$84,627
$100,000
$4,500
5
$4,500
$80,662
$100,000
$4,500
6
$4,500
$76,648
$100,000
$4,500
7
$4,500
$72,583
$100,000
$4,500
8
$4,500
$68,467
$100,000
$4,500
9
$4,500
$64,299
$100,000
$4,500
10
$4,500
$60,078
$100,000
$4,500
11
$4,500
$55,805
$100,000
$4,500
12
$4,500
$51,478
$100,000
$4,500
13
$4,500
$47,096
$100,000
$4,500
Activity (Death of first
Designated Life)
14
$4,500
$42,660
$100,000
$4,500
15
$4,500
$38,168
$100,000
$4,500
16
$4,500
$33,619
$100,000
$4,500
17
$4,500
$29,013
$100,000
$4,500
18
$4,500
$24,349
$100,000
$4,500
19
$4,500
$19,626
$100,000
$4,500
20
$4,500
$14,844
$100,000
$4,500
21
$4,500
$10,002
$100,000
$4,500
22
$4,500
$5,099
$100,000
$4,500
23
$4,500
$0
$100,000
$4,500
24
$4,500
$0
$100,000
$4,500
25
$4,500
$0
$100,000
$4,500
26
$4,500
$0
$100,000
$4,500
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase Payment = $100,000
•
Protected Payment Amount = 4.5% of Protected Payment Base =
$4,500
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($4,500), the Protected Payment Base remains unchanged.
During Contract Year 13, the death of the first Designated Life
occurred. Withdrawals of the Protected Payment Amount (4.5% of
the Protected Payment Base) will continue to be paid each year
(even after the Contract Value was reduced to zero) until the
Rider terminates.
If there was a change in Owner, Beneficiary or marital status
prior to the death of the first Designated Life that resulted in
the surviving Designated Life (spouse) to become ineligible for
lifetime income benefits, then the lifetime income benefits
under the Rider would not continue for the surviving Designated
Life and the Rider would terminate upon the death of the first
Designated Life.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
Any Credit Enhancement added to your Contract is not counted as
a Purchase Payment and is not included when determining the
guarantees under any of the optional living benefit riders. Any
calculations for determining a Reset are based on Contract
Value, which includes any Credit Enhancement. There may be minor
differences in the calculations due to rounding. These
examples are not intended to serve as projections of future
investment returns nor are they a reflection of how your
Contract will actually perform.
Example #1 –
Setting of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
Protected Payment Amount = 7% of Protected Payment
Base = $7,000
Example #2 – Subsequent
Purchase Payments.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$20,000
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(After Automatic Reset)
$122,000
$122,000
$8,540
$122,000
Immediately after the $20,000 subsequent Purchase Payment during
Contract Year 1, the Protected Payment Base and Remaining
Protected Balance are increased by the Purchase Payment amount
to $120,000 ($100,000 + $20,000). The Protected
Payment Amount after the Purchase Payment is equal to $8,400 (7%
of the Protected Payment Base after the Purchase Payment).
At Year 2 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary
(see balances at Year 2 Contract Anniversary –
Prior to Automatic Reset), an Automatic Reset occurred which
changes the Protected Payment Base and Remaining Protected
Balance to an amount equal to 100% of the Contract Value (see
balances at Year 2 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
is equal to $8,540 (7% of the reset Protected Payment Base).
In addition to Purchase Payments, the Contract Value is further
subject to increases
and/or
decreases during each Contract Year as a result of additional
amounts credited, charges, fees and other deductions, and
increases
and/or
decreases in the investment performance of the Variable Account.
108
Example #3 –
Withdrawals Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received during
Contract Year 1.
•
Automatic Reset at the Beginning of Contract Year 2.
•
A withdrawal equal to or less than the Protected Payment Amount
is taken during Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$20,000
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(After Automatic Reset)
$122,000
$122,000
$8,540
$122,000
Activity
$8,540
$116,000
$122,000
$0
$113,460
Year 3 Contract Anniversary
$116,000
$122,000
$8,540
$113,460
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
As the withdrawal during Contract Year 2 did not
exceed the Protected Payment Amount immediately prior to the
withdrawal ($8,540):
•
the Protected Payment Base remains unchanged; and
•
the Remaining Protected Balance is reduced by the amount of the
withdrawal to $113,460 ($122,000 − $8,540).
Example #4 –
Withdrawals Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Automatic Reset at Beginning of Contract Year 2 and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$100,000
$210,000
$200,000
$14,000
$200,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$14,000
$200,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$14,490
$207,000
Activity
$15,000
$206,490
$206,503
$0
$192,000
Year 3 Contract Anniversary
$206,490
$206,503
$14,455
$192,000
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$220,944
$206,503
$14,455
$192,000
Year 4 Contract Anniversary
(After Automatic Reset)
$220,944
$220,944
$15,466
$220,944
For an explanation of the activities at the start of and during
Contract Year 1 and 2, refer to Examples #1 and
#2.
Because the $15,000 withdrawal during Contract Year 2
exceeds the Protected Payment Amount immediately prior to
the withdrawal ($15,000 > $14,490), the Protected
Payment Base and Remaining Protected Balance immediately after
the withdrawal are reduced.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
No withdrawals were taken prior to the excess withdrawal
109
A withdrawal of $15,000 was taken, which exceeds the Protected
Payment Amount of $14,490 for the Contract Year. The Protected
Payment Base and Remaining Protected Balance will be reduced
based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $510 (total withdrawal
amount − Protected Payment Amount;
$15,000 − $14,490 = $510).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount).
The Contract Value prior to the withdrawal was $221,490, which
equals the $206,490 after the withdrawal plus the $15,000
withdrawal amount. Numerically, the ratio is 0.24%
($510 ¸ ($221,490 − $14,490);
$510 ¸ $207,000 = 0.0024
or 0.24%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$206,503 (Protected Payment
Base × (1 − ratio);
$207,000 − (1 −0.24%);
$207,000 × 99.76% = $206,503).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance immediately before the withdrawal is reduced
by the Protected Payment Amount multiplied by 1 less the ratio
determined above. Numerically, after the proportionate
reduction, the new Remaining Protected Balance is $192,047
(Remaining Protected Balance immediately before the
withdrawal − Protected Payment
Amount) × (1 − ratio);
($207,000 − $14,490) × (1 − 0.24%);
$192,510 × 99.76% = $192,047).
To determine the total withdrawal amount reduction, the
Remaining Protected Balance immediately before the withdrawal is
reduced by the total withdrawal amount. Numerically, after the
Remaining Protected Balance is reduced by the total withdrawal
amount, the new Remaining Protected Balance is $192,000
(Remaining Protected Balance immediately before the
withdrawal − total withdrawal amount;
$207,000 − $15,000 = $192,000).
Therefore, since $192,000 (total withdrawal amount method) is
less than $192,047 (proportionate method) the new Remaining
Protected Balance is $192,000.
The Protected Payment Amount immediately after the withdrawal is
equal to $0, but at the Beginning of Contract Year 3, it is
adjusted to $14,455 (7% of the Protected Payment Base (7% of
$206,503 = $14,455).
At Year 4 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 4 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurred which resets the Protected Payment Base
and Remaining Protected Balance to an amount equal to 100% of
the Contract Value (see balances at Year 4 Contract
Anniversary – After Automatic Reset).
Example #5 –
RMD Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base and Remaining Protected Balance. The
Annual RMD Amount is based on the entire interest of your
Contract as of the previous
year-end.
110
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
Contract
Anniversary
$100,000
$7,000
$100,000
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$5,125
$98,125
05/01/2007
Contract
Anniversary
$100,000
$7,000
$98,125
06/15/2007
$1,875
$100,000
$5,125
$96,250
09/15/2007
$1,875
$100,000
$3,250
$94,375
12/15/2007
$1,875
$100,000
$1,375
$92,500
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
$90,500
05/01/2008
Contract
Anniversary
$100,000
$7,000
$90,500
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. The only effect is a reduction in the
Remaining Protected Balance equal to the amount of each
withdrawal.
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
Contract
Anniversary
$100,000
$7,000
$100,000
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$5,125
$98,125
04/01/2007
$2,000
$100,000
$3,125
$96,125
05/01/2007
Contract
Anniversary
$100,000
$7,000
$96,125
06/15/2007
$1,875
$100,000
$5,125
$94,250
09/15/2007
$1,875
$100,000
$3,250
$92,375
11/15/2007
$4,000
$99,140
$0
$88,358
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $7,000 there was no
adjustment to the Protected Payment Base. The only effect is a
reduction in the Remaining Protected Balance and the Protected
Payment Amount equal to the amount of each withdrawal. On
5/1/07, the
Protected Payment Amount was re-calculated (7% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($7,000). As the withdrawal
exceeded the Protected Payment Amount and assuming the Contract
Value was $90,000 immediately prior to the withdrawal, the
Protected Payment Base is reduced to $99,140 and the Remaining
Protected Balance is reduced to $88,358.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
111
•
Remaining Protected Balance = $92,375
•
Protected Payment Amount less withdrawals already
taken = $7,000 − $3,750 = $3,250
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount for the Contract Year. The Protected Payment Base
and Remaining Protected Balance will be reduced based on the
following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount less withdrawals already taken.
Numerically, the excess withdrawal amount is $750 (total
withdrawal amount − Protected Payment Amount less
withdrawals already taken;
$4,000 − ($7,000 − $3,750) = $750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount).
Numerically, the ratio is 0.86%
($750 ¸ ($90,000 − $3,250);
$750 ¸ $86,750 = 0.0086
or 0.86%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$99,140 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 0.86%);
$100,000 × 99.14% = $99,140).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance is reduced by the Protected Payment Amount
multiplied by 1 less the ratio determined above. Numerically,
after the proportionate reduction, the Remaining Protected
Balance is $88,358 (Remaining Protected Balance −
Protected Payment
Amount) × (1 − ratio);
($92,375 − $3,250) × (1 − 0.86%);
$89,125 × 99.14% = $88,358).
To determine the total withdrawal amount reduction, the
Remaining Protected Balance is reduced by the total withdrawal
amount. Numerically, after the Remaining Protected Balance is
reduced by the total withdrawal amount, the Remaining Protected
Balance is $88,375 (Remaining Protected Balance −
total withdrawal amount;
$92,375 − $4,000 = $88,375).
Therefore, since $88,358 (proportionate method) is less than
$88,375 (total withdrawal amount method) the new Remaining
Protected Balance is $88,358.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. They have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments and withdrawals made from the
Contract Prior to the end of a
10-Year Term
effect the values and benefits under this Rider. Any Credit
Enhancement added to your Contract is not counted as a Purchase
Payment and is not included when determining the guarantees
under any of the optional living benefit riders. Any
calculations for determining a
Reset/Step-Up
are based on Contract Value, which includes any Credit
Enhancement. There may be minor differences in the calculations
due to rounding. These examples are not intended to serve as
projections of future investment returns nor are they a
reflection of how your Contract will actually perform.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received in Contract
Year 1 and $10,000 is received in Contract Year 4.
•
A withdrawal of $10,000 is taken during Contract Year 7.
Beginning
Purchase
Guaranteed
Amount
of Contract
Payments
Withdrawal
Contract
Protection
added to the
Year
Received
Amount
Value
Amount
Contract Value
1
$100,000
$105,000
$100,000
Activity
$20,000
$118,119
$120,000
2
$117,374
$120,000
3
$114,439
$120,000
4
$111,578
$120,000
Activity
$10,000
$119,480
$120,000
5
$118,726
$120,000
6
$124,662
$120,000
Step-Up
(New 10-
Year Term
Begins)
$124,662
$124,662
7
$121,546
$124,662
Activity
$10,000
$109,259
$114,209
8
$108,570
$114,209
9
$105,856
$114,209
10
$103,209
$114,209
11
$100,629
$114,209
12
$98,114
$114,209
13
$95,661
$114,209
14
$93,269
$114,209
15
$90,937
$114,209
Values at
End of
15th Year
$88,664
$114,209
$114,209
$0
$25,545
The Guaranteed Protection Amount is equal to
(a) + (b) − (c) as indicated below:
(a)
is the Contract Value at the start of the Term,
(b)
is the amount of each subsequent Purchase Payment received
during the first year of the Term, and
(c)
is a pro rata adjustment for withdrawals made from the Contract
during the Term. The adjustment for each withdrawal is
calculated by multiplying the Guaranteed Protection Amount prior
to the withdrawal by the ratio of the amount of the withdrawal,
including any applicable withdrawal charges, premium taxes,
and/or other taxes, to the Contract Value immediately prior to
the withdrawal.
On the Rider Effective Date, the initial values are set as
follows:
During Contract Year 1, an additional Purchase Payment of
$20,000 was made. Since this Purchase Payment was made during
the first Contract Year, the Guaranteed Protection Amount will
be increased by $20,000 to $120,000.
($100,000 + $20,000 − 0 = $120,000)
During Contract Year 4, an additional Purchase Payment of
$10,000 was made. However, this Purchase Payment will not
increase the Guaranteed Protection Amount because it was not
made during the first Contract Year (or first year of the
10-Year
Term).
On the
6th Contract
Anniversary, an optional
Step-Up was
elected. The
Step-Up will
reset the Guaranteed Protection Amount equal to the Contract
Value ($124,662) as of that Contract Anniversary.
During Contract Year 7, a withdrawal of $10,000 was made.
This withdrawal will reduce the Guaranteed Protection Amount on
a pro rata basis and will result in a new Guaranteed Protection
Amount. The pro rata adjustment is $10,453 and was determined by
calculating the ratio of the withdrawal to the Contract Value
immediately before the withdrawal
($10,000 / $119,259 = 0.08385)
multiplied by the Guaranteed Protection Amount prior to the
withdrawal ($124,662 * 0.08385 = $10,453).
The new Guaranteed Protection Amount
(a) + (b) − (c) = $114,209
($124,662 + 0 − $10,453 = 114,209).
At the end of Contract Year 15 (end of the
10-Year
Term) the Contract Value ($88,664) is less than the Guaranteed
Protection Amount ($114,209). Therefore, $25,545
($114,209 − $88,664 = $25,545) is
added to the Contract Value and the Rider terminates.
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. They have been provided to assist in
understanding the death benefit amount under the Contract and
the optional
Stepped-Up
Death Benefit and to demonstrate how Purchase Payments and
withdrawals made from the Contract may effect the values and
benefits. There may be minor differences in the calculations due
to rounding. These examples are not intended to reflect what
your actual death benefit proceeds will be or serve as
projections of future investment returns nor are they a
reflection of how your Contract will actually perform.
Death
Benefit Amount
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $25,000 is received in Contract
Year 3.
•
A withdrawal of $35,000 is taken during Contract Year 6.
•
A withdrawal of $10,000 is taken during Contract Year 11.
Beginning
Purchase
Return of
of Contract
Payments
Withdrawal
Purchase
Year
Received
Amount
Contract
Value1
Payments1
1
$100,000
$105,000
$100,000
2
$103,000
$100,000
3
$106,090
$100,000
Activity
$25,000
$133,468
$125,000
4
$134,458
$125,000
5
$138,492
$125,000
6
$142,647
$125,000
Activity
$35,000
$110,844
$95,000
7
$111,666
$95,000
8
$103,850
$95,000
9
$96,580
$95,000
10
$89,820
$95,000
11
$10,000
$73,530
$83,629
12
$68,383
$83,629
13
$63,596
$83,629
14
Death
Occurs
$59,144
$83,629
1
The greater of the Contract Value
or the adjusted Return of Purchase Payments represents the Death
Benefit Amount.
On the Rider Effective Date, the initial values are set as
follows:
•
Return of Purchase Payment = Initial Purchase
Payment = $100,000
•
Contract Value = Initial Purchase
Payment = $100,000
During Contract Year 3, an additional Purchase Payment of
$25,000 was made. The Return of Purchase Payment amount
increased to $125,000. The Contract Value increased to $133,468.
During Contract Year 6, a withdrawal of $35,000 was made.
This withdrawal reduced the Return of Purchase Payment amount on
a pro rata basis to $95,000 and decreased the Contract Value to
$110,844. Numerically, the new Return of Purchase Payment amount
is calculated as follows:
First, determine the ratio for the proportionate reduction. The
ratio is the withdrawal amount divided by the Contract Value
prior to the withdrawal ($145,844, which equals the $110,844
Contract Value after the withdrawal plus the $35,000 withdrawal
amount). Numerically, the ratio is
24.00% ($35,000 ¸ $145,844 = 0.2400
or 24.00%).
Second, determine the new Return of Purchase Payment amount. The
Return of Purchase Payment amount prior to the withdrawal is
multiplied by 1 less the ratio determined above. Numerically,
the new Return of Purchase Payment amount is $95,000 (Return of
Purchase Payment amount prior to the
withdrawal × (1 − ratio);
$125,000 × (1 − 24.00%);
$125,000 × 76.00% = $95,000).
115
During Contract Year 11, a withdrawal of $10,000 was made.
This withdrawal reduced the Return of Purchase Payment amount on
a pro rata basis to $83,629 and decreased the Contract Value to
$73,530. Numerically, the new Return of Purchase Payment amount
is calculated as follows:
First, determine the ratio for the proportionate reduction. The
ratio is the withdrawal amount divided by the Contract Value
prior to the withdrawal ($83,530, which equals the $73,530
Contract Value after the withdrawal plus the $10,000 withdrawal
amount). Numerically, the ratio is
11.97% ($10,000 ¸ $83,530 = 0.1197
or 11.97%).
Second, determine the new Return of Purchase Payment amount. The
Return of Purchase Payment amount prior to the withdrawal is
multiplied by 1 less the ratio determined above. Numerically,
the new Return of Purchase Payment amount is $83,629 (Return of
Purchase Payment prior to the
withdrawal × (1 − ratio);
$95,000 × (1 − 11.97%);
$95,000 × 88.03% = $83,629).
During Contract Year 14, death occurs. The Death Benefit
Amount will be the Return of Purchase Payments reduced by an
amount for each withdrawal ($83,629) because that amount is
greater than the Contract Value ($59,144).
Using the table above, if death occurred in Contract
Year 7, the Death Benefit Amount would be the Contract
Value ($111,666) because that amount is greater than the Return
of Purchase Payment (reduced by an amount for withdrawals) of
$95,000.
Stepped-Up
Death Benefit
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $25,000 is received in Contract
Year 3.
•
A withdrawal of $35,000 is taken during Contract Year 6.
•
Annual
Step-Ups
occur on each of the first 7 Contract Anniversaries.
Guaranteed
Minimum
Beginning
Purchase
Return of
(Stepped-Up)
of Contract
Payments
Withdrawal
Contract
Purchase
Death Benefit
Year
Received
Amount
Value1
Payments1
Amount
1
$100,000
$105,000
$100,000
$100,000
2
$103,000
$100,000
$103,000
3
$106,090
$100,000
$106,090
Activity
$25,000
$133,468
$125,000
$131,090
4
$134,458
$125,000
$134,458
5
$138,492
$125,000
$138,492
6
$142,647
$125,000
$142,647
Activity
$35,000
$110,844
$95,000
$108,412
7
$111,666
$95,000
$111,666
8
$103,850
$95,000
$111,666
9
$96,580
$95,000
$111,666
Death
Occurs
$89,820
$95,000
$111,666
1
The greater of the Contract Value
or the adjusted Return of Purchase Payments represents the Death
Benefit Amount.
On the Rider Effective Date, the initial values are set as
follows:
•
Return of Purchase Payment = Initial Purchase
Payment = $100,000
Contract Value = Initial Purchase
Payment = $100,000
During Contract Year 3, an additional Purchase Payment of
$25,000 was made. This results in an increase in the Return of
Purchase Payment amount to $125,000. The Contract Value
increased to $133,468 and the Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount increased to $131,090.
During Contract Year 6, a withdrawal of $35,000 was made.
This withdrawal reduced the Return of Purchase Payment amount on
a pro rata basis to $95,000 and decreased the Contract Value to
$110,844. In addition, the Guaranteed Minimum
(Stepped-Up)
Death Benefit
116
Amount was reduced on a pro rata basis to $108,412. Numerically,
the new Return of Purchase Payment and Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount is calculated as follows:
First, determine the ratio for the proportionate reduction. The
ratio is the withdrawal amount divided by the Contract Value
prior to the withdrawal ($145,844, which equals the $110,844
Contract Value after the withdrawal plus the $35,000 withdrawal
amount). Numerically, the ratio is
24.00% ($35,000 ¸ $145,844 = 0.2400
or 24.00%)
Second, determine the new Return of Purchase Payment amount. The
Return of Purchase Payment amount prior to the withdrawal is
multiplied by 1 less the ratio determined above. Numerically,
the new Return of Purchase Payment amount is $95,000 (Return of
Purchase Payment amount prior to the
withdrawal × (1 − ratio);
$125,000 × (1 − 24.00%);
$125,000 × 76.00% = $95,000).
Third, determine the new Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount. The Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount prior to the withdrawal is multiplied by 1
less the ratio determined above. Numerically, the new Guaranteed
Minimum
(Stepped-Up)
Death Benefit Amount is $108,412 (Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount prior to the
withdrawal × (1 − ratio);
$142,647 × (1 − 24.00%);
$142,647 × 76.00% = $108,412).
During Contract Year 9, death occurs. The death benefit
proceeds are the greater of the Death Benefit Amount (Contract
Value or Return of Purchase Payments adjusted for withdrawals)
or the Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount. The Death Benefit Amount is $95,000
because the Return of Purchase Payment Amount ($95,000) is
greater than the Contract Value ($89,820). The death benefit
proceeds are equal to the Guaranteed Minimum
(Stepped-Up)
Death Benefit Amount of $111,666 because it is greater than the
Death Benefit Amount (Return of Purchase Payments of $95,000).
(This Rider is called the Guaranteed Withdrawal
Benefit VII Rider-Single Life in the Contract’s
Rider.)
Rider
Terms
Annual RMD Amount – The amount required to be
distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Early Withdrawal – Any withdrawal that occurs
before the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age.
Excess Withdrawal – Any withdrawal (except an
RMD Withdrawal) that occurs after the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum amount
that can be withdrawn under this Rider without reducing the
Protected Payment Base. If the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, the Protected Payment Amount is equal to 4% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 4% of the Protected Payment Base computed on that
date. If the oldest Owner (or youngest Annuitant, in the case of
a
Non-Natural
Owner) is younger than
591/2 years
of age, the Protected Payment Amount is equal to zero (0);
however, once the oldest Owner (or youngest Annuitant, in the
case of a
Non-Natural
Owner) reaches
age 591/2,
the Protected Payment Amount will equal 4% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner).
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset or an
Owner-Elected Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets and Owner-Elected Resets in the Reset
of Protected Payment Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets or
Owner-Elected Resets of the Protected Payment Base to an amount
equal to 100% of the Contract Value. Once the Rider is
purchased, you cannot request a termination of the Rider (see
the Termination subsection of this Rider for more
information).
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, the Protected Payment Amount is 4% of the
Protected Payment Base. If the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset or Owner-Elected Reset will increase or decrease the
Protected Payment Base depending on the Contract Value on the
Reset Date. A withdrawal that is less than or equal to the
Protected Payment Amount will not change the Protected Payment
Base. If a withdrawal is greater than the Protected Payment
Amount and the Contract Value (less the Protected Payment
Amount) is lower than the Protected Payment Base at the time of
withdrawal, the Protected Payment Base will be reduced by an
amount that is greater than the excess amount withdrawn. For
withdrawals that are greater than the Protected Payment Amount,
see the Withdrawal of Protected Payment Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other
118
fees, charges and deductions, if applicable, as withdrawals
otherwise made under the provisions of the Contract. Withdrawals
under this Rider are not annuity payouts. Annuity payouts
generally receive a more favorable tax treatment than other
withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the oldest Owner (youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 4% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in
Sample Calculations for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Excess Withdrawal.) If a withdrawal is greater than the
Protected Payment Amount and the Contract Value (less the
Protected Payment Amount) is lower than the Protected Payment
Base, the Protected Payment Base will be reduced by an amount
that is greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See
example 5 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base as a
result of an Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
See example 6 in Sample Calculations for numerical
examples that describe what occurs when only withdrawals of the
Annual RMD Amount are made during a Contract Year and when
withdrawals of the Annual RMD Amount plus other non-RMD
Withdrawals are made during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees,
market decline, or otherwise), the Rider will terminate.
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
119
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
date of death of an Owner or the date of death of the sole
surviving Annuitant (first Annuitant in the case of a
Non-Natural Owner),
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit.
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is less than the Contract Value on that Contract
Anniversary. The annual charge percentage may change as a result
of any Automatic Reset (see CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges).
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Protected Payment Amount and annual
charge percentage to their respective amounts immediately before
the Automatic Reset. Any future Automatic Resets will continue
in accordance with the Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the reset is effective.
Automatic Reset – Future Participation. You may
elect not to participate in future Automatic Resets at any time.
Your election must be received, In Proper Form, while this Rider
is in effect and before the Annuity Date. Such election will be
effective for future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). You may, on any
Contract Anniversary, elect to reset the Protected Payment Base
to an amount equal to 100% of the Contract Value. An
Owner-Elected Reset may be elected while Automatic Resets are in
effect. The annual charge percentage may change as a result of
this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the reset is effective. The reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base and Protected Payment Amount. Generally, the
reduction will occur when your Contract Value is less than the
Protected Payment Base as of the Contract Anniversary you
elected the reset. You are strongly advised to work with your
financial advisor prior to electing an Owner-Elected Reset.
We will provide you with written confirmation of your
election.
Subsequent
Purchase Payments
If we receive additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, for purposes of
this Rider, we reserve the right to restrict additional Purchase
Payments that result in a total of all Purchase Payments
received on or after the later of the
1st Contract
Anniversary or most recent Reset Date to exceed $100,000 without
our prior approval.
120
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
•
the Life Only fixed annual payment amount based on the terms of
your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates upon the death of an Owner or sole
surviving Annuitant. If the surviving spouse continues the
Contract, the surviving spouse may re-purchase this Rider (if
available) on any Contract Anniversary. The existing protected
balances will not carry over to the new Rider and will be based
on the Contract Value at time of re-purchase.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of an Owner or the date of death of the
sole surviving Annuitant,
•
for Contracts with a Non-Natural Owner, the date of death of any
Annuitant, including Primary, Joint and Contingent Annuitants,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day we are notified of a change in ownership of the Contract
to a non-spouse Owner if the Contract is Non-Qualified
(excluding changes in ownership to or from certain trusts),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the oldest
Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
CoreIncome
Advantage Plus (Joint)
(This Rider is called the Guaranteed Withdrawal
Benefit VII Rider-Joint Life in the Contract’s
Rider.)
For purposes of meeting the eligibility requirements, Designated
Lives must be any one of the following:
•
a sole Owner with the Owner’s Spouse designated as the sole
primary Beneficiary,
•
Joint Owners, where the Owners are each other’s Spouses, or
•
if the Contract is issued as a custodial owned IRA or TSA, the
beneficial owner must be the Annuitant and the Annuitant’s
Spouse must be designated as the sole primary Beneficiary under
the Contract. The custodian, under a custodial owned IRA or TSA,
for the benefit of the beneficial owner, may be designated as
sole primary Beneficiary provided that the Spouse of the
beneficial owner is the sole primary Beneficiary of the
custodial account.
If this Rider is added on a Contract Anniversary, naming your
Spouse as the Beneficiary to meet eligibility requirements will
not be considered a change of Annuitant on the Contract.
121
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Designated Lives (each a “Designated
Life”) – Designated Lives must be natural
persons who are each other’s spouses on the Rider Effective
Date. Designated Lives will remain unchanged while this Rider is
in effect.
To be eligible for lifetime benefits, the Designated Life must:
•
be the Owner (or Annuitant, in the case of a custodial owned IRA
or TSA),
•
remain the Spouse of the other Designated Life and be the first
in line of succession, as determined under the Contract, for
payment of any death benefit.
Early Withdrawal – Any withdrawal that
occurs before the youngest Designated Life is
591/2 years
of age.
Excess Withdrawal – Any withdrawal (except
an RMD Withdrawal) that occurs after the youngest Designated
Life is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum
amount that can be withdrawn under this Rider without reducing
the Protected Payment Base. If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is equal to 4% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 4% of the Protected Payment Base computed on that
date. If the youngest Designated Life is younger than
591/2 years
of age, the Protected Payment Amount is equal to zero (0).
However, once the youngest Designated Life reaches
age 591/2,
the Protected Payment Amount will equal 4% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
youngest Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset or
Owner-Elected Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
Spouse – The Owner’s spouse who is
treated as the Owner’s spouse pursuant to federal law. If
the Contract is a custodial owned IRA or TSA, the
Annuitant’s spouse who is treated as the Annuitant’s
spouse pursuant to federal law.
Surviving Spouse – The surviving spouse of
a deceased Owner (or Annuitant in the case of a custodial owned
IRA or TSA).
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets and Owner-Elected Resets in the Reset
of Protected Payment Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets or
Owner-Elected Resets of the Protected Payment Base to an amount
equal to 100% of the Contract Value. Once the Rider is
purchased, you cannot request a termination of the Rider (see
the Termination subsection of this Rider for more
information).
If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is 4% of the
Protected Payment Base. If the youngest Designated Life is
younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset or Owner-Elected Reset will increase or decrease the
Protected Payment Base depending on the Contract Value on the
Reset Date. A withdrawal that is less than or equal to the
Protected Payment Amount will not change the Protected Payment
Base. If a withdrawal is greater than the Protected Payment
Amount and the Contract Value (less the Protected Payment
Amount) is lower than the Protected Payment Base at the time of
withdrawal, the Protected Payment Base will be reduced by an
amount that is greater than the excess amount withdrawn. For
withdrawals that are greater than the Protected Payment Amount,
see the Withdrawal of Protected Payment Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other
122
fees, charges and deductions, if applicable, as withdrawals
otherwise made under the provisions of the Contract. Withdrawals
under this Rider are not annuity payouts. Annuity payouts
generally receive a more favorable tax treatment than other
withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the youngest Designated Life is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 4% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in
Sample Calculations for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Excess Withdrawal.) If a withdrawal is greater than the
Protected Payment Amount and the Contract Value (less the
Protected Payment Amount) is lower than the Protected Payment
Base, the Protected Payment Base will be reduced by an amount
that is greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See
example 5 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base as a
result of an Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only,
•
the youngest Designated Life is
age 591/2
or older, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
See example 6 in Sample Calculations for numerical
examples that describe what occurs when only withdrawals of the
Annual RMD Amount are made during a Contract Year and when
withdrawals of the Annual RMD Amount plus other non-RMD
Withdrawals are made during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the youngest Designated Life is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees,
market decline, or otherwise), the Rider will terminate.
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
123
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
death of all Designated Lives eligible for lifetime benefits,
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit.
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is less than the Contract Value on that Contract
Anniversary. The annual charge percentage may change as a result
of any Automatic Reset (see CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges).
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Protected Payment Amount and annual
charge percentage to their respective amounts immediately before
the Automatic Reset. Any future Automatic Resets will continue
in accordance with the Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the reset is effective.
Automatic Reset – Future Participation. You may
elect not to participate in future Automatic Resets at any time.
Your election must be received, In Proper Form, while this Rider
is in effect and before the Annuity Date. Such election will be
effective for future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). You may, on any
Contract Anniversary, elect to reset the Protected Payment Base
to an amount equal to 100% of the Contract Value. An
Owner-Elected Reset may be elected while Automatic Resets are in
effect. The annual charge percentage may change as a result of
this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the reset is effective. The reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base and Protected Payment Amount. Generally, the
reduction will occur when your Contract Value is less than the
Protected Payment Base as of the Contract Anniversary you
elected the reset. You are strongly advised to work with your
financial advisor prior to electing an Owner-Elected Reset.
We will provide you with written confirmation of your
election.
Subsequent
Purchase Payments
If we receive additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, for purposes of
this Rider, we reserve the right to restrict additional Purchase
Payments that result in a total of all Purchase Payments
received on or after the later of the
1st Contract
Anniversary or most recent Reset Date to exceed $100,000 without
our prior approval.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only or Joint Life Only
fixed annuity option is chosen, the annuity payments will be
equal to the greater of:
•
the Life Only or Joint Life Only fixed annual payment amount
based on the terms of your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
124
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies and the Surviving Spouse (who is also a
Designated Life eligible for lifetime benefits) elects to
continue the Contract in accordance with its terms, the
Surviving Spouse may continue to take withdrawals of the
Protected Payment Amount under this Rider, until the Rider
terminates.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Ownership
and Beneficiary Changes
Changes to the Contract Owner, Annuitant
and/or
Beneficiary designations and changes in marital status,
including a dissolution of marriage, may adversely affect the
benefits of this Rider. A particular change may make a
Designated Life ineligible to receive lifetime income benefits
under this Rider. As a result, the Rider may remain in effect
and you may pay for benefits that you will not receive. You
are strongly advised to work with your financial advisor and
consider your options prior to making any Owner, Annuitant
and/or
Beneficiary changes to your Contract.
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of all Designated Lives eligible for
lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and a Surviving Spouse who chooses to continue the
Contract is not a Designated Life eligible for lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and the Contract is not continued by a Surviving
Spouse who is a Designated Life eligible for lifetime benefits,
•
if both Designated Lives are Joint Owners and there is a change
in marital status, the Rider will terminate upon the death of
the first Designated Life who is a Contract Owner,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day that neither Designated Life is an Owner (or Annuitant,
in the case of a custodial owned IRA or TSA),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the youngest
Designated Life is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
There may be minor differences in the calculations due to
rounding. These examples are not intended to serve as
projections of future investment returns nor are they a
reflection of how your contract will actually perform.
The examples apply to CoreIncome Advantage Plus (Single) and
(Joint) unless otherwise noted below.
125
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment
Base = $4,000
Example #2 – Subsequent
Purchase Payment.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Automatic Reset at Beginning of Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Protected Payment Base is
increased by the Purchase Payment amount to $200,000
($100,000 + $100,000). The Protected Payment Amount
after the Purchase Payment is equal to $8,000 (4% of the
Protected Payment Base after the Purchase Payment).
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This resets the Protected
Payment Base to $207,000 and the Protected Payment Amount to
$8,280 (4% × $207,000).
In addition to Purchase Payments, the Contract Value is further
subject to increases and/or decreases during each Contract Year
as a result of charges, fees and other deductions, and increases
and/or decreases in the investment performance of the Variable
Account.
126
Example #3 – Withdrawal
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal equal to or less than the Protected Payment Amount
is taken during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Activity
$5,000
$216,490
(after $5,000 withdrawal)
$207,000
$3,280
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$216,490
$207,000
$8,280
Year 3 Contract Anniversary
(After Automatic Reset)
$216,490
$216,490
$8,660
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This reset increases the
Protected Payment Base to $207,000 and the Protected Payment
Amount to $8,280 (4% × $207,000).
Because the $5,000 withdrawal during Contract Year 2 did
not exceed the $8,280 Protected Payment Amount immediately prior
to the withdrawal, the Protected Payment Base remains unchanged.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 3 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value (see
balances at Year 3 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
after the automatic reset at the Year 3 Contract
Anniversary is equal to $8,660 (4% of the reset Protected
Payment Base).
Example #4 –
Withdrawal Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $195,000.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
127
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$4,000
Activity
$100,000
$210,000
$200,000
$8,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$8,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$8,280
Activity
$30,000
$165,000
(after $30,000 withdrawal)
$182,926
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$192,000
$182,926
$7,317
Year 3 Contract Anniversary
(After Automatic Reset)
$192,000
$192,000
$7,680
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $30,000 withdrawal during Contract Year 2 exceeds
the $8,280 Protected Payment Amount immediately prior to the
withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the excess withdrawal amount, which is the
total withdrawal amount less the Protected Payment Amount:
$30,000 − $8,280 = $21,720.
Second, determine the reduction percentage by dividing the
excess withdrawal amount computed above by the difference
between the Contract Value and the Protected Payment Amount
immediately before the withdrawal:
$21,720 ¸ ($195,000 − $8,280) = 0.1163
or 11.63%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the percentage computed above:
$207,000 − ($207,000 × 11.63%) = $182,926.
The Protected Payment Amount immediately after the withdrawal is
equal to $0. This amount is determined by multiplying the
Protected Payment Base before the withdrawal by 4% and then
subtracting all of the withdrawals made during that Contract
Year:
(4% × $207,000) − $30,000 = -$21,720
or $0, since the Protected Payment Amount can’t be less
than zero.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an automatic reset occurs that increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value on that date. (Compare the balances at
Year 3 Contract Anniversary Prior to and After Automatic
Reset).
Example #5 –
Early Withdrawal.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (youngest Designated Life for Joint)
is
561/2 years
old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2, 3
and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$0
Activity
$100,000
$210,000
$200,000
$0
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$0
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$0
Activity
$25,000
$196,490
(after $25,000 withdrawal)
$182,000
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$196,490
$182,000
$0
Year 3 Contract Anniversary
(After Automatic Reset)
$196,490
$196,490
$0
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$205,000
$196,490
$0
Year 4 Contract Anniversary
(After Automatic Reset)
$205,000
$205,000
$8,200
128
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $25,000 withdrawal during Contract Year 2
exceeds the $0 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the early withdrawal amount. The early
withdrawal amount is the total withdrawal amount of $25,000.
Second, determine the reduction percentage by dividing the early
withdrawal amount determined by the Contract Value prior to the
withdrawal:
$25,000 ¸
$221,490 = 0.1129 or 11.29%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the greater of (a) the total withdrawal amount ($25,000)
and (b) the reduction percentage ($207,000 ×
11.29%) = $23,370. Since $25,000 is greater than $23,370,
the new Protected Payment Base is computed by subtracting
$25,000 from the prior Protected Payment Base:
$207,000 − $25,000 = $182,000.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an Automatic Reset occurs which increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value (compare balances at Year 3 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount remains at $0 since the
oldest Owner (youngest Annuitant for
Non-Natural
Owner; youngest Designated Life for Joint) has not reached
age 591/2.
At Year 4 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary,
an Automatic Reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value
(compare balances at Year 4 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount is set to $8,200
(4% × $205,000) since the oldest Owner (youngest
Annuitant for
Non-Natural
Owner; youngest Designated Life for Joint) reached
age 591/2.
Example #6 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base. The Annual RMD Amount is based on the
entire interest of your Contract as of the previous year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$100,000
$4,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,125
05/01/2007
$100,000
$4,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,125
09/15/2007
$1,875
$100,000
$250
12/15/2007
$1,875
$100,000
$0
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
05/01/2008
$100,000
$4,000
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. In addition, each contract year the
Protected Payment Amount is reduced by the amount of each
withdrawal until the Protected Payment Amount is zero.
129
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$0
$100,000
$4,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$2,125
04/01/2007
$2,000
$100,000
$125
05/01/2007
$100,000
$4,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$2,125
09/15/2007
$1,875
$100,000
$250
11/15/2007
$4,000
$95,820
$0
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $4,000 there was no
adjustment to the Protected Payment Base. On
5/1/07, the
Protected Payment Amount was re-calculated (4% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($4,000). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($250), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $95,820.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Protected Payment Amount = $250
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount of $250. The Protected Payment Base will be
reduced based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $3,750 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $250 = $3,750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount);
the calculation is based on the Contract Value and the Protected
Payment Amount values immediately before the excess withdrawal.
Numerically, the ratio is 4.18%
($3,750 ¸ ($90,000 − $250);
$3,750 ¸ $89,750 = 0.0418
or 4.18%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$95,820 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 4.18%);
$100,000 × 95.82% = $95,820).
Example #7 – Lifetime
Income.
This example applies to CoreIncome Advantage Plus (Single)
only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant is 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 4% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset or Owner-Elected Reset is assumed during the
life of the Rider.
•
Death occurs during Contract Year 26 after the $4,000
withdrawal was made.
130
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$4,000
$96,489
$100,000
$4,000
2
$4,000
$92,410
$100,000
$4,000
3
$4,000
$88,543
$100,000
$4,000
4
$4,000
$84,627
$100,000
$4,000
5
$4,000
$80,662
$100,000
$4,000
6
$4,000
$76,648
$100,000
$4,000
7
$4,000
$72,583
$100,000
$4,000
8
$4,000
$68,467
$100,000
$4,000
9
$4,000
$64,299
$100,000
$4,000
10
$4,000
$60,078
$100,000
$4,000
11
$4,000
$55,805
$100,000
$4,000
12
$4,000
$51,478
$100,000
$4,000
13
$4,000
$47,096
$100,000
$4,000
14
$4,000
$42,660
$100,000
$4,000
15
$4,000
$38,168
$100,000
$4,000
16
$4,000
$33,619
$100,000
$4,000
17
$4,000
$29,013
$100,000
$4,000
18
$4,000
$24,349
$100,000
$4,000
19
$4,000
$19,626
$100,000
$4,000
20
$4,000
$14,844
$100,000
$4,000
21
$4,000
$10,002
$100,000
$4,000
22
$4,000
$5,099
$100,000
$4,000
23
$4,000
$0
$100,000
$4,000
24
$4,000
$0
$100,000
$4,000
25
$4,000
$0
$100,000
$4,000
26
$4,000
$0
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment
Base = $4,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($4,000), the Protected Payment Base remains unchanged.
Withdrawals of 4% of the Protected Payment Base will continue to
be paid each year (even after the Contract Value has been
reduced to zero) until the date of death of an Owner or the date
of death of the sole surviving Annuitant (death of any Annuitant
for Non-Natural Owners), whichever occurs first.
Example #8 –
Lifetime Income.
This example applies to CoreIncome Advantage Plus
(Joint) only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
All Designated Lives are 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 4% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset or Owner-Elected Reset is assumed during the
life of the Rider.
•
All Designated Lives remain eligible for lifetime income
benefits while the Rider is in effect.
•
Surviving Spouse continues Contract upon the death of the first
Designated Life.
131
•
Surviving Spouse dies during Contract Year 26 after the
$4,000 withdrawal was made.
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$4,000
$96,489
$100,000
$4,000
2
$4,000
$92,410
$100,000
$4,000
3
$4,000
$88,543
$100,000
$4,000
4
$4,000
$84,627
$100,000
$4,000
5
$4,000
$80,662
$100,000
$4,000
6
$4,000
$76,648
$100,000
$4,000
7
$4,000
$72,583
$100,000
$4,000
8
$4,000
$68,467
$100,000
$4,000
9
$4,000
$64,299
$100,000
$4,000
10
$4,000
$60,078
$100,000
$4,000
11
$4,000
$55,805
$100,000
$4,000
12
$4,000
$51,478
$100,000
$4,000
13
$4,000
$47,096
$100,000
$4,000
Activity (Death of first
Designated Life)
14
$4,000
$42,660
$100,000
$4,000
15
$4,000
$38,168
$100,000
$4,000
16
$4,000
$33,619
$100,000
$4,000
17
$4,000
$29,013
$100,000
$4,000
18
$4,000
$24,349
$100,000
$4,000
19
$4,000
$19,626
$100,000
$4,000
20
$4,000
$14,844
$100,000
$4,000
21
$4,000
$10,002
$100,000
$4,000
22
$4,000
$5,099
$100,000
$4,000
23
$4,000
$0
$100,000
$4,000
24
$4,000
$0
$100,000
$4,000
25
$4,000
$0
$100,000
$4,000
26
$4,000
$0
$100,000
$4,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase Payment = $100,000
•
Protected Payment Amount = 4% of Protected Payment Base = $4,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($4,000), the Protected Payment Base remains unchanged.
During Contract Year 13, the death of the first Designated Life
occurred. Withdrawals of the Protected Payment Amount (4% of the
Protected Payment Base) will continue to be paid each year (even
after the Contract Value was reduced to zero) until the Rider
terminates.
If there was a change in Owner, Beneficiary or marital status
prior to the death of the first Designated Life that resulted in
the surviving Designated Life (spouse) to become ineligible for
lifetime income benefits, then the lifetime income benefits
under the Rider would not continue for the surviving Designated
Life and the Rider would terminate upon the death of the first
Designated Life.
CoreIncome
Advantage 5 Plus (Single)
(This Rider is called the Guaranteed Withdrawal
Benefit V Rider-Single Life in the Contract’s
Rider.)
Rider
Terms
Annual RMD Amount – The amount required to be
distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Early Withdrawal – Any withdrawal that occurs
before the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age.
132
Excess Withdrawal – Any withdrawal (except an
RMD Withdrawal) that occurs after the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum amount
that can be withdrawn under this Rider without reducing the
Protected Payment Base. If the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, the Protected Payment Amount is equal to 5% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 5% of the Protected Payment Base computed on that
date. If the oldest Owner (or youngest Annuitant, in the case of
a
Non-Natural
Owner) is younger than
591/2 years
of age, the Protected Payment Amount is equal to zero (0);
however, once the oldest Owner (or youngest Annuitant, in the
case of a
Non-Natural
Owner) reaches
age 591/2,
the Protected Payment Amount will equal 5% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner).
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset or an
Owner-Elected Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets and Owner-Elected Resets in the Reset
of Protected Payment Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets or
Owner-Elected Resets of the Protected Payment Base to an amount
equal to 100% of the Contract Value. Once the Rider is
purchased, you cannot request a termination of the Rider (see
the Termination subsection of this Rider for more
information).
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, the Protected Payment Amount is 5% of the
Protected Payment Base. If the oldest Owner (or youngest
Annuitant, in the case of a
Non-Natural
Owner) is younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset or Owner-Elected Reset will increase or decrease the
Protected Payment Base depending on the Contract Value on the
Reset Date. A withdrawal that is less than or equal to the
Protected Payment Amount will not change the Protected Payment
Base. If a withdrawal is greater than the Protected Payment
Amount and the Contract Value (less the Protected Payment
Amount) is lower than the Protected Payment Base at the time of
withdrawal, the Protected Payment Base will be reduced by an
amount that is greater than the excess amount withdrawn. For
withdrawals that are greater than the Protected Payment Amount,
see the Withdrawal of Protected Payment Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the oldest Owner (youngest Annuitant, in the case of a
Non-Natural
Owner) is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 5% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
133
Withdrawals Exceeding the Protected Payment Amount. If a
withdrawal (except an RMD Withdrawal) exceeds the Protected
Payment Amount immediately prior to that withdrawal, we will
(immediately following the withdrawal) reduce the Protected
Payment Base on a proportionate basis for the amount in excess
of the Protected Payment Amount. (See example 4 in
Sample Calculations for a numerical example of the
adjustments to the Protected Payment Base as a result of an
Excess Withdrawal.) If a withdrawal is greater than the
Protected Payment Amount and the Contract Value (less the
Protected Payment Amount) is lower than the Protected Payment
Base, the Protected Payment Base will be reduced by an amount
that is greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See
example 5 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base as a
result of an Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
See example 6 in Sample Calculations for numerical
examples that describe what occurs when only withdrawals of the
Annual RMD Amount are made during a Contract Year and when
withdrawals of the Annual RMD Amount plus other non-RMD
Withdrawals are made during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees,
market decline, or otherwise), the Rider will terminate.
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
date of death of an Owner or the date of death of the sole
surviving Annuitant (first Annuitant in the case of a
Non-Natural Owner),
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit.
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
134
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is less than the Contract Value on that Contract
Anniversary. The annual charge percentage may change as a result
of any Automatic Reset (see CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges).
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Protected Payment Amount and annual
charge percentage to their respective amounts immediately before
the Automatic Reset. Any future Automatic Resets will continue
in accordance with the Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the reset is effective.
Automatic Reset – Future Participation. You may
elect not to participate in future Automatic Resets at any time.
Your election must be received, In Proper Form, while this Rider
is in effect and before the Annuity Date. Such election will be
effective for future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). You may, on any
Contract Anniversary, elect to reset the Protected Payment Base
to an amount equal to 100% of the Contract Value. An
Owner-Elected Reset may be elected while Automatic Resets are in
effect. The annual charge percentage may change as a result of
this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the reset is effective. The reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base and Protected Payment Amount. Generally, the
reduction will occur when your Contract Value is less than the
Protected Payment Base as of the Contract Anniversary you
elected the reset. You are strongly advised to work with your
financial advisor prior to electing an Owner-Elected Reset.
We will provide you with written confirmation of your
election.
Subsequent
Purchase Payments
If we receive additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, for purposes of
this Rider, we reserve the right to restrict additional Purchase
Payments that result in a total of all Purchase Payments
received on or after the later of the
1st Contract
Anniversary or most recent Reset Date to exceed $100,000 without
our prior approval.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
•
the Life Only fixed annual payment amount based on the terms of
your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
This Rider terminates upon the death of an Owner or sole
surviving Annuitant. If the surviving spouse continues the
Contract, the surviving spouse may re-purchase this Rider (if
available) on any Contract Anniversary. The existing protected
balances will not carry over to the new Rider and will be based
on the Contract Value at time of re-purchase.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
135
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of an Owner or the date of death of the
sole surviving Annuitant,
•
for Contracts with a Non-Natural Owner, the date of death of any
Annuitant, including Primary, Joint and Contingent Annuitants,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day we are notified of a change in ownership of the Contract
to a non-spouse Owner if the Contract is Non-Qualified
(excluding changes in ownership to or from certain trusts),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the oldest
Owner (or youngest Annuitant, in the case of a
Non-Natural
Owner) is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
CoreIncome
Advantage 5 Plus (Joint)
(This Rider is called the Guaranteed Withdrawal
Benefit V Rider-Joint Life in the Contract’s
Rider.)
For purposes of meeting the eligibility requirements, Designated
Lives must be any one of the following:
•
a sole Owner with the Owner’s Spouse designated as the sole
primary Beneficiary,
•
Joint Owners, where the Owners are each other’s Spouses, or
•
if the Contract is issued as a custodial owned IRA or TSA, the
beneficial owner must be the Annuitant and the Annuitant’s
Spouse must be designated as the sole primary Beneficiary under
the Contract. The custodian, under a custodial owned IRA or TSA,
for the benefit of the beneficial owner, may be designated as
sole primary Beneficiary provided that the Spouse of the
beneficial owner is the sole primary Beneficiary of the
custodial account.
If this Rider is added on a Contract Anniversary, naming your
Spouse as the Beneficiary to meet eligibility requirements will
not be considered a change of Annuitant on the Contract.
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Designated Lives (each a “Designated
Life”) – Designated Lives must be natural
persons who are each other’s spouses on the Rider Effective
Date. Designated Lives will remain unchanged while this Rider is
in effect.
To be eligible for lifetime benefits, the Designated Life must:
•
be the Owner (or Annuitant, in the case of a custodial owned IRA
or TSA),
•
remain the Spouse of the other Designated Life and be the first
in line of succession, as determined under the Contract, for
payment of any death benefit.
Early Withdrawal – Any withdrawal that
occurs before the youngest Designated Life is
591/2 years
of age.
Excess Withdrawal – Any withdrawal (except
an RMD Withdrawal) that occurs after the youngest Designated
Life is
age 591/2
or older and exceeds the Protected Payment Amount.
Protected Payment Amount – The maximum
amount that can be withdrawn under this Rider without reducing
the Protected Payment Base. If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is equal to 5% of
the Protected Payment Base, less cumulative withdrawals during
that Contract Year and will be reset on each Contract
Anniversary to 5% of the Protected Payment Base computed on that
date. If the youngest Designated Life is younger than
591/2 years
of age, the Protected Payment
136
Amount is equal to zero (0). However, once the youngest
Designated Life reaches
age 591/2,
the Protected Payment Amount will equal 5% of the Protected
Payment Base and will be reset each Contract Anniversary. The
initial Protected Payment Amount will depend upon the age of the
youngest Designated Life.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset or
Owner-Elected Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider
Effective Date is the date of that Contract Anniversary.
Spouse – The Owner’s spouse who is
treated as the Owner’s spouse pursuant to federal law. If
the Contract is a custodial owned IRA or TSA, the
Annuitant’s spouse who is treated as the Annuitant’s
spouse pursuant to federal law.
Surviving Spouse – The surviving spouse of
a deceased Owner (or Annuitant in the case of a custodial owned
IRA or TSA).
You will find information about an RMD Withdrawal in the
Required Minimum Distributions subsection and information
about Automatic Resets and Owner-Elected Resets in the Reset
of Protected Payment Base subsection below.
How the
Rider Works
Beginning at age
591/2,
this Rider guarantees you can withdraw up to the Protected
Payment Amount, regardless of market performance, until the
Rider terminates. Beginning with the
1st anniversary
of the Rider Effective Date or most recent Reset Date, whichever
is later, the Rider provides for Automatic Annual Resets or
Owner-Elected Resets of the Protected Payment Base to an amount
equal to 100% of the Contract Value. Once the Rider is
purchased, you cannot request a termination of the Rider (see
the Termination subsection of this Rider for more
information).
If the youngest Designated Life is
591/2 years
of age or older, the Protected Payment Amount is 5% of the
Protected Payment Base. If the youngest Designated Life is
younger than
591/2 years
of age, the Protected Payment Amount is zero (0).
The Protected Payment Base may change over time. An Automatic
Reset or Owner-Elected Reset will increase or decrease the
Protected Payment Base depending on the Contract Value on the
Reset Date. A withdrawal that is less than or equal to the
Protected Payment Amount will not change the Protected Payment
Base. If a withdrawal is greater than the Protected Payment
Amount and the Contract Value (less the Protected Payment
Amount) is lower than the Protected Payment Base at the time of
withdrawal, the Protected Payment Base will be reduced by an
amount that is greater than the excess amount withdrawn. For
withdrawals that are greater than the Protected Payment Amount,
see the Withdrawal of Protected Payment Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including an IRA or
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event (e.g.
reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
When the youngest Designated Life is
591/2 years
of age or older, you may withdraw up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. The Protected Payment Amount will be
reduced by the amount withdrawn during the Contract Year and
will be reset each Contract Anniversary to 5% of the Protected
Payment Base. Any portion of the Protected Payment Amount not
withdrawn during a Contract Year may not be carried over to the
next Contract Year. If a withdrawal does not exceed the
Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged.
Withdrawals Exceeding the Protected Payment
Amount. If a withdrawal (except an RMD Withdrawal)
exceeds the Protected Payment Amount immediately prior to that
withdrawal, we will (immediately following the withdrawal)
reduce the Protected Payment Base on a proportionate basis for
the amount in excess of the Protected Payment Amount. (See
example 4 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base as a
result of an Excess Withdrawal.) If a withdrawal is greater than
the
137
Protected Payment Amount and the Contract Value (less the
Protected Payment Amount) is lower than the Protected Payment
Base, the Protected Payment Base will be reduced by an amount
that is greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Early
Withdrawal
If an Early Withdrawal occurs, we will (immediately following
the Early Withdrawal) reduce the Protected Payment Base either
on a proportionate basis or by the total withdrawal amount,
whichever results in a lower Protected Payment Base. See
example 5 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base as a
result of an Early Withdrawal.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only,
•
the youngest Designated Life is
age 591/2
or older, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
See example 6 in Sample Calculations for numerical
examples that describe what occurs when only withdrawals of the
Annual RMD Amount are made during a Contract Year and when
withdrawals of the Annual RMD Amount plus other non-RMD
Withdrawals are made during a Contract Year.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Depletion
of Contract Value
If the youngest Designated Life is younger than
age 591/2
when the Contract Value is zero (due to withdrawals, fees,
market decline, or otherwise), the Rider will terminate.
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal that exceeds the Protected Payment Amount, the Rider
will terminate.
If the youngest Designated Life is
age 591/2
or older and the Contract Value was reduced to zero by a
withdrawal (including an RMD Withdrawal) that did not exceed the
Protected Payment Amount, the following will apply:
•
the Protected Payment Amount will be paid each year until the
death of all Designated Lives eligible for lifetime benefits,
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract, and
•
the Contract will cease to provide any death benefit.
Reset of
Protected Payment Base
On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was
originally issued. The limitations and restrictions on Purchase
Payments and withdrawals, the deduction of Rider charges and any
future reset options available on and after the Reset Date, will
again apply and will be measured from that Reset Date. A reset
occurs when the Protected Payment Base is changed to an amount
equal to the Contract Value as of the Reset Date.
Automatic Reset. On each Contract Anniversary while this
Rider is in effect and before the Annuity Date, we will
automatically reset the Protected Payment Base to an amount
equal to 100% of the Contract Value, if the Protected Payment
Base is less than the Contract Value on that Contract
Anniversary. The annual charge percentage may change as a result
of any Automatic Reset (see CHARGES, FEES AND
DEDUCTIONS – Optional Rider Charges).
138
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Protected Payment Amount and annual
charge percentage to their respective amounts immediately before
the Automatic Reset. Any future Automatic Resets will continue
in accordance with the Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the reset is effective.
Automatic Reset – Future Participation. You may
elect not to participate in future Automatic Resets at any time.
Your election must be received, In Proper Form, while this Rider
is in effect and before the Annuity Date. Such election will be
effective for future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). You may, on any
Contract Anniversary, elect to reset the Protected Payment Base
to an amount equal to 100% of the Contract Value. An
Owner-Elected Reset may be elected while Automatic Resets are in
effect. The annual charge percentage may change as a result of
this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the reset is effective. The reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base and Protected Payment Amount. Generally, the
reduction will occur when your Contract Value is less than the
Protected Payment Base as of the Contract Anniversary you
elected the reset. You are strongly advised to work with your
financial advisor prior to electing an Owner-Elected Reset.
We will provide you with written confirmation of your
election.
Subsequent
Purchase Payments
If we receive additional Purchase Payments after the Rider
Effective Date, we will increase the Protected Payment Base by
the amount of the Purchase Payments. However, for purposes of
this Rider, we reserve the right to restrict additional Purchase
Payments that result in a total of all Purchase Payments
received on or after the later of the
1st Contract
Anniversary or most recent Reset Date to exceed $100,000 without
our prior approval.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only or Joint Life Only
fixed annuity option is chosen, the annuity payments will be
equal to the greater of:
•
the Life Only or Joint Life Only fixed annual payment amount
based on the terms of your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base and Protected Payment
Amount under this Rider will not be used in determining any
annuity payments. Work with your financial advisor to determine
if you should annuitize your Contract before the maximum Annuity
Date or stay in the accumulation phase and continue to take
withdrawals under the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies and the Surviving Spouse (who is also a
Designated Life eligible for lifetime benefits) elects to
continue the Contract in accordance with its terms, the
Surviving Spouse may continue to take withdrawals of the
Protected Payment Amount under this Rider, until the Rider
terminates.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract (see DEATH
BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death
Benefits).
Ownership
and Beneficiary Changes
Changes to the Contract Owner, Annuitant
and/or
Beneficiary designations and changes in marital status,
including a dissolution of marriage, may adversely affect the
benefits of this Rider. A particular change may make a
Designated Life ineligible to receive lifetime income benefits
under this Rider. As a result, the Rider may remain in effect
and you may pay for benefits that you will not receive. You
are strongly advised to work with your financial advisor and
consider your options prior to making any Owner, Annuitant
and/or
Beneficiary changes to your Contract.
139
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the date of the death of all Designated Lives eligible for
lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and a Surviving Spouse who chooses to continue the
Contract is not a Designated Life eligible for lifetime benefits,
•
upon the death of the first Designated Life, if a death benefit
is payable and the Contract is not continued by a Surviving
Spouse who is a Designated Life eligible for lifetime benefits,
•
if both Designated Lives are Joint Owners and there is a change
in marital status, the Rider will terminate upon the death of
the first Designated Life who is a Contract Owner,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day that neither Designated Life is an Owner (or Annuitant,
in the case of a custodial owned IRA or TSA),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information),
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount, or
•
the day the Contract Value is reduced to zero if the youngest
Designated Life is younger than
age 591/2.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero.
Sample
Calculations
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
There may be minor differences in the calculations due to
rounding. These examples are not intended to serve as
projections of future investment returns nor are they a
reflection of how your contract will actually perform.
The examples apply to CoreIncome Advantage 5 Plus
(Single) and (Joint) unless otherwise noted below.
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Example #2 – Subsequent
Purchase Payment.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
140
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Automatic Reset at Beginning of Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Protected Payment Base is
increased by the Purchase Payment amount to $200,000
($100,000 + $100,000). The Protected Payment Amount
after the Purchase Payment is equal to $10,000 (5% of the
Protected Payment Base after the Purchase Payment).
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This resets the Protected
Payment Base to $207,000 and the Protected Payment Amount to
$10,350 (5% × $207,000).
In addition to Purchase Payments, the Contract Value is further
subject to increases and/or decreases during each Contract Year
as a result of charges, fees and other deductions, and increases
and/or decreases in the investment performance of the Variable
Account.
Example #3 – Withdrawal
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal lower than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Activity
$5,000
$216,490
(after $5,000 withdrawal)
$207,000
$5,350
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$216,490
$207,000
$10,350
Year 3 Contract Anniversary
(After Automatic Reset)
$216,490
$216,490
$10,825
141
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
An automatic reset takes place at Year 2 Contract
Anniversary, since the Contract Value ($207,000) is higher than
the Protected Payment Base ($200,000). This reset increases the
Protected Payment Base to $207,000 and the Protected Payment
Amount to $10,350 (5% × $207,000).
Because the $5,000 withdrawal during Contract Year 2 did
not exceed the $10,350 Protected Payment Amount immediately
prior to the withdrawal, the Protected Payment Base remains
unchanged.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 3 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value (see
balances at Year 3 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
after the automatic reset at the Year 3 Contract
Anniversary is equal to $10,825 (5% of the reset Protected
Payment Base).
Example #4 –
Withdrawal Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (every Designated Life for Joint) is
64 years old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $195,000.
•
Automatic Resets at Beginning of Contract Years 2
and 3.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$5,000
Activity
$100,000
$210,000
$200,000
$10,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$10,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$10,350
Activity
$30,000
$165,000
(after $30,000 withdrawal)
$184,975
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$192,000
$184,975
$9,249
Year 3 Contract Anniversary
(After Automatic Reset)
$192,000
$192,000
$9,600
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $30,000 withdrawal during Contract Year 2
exceeds the $10,350 Protected Payment Amount immediately prior
to the withdrawal, the Protected Payment Base immediately after
the withdrawal will be reduced based on the following
calculation:
First, determine the excess withdrawal amount, which is the
total withdrawal amount less the Protected Payment Amount:
$30,000 − $10,350 = $19,650.
Second, determine the reduction percentage by dividing the
excess withdrawal amount computed above by the difference
between the Contract Value and the Protected Payment Amount
immediately before the withdrawal:
$19,650 ¸
($195,000 − $10,350) = 0.1064 or 10.64%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the percentage computed above: $207,000 −
($207,000 × 10.64%) = $184,975.
The Protected Payment Amount immediately after the withdrawal is
equal to $0. This amount is determined by multiplying the
Protected Payment Base before the withdrawal by 5% and then
subtracting all of the withdrawals made during that Contract
Year:
(5% × $207,000) − $30,000 = -$19,650
or $0, since the Protected Payment Amount can’t be less
than zero.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an automatic reset occurs that increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value on that date. (Compare the balances at
Year 3 Contract Anniversary Prior to and After Automatic
Reset).
142
Example #5 –
Early Withdrawal.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant (youngest Designated Life for Joint)
is
561/2 years
old.
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Contract Value immediately before
withdrawal = $221,490.
•
Automatic Resets at Beginning of Contract Years 2, 3
and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Purchase
Contract
Payment
Payment
Payment
Withdrawal
Value
Base
Amount
Rider Effective Date
$100,000
$105,000
$100,000
$0
Activity
$100,000
$210,000
$200,000
$0
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$0
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$0
Activity
$25,000
$196,490
(after $25,000 withdrawal)
$182,000
$0
Year 3 Contract Anniversary
(Prior to Automatic Reset)
$196,490
$182,000
$0
Year 3 Contract Anniversary
(After Automatic Reset)
$196,490
$196,490
$0
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$205,000
$196,490
$0
Year 4 Contract Anniversary
(After Automatic Reset)
$205,000
$205,000
$10,250
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $25,000 withdrawal during Contract Year 2
exceeds the $0 Protected Payment Amount immediately prior to
the withdrawal, the Protected Payment Base immediately after the
withdrawal will be reduced based on the following calculation:
First, determine the early withdrawal amount. The early
withdrawal amount is the total withdrawal amount of $25,000.
Second, determine the reduction percentage by dividing the early
withdrawal amount determined by the Contract Value prior to the
withdrawal:
$25,000 ¸
$221,490 = 0.1129 or 11.29%.
Third, determine the new Protected Payment Base by reducing the
Protected Payment Base immediately prior to the withdrawal by
the greater of (a) the total withdrawal amount ($25,000)
and (b) the reduction percentage ($207,000 ×
11.29%) = $23,370. Since $25,000 is greater than $23,370,
the new Protected Payment Base is computed by subtracting
$25,000 from the prior Protected Payment Base:
$207,000 − $25,000 = $182,000.
At Year 3 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary, an Automatic Reset occurs which increases the
Protected Payment Base to an amount equal to 100% of the
Contract Value (compare balances at Year 3 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount remains at $0 since the
oldest Owner (youngest Annuitant for
Non-Natural
Owner; youngest Designated Life for Joint) has not reached
age 591/2.
At Year 4 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary,
an Automatic Reset occurs which increases the Protected Payment
Base to an amount equal to 100% of the Contract Value
(compare balances at Year 4 Contract
Anniversary – Prior to and After Automatic
Reset). The Protected Payment Amount is set to $10,250
(5% × $205,000) since the oldest Owner (youngest
Annuitant for
Non-Natural
Owner; youngest Designated Life for Joint) reached
age 591/2.
Example #6 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base. The Annual RMD Amount is based on the
entire interest of your Contract as of the previous year-end.
143
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$100,000
$5,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
05/01/2007
$100,000
$5,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
09/15/2007
$1,875
$100,000
$1,250
12/15/2007
$1,875
$100,000
$0
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
05/01/2008
$100,000
$5,000
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. In addition, each contract year the
Protected Payment Amount is reduced by the amount of each
withdrawal until the Protected Payment Amount is zero.
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Activity
RMD
Non-RMD
RMD
Payment
Payment
Date
Withdrawal
Withdrawal
Amount
Base
Amount
05/01/2006
$0
$100,000
$5,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
04/01/2007
$2,000
$100,000
$1,125
05/01/2007
$100,000
$5,000
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
09/15/2007
$1,875
$100,000
$1,250
11/15/2007
$4,000
$96,900
$0
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $5,000 there was no
adjustment to the Protected Payment Base. On
5/1/07, the
Protected Payment Amount was re-calculated (5% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($5,000). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($1,250), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $96,900.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Protected Payment Amount = $1,250
144
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount of $1,250. The Protected Payment Base will be
reduced based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $2,750 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $1,250 = $2,750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount);
the calculation is based on the Contract Value and the Protected
Payment Amount values immediately before the excess withdrawal.
Numerically, the ratio is 3.10%
($2,750 ¸ ($90,000 − $1,250);
$2,750 ¸ $88,750 = 0.0310
or 3.10%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$96,900 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 3.10%);
$100,000 × 96.90% = $96,900).
Example #7 – Lifetime
Income.
This example applies to CoreIncome Advantage 5 Plus (Single)
only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Every Owner and Annuitant is 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 5% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset or Owner-Elected Reset is assumed during the
life of the Rider.
•
Death occurred during Contract Year 26 after the $5,000
withdrawal was made.
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$5,000
$96,489
$100,000
$5,000
2
$5,000
$92,410
$100,000
$5,000
3
$5,000
$88,543
$100,000
$5,000
4
$5,000
$84,627
$100,000
$5,000
5
$5,000
$80,662
$100,000
$5,000
6
$5,000
$76,648
$100,000
$5,000
7
$5,000
$72,583
$100,000
$5,000
8
$5,000
$68,467
$100,000
$5,000
9
$5,000
$64,299
$100,000
$5,000
10
$5,000
$60,078
$100,000
$5,000
11
$5,000
$55,805
$100,000
$5,000
12
$5,000
$51,478
$100,000
$5,000
13
$5,000
$47,096
$100,000
$5,000
14
$5,000
$42,660
$100,000
$5,000
15
$5,000
$38,168
$100,000
$5,000
16
$5,000
$33,619
$100,000
$5,000
17
$5,000
$29,013
$100,000
$5,000
18
$5,000
$24,349
$100,000
$5,000
19
$5,000
$19,626
$100,000
$5,000
20
$5,000
$14,844
$100,000
$5,000
21
$5,000
$10,002
$100,000
$5,000
22
$5,000
$5,099
$100,000
$5,000
23
$5,000
$0
$100,000
$5,000
24
$5,000
$0
$100,000
$5,000
25
$5,000
$0
$100,000
$5,000
26
$5,000
$0
$100,000
$5,000
145
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
•
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($5,000), the Protected Payment Base remains unchanged.
Withdrawals of 5% of the Protected Payment Base will continue to
be paid each year (even after the Contract Value has been
reduced to zero) until the date of death of an Owner or the date
of death of the sole surviving Annuitant (death of any Annuitant
for Non-Natural Owners), whichever occurs first.
Example #8 –
Lifetime Income.
This example applies to CoreIncome Advantage 5 Plus
(Joint) only.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
All Designated Lives are 64 years old.
•
No subsequent Purchase Payments are received.
•
Withdrawals, each equal to 5% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset or Owner-Elected Reset is assumed during the
life of the Rider.
•
All Designated Lives remain eligible for lifetime income
benefits while the Rider is in effect.
•
Surviving Spouse continues Contract upon the death of the first
Designated Life.
•
Surviving Spouse died during Contract Year 26 after the
$5,000 withdrawal was made.
Protected
Protected
Contract
End of Year
Payment
Payment
Year
Withdrawal
Contract Value
Base
Amount
1
$5,000
$96,489
$100,000
$5,000
2
$5,000
$92,410
$100,000
$5,000
3
$5,000
$88,543
$100,000
$5,000
4
$5,000
$84,627
$100,000
$5,000
5
$5,000
$80,662
$100,000
$5,000
6
$5,000
$76,648
$100,000
$5,000
7
$5,000
$72,583
$100,000
$5,000
8
$5,000
$68,467
$100,000
$5,000
9
$5,000
$64,299
$100,000
$5,000
10
$5,000
$60,078
$100,000
$5,000
11
$5,000
$55,805
$100,000
$5,000
12
$5,000
$51,478
$100,000
$5,000
13
$5,000
$47,096
$100,000
$5,000
Activity (Death of first
Designated Life)
14
$5,000
$42,660
$100,000
$5,000
15
$5,000
$38,168
$100,000
$5,000
16
$5,000
$33,619
$100,000
$5,000
17
$5,000
$29,013
$100,000
$5,000
18
$5,000
$24,349
$100,000
$5,000
19
$5,000
$19,626
$100,000
$5,000
20
$5,000
$14,844
$100,000
$5,000
21
$5,000
$10,002
$100,000
$5,000
22
$5,000
$5,099
$100,000
$5,000
23
$5,000
$0
$100,000
$5,000
24
$5,000
$0
$100,000
$5,000
25
$5,000
$0
$100,000
$5,000
26
$5,000
$0
$100,000
$5,000
146
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase Payment = $100,000
•
Protected Payment Amount = 5% of Protected Payment Base = $5,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($5,000), the Protected Payment Base remains unchanged.
During Contract Year 13, the death of the first Designated Life
occurred. Withdrawals of the Protected Payment Amount (5% of the
Protected Payment Base) will continue to be paid each year (even
after the Contract Value was reduced to zero) until the Rider
terminates.
If there was a change in Owner, Beneficiary or marital status
prior to the death of the first Designated Life that resulted in
the surviving Designated Life (spouse) to become ineligible for
lifetime income benefits, then the lifetime income benefits
under the Rider would not continue for the surviving Designated
Life and the Rider would terminate upon the death of the first
Designated Life.
Income
Access
Rider
Terms
Annual RMD Amount – The amount required to
be distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Protected Payment Amount – The maximum
amount that can be withdrawn each Contract Year under this Rider
without reducing the Protected Payment Base. The Protected
Payment Amount on any day after the Rider Effective Date is
equal to the lesser of:
•
7% of the Protected Payment Base as of that day, or
•
the Remaining Protected Balance as of that day.
The Protected Payment Amount for a Contract Year is determined
at the beginning of that Contract Year and will remain unchanged
throughout that Contract Year. The initial Protected Payment
Amount on the Rider Effective Date is equal to 7% of the initial
Protected Payment Base.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will remain unchanged except as otherwise described under
the provisions of this Rider. The initial Protected Payment Base
is equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Remaining Protected Balance – The amount
available for future withdrawals made under this Rider. The
initial Remaining Protected Balance is equal to the initial
Purchase Payment, if the Rider Effective Date is on the Contract
Date, or the Contract Value, if the Rider Effective Date is on a
Contract Anniversary.
Reset Date – Any Contract Anniversary
beginning with the
1st Contract
Anniversary after the Rider Effective Date or the most recent
Reset Date, whichever is later, on which an Automatic Reset or
Owner-Elected Reset occurs to Reset the Remaining Protected
Balance to an amount equal to 100% of the Contract Value,
determined as of that Contract Anniversary. The terms Reset and
Step-Up have the same meaning for this Rider. The term Step-Up
may be used in the Rider attached to your Contract.
Rider Effective Date – The date the
guarantees and charges for the Rider become effective. If the
Rider is purchased within 60 days of the Contract Date, the
Rider Effective Date is the Contract Date. If the Rider is
purchased within 60 days of a Contract Anniversary, the
Rider Effective Date is the date of that Contract Anniversary.
How the
Rider Works
This Rider allows for withdrawals up to the Protected Payment
Amount each Contract Year, regardless of market performance,
until the Rider terminates. This Rider does not provide lifetime
withdrawal benefits. The initial Remaining Protected Balance is
equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary. Once the
Rider is purchased, you cannot request a termination of the
Rider (see the Termination subsection of this Rider for
more information).
The Income Access Rider also provides, on any Contract
Anniversary beginning with the
1st anniversary
of the Effective Date or most recent Reset Date, Automatic
Annual Resets and Owner-Elected Resets of the Protected Payment
Base and Remaining Protected Balance to an amount equal to 100%
of the Contract Value as of that Contract Anniversary.
The Protected Payment Base and Remaining Protected Balance may
change over time. An Automatic Reset or Owner-Elected Reset will
increase or decrease the Protected Payment Base and Remaining
Protected Balance depending on the Contract Value on the Reset
Date. A withdrawal that is less than or equal to the Protected
Payment Amount will reduce the Remaining Protected Balance by
the amount of
147
the withdrawal and will not change the Protected Payment Base.
If a withdrawal is greater than the Protected Payment Amount and
the Contract Value is less than the Protected Payment Base, both
the Protected Payment Base and Remaining Protected Balance will
be reduced by an amount that is greater than the excess amount
withdrawn. For withdrawals that are greater than the Protected
Payment Amount, see the Withdrawal of Protected Payment
Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under the Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including a
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event
(e.g. reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
While the Rider is in effect, you may make cumulative
withdrawals up to the Protected Payment Amount each Contract
Year, regardless of market performance, until the Remaining
Protected Balance equals zero. Any portion of the Protected
Payment Amount not withdrawn during a Contract Year may not be
carried over to the next Contract Year.
Under your Contract, you may withdraw more than the Protected
Payment Amount each Contract Year. However, withdrawals of
more than the Protected Payment Amount in a Contract Year will
cause an immediate adjustment to the Remaining Protected
Balance, the Protected Payment Base, and, at the next Contract
Anniversary, the Protected Payment Amount.
If a withdrawal does not cause the total amount withdrawn during
the Contract Year to exceed the Protected Payment Amount, the
Protected Payment Base will remain unchanged. The Remaining
Protected Balance will decrease by the withdrawal amount
immediately following the withdrawal.
Withdrawals Exceeding the Protected Payment
Amount. If a withdrawal (except an RMD Withdrawal)
causes the total amount withdrawn during the Contract Year to
exceed the Protected Payment Amount, we will (immediately
following the excess withdrawal) reduce the Protected Payment
Base on a proportionate basis for the amount in excess of the
Protected Payment Amount. We will reduce the Remaining Protected
Balance either on a proportionate basis or by the total
withdrawal amount, whichever results in the lower Remaining
Protected Balance amount. (See example 4 in Sample
Calculations for a numerical example of the adjustments to
the Protected Payment Base and Remaining Protected Balance as a
result of an excess withdrawal.) If a withdrawal is greater than
the Protected Payment Amount and the Contract Value is less than
the Protected Payment Base, both the Protected Payment Base and
Remaining Protected Balance will be reduced by an amount that is
greater than the excess amount withdrawn.
The Protected Payment Amount will remain unchanged until the
next Contract Anniversary, when the Protected Payment Amount for
the new Contract Year is determined.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
A withdrawal may not exceed the amount available for withdrawal
under the Contract, if such withdrawal would cause the
cumulative withdrawals for that Contract Year to exceed the
Protected Payment Amount and reduce the Contract Value to zero.
Except as otherwise provided under the Required Minimum
Distributions subsection below, if, immediately after a
withdrawal, the cumulative withdrawals for that Contract Year do
not exceed the Protected Payment Amount and the Contract Value
is reduced to zero, the following will apply:
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency, as elected
by you, but no less frequently than annually, until the
Remaining Protected Balance is reduced to zero,
•
no additional Purchase Payments will be accepted under the
Contract,
•
any Remaining Protected Balance will not be available for
payment in a lump sum or may not be applied to provide payments
under an Annuity Option, and
•
the Contract will cease to provide any death benefit.
If the Owner or sole surviving Annuitant dies and the Contract
Value is zero as of the date of death, any Remaining Protected
Balance will be paid to the designated Beneficiary under the
series of pre-authorized withdrawals and payment frequency then
in effect at the time of the Owner’s or sole surviving
Annuitant’s death. If, however, the Remaining Protected
Balance would be paid over a period that
148
exceeds the life expectancy of the Beneficiary, the
pre-authorized withdrawal amount will be adjusted so that the
withdrawal payments will be paid over a period that does not
exceed the Beneficiary’s life expectancy.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
Immediately following an RMD Withdrawal, the Remaining Protected
Balance will decrease by the RMD Withdrawal amount.
If the Contract Value is reduced to zero, RMD Withdrawals will
cease and any Remaining Protected Balance will be paid under a
series of pre-authorized withdrawals in accordance with the
terms of the Rider.
See FEDERAL TAX ISSUES – Qualified
Contracts – Required Minimum Distributions.
Reset of
Protected Payment Base and Remaining Protected Balance
Regardless of which Reset option is used, on and after each
Reset Date, the provisions of this Rider shall apply in the same
manner as they applied when the Rider was originally issued. The
limitations and restrictions on Purchase Payments and
withdrawals, the deduction of annual Charges and any future
Reset options available on and after the Reset Date, will again
apply and will be measured from that Reset Date. Please discuss
with your financial advisor your Contract’s maximum Annuity
Date when considering Reset options. A Reset occurs when the
Protected Payment Base and Remaining Protected Balance are
changed to an amount equal to the Contract Value as of the Reset
Date.
Automatic Reset. On each Contract Anniversary while
this Rider is in effect and before the Annuity Date, we will
automatically Reset the Protected Payment Base and Remaining
Protected Balance to an amount equal to 100% of the Contract
Value, if the Protected Payment Base is less than the Contract
Value on that Contract Anniversary. The annual charge percentage
may change as a result of any Automatic Reset (see CHARGES,
FEES AND DEDUCTIONS – Optional Rider Charges).
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Remaining Protected Balance and any
change in the annual charge percentage to their respective
amounts immediately before the Automatic Reset. Any future
Automatic Resets will continue in accordance with the
Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the Reset is effective.
Automatic Reset – Future
Participation. You may elect not to participate in
future Automatic Resets at any time. Your election must be
received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). On any
Contract Anniversary beginning with the
1st
Contract Anniversary, measured from the Rider Effective Date or
the most recent Reset Date, whichever is later, you may elect to
Reset the Remaining Protected Balance and Protected Payment Base
to an amount equal to 100% of the Contract Value. The annual
charge percentage may change as a result of this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the Reset is effective. The Reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base, Remaining Protected Balance and Protected Payment
Amount. Generally, the reduction will occur when your
Contract Value is less than the Protected Payment Base as of the
Contract Anniversary you elected the reset. You are strongly
advised to work with your financial advisor prior to electing an
Owner-Elected Reset. We will provide you with written
confirmation of your election.
149
Subsequent
Purchase Payments
If we receive any additional Purchase Payments to the Contract,
we will immediately increase the Protected Payment Base and
Remaining Protected Balance by the amount of the Purchase
Payment. However, the Protected Payment Amount will remain
unchanged until the next Contract Anniversary, when the
Protected Payment Amount for the new Contract Year is determined.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies while this Rider is in effect and if the
surviving spouse of the deceased Owner elects to continue the
Contract in accordance with its terms, the surviving spouse may
continue to take withdrawals of the Protected Payment Amount
under this Rider, until the Remaining Protected Balance is
reduced to zero (0). The surviving spouse may elect any of
the reset options available under this Rider for subsequent
Contract Anniversaries.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract and Rider (see
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS –
Death Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically end on
the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the day the Remaining Protected Balance is reduced to zero,
•
the date of the first death of an Owner or the date of death of
the sole surviving Annuitant (except as provided under the
Continuation of Rider if Surviving Spouse Continues Contract
subsection),
•
for Contracts with a
Non-Natural
Owner, the date of the first death of an Annuitant, including
Primary, Joint and Contingent Annuitants,
•
the day the Contract is terminated in accordance with the
provisions of the Contract, except as otherwise provided in the
paragraph below,
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date, or
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount.
The Rider and the Contract will not terminate on the first death
of an Owner or death of the sole surviving Annuitant, or the day
the Contract is terminated in accordance with the provisions of
the Contract if, at the time of those events, the Contract Value
is zero and we are making pre-authorized withdrawals of the
Remaining Protected Balance under the provisions of the Rider.
If we are making pre-authorized withdrawals, the Contract will
terminate on the day the Remaining Protected Balance is zero.
Sample
Calculations
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
There may be minor differences in the calculations due to
rounding. These examples are not intended to serve as
projections of future investment returns nor are they a
reflection of how your contract will actually perform.
Example #1 –
Setting of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
150
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
Protected Payment Amount = 7% of Protected Payment
Base = $7,000
Example #2 – Subsequent
Purchase Payments.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$20,000
$122,000
$120,000
$7,000
$120,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(After Automatic Reset)
$122,000
$122,000
$8,540
$122,000
Immediately after the $20,000 subsequent Purchase Payment during
Contract Year 1, the Protected Payment Base and Remaining
Protected Balance are increased by the Purchase Payment amount
to $120,000 ($100,000 + $20,000). The Protected
Payment Amount after the Purchase Payment remains at $7,000
until the Protected Payment Amount is determined at Year 2
Contract Anniversary.
At Year 2 Contract Anniversary, since the Protected Payment Base
was less than the Contract Value on that Contract Anniversary
(see balances at Year 2 Contract Anniversary –
Prior to Automatic Reset), an Automatic Reset occurred which
changes the Protected Payment Base and Remaining Protected
Balance to an amount equal to 100% of the Contract Value (see
balances at Year 2 Contract Anniversary – After
Automatic Reset). As a result, the Protected Payment Amount
is equal to $8,540 (7% of the reset Protected Payment Base).
In addition to Purchase Payments, the Contract Value is further
subject to increases
and/or
decreases during each Contract Year as a result of additional
amounts credited, charges, fees and other deductions, and
increases
and/or
decreases in the investment performance of the Variable Account.
Example #3 –
Withdrawals Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received during
Contract Year 1.
•
Automatic Reset at the Beginning of Contract Year 2.
•
A withdrawal equal to or less than the Protected Payment Amount
is taken during Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$20,000
$122,000
$120,000
$7,000
$120,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$122,000
$120,000
$8,400
$120,000
Year 2 Contract Anniversary
(After Automatic Reset)
$122,000
$122,000
$8,540
$122,000
Activity
$8,540
$116,000
$122,000
$8,540
$113,460
Year 3 Contract Anniversary
$116,000
$122,000
$8,540
$113,460
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
151
As the withdrawal during Contract Year 2 did not
exceed the Protected Payment Amount immediately prior to the
withdrawal ($8,540):
•
the Protected Payment Base remains unchanged; and
•
the Remaining Protected Balance is reduced by the amount of the
withdrawal to $113,460 ($122,000 − $8,540).
Example #4 –
Withdrawals Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Automatic Reset at Beginning of Contract Year 2 and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Protected
Protected
Remaining
Purchase
Contract
Payment
Payment
Protected
Payment
Withdrawal
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$7,000
$100,000
Activity
$100,000
$210,000
$200,000
$7,000
$200,000
Year 2 Contract Anniversary
(Prior to Automatic Reset)
$207,000
$200,000
$14,000
$200,000
Year 2 Contract Anniversary
(After Automatic Reset)
$207,000
$207,000
$14,490
$207,000
Activity
$15,000
$206,490
$206,503
$14,490
$192,000
Year 3 Contract Anniversary
$206,490
$206,503
$14,455
$192,000
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$220,944
$206,503
$14,455
$192,000
Year 4 Contract Anniversary
(After Automatic Reset)
$220,944
$220,944
$15,466
$220,944
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $15,000 withdrawal during Contract Year 2
exceeds the Protected Payment Amount immediately prior to
the withdrawal ($15,000 > $14,490), the Protected
Payment Base and Remaining Protected Balance immediately after
the withdrawal are reduced.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
No withdrawals were taken prior to the excess withdrawal
A withdrawal of $15,000 was taken, which exceeds the Protected
Payment Amount of $14,490 for the Contract Year. The Protected
Payment Base and Remaining Protected Balance will be reduced
based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $510 (total withdrawal amount − Protected
Payment Amount;
$15,000 − $14,490 = $510).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount). The
Contract Value prior to the withdrawal was $221,490, which
equals the $206,490 after the withdrawal plus the $15,000
withdrawal amount. Numerically, the ratio is 0.24%
($510 ¸ ($221,490 − $14,490);
$510 ¸ $207,000 = 0.0024
or 0.24%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$206,503 (Protected Payment
Base × (1 − ratio);
$207,000 × (1 − 0.24%);
$207,000 × 99.76% = $206,503).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance immediately before the withdrawal is reduced
by the Protected Payment Amount multiplied by 1 less the ratio
determined above. Numerically, after the proportionate
reduction, the new Remaining Protected Balance is $192,047
(Remaining Protected Balance immediately before the
withdrawal − Protected Payment
Amount) × (1 − ratio);
($207,000 − $14,490) × (1 − 0.24%);
$192,510 × 99.76% = $192,047).
152
To determine the total withdrawal amount reduction, the
Remaining Protected Balance immediately before the withdrawal is
reduced by the total withdrawal amount. Numerically, after the
Remaining Protected Balance is reduced by the total withdrawal
amount, the new Remaining Protected Balance is $192,000
(Remaining Protected Balance immediately before the
withdrawal − total withdrawal amount;
$207,000 − $15,000 = $192,000).
Therefore, since $192,000 (total withdrawal amount method) is
less than $192,047 (proportionate method) the new Remaining
Protected Balance is $192,000.
The Protected Payment Amount immediately after the withdrawal is
equal to $14,490, but at the Beginning on Contract Year 3,
it is adjusted to $14,455 (7% of the Protected Payment Base (7%
of $206,503 = $14,455).
At Year 4 Contract Anniversary, since the Protected Payment
Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 4 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurred which resets the Protected Payment Base
and Remaining Protected Balance to an amount equal to 100% of
the Contract Value (see balances at Year 4 Contract
Anniversary – After Automatic Reset).
Example #5 – RMD Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base and Remaining Protected Balance. The
Annual RMD Amount is based on the entire interest of your
Contract as of the previous
year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
Contract
Anniversary
$100,000
$7,000
$100,000
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$7,000
$98,125
05/01/2007
Contract
Anniversary
$100,000
$7,000
$98,125
06/15/2007
$1,875
$100,000
$7,000
$96,250
09/15/2007
$1,875
$100,000
$7,000
$94,375
12/15/2007
$1,875
$100,000
$7,000
$92,500
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$7,000
$90,500
05/01/2008
Contract
Anniversary
$100,000
$7,000
$90,500
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. The only effect is a reduction in the
Remaining Protected Balance equal to the amount of each
withdrawal.
153
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
Contract
Anniversary
$100,000
$7,000
$100,000
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$7,000
$98,125
04/01/2007
$2,000
$100,000
$7,000
$96,125
05/01/2007
Contract
Anniversary
$100,000
$7,000
$96,125
06/15/2007
$1,875
$100,000
$7,000
$94,250
09/15/2007
$1,875
$100,000
$7,000
$92,375
11/15/2007
$4,000
$99,140
$7,000
$88,358
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $7,000 there was no
adjustment to the Protected Payment Base. The only effect is a
reduction in the Remaining Protected Balance and the Protected
Payment Amount equal to the amount of each withdrawal. On
5/1/07, the
Protected Payment Amount was re-calculated (7% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($7,000). As the withdrawal
exceeded the Protected Payment Amount and assuming the Contract
Value was $90,000 immediately prior to the withdrawal, the
Protected Payment Base is reduced to $99,140 and the Remaining
Protected Balance is reduced to $88,358.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
•
Contract Value = $90,000
•
Protected Payment Base = $100,000
•
Remaining Protected Balance = $92,375
•
Protected Payment Amount less withdrawals already
taken = $7,000 − $3,750 = $3,250
A withdrawal of $4,000 was taken, which exceeds the Protected
Payment Amount for the Contract Year. The Protected Payment Base
and Remaining Protected Balance will be reduced based on the
following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount less withdrawals already taken.
Numerically, the excess withdrawal amount is $750 (total
withdrawal amount − Protected Payment Amount less
withdrawals already taken;
$4,000 − ($7,000 − $3,750) = $750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount).
Numerically, the ratio is 0.86%
($750 ¸ ($90,000 − $3,250);
$750 ¸ $86,750 = 0.0086
or 0.86%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$99,140 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 0.86%);
$100,000 × 99.14% = $99,140).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance is reduced by the Protected Payment Amount
multiplied by 1 less the ratio determined above. Numerically,
after the proportionate reduction, the Remaining Protected
Balance is $88,358 (Remaining Protected Balance −
Protected Payment
Amount) × (1 − ratio);
($92,375 − $3,250) × (1 − 0.86%);
$89,125 × 99.14% = $88,358).
To determine the total withdrawal amount reduction, the
Remaining Protected Balance is reduced by the total withdrawal
amount. Numerically, after the Remaining Protected Balance is
reduced by the total withdrawal amount, the Remaining Protected
Balance is $88,375 (Remaining Protected Balance −
total withdrawal amount;
$92,375 − $4,000 = $88,375).
154
Therefore, since $88,358 (proportionate method) is less than
$88,375 (total withdrawal amount method) the new Remaining
Protected Balance is $88,358.
(This Rider is called the Guaranteed Withdrawal Benefit IV
Rider in the Contract’s Rider.)
Rider
Terms
Annual Credit – An amount added to the Annual
Credit Value.
Annual Credit Value – One of two values (the
other value is the Highest Anniversary Value) that determine the
Protected Payment Base prior to the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date.
The Annual Credit Value is increased each year by any Annual
Credits, plus any subsequent Purchase Payments received from the
most recent Contract Anniversary, during the periods described
above.
The initial Annual Credit Value is equal to the initial Purchase
Payment, if the Rider Effective Date is on the Contract Date, or
the Contract Value, if the Rider Effective Date is on a Contract
Anniversary.
Annual RMD Amount – The amount required to be
distributed each Calendar Year for purposes of satisfying the
minimum distribution requirements of Code Section 401(a)(9)
(“Section 401(a)(9)”) and related Code provisions
in effect as of the Rider Effective Date.
Highest Anniversary Value – One of two values
(the other value is the Annual Credit Value) that determine the
Protected Payment Base prior to the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date.
On any day after the Rider Effective Date and during the periods
described above, the Highest Anniversary Value is equal to:
•
the Highest Anniversary Value as of the prior day, plus
•
Purchase Payments received by us on that day.
On any Contract Anniversary after the Rider Effective Date, the
Highest Anniversary Value is equal to the greater of:
•
the Contract Value as of that Contract Anniversary (prior to the
Rider fee assessment), or
•
the Highest Anniversary Value immediately prior to that Contract
Anniversary.
The initial Highest Anniversary Value is equal to the initial
Purchase Payment, if the Rider Effective Date is on the Contract
Date, or the Contract Value, if the Rider Effective Date is on a
Contract Anniversary.
Protected Payment Amount – The maximum amount
that can be withdrawn under this Rider without reducing the
Protected Payment Base.
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural Owner) is age 65 or older when the first
withdrawal was taken or the most recent reset, whichever is
later, the Protected Payment Amount on any day after the Rider
Effective Date is equal to 5% multiplied by the Protected
Payment Base as of that day, less cumulative withdrawals during
the Contract Year.
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural Owner) is age 64 or younger when the first
withdrawal was taken or the most recent reset, whichever is
later, the Protected Payment Amount on any day after the Rider
Effective Date is equal to the lesser of:
•
5% multiplied by the Protected Payment Base as of that day, less
cumulative withdrawals during that Contract Year, or
•
the Remaining Protected Balance as of that day.
The Protected Payment Amount will never be less than zero. The
initial Protected Payment Amount on the Rider Effective Date is
equal to 5% of the initial Protected Payment Base.
Protected Payment Base – An amount used to
determine the Protected Payment Amount. The Protected Payment
Base will never be less than zero and will remain unchanged
except as otherwise described under the provisions of this
Rider. The initial Protected Payment Base is equal to the
initial Purchase Payment, if the Rider Effective Date is on the
Contract Date, or the Contract Value, if the Rider Effective
Date is on a Contract Anniversary.
155
Remaining Protected Balance – The amount
available for future withdrawals made under this Rider, unless
withdrawals are guaranteed until the death of an Owner or sole
surviving Annuitant (first Annuitant in the case of a
Non-Natural Owner). The Remaining Protected Balance will never
be less than zero. The initial Remaining Protected Balance is
equal to the initial Purchase Payment, if the Rider Effective
Date is on the Contract Date, or the Contract Value, if the
Rider Effective Date is on a Contract Anniversary.
Reset Date – Any Contract Anniversary after the
Rider Effective Date on which an Automatic Reset or an
Owner-Elected Reset occurs.
Rider Effective Date – The date the guarantees
and charges for the Rider become effective. If the Rider is
purchased within 60 days of the Contract Date, the Rider
Effective Date is the Contract Date. If the Rider is purchased
within 60 days of a Contract Anniversary, the Rider Effective
Date is the date of that Contract Anniversary.
Adjustment
to Protected Payment Base and Remaining Protected Balance Using
the Annual Credit Value or Highest Anniversary Value
On each Contract Anniversary, while this Rider is in effect,
before the Annuity Date, and before the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date,
the Protected Payment Base and Remaining Protected Balance will
be equal to the greater of the Annual Credit Value or the
Highest Anniversary Value. An increase to the Annual Credit
Value or Highest Anniversary Value is not considered an
Automatic Reset or an Owner-Elected Reset and will not result in
a change to the annual charge percentage. In addition, once
resets become available (after the first withdrawal or 10
Contract Anniversaries as described above), eligibility for the
Annual Credit Value or Highest Anniversary Value adjustment
cannot be reinstated by any Automatic Reset or Owner-Elected
Reset.
Subsequent
Purchase Payments
Purchase Payments received after the Rider Effective Date and
prior to the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date,
will result in an increase in the Annual Credit Value, Highest
Anniversary Value, Protected Payment Base, and Remaining
Protected Balance equal to the Purchase Payment Amount.
Purchase Payments received after the Rider Effective Date and
after the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date,
will result in an increase in the Protected Payment Base and
Remaining Protected Balance equal to the Purchase Payment Amount.
In addition, for purposes of this Rider, we reserve the right to
restrict additional Purchase Payments that result in a total of
all Purchase Payments received on or after the later of the
1st
Contract Anniversary or most recent Reset Date to exceed
$100,000 without our prior approval. This provision only applies
if the Contract to which this Rider is attached, permits
Purchase Payments after the
1st
Contract Anniversary, measured from the Contract Date.
How the
Rider Works
On any day, this Rider guarantees you can withdraw up to the
Protected Payment Amount each contract year, regardless of
market performance, until the Rider terminates. Lifetime
withdrawals up to the Protected Payment Amount may continue
after the Remaining Protected Balance is reduced to
zero (0) if the oldest Owner (or youngest Annuitant, in the
case of a Non-Natural Owner) was age 65 or older when the
first withdrawal was taken after the Rider Effective Date or the
most recent Reset Date, whichever is later. If a withdrawal
was taken at age 64 or younger and there was no subsequent
Reset, the Rider will terminate once the Remaining Protected
Balance is reduced to zero (0). This Rider also provides for
a Highest Anniversary Value feature and for an amount (an
“Annual Credit”) to be added to the Annual Credit
Value. Once the Rider is purchased, you cannot request a
termination of the Rider (see the Termination subsection
of this Rider for more information).
The Protected Payment Base and Remaining Protected Balance may
change over time. The Annual Credit Value or the Highest
Anniversary Value (whichever is greater) will increase the
Protected Payment Base and the Remaining Protected Balance prior
to the earlier of the first withdrawal since the Rider Effective
Date or 10 Contract Anniversaries from the Rider Effective
Date. An Automatic Reset or Owner-Elected Reset will increase or
decrease the Protected Payment Base and Remaining Protected
Balance depending on the Contract Value on the Reset Date. A
withdrawal that is less than or equal to the Protected Payment
Amount will reduce the Remaining Protected Balance by the amount
of the withdrawal and will not change the Protected Payment
Base. If a withdrawal is greater than Protected Payment Amount
and the Contract Value is less than the Protected Payment Base,
both the Protected Payment Base and
156
Remaining Protected Balance will be reduced by an amount that is
greater than the excess amount withdrawn. For withdrawals that
are greater than the Protected Payment Amount, see the
Withdrawal of Protected Payment Amount subsection.
For purposes of this Rider, the term “withdrawal”
includes any applicable withdrawal charges. Amounts withdrawn
under this Rider will reduce the Contract Value by the amount
withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and
deductions, if applicable, as withdrawals otherwise made under
the provisions of the Contract. Withdrawals under this Rider are
not annuity payouts. Annuity payouts generally receive a more
favorable tax treatment than other withdrawals.
If your Contract is a Qualified Contract, including a
TSA/403(b) Contract, you are subject to restrictions on
withdrawals you may take prior to a triggering event
(e.g. reaching
age 591/2,
separation from service, disability) and you should consult your
tax or legal advisor prior to purchasing this optional
guarantee, the primary benefit of which is guaranteeing
withdrawals. For additional information regarding withdrawals
and triggering events, see FEDERAL TAX ISSUES –
IRAs and Qualified Plans.
Withdrawal
of Protected Payment Amount
While this Rider is in effect, you may withdraw up to the
Protected Payment Amount each Contract Year, regardless of
market performance, until the Rider terminates. Any portion of
the Protected Payment Amount not withdrawn during a Contract
Year may not be carried over to the next Contract Year.
If a withdrawal does not exceed the Protected Payment Amount
immediately prior to that withdrawal, the Protected Payment Base
will remain unchanged. The Remaining Protected Balance will
decrease by the withdrawal amount immediately following the
withdrawal.
Withdrawals Exceeding the Protected Payment
Amount. If a withdrawal (except an RMD Withdrawal)
exceeds the Protected Payment Amount immediately prior to that
withdrawal, we will (immediately following the excess
withdrawal) reduce the Protected Payment Base on a proportionate
basis for the amount in excess of the Protected Payment Amount.
We will reduce the Remaining Protected Balance either on a
proportionate basis or by the total withdrawal amount, whichever
results in the lower Remaining Protected Balance amount. (See
example 4 in Sample Calculations for a numerical
example of the adjustments to the Protected Payment Base,
Remaining Protected Balance and Protected Payment Amount as a
result of an excess withdrawal.) If a withdrawal is greater than
the Protected Payment Amount and the Contract Value is less than
the Protected Payment Base, both the Protected Payment Base and
Remaining Protected Balance will be reduced by an amount that is
greater than the excess amount withdrawn.
The amount available for withdrawal under the Contract must be
sufficient to support any withdrawal that would otherwise exceed
the Protected Payment Amount.
For information regarding taxation of withdrawals, see
FEDERAL TAX ISSUES.
Required
Minimum Distributions
No adjustment will be made to the Protected Payment Base as a
result of a withdrawal that exceeds the Protected Payment Amount
immediately prior to the withdrawal, provided:
•
such withdrawal (an “RMD Withdrawal”) is for purposes
of satisfying the minimum distribution requirements of
Section 401(a)(9) and related Code provisions in effect at
that time,
•
you have authorized us to calculate and make periodic
distribution of the Annual RMD Amount for the Calendar Year
required based on the payment frequency you have chosen,
•
the Annual RMD Amount is based on this Contract only, and
•
only RMD Withdrawals are made from the Contract during the
Contract Year.
Immediately following an RMD Withdrawal, the Remaining Protected
Balance will decrease by the RMD Withdrawal amount.
See FEDERAL TAX ISSUES – Qualified
Contracts – General Rules – Required
Minimum Distributions.
Depletion
of Contract Value
If a withdrawal (including an RMD Withdrawal) does not exceed
the Protected Payment Amount immediately prior to the withdrawal
and reduces the Contract Value to zero, the following will apply:
•
if the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural Owner):
•
was age 64 or younger when the first withdrawal was taken
under the Rider, after the Rider Effective Date or the most
recent Reset Date, whichever is later, the Protected Payment
Amount will be paid each year until the Remaining Protected
Balance is reduced to zero, or
157
•
was age 65 or older when the first withdrawal was taken
under the Rider after the Rider Effective Date or the most
recent Reset Date, whichever is later, the Protected Payment
Amount will be paid each year until the day of death of an Owner
or sole surviving Annuitant (first Annuitant in the case of a
Non-Natural Owner).
•
the Protected Payment Amount will be paid under a series of
pre-authorized withdrawals under a payment frequency as elected
by the Owner, but no less frequently than annually,
•
no additional Purchase Payments will be accepted under the
Contract,
•
any Remaining Protected Balance will not be available for
payment in a lump sum and will not be applied to provide
payments under an Annuity Option, and
•
the Contract will cease to provide any death benefit.
Depletion
of Remaining Protected Balance
If a withdrawal (including an RMD Withdrawal) reduced the
Remaining Protected Balance to zero and Contract Value remains,
the following will apply:
If the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural Owner):
•
was age 64 or younger when the first withdrawal was taken
under the Rider after the Rider Effective Date or the most
recent Reset Date, whichever is later, this Rider will
terminate, or
•
was age 65 or older when the first withdrawal was taken
under the Rider after the Rider Effective Date or the most
recent Reset Date, whichever is later, you may elect to withdraw
up to the Protected Payment Amount each year until the day of
death of an Owner or the sole surviving Annuitant (first
Annuitant in the case of a Non-Natural Owner). If an Automatic
or Owner-Elected Reset occurs, the Remaining Protected Balance
will be reinstated to an amount equal to the Contract Value as
of that Contract Anniversary.
Before your Remaining Protected Balance is zero, if you took
your first withdrawal at age 64 or younger and you would
like to be eligible for lifetime payments under the Rider, an
Automatic or Owner-Elected Reset must occur and your first
withdrawal after that Reset must be taken on or after
age 65. See the Reset of Protected Payment Base and
Remaining Protected Balance subsection of this Rider. If you
are age 64 or younger when the Remaining Protected Balance
is zero and Contract Value remains, the Rider will terminate and
there is no opportunity for a Reset.
If a withdrawal (except an RMD Withdrawal) made from the
Contract exceeds the Protected Payment Amount, the Protected
Payment Base will be reduced according to the Withdrawals
Exceeding the Protected Payment Amount subsection.
Any death benefit proceeds to be paid to the Beneficiary from
remaining Contract Value will be paid according to the Death
Benefit provisions of the Contract.
Annual
Credit
On each Contract Anniversary after the Rider Effective Date, an
Annual Credit will be added to the Annual Credit Value until the
earlier of:
•
the first withdrawal from the Contract since the Rider Effective
Date, or
•
10 Contract Anniversaries measured from the Rider Effective Date.
The Annual Credit is equal to 5% of either:
•
total Purchase Payments if the Rider is purchased on the
Contract Issue Date, or
•
the Contract Anniversary Value at the time the Rider is added to
the Contract plus any subsequent Purchase Payments received
after the Rider Effective Date.
Once a withdrawal (including an RMD Withdrawal) or 10 Contract
Anniversaries has occurred, as measured from the Rider Effective
Date, no Annual Credit will be added to the Annual Credit Value.
In addition, Annual Credit eligibility cannot be reinstated by
any Automatic Reset or Owner-Elected Reset.
The Annual Credit is not added to your Contract Value.
Reset of
Protected Payment Base and Remaining Protected Balance
A reset occurs when the Protected Payment Base and Remaining
Protected Balance are changed to an amount equal to the Contract
Value as of the Reset Date.
158
Automatic Reset. On each Contract Anniversary, while
this Rider is in effect, before the Annuity Date, and after the
earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date,
we will automatically reset the Protected Payment Base and
Remaining Protected Balance to an amount equal to 100% of the
Contract Value, if the Protected Payment Base is less than the
Contract Value on that Contract Anniversary. The annual charge
percentage may change as a result of any Automatic Reset (see
CHARGES, FEES AND DEDUCTIONS – Optional Rider
Charges).
Automatic Reset – Opt-Out Election. Within
60 days after a Contract Anniversary on which an Automatic
Reset is effective, you have the option to reinstate the
Protected Payment Base, Remaining Protected Balance, Protected
Payment Amount and annual charge percentage to their respective
amounts immediately before the Automatic Reset. Any future
Automatic Resets will continue in accordance with the
Automatic Reset paragraph above.
If you elect this option, your opt-out election must be
received, In Proper Form, within the same 60 day period
after the Contract Anniversary on which the reset is effective.
Automatic Reset – Future
Participation. You may elect not to participate in
future Automatic Resets at any time. Your election must be
received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries.
If you previously elected not to participate in Automatic
Resets, you may re-elect to participate in future Automatic
Resets at any time. Your election to resume participation must
be received, In Proper Form, while this Rider is in effect and
before the Annuity Date. Such election will be effective for
future Contract Anniversaries as described in the Automatic
Reset paragraph above.
Owner-Elected Resets (Non-Automatic). You may, on
any Contract Anniversary after the earlier of:
•
the first withdrawal since the Rider Effective Date, or
•
10 Contract Anniversaries from the Rider Effective Date,
elect to reset the Protected Payment Base and Remaining
Protected Balance to an amount equal to 100% of the Contract
Value. An Owner-Elected Reset may be elected while Automatic
Resets are in effect. The annual charge percentage may change as
a result of this Reset.
If you elect this option, your election must be received, In
Proper Form, within 60 days after the Contract Anniversary
on which the reset is effective. The reset will be based on the
Contract Value as of that Contract Anniversary. Your election
of this option may result in a reduction in the Protected
Payment Base, Remaining Protected Balance and Protected Payment
Amount. Generally, the reduction will occur when your
Contract Value is less than the Protected Payment Base as of the
Contract Anniversary you elected the reset. You are strongly
advised to work with your financial advisor prior to electing an
Owner-Elected Reset. We will provide you with written
confirmation of your election.
Annuitization
If you annuitize the Contract at the maximum Annuity Date
specified in your Contract and this Rider is still in effect at
the time of your election and a Life Only fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
•
the Life Only fixed annual payment amount based on the terms of
your Contract, or
•
the Protected Payment Amount in effect at the maximum Annuity
Date.
If you annuitize the Contract at any time prior to the maximum
Annuity Date specified in your Contract, your annuity payments
will be determined in accordance with the terms of your
Contract. The Protected Payment Base, Remaining Protected
Balance and Protected Payment Amount under this Rider will not
be used in determining any annuity payments. Work with your
financial advisor to determine if you should annuitize your
Contract before the maximum Annuity Date or stay in the
accumulation phase and continue to take withdrawals under the
Rider.
The annuity payments described in this subsection are available
to you even if your first withdrawal was taken prior to
age 65 and no Resets have occurred.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Contract Value or Remaining Protected Balance is zero
when the Owner dies, the Rider will terminate. If the Contract
Value and Remaining Protected Balance are greater than zero and
the Owner dies while this Rider is in effect, the surviving
spouse of the deceased Owner may elect to continue the Contract
in accordance with its terms and the surviving spouse may
continue to take withdrawals of the Protected Payment Amount
under this Rider, until the Remaining Protected Balance is
reduced to zero.
159
The surviving spouse may elect any of the reset options
available under this Rider for subsequent Contract
Anniversaries. If a reset takes place, then the provisions of
this Rider will continue in full force and in effect for the
surviving spouse. In addition, if the surviving spouse is age 65
or older when the first withdrawal is taken after the most
recent Reset Date and this Reset Date occurred after the
surviving spouse continued the Contract, then the surviving
spouse may take withdrawals of the Protected Payment Amount
(based on the new Protected Payment Base) for life.
The surviving spouse may elect to receive any death benefit
proceeds instead of continuing the Contract and Rider (see
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT
RIDERS – Death Benefits).
Termination
You cannot request a termination of the Rider. Except as
otherwise provided below, the Rider will automatically terminate
on the earliest of:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the day the Remaining Protected Balance is reduced to zero if
the oldest Owner (or youngest Annuitant, in the case of a
Non-Natural Owner), was age 64 or younger when the first
withdrawal was taken under the Rider after the Rider Effective
Date or the most recent Reset Date, whichever is later,
•
the date of death of an Owner or the sole surviving Annuitant
(except as provided under the Continuation of Rider if
Surviving Spouse Continues Contract subsection),
•
for Contracts with a Non-Natural Owner, the date of death of an
Annuitant, including Primary, Joint and Contingent Annuitants,
•
the day the Contract is terminated in accordance with the
provisions of the Contract,
•
the day we are notified of a change in ownership of the Contract
to a non-spouse Owner if the Contract is Non-Qualified
(excluding changes in ownership to or from certain trusts),
•
the day you exchange this Rider for another withdrawal benefit
Rider,
•
the Annuity Date (see the Annuitization subsection for
additional information), or
•
the day the Contract Value is reduced to zero as a result of a
withdrawal (except an RMD Withdrawal) that exceeds the Protected
Payment Amount.
See the Depletion of Contract Value subsection for
situations where the Rider will not terminate when the Contract
Value is reduced to zero and see the Depletion of Remaining
Protected Balance subsection for situations where the Rider
will not terminate when the Remaining Protected Balance is
reduced to zero.
Sample Calculations
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
Any Credit Enhancement added to your Contract is not counted as
a Purchase Payment and is not included when determining the
guarantees under any of the optional living benefit riders. Any
calculations for determining a Reset/Step-Up are based on
Contract Value, which includes any Credit Enhancement. There may
be minor differences in the calculations due to rounding.
These examples are not intended to serve as projections of
future investment returns nor are they a reflection of how your
Contract will actually perform.
160
Example #1 – Setting
of Initial Values.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Owner’s Age = 65 on the Contract Date
Annual
Highest
Protected
Protected
Remaining
Purchase
Credit
Anniversary
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Value
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$100,000
$100,000
$5,000
$100,000
On the Rider Effective Date, the initial values are set as
follows:
•
Annual Credit Value = $100,000
•
Highest Anniversary Value = $100,000
•
Protected Payment Base = Initial Purchase
Payment = $100,000
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Example #2 – Subsequent
Purchase Payments.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Owner’s Age = 65 on the Contract Date
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
No withdrawals taken.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Annual
Highest
Protected
Protected
Remaining
Purchase
Credit
Anniversary
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Value
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$100,000
$100,000
$5,000
$100,000
Activity
$100,000
$210,000
$200,000
$200,000
$200,000
$10,000
$200,000
Year 2 Contract Anniversary
$208,000
$210,000
$208,000
$210,000
$10,500
$210,000
Immediately after the $100,000 subsequent Purchase Payment
during Contract Year 1, the Annual Credit Value, Highest
Anniversary Value, Protected Payment Base and Remaining
Protected Balance are increased by the Purchase Payment amount
to $200,000 ($100,000 + $100,000). The Protected
Payment Amount after the Purchase Payment is equal to $10,000
(5% of the Protected Payment Base after the Purchase Payment
since there were no withdrawals during that Contract Year).
Since no withdrawal occurred prior to Year 2 Contract
Anniversary, an annual credit of $10,000 (5% of total Purchase
Payments) is applied to the Annual Credit Value on that Contract
Anniversary, increasing it to $210,000. On Year 2 Contract
Anniversary, the Protected Payment Base and Remaining Protected
Balance are reset to $210,000, which is the greater of Annual
Credit Value or Highest Anniversary Value. As a result, the
Protected Payment Amount on that Contract Anniversary is equal
to $10,500 (5% of the Protected Payment Base on that Contract
Anniversary).
In addition to Purchase Payments, the Contract Value is further
subject to increases
and/or
decreases during each Contract Year as a result of additional
amounts credited, charges, fees and other deductions, and
increases
and/or
decreases in the investment performance of the Variable Account.
161
Example #3 – Withdrawals
Not Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Owner’s Age = 65 on the Contract Date
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal equal to or less than the Protected Payment Amount
is taken during Contract Years 2 and 4.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Annual
Highest
Protected
Protected
Remaining
Purchase
Credit
Anniversary
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Value
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$100,000
$100,000
$5,000
$100,000
Activity
$100,000
$210,000
$200,000
$200,000
$200,000
$10,000
$200,000
Year 2 Contract Anniversary
$208,000
$210,000
$208,000
$210,000
$10,500
$210,000
Activity
$10,500
$205,000
$210,000
$0
$199,500
Year 3 Contract Anniversary
$205,000
NA
NA
$210,000
$10,500
$199,500
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$215,000
NA
NA
$210,000
$10,500
$199,500
Year 4 Contract Anniversary
(After to Automatic Reset)
$215,000
NA
NA
$215,000
$10,750
$215,000
Activity
$10,750
$212,000
$215,000
$0
$204,250
Year 5 Contract Anniversary
(Prior to Automatic Reset)
$217,000
NA
NA
$215,000
$10,750
$204,250
Year 5 Contract Anniversary
(After to Automatic Reset)
$217,000
NA
NA
$217,000
$10,850
$217,000
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
As the withdrawal during Contract Year 2 did not
exceed the Protected Payment Amount immediately prior to the
withdrawal ($10,500):
•
the Protected Payment Base remains unchanged;
•
the Remaining Protected Balance is reduced by the amount of the
withdrawal to $199,500
($210,000 − $10,500); and
•
since a withdrawal occurred, the Annual Credit Value and Highest
Anniversary Value are no longer applicable.
Because at Year 4 Contract Anniversary, the Protected
Payment Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 4 Contract
Anniversary – Prior to Automatic Reset), an
Automatic Reset occurred which resets the Protected Payment Base
and Remaining Protected Balance to an amount equal to 100% of
the Contract Value (see balances at Year 4 Contract
Anniversary – After Automatic Reset). The
Protected Payment Amount is equal to $10,750 (5% of the reset
Protected Payment Base).
As the withdrawal during Contract Year 4 did not
exceed the Protected Payment Amount immediately prior to the
withdrawal ($10,750):
•
the Protected Payment Base remains unchanged; and
•
the Remaining Protected Balance is reduced by the amount of the
withdrawal to $204,250 ($215,000 − $10,750).
Because at Year 5 Contract Anniversary, the Protected
Payment Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 5 Contract
Anniversary – Prior to Automatic Reset), an
Automatic Reset occurred which resets the Protected Payment Base
and Remaining Protected Balance to an amount equal to 100% of
the Contract Value (see balances at Year 5 Contract
Anniversary – After Automatic Reset). The
Protected Payment Amount is equal to $10,850 (5% of the reset
Protected Payment Base).
162
Example #4 – Withdrawals
Exceeding Protected Payment Amount.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
Owner’s Age = 65 on the Contract Date
•
A subsequent Purchase Payment of $100,000 is received during
Contract Year 1.
•
A withdrawal greater than the Protected Payment Amount is taken
during Contract Year 2.
•
Each Contract Anniversary referenced in the table represents the
first day of the applicable Contract Year.
Annual
Highest
Protected
Protected
Remaining
Purchase
Credit
Anniversary
Payment
Payment
Protected
Payment
Withdrawal
Contract Value
Value
Value
Base
Amount
Balance
Rider Effective Date
$100,000
$105,000
$100,000
$100,000
$100,000
$5,000
$100,000
Activity
$100,000
$210,000
$200,000
$200,000
$200,000
$10,000
$200,000
Year 2 Contract Anniversary
$208,000
$210,000
$208,000
$210,000
$10,500
$210,000
Activity
$20,000
$195,000
$200,235
$0
$190,000
Year 3 Contract Anniversary
$195,000
NA
NA
$200,235
$10,011
$190,000
Year 4 Contract Anniversary
(Prior to Automatic Reset)
$215,000
NA
NA
$200,235
$10,011
$190,000
Year 4 Contract Anniversary
(After to Automatic Reset)
$215,000
NA
NA
$215,000
$10,750
$215,000
For an explanation of the values and activities at the start of
and during Contract Year 1, refer to Examples #1
and #2.
Because the $20,000 withdrawal during Contract Year 2
exceeds the Protected Payment Amount immediately prior to
the withdrawal ($20,000 > $10,500), the Protected
Payment Base and Remaining Protected Balance immediately after
the withdrawal are reduced. Since a withdrawal occurred, the
Annual Credit Value and Highest Anniversary Value are no longer
applicable.
The Values shown below are based on the following assumptions
immediately before the excess withdrawal:
No withdrawals were taken prior to the excess withdrawal
A withdrawal of $20,000 was taken, which exceeds the Protected
Payment Amount of $10,500 for the Contract Year. The Protected
Payment Base and Remaining Protected Balance will be reduced
based on the following calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $9,500 (total withdrawal amount − Protected
Payment Amount;
$20,000 − $10,500 = $9,500).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount). The
Contract Value prior to the withdrawal was $215,000, which
equals the $195,000 after the withdrawal plus the $20,000
withdrawal amount. Numerically, the ratio is 4.65%
($9,500 ¸ ($215,000 − $10,500);
$9,500 ¸ $204,500 = 0.0465
or 4.65%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$200,235 (Protected Payment
Base × (1 − ratio);
$210,000 × (1 − 4.65%);
$210,000 × 95.35% = $200,235).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance immediately before the withdrawal is reduced
by the Protected Payment Amount multiplied by 1 less the ratio
determined above. Numerically, after the proportionate
reduction, the new Remaining Protected Balance is $190,223
((Remaining Protected Balance immediately before the
withdrawal − Protected Payment
Amount) × (1 − ratio);
($210,000 − $10,500) × (1 − 4.65%);
$199,500 × 95.35% = $190,223).
To determine the total withdrawal amount reduction, the
Remaining Protected Balance immediately before the withdrawal is
reduced by the total withdrawal amount. Numerically, after the
Remaining Protected Balance is reduced by the total withdrawal
amount, the new Remaining Protected Balance is $190,000
(Remaining Protected Balance immediately before the
withdrawal − total withdrawal amount;
$210,000 − $20,000 = $190,000).
163
Therefore, since $190,000 (total withdrawal amount method) is
less than $190,223 (proportionate method) the new Remaining
Protected Balance is $190,000.
The Protected Payment Amount immediately after the withdrawal is
equal to $0 (5% of the Protected Payment Base after the
withdrawal (5% of $200,235 = $10,011), less cumulative
withdrawals during that Contract Year ($20,000), but not less
than zero).
Because at Year 4 Contract Anniversary, the Protected
Payment Base was less than the Contract Value on that Contract
Anniversary (see balances at Year 4 Contract
Anniversary – Prior to Automatic Reset), an
automatic reset occurred which resets the Protected Payment Base
and Remaining Protected Balance to an amount equal to 100% of
the Contract Value (see balances at Year 4 Contract
Anniversary – After Automatic Reset). The
Protected Payment Amount is equal to $10,750 (5% of the reset
Protected Payment Base).
Example #5 – RMD
Withdrawals.
This is an example of the effect of cumulative RMD Withdrawals
during the Contract Year that exceed the Protected Payment
Amount established for that Contract Year and its effect on the
Protected Payment Base and Remaining Protected Balance. The
Annual RMD Amount is based on the entire interest of your
Contract as of the previous year-end.
This table assumes quarterly withdrawals of only the Annual RMD
Amount during the Contract Year. The calculated Annual RMD
amount for the Calendar Year is $7,500 and the Contract
Anniversary is May 1 of each year.
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
$100,000
$5,000
$100,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
$98,125
05/01/2007
$100,000
$5,000
$98,125
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
$96,250
09/15/2007
$1,875
$100,000
$1,250
$94,375
12/15/2007
$1,875
$100,000
$0
$92,500
01/01/2008
$8,000
03/15/2008
$2,000
$100,000
$0
$90,500
05/01/2008
$100,000
$5,000
$90,500
Contract
Anniversary
Since the RMD Amount for 2008 increases to $8,000, the quarterly
withdrawals of the RMD Amount increase to $2,000, as shown by
the RMD Withdrawal on March 15, 2008. Because all
withdrawals during the Contract Year were RMD Withdrawals, there
is no adjustment to the Protected Payment Base for exceeding the
Protected Payment Amount. The only effect is a reduction in the
Remaining Protected Balance equal to the amount of each
withdrawal. In addition, each contract year the Protected
Payment Amount is reduced by the amount of each withdrawal until
the Protected Payment Amount is zero.
This chart assumes quarterly withdrawals of the Annual RMD
Amount and other non-RMD Withdrawals during the Contract Year.
The calculated Annual RMD amount and Contract Anniversary are
the same as above.
164
Annual
Protected
Protected
Remaining
Activity
RMD
Non-RMD
RMD
Payment
Payment
Protected
Date
Withdrawal
Withdrawal
Amount
Base
Amount
Balance
05/01/2006
$0
$100,000
$5,000
$100,000
Contract
Anniversary
01/01/2007
$7,500
03/15/2007
$1,875
$100,000
$3,125
$98,125
04/01/2007
$2,000
$100,000
$1,125
$96,125
05/01/2007
$100,000
$5,000
$96,125
Contract
Anniversary
06/15/2007
$1,875
$100,000
$3,125
$94,250
09/15/2007
$1,875
$100,000
$1,250
$92,375
11/15/2007
$4,000
$96,900
$0
$88,300
On 3/15/07
there was an RMD Withdrawal of $1,875 and on
4/1/07 a
non-RMD Withdrawal of $2,000. Because the total withdrawals
during the Contract Year
(5/1/06
through
4/30/07) did
not exceed the Protected Payment Amount of $5,000 there was no
adjustment to the Protected Payment Base. The only effect is a
reduction in the Remaining Protected Balance and the Protected
Payment Amount equal to the amount of each withdrawal. On
5/1/07, the
Protected Payment Amount was re-calculated (5% of the Protected
Payment Base) as of that Contract Anniversary.
On 11/15/07,
there was a non-RMD Withdrawal ($4,000) that caused the
cumulative withdrawals during the Contract Year ($7,750) to
exceed the Protected Payment Amount ($5,000). As the withdrawal
exceeded the Protected Payment Amount immediately prior to the
withdrawal ($1,250), and assuming the Contract Value was $90,000
immediately prior to the withdrawal, the Protected Payment Base
is reduced to $96,900 and the Remaining Protected Balance is
reduced to $88,300. The Protected Payment Base and Remaining
Protected Balance will be reduced based on the following
calculation:
First, determine the excess withdrawal amount. The excess
withdrawal amount is the total withdrawal amount less the
Protected Payment Amount. Numerically, the excess withdrawal
amount is $2,750 (total withdrawal
amount − Protected Payment Amount;
$4,000 − $1,250 = $2,750).
Second, determine the ratio for the proportionate reduction. The
ratio is the excess withdrawal amount determined above divided
by (Contract Value − Protected Payment Amount).
Numerically, the ratio is 3.10%
($2,750 ¸ ($90,000 − $1,250);
$2,750 ¸ $88,750 = 0.0310
or 3.10%).
Third, determine the new Protected Payment Base. The Protected
Payment Base will be reduced on a proportionate basis. The
Protected Payment Base is multiplied by 1 less the ratio
determined above. Numerically, the new Protected Payment Base is
$96,900 (Protected Payment
Base × (1 − ratio);
$100,000 × (1 − 3.10%);
$100,000 × 96.90% = $96,900).
Fourth, determine the new Remaining Protected Balance. The
Remaining Protected Balance is reduced either on a proportionate
basis or by the total withdrawal amount, whichever results in
the lower Remaining Protected Balance amount.
To determine the proportionate reduction, the Remaining
Protected Balance is reduced by the Protected Payment Amount
multiplied by 1 less the ratio determined above. Numerically,
after the proportionate reduction, the Remaining Protected
Balance is $88,300 ((Remaining Protected
Balance − Protected Payment
Amount) × (1 − ratio);
($92,375 − $1,250) × (1 − 3.10%);
$91,125 × 96.90% = $88,300).
To determine the total withdrawal amount reduction, the
Remaining Protected Balance is reduced by the total withdrawal
amount. Numerically, after the Remaining Protected Balance is
reduced by the total withdrawal amount, the Remaining Protected
Balance is $88,375 (Remaining Protected
Balance − total withdrawal amount;
$92,375 − $4,000 = $88,375).
Therefore, since $88,300 (proportionate method) is less than
$88,375 (total withdrawal amount method) the new Remaining
Protected Balance is $88,300.
Example #6 – Lifetime
Income.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
No subsequent Purchase Payments are received.
•
Owner is age 65 or older when the first withdrawal was
taken.
165
•
Withdrawals, each equal to 5% of the Protected Payment Base are
taken each Contract Year.
•
No Automatic Reset or Owner-Elected Reset is assumed during the
life of the Rider.
Protected
Protected
Remaining
Contract
End of Year
Payment
Payment
Protected
Year
Withdrawal
Contract Value
Base
Amount
Balance
1
$5,000
$96,489
$100,000
$5,000
$95,000
2
$5,000
$94,384
$100,000
$5,000
$90,000
3
$5,000
$92,215
$100,000
$5,000
$85,000
4
$5,000
$89,982
$100,000
$5,000
$80,000
5
$5,000
$87,681
$100,000
$5,000
$75,000
6
$5,000
$85,311
$100,000
$5,000
$70,000
7
$5,000
$82,871
$100,000
$5,000
$65,000
8
$5,000
$80,357
$100,000
$5,000
$60,000
9
$5,000
$77,768
$100,000
$5,000
$55,000
10
$5,000
$75,101
$100,000
$5,000
$50,000
11
$5,000
$72,354
$100,000
$5,000
$45,000
12
$5,000
$69,524
$100,000
$5,000
$40,000
13
$5,000
$66,610
$100,000
$5,000
$35,000
14
$5,000
$63,608
$100,000
$5,000
$30,000
15
$5,000
$60,517
$100,000
$5,000
$25,000
16
$5,000
$57,332
$100,000
$5,000
$20,000
17
$5,000
$54,052
$100,000
$5,000
$15,000
18
$5,000
$50,674
$100,000
$5,000
$10,000
19
$5,000
$47,194
$100,000
$5,000
$5,000
20
$5,000
$43,610
$100,000
$5,000
$0
21
$5,000
$39,918
$100,000
$5,000
$0
22
$5,000
$36,115
$100,000
$5,000
$0
23
$5,000
$32,199
$100,000
$5,000
$0
24
$5,000
$28,165
$100,000
$5,000
$0
25
$5,000
$24,010
$100,000
$5,000
$0
26
$5,000
$19,730
$100,000
$5,000
$0
27
$5,000
$15,322
$100,000
$5,000
$0
28
$5,000
$10,782
$100,000
$5,000
$0
29
$5,000
$6,105
$100,000
$5,000
$0
30
$5,000
$1,288
$100,000
$5,000
$0
31
$5,000
$0
$100,000
$5,000
$0
32
$5,000
$0
$100,000
$5,000
$0
33
$5,000
$0
$100,000
$5,000
$0
34
$5,000
$0
$100,000
$5,000
$0
On the Rider Effective Date, the initial values are set as
follows:
•
Protected Payment Base = Initial Purchase
Payment = $100,000
Protected Payment Amount = 5% of Protected Payment
Base = $5,000
Because the amount of each withdrawal does not exceed the
Protected Payment Amount immediately prior to the withdrawal
($5,000): (a) the Protected Payment Base remains unchanged;
and (b) the Remaining Protected Balance is reduced by the
amount of each withdrawal.
Since a withdrawal occurred during Contract Year 1, no
annual credit will be applied. Since it was assumed that the
Owner was age 65 or older when the first withdrawal was
taken, withdrawals of 5% of the Protected Payment Base will
continue to be paid each year (even after the Contract Value and
Remaining Protected Balance have been reduced to zero) until the
day of the first death of an Owner or the date of death of the
sole surviving Annuitant (death of any Annuitant for Non-Natural
Owners), whichever occurs first.
166
Guaranteed
Protection Advantage 3 (GPA 3)
How the
Rider Works
The Rider will remain in effect, unless otherwise terminated,
for a
10-year period
(the “Term”) beginning on the Effective Date of the
Rider.
On the last day of the Term, we will add an additional amount to
your Contract Value if, on that day, the Contract Value is less
than the Guaranteed Protection Amount. The additional amount
will be equal to the difference between the Contract Value on
the last day of the Term and the Guaranteed Protection Amount.
The additional amount added to the Contract Value will be
considered earnings and allocated to your Investment Options
according to your most recent allocation instructions.
Additional Purchase Payments that are not part of the Guaranteed
Protection Amount (Purchase Payments made after the first year
of a Term and not included in a
Step-Up)
will not be included in the benefit calculation at the end of
Term.
The Guaranteed Protection Amount is equal to (a) plus
(b) minus (c) as indicated below:
(a)
is the Contract Value at the start of the Term,
(b)
is the amount of each subsequent Purchase Payment received
during the first year of the Term, and
(c)
is a pro rata adjustment for withdrawals made from the Contract
during the Term. The adjustment for each withdrawal is
calculated by multiplying the Guaranteed Protection Amount prior
to the withdrawal by the ratio of the amount of the withdrawal,
including any applicable withdrawal charges, premium taxes,
and/or other taxes, to the Contract Value immediately prior to
the withdrawal.
For purposes of determining the Contract Value at the start of
the Term, if the Effective Date of the Rider is the Contract
Date, the Contract Value is equal to the initial Purchase
Payment. If the Effective Date of the Rider is a Contract
Anniversary, the Contract Value is equal to the Contract Value
on that Contract Anniversary. Any subsequent Purchase Payments
received after the first year of a Term are not included in the
Guaranteed Protection Amount.
If, on the last day of the Term, the Contract is annuitized, the
first death of an Owner or the death of the last surviving
Annuitant occurs (death of any Annuitant for Non-Natural
Owners), or a full withdrawal is made, the Contract Value will
reflect any additional amount owed under the Rider before the
payment of any annuity or death benefits, or full withdrawal. No
additional amount will be made if the Contract Value on the last
day of the Term is greater than or equal to the Guaranteed
Protection Amount.
Optional
Step-Up in
the Guaranteed Protection Amount
On any Contract Anniversary beginning with the
3rd anniversary
of the Effective Date of this Rider and before the Annuity Date,
you may elect to increase
(“Step-Up”)
your Guaranteed Protection Amount.
If you elect the optional
Step-Up, the
following conditions will apply:
•
your election of a
Step-Up must
be received, In Proper Form, within 60 days after the
Contract Anniversary on which the
Step-Up is
effective,
•
the Guaranteed Protection Amount will be equal to your Contract
Value as of the Effective Date of the
Step-Up
(“Step-Up
Date”),
•
a new
10-year Term
will begin as of the
Step-Up
Date, and
•
you may not elect another
Step-Up
until on or after the
3rd anniversary
of the latest
Step-Up Date.
We will not permit a
Step-Up if
the new
10-year Term
will extend beyond the Annuity Date.
The annual charge percentage may change if you elect a
Step-Up, but
it will never be more than the maximum annual charge percentage
associated with the Rider. If you do not elect any
Step-Up of
the Guaranteed Protection Amount during the Term of the Rider,
your annual charge percentage will remain the same as it was on
the Effective Date of the Rider.
Continuation
of Rider if Surviving Spouse Continues Contract
If the Owner dies during the Term and the surviving spouse of
the deceased Owner elects to continue the Contract in accordance
with its terms, then the provisions of the Rider will continue
until the end of the Term.
Termination
The Rider will automatically terminate at the end of the Term,
or, if earlier on:
•
the day any portion of the Contract Value is no longer allocated
according to the Investment Allocation Requirements,
•
the day we receive notification from the Owner to terminate the
Rider,
167
•
the date a full withdrawal of the amount available for
withdrawal is made under the Contract,
•
the date of the first death of an Owner or the date of death of
the last surviving Annuitant (except as provided under the
Continuation of Rider if Surviving Spouse Continues Contract
subsection),
•
for Contracts with a Non-Natural Owner, the date of the first
death of an Annuitant, including Primary, Joint and Contingent
Annuitants,
•
the date the Contract is terminated according to the provisions
of the Contract, or
•
the Annuity Date.
If your request to terminate the Rider is received at our
Service Center within 60 days after a Contract Anniversary,
the Rider will terminate on that Contract Anniversary. If your
request to terminate the Rider is received at our Service Center
more than 60 days after a Contract Anniversary, the Rider
will terminate the day we receive the request.
If the Rider is terminated, you must wait until a Contract
Anniversary that is at least 1 year from the Effective Date
of the termination before the Rider may be purchased again (if
available).
Sample
Calculations
The examples provided are based on certain hypothetical
assumptions and are for example purposes only. Where Contract
Value is reflected, the examples do not assume any specific
return percentage. The examples have been provided to assist in
understanding the benefits provided by this Rider and to
demonstrate how Purchase Payments received and withdrawals made
from the Contract prior to the Annuity Date affect the values
and benefits under this Rider over an extended period of time.
There may be minor differences in the calculations due to
rounding. These examples are not intended to serve as
projections of future investment returns nor are they a
reflection of how your contract will actually perform.
The values shown below are based on the following assumptions:
•
Initial Purchase Payment = $100,000
•
Rider Effective Date = Contract Date
•
A subsequent Purchase Payment of $20,000 is received in Contract
Year 1 and $10,000 is received in Contract Year 4.
•
A withdrawal of $10,000 is taken during Contract Year 7.
Beginning
Purchase
Guaranteed
Amount
of Contract
Payments
Withdrawal
Contract
Protection
added to the
Year
Received
Amount
Value
Amount
Contract Value
1
$100,000
$105,000
$100,000
Activity
$20,000
$118,119
$120,000
2
$117,374
$120,000
3
$114,439
$120,000
4
$111,578
$120,000
Activity
$10,000
$119,480
$120,000
5
$118,726
$120,000
6
$124,662
$120,000
Step-Up
(New 10-
Year Term
Begins)
$124,662
$124,662
7
$121,546
$124,662
Activity
$10,000
$109,259
$114,209
8
$108,570
$114,209
9
$105,856
$114,209
10
$103,209
$114,209
11
$100,629
$114,209
12
$98,114
$114,209
13
$95,661
$114,209
14
$93,269
$114,209
15
$90,937
$114,209
Values at
End of
15th Year
$88,664
$114,209
$114,209
$0
$25,545
168
The Guaranteed Protection Amount is equal to
(a) + (b) − (c) as indicated below:
(a)
is the Contract Value at the start of the Term,
(b)
is the amount of each subsequent Purchase Payment received
during the first year of the Term, and
(c)
is a pro rata adjustment for withdrawals made from the Contract
during the Term. The adjustment for each withdrawal is
calculated by multiplying the Guaranteed Protection Amount prior
to the withdrawal by the ratio of the amount of the withdrawal,
including any applicable withdrawal charges, premium taxes,
and/or other taxes, to the Contract Value immediately prior to
the withdrawal.
On the Rider Effective Date, the initial values are set as
follows:
During Contract Year 1, an additional Purchase Payment of
$20,000 was made. Since this Purchase Payment was made during
the first Contract Year, the Guaranteed Protection Amount will
be increased by $20,000 to $120,000.
($100,000 + $20,000 − 0 = $120,000)
During Contract Year 4, an additional Purchase Payment of
$10,000 was made. However, this Purchase Payment will not
increase the Guaranteed Protection Amount because it was not
made during the first Contract Year (or first year of the
10-Year
Term).
On the
6th Contract
Anniversary, an optional
Step-Up was
elected. The
Step-Up will
reset the Guaranteed Protection Amount equal to the Contract
Value ($124,662) as of that Contract Anniversary.
During Contract Year 7, a withdrawal of $10,000 was made.
This withdrawal will reduce the Guaranteed Protection Amount on
a pro rata basis and will result in a new Guaranteed Protection
Amount. The pro rata adjustment is $10,453 and was determined by
calculating the ratio of the withdrawal to the Contract Value
immediately before the withdrawal
($10,000 / $119,259 = 0.08385)
multiplied by the Guaranteed Protection Amount prior to the
withdrawal ($124,662 * 0.08385 = $10,453).
The new Guaranteed Protection Amount
(a) + (b) − (c) = $114,209
($124,662 + 0 − $10,453 = 114,209).
At the end of Contract Year 15 (end of the
10-Year
Term) the Contract Value ($88,664) is less than the Guaranteed
Protection Amount ($114,209). Therefore, $25,545
($114,209 − $88,664 = $25,545) is
added to the Contract Value and the Rider terminates.
If you have any questions about the Contract, please ask your financial advisor or contact us.
You will find more information about this variable annuity contract and Separate Account A in the Statement of Additional Information (SAI) dated May 1, 2013.
The SAI has been filed with the SEC and is considered to be part of this Prospectus because it is incorporated by reference. In this Prospectus, you will find the table of contents for the SAI on page 84.
You can get a copy of the SAI at no charge by visiting our website, calling or writing to us, or by contacting the SEC. The SEC may charge you a fee for this information.
Commission’s Public Reference Section
100 F Street, NE
Washington, D.C. 20549
(202) 551-8090
Website: www.sec.gov
e-mail: publicinfo@sec.gov
FINRA Public Disclosure Program
The Financial Industry Regulatory Authority (FINRA) provides
investor protection education through its website and printed
materials. The FINRA regulation website address is
www.finra.org. An investor brochure that includes information
describing the BrokerCheck program may be obtained from FINRA.
The FINRA BrokerCheck hotline number is
(800) 289-9999.
FINRA does not charge a fee for the BrokerCheck program
services.
Pacific Value Select (the “Contract”) is a variable
annuity contract offered by Pacific Life & Annuity Company
(“PL&A”).
This Statement of Additional Information (“SAI”) is
not a Prospectus and should be read in conjunction with the
Contract’s Prospectus, dated May 1, 2013, and any
supplement thereto, which is available without charge upon
written or telephone request to PL&A. Terms used in this
SAI have the same meanings as in the Prospectus, and some
additional terms are defined particularly for this SAI. This SAI
is incorporated by reference into the Contract’s Prospectus.
From time to time, our reports or other communications to
current or prospective Contract Owners or our advertising or
other promotional material may quote the performance (yield and
total return) of a Subaccount. Quoted results are based on past
performance and reflect the performance of all assets held in
that Subaccount for the stated time period. Quoted results
are neither an estimate nor a guarantee of future investment
performance, and do not represent the actual experience of
amounts invested by any particular Contract Owner.
A Subaccount may advertise its “average annual total
return” over various periods of time. “Total
return” represents the average percentage change in value
of an investment in the Subaccount from the beginning of a
measuring period to the end of that measuring period.
“Annualized” total return assumes that the total
return achieved for the measuring period is achieved for each
full year period. “Average annual” total return is
computed in accordance with a standard method prescribed by the
SEC, and is also referred to as “standardized return.”
Average
Annual Total Return
To calculate a Subaccount’s average annual total return for
a specific measuring period, we first take a hypothetical $1,000
investment in that Subaccount, at its applicable Subaccount Unit
Value (the “initial payment”) and we compute the
ending redeemable value of that initial payment at the end of
the measuring period based on the investment experience of that
Subaccount (“full withdrawal value”). The full
withdrawal value reflects the effect of all recurring fees and
charges applicable to a Contract Owner under the Contract,
including the Risk Charge, the asset-based Administrative Fee
and the deduction of the applicable withdrawal charge, but does
not reflect any charges for applicable premium taxes and/or any
other taxes, any optional Rider charge, any non-recurring fees
or charges, or any increase in the Risk Charge for an optional
Death Benefit Rider. The Annual Fee is also taken into account,
assuming an average Contract Value of $100,000. The redeemable
value is then divided by the initial payment and this quotient
is raised to the 365/N power (N represents the number
of days in the measuring period), and 1 is subtracted from
this result. Average annual total return is expressed as a
percentage.
T = (ERV/P)(365/N)
− 1
where
T
=
average annual total return
ERV
=
ending redeemable value
P
=
hypothetical initial payment of $1,000
N
=
number of days
Average annual total return figures will be given for recent
1-,
3-,
5- and
10-year
periods (if applicable), and may be given for other periods as
well (such as from commencement of the Subaccount’s
operations, or on a year-by-year basis).
When considering “average” total return figures for
periods longer than one year, it is important to note that the
relevant Subaccount’s annual total return for any one year
in the period might have been greater or less than the average
for the entire period.
Aggregate
Total Return
A Subaccount may use “aggregate” total return figures
along with its “average annual” total return figures
for various periods; these figures represent the cumulative
change in value of an investment in the Subaccount for a
specific period. Aggregate total returns may be shown by means
of schedules, charts or graphs and may indicate subtotals of the
various components of total return. The SEC has not prescribed
standard formulas for calculating aggregate total return.
Total returns may also be shown for the same periods that do not
take into account the withdrawal charge or the Annual Fee.
1
Non-Standardized
Total Returns
We may also calculate non-standardized total returns which may
or may not reflect any Annual Fee, any Credit Enhancement,
withdrawal charges, increases in Risk Charge for an optional
Death Benefit Rider, charges for premium taxes and/or any other
taxes, any charge for an optional Rider, or any non-recurring
fees or charges.
Standardized return figures will always accompany any
non-standardized returns shown.
The “yield” (also called “current yield”) of
the Cash Management Subaccount is computed in accordance with a
standard method prescribed by the SEC. The net change in the
Subaccount’s Unit Value during a seven-day period is
divided by the Unit Value at the beginning of the period to
obtain a base rate of return. The current yield is generated
when the base rate is “annualized” by multiplying it
by the fraction
365/7;
that is, the base rate of return is assumed to be generated each
week over a 365-day period and is shown as a percentage of the
investment. The “effective yield” of the Cash
Management Subaccount is calculated similarly but, when
annualized, the base rate of return is assumed to be reinvested.
The effective yield will be slightly higher than the current
yield because of the compounding effect of this assumed
reinvestment.
The formula for effective yield is: [(Base Period Return +
1) (To the power of
365/7)]
− 1.
Realized capital gains or losses and unrealized appreciation or
depreciation of the assets of the underlying Cash Management
Portfolio are not included in the yield calculation. Current
yield and effective yield do not reflect any Credit Enhancement,
the deduction of charges for any applicable premium taxes and/or
any other taxes, any increase in the Risk Charge for an optional
Death Benefit Rider, any charge for an optional Rider or any
non-recurring
fees or changes but do reflect a deduction for the Annual Fee,
the Risk Charge and the asset-based Administrative Fee and
assume an average Contract Value of $100,000.
Other
Subaccounts
“Yield” of the other Subaccounts is computed in
accordance with a different standard method prescribed by the
SEC. The net investment income (investment income less expenses)
per Subaccount Unit earned during a specified one-month or
30-day period is divided by the Subaccount Unit Value on the
last day of the specified period. This result is then annualized
(that is, the yield is assumed to be generated each month or
each 30-day
period for a year), according to the following formula, which
assumes semi-annual compounding:
YIELD = 2*[(
a – b
c*d
+ 1)6
− 1]
where:
a
=
net investment income earned during the period by the Portfolio
attributable to the Subaccount.
b
=
expenses accrued for the period (net of reimbursements).
c
=
the average daily number of Subaccount Units outstanding during
the period that were entitled to receive dividends.
d
=
the Unit Value of the Subaccount Units on the last day of the
period.
The yield of each Subaccount reflects the deduction of all
recurring fees and charges applicable to the Subaccount, such as
the Risk Charge, asset-based Administrative Fee and the Annual
Fee (assuming an average Contract Value of $100,000), but does
not reflect any Credit Enhancement, withdrawal charge, charge
for applicable premium taxes and/or any other taxes, increase in
the Risk Charge for an optional Death Benefit Rider, any charge
for an optional Rider, or any non-recurring fees or charges.
The Subaccounts’ yields will vary from time to time
depending upon market conditions, the composition of each
Portfolio and operating expenses of the Fund allocated to each
Portfolio. Consequently, any given performance quotation should
not be considered representative of the Subaccount’s
performance in the future. Yield should also be considered
relative to changes in Subaccount Unit Values and to the
relative risks associated with the investment policies and
objectives of the various Portfolios. In addition, because
performance will fluctuate, it may not provide a
2
basis for comparing the yield of a Subaccount with certain bank
deposits or other investments that pay a fixed yield or return
for a stated period of time.
In advertisements and sales literature, we may compare the
performance of some or all of the Subaccounts to the performance
of other variable annuity issuers in general and to the
performance of particular types of variable annuities investing
in mutual funds, or series of mutual funds, with investment
objectives similar to each of the Subaccounts. This performance
may be presented as averages or rankings compiled by Lipper
Analytical Services, Inc. (“Lipper”), or Morningstar,
Inc. (“Morningstar”), which are independent services
that monitor and rank the performance of variable annuity
issuers and mutual funds in each of the major categories of
investment objectives on an industry-wide basis. Lipper’s
rankings include variable life issuers as well as variable
annuity issuers. The performance analyses prepared by Lipper and
Morningstar rank such issuers on the basis of total return,
assuming reinvestment of dividends and distributions, but do not
take sales charges, redemption fees or certain expense
deductions at the separate account level into consideration. In
addition, Morningstar prepares risk adjusted rankings, which
consider the effects of market risk on total return performance.
We may also compare the performance of the Subaccounts with
performance information included in other publications and
services that monitor the performance of insurance company
separate accounts or other investment vehicles. These other
services or publications may be general interest business
publications such as The Wall Street Journal, Barron’s,
Business Week, Forbes, Fortune, and Money.
In addition, our reports and communications to Contract Owners,
advertisements, or sales literature may compare a
Subaccount’s performance to various benchmarks that measure
the performance of a pertinent group of securities widely
regarded by investors as being representative of the securities
markets in general or as being representative of a particular
type of security. We may also compare the performance of the
Subaccounts with that of other appropriate indices of investment
securities and averages for peer universes of funds or data
developed by us derived from such indices or averages. Unmanaged
indices generally assume the reinvestment of dividends or
interest but do not generally reflect deductions for investment
management or administrative costs and expenses.
Tax
Deferred Accumulation
In reports or other communications to you or in advertising or
sales materials, we may also describe the effects of
tax-deferred compounding on the Separate Account’s
investment returns or upon returns in general. These effects may
be illustrated in charts or graphs and may include comparisons
at various points in time of returns under the Contract or in
general on a tax-deferred basis with the returns on a taxable
basis. Different tax rates may be assumed.
In general, individuals who own annuity contracts are not taxed
on increases in the value under the annuity contract until some
form of distribution is made from the contract (Non-Natural
Persons as Owners may not receive tax deferred accumulation).
Thus, the annuity contract will benefit from tax deferral during
the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more
rapidly than a comparable investment under which increases in
value are taxed on a current basis. The following chart
illustrates this benefit by comparing accumulation under a
variable annuity contract with accumulations from an investment
on which gains are taxed on a current ordinary income basis.
The chart shows a single Purchase Payment of $10,000, assuming
hypothetical annual returns of 0%, 4% and 8%, compounded
annually, and a tax rate of 33%. The values shown for the
taxable investment do not include any deduction for management
fees or other expenses but assume that taxes are deducted
annually from investment returns. The values shown for the
variable annuity do not reflect the Credit Enhancement, the
deduction of contractual expenses such as the Risk Charge (equal
to an annual rate of 1.45% of average daily Account Value), the
Administrative Fee (equal to an annual rate of 0.15% of average
daily Account Value), the Annual Fee (equal to $30 per year
if your Net Contract Value is less than $50,000 on your Contract
Anniversary); any increase in the Risk Charge for an optional
Death Benefit Rider (equal to a maximum annual rate of 0.20% of
average daily Account Value), other optional Rider charges
(equal to a maximum annual rate of 2.75% of the Protected
Payment Base); a charge for premium taxes and/or other taxes,
any applicable withdrawal charge, or any underlying Fund
expenses.
If these expenses and fees were taken into account, they would
reduce the investment return shown for both the taxable
investment and the hypothetical variable annuity contract. In
addition, these values assume that you do not surrender
3
the Contract or make any withdrawals until the end of the period
shown. The chart assumes a full withdrawal, at the end of the
period shown, of all Contract Value and the payment of taxes at
the 33% rate on the amount in excess of the Purchase Payments.
The rates of return illustrated are hypothetical and are not an
estimate or guarantee of performance. Actual tax rates may vary
for different assets (e.g. capital gains and qualifying
dividend income) and taxpayers from that illustrated.
Withdrawals by and distributions to Contract Owners who have not
reached
age 591/2 may
be subject to a tax penalty of 10%.
Pacific Select Distributors, Inc., our affiliate, acts as the
distributor of the Contracts and offers the Contracts on a
continuous basis. PSD is located at 700 Newport Center Drive,
Newport Beach, California92660. PSD is registered as a
broker-dealer with the SEC and is a member of FINRA. We pay PSD
for acting as distributor under a Distribution Agreement. We and
PSD enter into selling agreements with broker-dealers whose
financial advisors are authorized by the Insurance
Superintendent of the State of New York to solicit applications
for the Contracts. The aggregate amount of underwriting
commissions paid to PSD for 2012 and 2011 with regard to this
Contract was [ ] and
$160,138, of which $0 was retained.
PSD or an affiliate pays various sales compensation to
broker-dealers that solicit applications for the Contracts. PSD
or an affiliate also may provide reimbursement for other
expenses associated with the promotion and solicitation of
applications for the Contracts. Your financial advisor typically
receives a portion of the compensation that is payable to
4
his or her broker-dealer in connection with the Contract,
depending on the agreement between your financial advisor and
his or her firm. PL&A is not involved in determining that
compensation arrangement, which may present its own incentives
or conflicts. You may ask your financial advisor how he/she will
personally be compensated for the transaction.
Under certain circumstances where PSD pays lower initial
commissions, certain broker-dealers that solicit applications
for Contracts may be paid an ongoing persistency trail
commission (sometimes called a residual). The mix of Purchase
Payment-based versus trail commissions varies depending upon our
agreement with the selling broker-dealer and the commission
option selected by your financial advisor or broker-dealer.
In addition to the Purchase Payment-based and trail commissions
described above, we
and/or an
affiliate may pay additional cash compensation from our own
resources in connection with the promotion and solicitation of
applications for the Contracts by some, but not all,
broker-dealers. The range of additional cash compensation based
on Purchase Payments generally does not exceed 0.40% and
trailing compensation based on Account Value generally does not
exceed 0.10% on an annual basis. Such additional compensation
may give PL&A greater access to financial advisors of the
broker-dealers that receive such compensation. While this
greater access provides the opportunity for training and other
educational programs so that your financial advisor may serve
you better, this additional compensation also may afford
PL&A a “preferred” status at the recipient
broker-dealer and provide some other marketing benefit such as
website placement, access to financial advisor lists, extra
marketing assistance or other heightened visibility and access
to the broker-dealer’s sales force that may otherwise
influence the way that the broker-dealer and the financial
advisor market the Contracts.
As of December 31, [ ], the
following firms have arrangements in effect with the Distributor
pursuant to which the firm is entitled to receive a revenue
sharing payment:
American Portfolios Financial Services Inc., Askar Corporation,
Bancwest Investment Services Inc., C C O Investment
Services Corp, C U N A Brokerage Services Inc.,
C U S O Financial Services LP, Centaurus
Financial, Inc., Citigroup Global Markets Inc., Commonwealth
Financial Network, B B V A Compass Investment
Solutions Inc., Edward D. Jones & Co., LP, Essex
National Securities Inc., F S C Securities
Corporation, Fifth Third Securities Inc., Financial Network
Investment Corp., First Allied Securities Inc., First Heartland
Capital Inc., First Tennessee Brokerage Inc., Geneos Wealth
Management Inc., I N G Financial Partners Inc.,
Infinex Investments Inc., Invest Financial Corporation,
Investacorp Inc., Investment Centers of America Inc., Investment
Professionals Inc., J J B Hilliard,
W L Lyons Inc., Jacques Financial L L C,
Janney Montgomery Scott Inc., Key Investment Services
L L C, L P L Financial Corp., Lincoln
Financial Advisors Corp., Lincoln Financial Securities Corp.,
M & T Securities Inc., M Holdings Securities
Inc., M M L Investors Services Inc., Merrill Lynch,
Pierce, Fenner & Smith, Morgan Keegan &
Company Inc., Morgan Stanley & Co. Incorporated,
Multi-Financial Securities Corp., Mutual Of Omaha Investor
Services Inc., NF P Securities Inc., National Planning
Corporation, NEXT Financial Group Inc., P N C
Investments L L C, Park Avenue Securities LLC.,
Primevest Financial Services Inc., ProEquities Inc.,
R B C Capital Markets Corporation, Raymond
James & Associates Inc., Raymond James Financial
Services Inc., Robert W Baird & Company Inc., Royal
Alliance Associates Inc., S I I Investments Inc.,
Sagepoint Financial Inc., Securian Financial Services Inc.,
Securities America Inc., Sigma Financial Corp., Signator
Investors Inc., Sorrento Pacific Financial L L C,
Stifel Nicolaus & Company Inc., Suntrust Investment
Services Inc., Tower Square Securities Inc., Transamerica
Financial Advisors Inc., Triad Advisors Inc., U B S
Financial Services Inc., U S Bancorp Investments Inc.,
Unionbanc Investment Services L L C, United
Planners’ Financial Services of America, V S R
Financial Services Inc., Vision Investment Services Inc., Walnut
Street Securities, Wells Fargo Advisors LLC, Wells Fargo
Investments LLC, Wescom Financial Services L L C,
Woodbury Financial Services Inc., Zions Direct Inc.
We or our affiliates may also pay override payments, expense
allowances and reimbursements, bonuses, wholesaler fees, and
training and marketing allowances. Such payments may offset the
broker-dealer’s expenses in connection with activities that
it is required to perform, such as educating personnel and
maintaining records. Financial advisors may also receive
non-cash compensation, such as expense-paid educational or
training seminars involving travel within and outside the U.S.
or promotional merchandise.
All of the compensation described in this section, and other
compensation or benefits provided by us or our affiliates, may
be more or less than the overall compensation on similar or
other products and may influence your financial advisor or
broker-dealer to present this Contract over other investment
options. You may ask your financial advisor
5
about these potential conflicts of interest and how he/she and
his/her broker-dealer are compensated for selling the Contract.
Portfolio Managers of the underlying Portfolios available under
this Contract may from time to time bear all or a portion of the
expenses of conferences or meetings sponsored by PL&A or
PSD that are attended by, among others, representatives of PSD,
who would receive information and/or training regarding the
Fund’s Portfolios and their management by the Portfolio
Managers in addition to information regarding the variable
annuity and/or life insurance products issued by PL&A and
its affiliates. Other persons may also attend all or a portion
of any such conferences or meetings, including directors,
officers and employees of PL&A, officers and trustees of
Pacific Select Fund, and spouses/guests of the foregoing. The
Pacific Select Fund Board of Trustees may hold meetings
concurrently with such a conference or meeting. The Pacific
Select Fund pays for the expenses of the meetings of its Board
of Trustees, including the pro rata share of expenses for
attendance by the Trustees at the concurrent conferences or
meetings sponsored by PL&A or PSD. Additional expenses and
promotional items may be paid for by PL&A and/or Portfolio
Managers. PSD serves as the Pacific Select Fund Distributor.
The Unit Value of the Subaccount Units in each Variable
Investment Option is computed at the close of the New York
Stock Exchange, which is usually 4:00 p.m. Eastern time on
each Business Day. The initial Unit Value of each Subaccount was
$10 on the Business Day the Subaccount began operations. At the
end of each Business Day, the Unit Value for a Subaccount is
equal to:
Y × Z
where
(Y)
=
the Unit Value for that Subaccount as of the end of the
preceding Business Day; and
(Z)
=
the Net Investment Factor for that Subaccount for the period (a
“valuation period”) between that Business Day and the
immediately preceding Business Day.
The “Net Investment Factor” for a Subaccount for any
valuation period is equal to:
(A
¸
B) − C
where
(A)
=
the “per share value of the assets” of that Subaccount
as of the end of that valuation period, which is equal to: a+b+c
where
(a)
=
the net asset value per share of the corresponding Portfolio
shares held by that Subaccount as of the end of that valuation
period;
(b)
=
the per share amount of any dividend or capital gain
distributions made by the Fund for that Portfolio during that
valuation period; and
(c)
=
any per share charge (a negative number) or credit (a
positive number) for any income taxes or other amounts set aside
during that valuation period as a reserve for any income and/or
any other taxes which we determine to have resulted from the
operations of the Subaccount or Contract, and/or any taxes
attributable, directly or indirectly, to Investments;
(B)
=
the net asset value per share of the corresponding Portfolio
shares held by the Subaccount as of the end of the preceding
valuation period; and
(C)
=
a factor that assesses against the Subaccount net assets for
each calendar day in the valuation period, the basic Risk Charge
plus the Administrative Fee and any applicable increase in the
Risk Charge (see the CHARGES, FEES AND DEDUCTIONS section
in the Prospectus).
As explained in the Prospectus, the Annual Fee, if applicable,
will be charged proportionately against your Investment Options.
Assessments against your Variable Investment Options are
assessed against your Variable Account Value through the
automatic debit of Subaccount Units; the Annual Fee decreases
the number of Subaccount Units attributed to your Contract but
does not alter the Unit Value for any Subaccount.
The following steps show how we determine the amount of each
variable annuity payment under your Contract.
First:
Pay Applicable Premium Taxes
When you convert any portion of your Net Contract Value into
annuity payments, you must pay any applicable charge for premium
taxes and/or other taxes on your Contract Value (unless
applicable law requires those taxes to be paid at a later time).
We assess this charge by reducing your Account Value
proportionately, relative to your Account Value in each
Subaccount and in any fixed option, in an amount equal to the
aggregate amount of the charges. The remaining amount of your
available Net Contract Value may be used to provide variable
annuity payments. Alternatively, your remaining available Net
Contract Value may be used to provide fixed annuity payments, or
it may be divided to provide both fixed and variable annuity
payments. You may also choose to withdraw some or all of your
remaining Net Contract Value, less any applicable Annual Fees,
any optional Rider charge, and/or withdrawal charge, and any
charges for premium taxes and/or other taxes without converting
this amount into annuity payments.
Second:
The First Variable Payment
We begin by referring to your Contract’s Option Table for
your Annuity Option (the “Annuity Option Table”). The
Annuity Option Table allows us to calculate the dollar amount of
the first variable annuity payment under your Contract, based on
the amount applied toward the variable annuity. The number that
the Annuity Option Table yields will be based on the
Annuitant’s age (and, in certain cases, sex) and assumes a
4% rate of return, as described in more detail below.
Example: Assume a man is 65 years of age at his
Annuity Date and has selected a lifetime annuity with monthly
payments guaranteed for 10 years. According to the Annuity
Option Table, this man should receive an initial monthly payment
of $4.99 for every $1,000 of his Contract Value (reduced by
applicable charges) that he will be using to provide variable
payments. Therefore, if his Contract Value after deducting
applicable fees and charges is $100,000 on his Annuity Date and
he applies this entire amount toward his variable annuity, his
first monthly payment will be $499.00.
You may choose any other Annuity Option Table that assumes a
different rate of return which we offer at the time your Annuity
Option is effective.
Third:
Subaccount Annuity Units
For each Subaccount, we use the amount of the first variable
annuity payment under your Contract attributed to each
Subaccount to determine the number of Subaccount Annuity Units
that will form the basis of subsequent payment amounts. First,
we use the Annuity Option Table to determine the amount of that
first variable payment for each Subaccount. Then, for each
Subaccount, we divide that amount of the first variable annuity
payment by the value of one Subaccount Annuity Unit (the
“Subaccount Annuity Unit Value”) as of the end of the
Annuity Date to obtain the number of Subaccount Annuity Units
for that particular Subaccount. The number of Subaccount Annuity
Units used to calculate subsequent payments under your Contract
will not change unless exchanges of Annuity Units are made, (or
if the Joint and Survivor Annuity Option is elected and the
Primary Annuitant dies first) but the value of those Annuity
Units will change daily, as described below.
Fourth:
The Subsequent Variable Payments
The amount of each subsequent variable annuity payment will be
the sum of the amounts payable based on each Subaccount. The
amount payable based on each Subaccount is equal to the number
of Subaccount Annuity Units for that Subaccount multiplied by
their Subaccount Annuity Unit Value at the end of the Business
Day in each payment period you elected that corresponds to the
Annuity Date.
Each Subaccount’s Subaccount Annuity Unit Value, like its
Subaccount Unit Value, changes each day to reflect the net
investment results of the underlying investment vehicle, as well
as the assessment of the Risk Charge at an annual rate of 1.45%
and the Administrative Fee at an annual rate of 0.15%. In
addition, the calculation of Subaccount Annuity Unit Value
incorporates an additional factor; as discussed in more detail
below, this additional factor adjusts
7
Subaccount Annuity Unit Values to correct for the Option
Table’s implicit assumed annual investment return on
amounts applied but not yet used to furnish annuity benefits.
Any increase in your Risk Charge for an optional death benefit
rider is not charged on and after the Annuity Date.
Different Subaccounts may be selected for your Contract before
and after your Annuity Date, subject to any restrictions we may
establish. Currently, you may exchange Subaccount Annuity Units
in any Subaccount for Subaccount Annuity Units in any other
Subaccount(s) up to four times in any twelve month period after
your Annuity Date. The number of Subaccount Annuity Units in any
Subaccount may change due to such exchanges. Exchanges following
your Annuity Date will be made by exchanging Subaccount Annuity
Units of equivalent aggregate value, based on their relative
Subaccount Annuity Unit Values.
Understanding
the “Assumed Investment Return” Factor
The Annuity Option Table incorporates a number of implicit
assumptions in determining the amount of your first variable
annuity payment. As noted above, the numbers in the Annuity
Option Table reflect certain actuarial assumptions based on the
Annuitant’s age, and, in some cases, the Annuitant’s
sex. In addition, these numbers assume that the amount of your
Contract Value that you convert to a variable annuity will have
a positive net investment return of 4% each year during the
payout of your annuity; thus 4% is referred to as an
“assumed investment return.”
The Subaccount Annuity Unit Value for a Subaccount will increase
only to the extent that the investment performance of that
Subaccount exceeds the Risk Charge, the Administrative Fee, and
the assumed investment return. The Subaccount Annuity Unit Value
for any Subaccount will generally be less than the Subaccount
Unit Value for that same Subaccount, and the difference will be
the amount of the assumed investment return factor.
Example: Assume the net investment performance of a
Subaccount is at a rate of 4.00% per year (after deduction
of the 1.45% Risk Charge and the 0.15% Administrative Fee). The
Subaccount Unit Value for that Subaccount would increase at a
rate of 4.00% per year, but the Subaccount Annuity
Unit Value would not increase (or decrease) at all. The net
investment factor for that 4% return [1.04] is then divided by
the factor for the 4% assumed investment return [1.04] and 1 is
subtracted from the result to determine the adjusted rate of
change in Subaccount Annuity Unit Value:
1.04
1.04
= 1; 1 − 1 = 0; 0 × 100% = 0%.
If the net investment performance of a Subaccount’s assets
is at a rate less than 4.00% per year, the Subaccount Annuity
Unit Value will decrease, even if the Subaccount Unit Value is
increasing.
Example: Assume the net investment performance of a
Subaccount is at a rate of 2.60% per year (after deduction of
the 1.45% Risk Charge and the 0.15% Administrative Fee). The
Subaccount Unit Value for that Subaccount would increase at a
rate of 2.60% per year, but the Subaccount Annuity Unit Value
would decrease at a rate of 1.35% per year. The net
investment factor for that 2.6% return [1.026] is then divided
by the factor for the 4% assumed investment return [1.04] and 1
is subtracted from the result to determine the adjusted rate of
change in Subaccount Annuity Unit Value:
The assumed investment return will always cause increases in
Subaccount Annuity Unit Values to be somewhat less than if the
assumption had not been made, will cause decreases in Subaccount
Annuity Unit Values to be somewhat greater than if the
assumption had not been made, and will (as shown in the example
above) sometimes cause a decrease in Subaccount Annuity Unit
Values to take place when an increase would have occurred if the
assumption had not been made. If we had assumed a higher
investment return in our Annuity Option tables, it would produce
annuities with larger first payments, but the increases in
subaccount annuity payments would be smaller and the decreases
in subsequent annuity payments would be greater; a lower assumed
investment return would produce annuities with smaller first
payments, and the increases in subsequent annuity payments would
be greater and the decreases in subsequent annuity payments
would be smaller.
If variable payments are elected under Annuity Options 2 and 4,
you may redeem all remaining guaranteed variable payments after
the Annuity Date. Also, under Option 4, partial redemptions of
remaining guaranteed variable payments after the Annuity Date
are available. If you elect to redeem all remaining
guaranteed variable payments in a single sum, we will not make
any additional variable annuity payments during the
Annuitant’s lifetime or the remaining guaranteed period
after the redemption. The amount available upon full
redemption would be the present value of any remaining
guaranteed variable payments at the assumed investment return.
Any applicable withdrawal charge will be deducted from the
present value as if you made a full withdrawal, or if
applicable, a partial withdrawal. For purposes of calculating
the withdrawal charge and Free Withdrawal amount, it will be
assumed that the Contract was never converted to provide annuity
payments and any prior variable annuity payments in that
Contract Year will be treated as if they were partial
withdrawals from the Contract (see the CHARGES, FEES AND
DEDUCTIONS – Withdrawal Charge section in the
Prospectus). For example, assume that a Contract was issued with
a single investment of $10,000 and in Contract Year 2 the Owner
elects to receive variable annuity payments under Annuity Option
4. In Contract Year 3, the Owner elects to make a partial
redemption of $5,000. The withdrawal charge as a percentage of
the Purchase Payments with an age of 3 years is 8%.
Assuming the Free Withdrawal amount immediately prior to the
partial redemption is $200, the withdrawal charge for the
partial redemption will be $384 (($5,000 − $200)
× 8% = $384). No withdrawal charge will be imposed on a
redemption if:
•
the Annuity Option is elected as the form of payments of death
benefit proceeds, or
•
the Annuitant dies before the period certain has ended and the
Beneficiary requests a redemption of the variable annuity
payments.
The variable payment amount we use in calculating the present
value is determined by summing an amount for each Subaccount,
which we calculate by multiplying your Subaccount Annuity Units
by the Annuity Unit Value next computed after we receive your
redemption request. This variable payment amount is then
discounted at the assumed investment return from each future
Annuity Payment date that falls within the payment guaranteed
period. The sum of these discounted remaining variable payment
amounts is the present value of remaining guaranteed variable
payments.
If you elect to redeem all remaining guaranteed variable
payments in a single sum, we will not make any additional
variable annuity payments during the remaining guaranteed period
after the redemption.
If you elect to redeem a portion of the remaining guaranteed
variable payments in a single sum, we will reduce the number of
Annuity Units for each Subaccount by the same percentage as the
partial redemption value bears to the amount available upon a
full redemption.
Redemption of remaining guaranteed variable payments will not
affect the amount of any fixed annuity payments.
If any systematic pre-authorized transaction under your Contract
is scheduled to occur on a “corresponding date” that
does not exist in a given calendar period or is scheduled to
occur on the last day of the month that is not a Business Day,
the transaction will be deemed to occur on the last Business Day
of the month.
Example: If your Contract is issued on
February 29 in year 1 (a leap year), your Contract
Anniversary in years 2, 3 and 4 will be on February 28.
Example: If your Annuity Date is January 31,
and you select monthly annuity payments, the payments received
will be based on valuations made on February 28 (or 29 in a
leap year), March 31, April 30, May 31,
June 30, July 31, August 31, September 30,
October 31, November 30, and December 31 if those
days are Business Days. Otherwise, the valuations made will be
based on the last Business Day of the applicable month.
The Contracts generally provide for sex-distinct annuity income
factors in the case of life annuities. Statistically, females
tend to have longer life expectancies than males; consequently,
if the amount of annuity payments is based on life expectancy,
they will ordinarily be higher if an annuitant is male than if
an annuitant is female. Certain states’
9
regulations prohibit sex-distinct annuity income factors, and
Contracts issued in those states will use unisex factors. In
addition, Contracts issued in connection with Qualified Plans
are required to use unisex factors.
We may require proof of your Annuitant’s age and sex before
or after commencing annuity payments. If the age or sex (or
both) of your Annuitant are incorrectly stated in your Contract,
we will correct the amount payable to equal the amount that the
annuitized portion of the Contract Value under that Contract
would have purchased for your Annuitant’s correct age and
sex. If we make the correction after annuity payments have
started, and we have made overpayments based on the incorrect
information, we will deduct the amount of the overpayment, with
interest as stated in your Contract, from any payments due then
or later; if we have made underpayments, we will add the amount,
with interest as stated in your Contract, of the underpayments
to the next payment we make after we receive proof of the
correct age and/or sex.
Additionally, we may require proof of the Annuitant’s or
Owner’s age before any payments associated with the Death
Benefit provisions of your Contract are made. If the age or sex
of the Annuitant is incorrectly stated in your Contract, we will
base any payment associated with the Death Benefit provisions on
your Contract on the Annuitant’s or Owner’s correct
age or sex.
The fixed option(s) are not available in connection with
portfolio rebalancing. If you are using the earnings sweep, you
may also use portfolio rebalancing only if you selected the Cash
Management Subaccount. You may not use dollar cost averaging,
DCA Plus, and the earnings sweep at the same time. Only
portfolio rebalancing is available after you annuitize. The
systematic transfer options are subject to the same requirements
and restrictions as non-systematic transfers. In addition, no
fixed option(s) may be used as the target Investment Option
under any systematic transfer program.
Dollar
Cost Averaging
When you request dollar cost averaging, you are authorizing us
to make periodic reallocations of your Contract Value without
waiting for any further instruction from you. You may request to
begin or stop dollar cost averaging at any time prior to your
Annuity Date; the effective date of your request will be the day
we receive notice from you In Proper Form. Your request may
specify the date on which you want your first transfer to be
made. Your first transfer may not be made until 30 days
after your Contract Date, and if you specify an earlier date,
your first transfer will be delayed until one calendar month
after the date you specify. If you request dollar cost averaging
on your application for your Contract and you fail to specify a
date for your first transfer, your first transfer will be made
one period after your Contract Date (that is, if you specify
monthly transfers, the first transfer will occur 30 days
after your Contract Date; quarterly transfers, 90 days
after your Contract Date; semi-annual transfers, 180 days
after your Contract Date; and if you specify annual transfers,
the first transfer will occur on your Contract Anniversary). If
you stop dollar cost averaging, you must wait 30 days
before you may begin this option again. Currently, we are not
enforcing the 30 day waiting period but we reserve the
right to enforce such waiting period in the future.
Your request to begin dollar cost averaging must specify the
Investment Option you wish to transfer money from (your
“source account”). You may choose any one Investment
Option as your source account. The Account Value of your source
account must be at least $5,000 for you to begin dollar cost
averaging. Currently, we are not enforcing the minimum Account
Value but we reserve the right to enforce such minimum amounts
in the future.
Your request to begin dollar cost averaging must also specify
the amount and frequency of your transfers. You may choose
monthly, quarterly, semiannual or annual transfers. The amount
of your transfers may be specified as a dollar amount or a
percentage of your source Account Value; however, each transfer
must be at least $250. Currently, we are not enforcing the
minimum transfer amount but we reserve the right to enforce such
minimum amounts in the future. Dollar cost averaging transfers
are not subject to the same requirements and limitations as
other transfers.
Finally, your request must specify the Variable Investment
Option(s) you wish to transfer amounts to (your
“target account(s)”). If you select more than one
target account, your dollar cost averaging request must specify
how transferred amounts should be allocated among the target
accounts. Your source account may not also be a target account.
10
Your dollar cost averaging transfers will continue until the
earlier of:
•
your request to stop dollar cost averaging is effective, or
•
your source Account Value is zero, or
•
your Annuity Date.
If, as a result of a dollar cost averaging transfer, your source
Account Value falls below any minimum Account Value we may
establish, we have the right, at our option, to transfer that
remaining Account Value to your target account(s) on a
proportionate basis relative to your most recent allocation
instructions. We may change, terminate or suspend the dollar
cost averaging option at any time.
Portfolio
Rebalancing
Portfolio rebalancing allows you to maintain the percentage of
your Contract Value allocated to each Variable Investment Option
at a pre-set level prior to annuitization.
For example, you could specify that 30% of your Contract Value
should be in Subaccount A, 40% in Subaccount B, and
30% in Subaccount C.
Over time, the variations in each Subaccount’s investment
results will shift this balance of these Subaccount Value
allocations. If you elect the portfolio rebalancing feature, we
will automatically transfer your Subaccount Value back to the
percentages you specify.
You may choose to have rebalances made quarterly, semi-annually
or annually. Only portfolio rebalancing is available after you
annuitize.
Procedures for selecting portfolio rebalancing are generally the
same as those discussed in detail above for selecting dollar
cost averaging: You may make your request at any time prior to
your Annuity Date and it will be effective when we receive it In
Proper Form. If you stop portfolio rebalancing, you must wait
30 days to begin again. Currently, we are not enforcing the
30-day waiting period but we reserve the right to enforce such
waiting period in the future. If you specify a date fewer than
30 days after your Contract Date, your first rebalance will
be delayed one month, and if you request rebalancing on your
application but do not specify a date for the first rebalance,
it will occur one period after your Contract Date, as described
above under Dollar Cost Averaging. We may change, terminate or
suspend the portfolio rebalancing feature at any time.
Earnings
Sweep
An earnings sweep automatically transfers the earnings
attributable to the Cash Management Subaccount (the “sweep
option”) to one or more other Variable Investment Options
(your “target option(s)”). The Account Value of your
sweep option will be required to be at least $5,000 when you
elect the earnings sweep. Currently, we are not enforcing the
minimum Account Value but we reserve the right to enforce such
minimum amounts in the future.
You may choose to have earnings sweeps occur monthly, quarterly,
semi-annually or annually until you annuitize. At each earnings
sweep, we will automatically transfer your accumulated earnings
attributable to your sweep option for the previous period
proportionately to your target option(s). That is, if you select
a monthly earnings sweep, we will transfer the sweep option
earnings from the preceding month; if you select a semi-annual
earnings sweep, we will transfer the sweep option earnings
accumulated over the preceding 6 months. Earnings sweep
transfers are not subject to the same requirements and
limitations as other transfers.
To determine the earnings, we take the change in the sweep
option’s Account Value during the sweep period, add any
withdrawals or transfers out of the sweep option Account that
occurred during the sweep period, and subtract any allocations,
including Credit Enhancements, to the sweep option Account
during the sweep period. The result of this calculation
represents the “total earnings” for the sweep period.
If, during the sweep period, you withdraw or transfer amounts
from the sweep option Account, we assume that earnings are
withdrawn or transferred before any other Account Value.
Therefore, your “total earnings” for the sweep period
will
11
be reduced by any amounts withdrawn or transferred during the
sweep option period. The remaining earnings are eligible for the
sweep transfer.
Procedures for selecting the earnings sweep are generally the
same as those discussed in detail above for selecting dollar
cost averaging and portfolio rebalancing: You may make your
request at any time and it will be effective when we receive In
Proper Form. If you stop the earnings sweep, you must wait
30 days to begin again. Currently, we are not enforcing the
30-day waiting period but we reserve the right to enforce such
waiting period in the future. If you specify a date fewer than
30 days after your Contract Date, your first earnings sweep
will be delayed one month, and if you request the earnings sweep
on your application but do not specify a date for the first
sweep, it will occur one period after your Contract Date, as
described above under Dollar Cost Averaging.
If, as a result of an earnings sweep transfer, your source
Account Value falls below $500, we have the right, at our
option, to transfer that remaining Account Value to your target
account(s) on a proportionate basis relative to your most recent
allocation instructions. We may change, terminate or suspend the
earnings sweep option at any time.
You may specify a dollar amount for your pre-authorized
withdrawals, or you may specify a percentage of your Contract
Value or an Account Value. You may direct us to make your
pre-authorized withdrawals from one or more specific Investment
Options. If you do not give us these specific instructions,
amounts will be deducted proportionately from your Account Value
in each Investment Option.
Procedures for selecting pre-authorized withdrawals are
generally the same as those discussed in detail above for
selecting dollar cost averaging, portfolio rebalancing, and
earnings sweeps: You may make your request at any time and it
will be effective when we receive it In Proper Form. If you stop
the pre-authorized withdrawals, you must wait 30 days to
begin again. Currently, we are not enforcing the 30-day waiting
period but we reserve the right to enforce such waiting period
in the future.
Pre-authorized withdrawals are subject to the same withdrawal
charges as are other withdrawals, and each withdrawal is subject
to any applicable charge for premium taxes and/or other taxes,
to federal income tax on its taxable portion, and, if you have
not reached age
591/2,
may be subject to a 10% federal tax penalty.
Section 817(h) of the Code provides that the investments
underlying a variable annuity must satisfy certain
diversification requirements. Details on these diversification
requirements generally appear in the Fund SAIs. We believe the
underlying Variable Investment Options for the Contract meet
these requirements. On March 7, 2008, the Treasury Department
issued Final Regulations under Section 817(h). These Final
Regulations do not provide guidance concerning the extent to
which you may direct your investments to particular divisions of
a separate account. Such guidance may be included in regulations
or revenue rulings under Section 817(d) relating to the
definition of a variable contract. We reserve the right to make
such changes as we deem necessary or appropriate to ensure that
your Contract continues to qualify as an annuity for tax
purposes. Any such changes will apply uniformly to affected
Contract Owners and will be made with such notice to affected
Contract Owners as is feasible under the circumstances.
For a variable life insurance contract or a variable annuity
contract to qualify for tax deferral, assets in the separate
accounts supporting the contract must be considered to be owned
by the insurance company and not by the contract owner. Under
current U.S. tax law, if a contract owner has excessive control
over the investments made by a separate account, or the
underlying fund, the contract owner will be taxed currently on
income and gains from the account or fund. In other words, in
such a case of “investor control” the contract owner
would not derive the tax benefits normally associated with
variable life insurance or variable annuities.
Generally, according to the IRS, there are two ways that
impermissible investor control may exist. The first relates to
the design of the contract or the relationship between the
contract and a separate account or underlying fund. For example,
at various times, the IRS has focused on, among other factors,
the number and type of investment choices available pursuant to
a given variable contract, whether the contract offers access to
funds that are available to the
12
general public, the number of transfers that a contract owner
may make from one investment option to another, and the degree
to which a contract owner may select or control particular
investments.
With respect to this first aspect of investor control, we
believe that the design of our contracts and the relationship
between our contracts and the Portfolios satisfy the current
view of the IRS on this subject, such that the investor control
doctrine should not apply. However, because of some uncertainty
with respect to this subject and because the IRS may issue
further guidance on this subject, we reserve the right to make
such changes as we deem necessary or appropriate to reduce the
risk that your contract might not qualify as a life insurance
contract or as an annuity for tax purposes.
The second way that impermissible investor control might exist
concerns your actions. Under the IRS pronouncements, you may not
select or control particular investments, other than choosing
among broad investment choices such as selecting a particular
Portfolio. You may not select or direct the purchase or sale of
a particular investment of a Separate Account, a Subaccount (or
Variable Investment Option), or a Portfolio. All investment
decisions concerning the Separate Accounts and the Subaccounts
must be made by us, and all investment decisions concerning the
underlying Portfolios must be made by the portfolio manager for
such Portfolio in his or her sole and absolute discretion, and
not by the contract owner. Furthermore, under the IRS
pronouncements, you may not enter into an agreement or
arrangement with a portfolio manager of a Portfolio or
communicate directly or indirectly with such a portfolio manager
or any related investment officers concerning the selection,
quality, or rate of return of any specific investment or group
of investments held by a Portfolio, and you may not enter into
any such agreement or arrangement or have any such communication
with us or PLFA.
Finally, the IRS may issue additional guidance on the investor
control doctrine, which might further restrict your actions or
features of the variable contract. Such guidance could be
applied retroactively. If any of the rules outlined above are
not complied with, the IRS may seek to tax you currently on
income and gains from a Portfolio such that you would not derive
the tax benefits normally associated with variable life
insurance or variable annuities. Although highly unlikely, such
an event may have an adverse impact on the fund and other
variable contracts. We urge you to consult your own tax adviser
with respect to the application of the investor control doctrine.
Loans
Certain Owners of Qualified Contracts may borrow against their
Contracts. Otherwise loans from us are not permitted. You may
request a loan from us, using your Contract Value as your only
security if your Qualified Contract is:
•
not subject to Title 1 of ERISA,
•
issued under Section 403(b) of the Code, and
•
permits loans under its terms (a “Loan Eligible Plan”).
You will be charged interest on your Contract Debt at a fixed
annual rate equal to 5%. The amount held in the Loan Account to
secure your loan will earn a return equal to an annual rate of
3%. The net amount of interest you pay on your loan will be
2.00% annually.
Interest charges accrue on your Contract Debt daily, beginning
on the effective date of your loan. Interest earned on the Loan
Account Value accrue daily beginning on the day following the
effective date of the loan, and those earnings will be
transferred once a year to your Investment Options in accordance
with your most recent allocation instructions.
We may change these loan provisions to reflect changes in the
Code or interpretations thereof. We urge you to consult with
a qualified tax adviser prior to effecting any loan transaction
under your Contract.
If you purchase any optional living benefit rider (including any
and all previous, current, and future versions), taking a loan
while an optional living benefit rider is in effect will
terminate your Rider. If you have an existing loan on your
Contract, you should carefully consider whether an optional
living benefit rider is appropriate for you.
Tax and
Legal Matters
The tax and ERISA rules relating to Contract loans are complex
and in many cases unclear. For these reasons, and because the
rules vary depending on the individual circumstances, these
loans are processed by your Plan
13
Administrator. We urge you to consult with a qualified tax
adviser prior to effecting any loan transaction under your
Contract.
Generally, interest paid on your loan under a 403(b)
tax-sheltered annuity will be considered non-deductible
“personal interest” under Section 163(h) of the
Code, to the extent the loan comes from and is secured by your
pre-tax contributions, even if the proceeds of your loan are
used to acquire your principal residence.
Loan
Procedures
Your loan request must be submitted on our Non-ERISA TSA
Application and Loan Agreement Form. You may submit a loan
request 30 days after your Contract Date and before your
Annuity Date. However, before requesting a new loan, you must
wait 30 days after the last payment of a previous loan. If
approved, your loan will usually be effective as of the end of
the Business Day on which we receive all necessary documentation
In Proper Form. We will normally forward proceeds of your loan
to you within 7 calendar days after the effective date of
your loan.
In order to secure your loan, on the effective date of your
loan, we will transfer an amount equal to the principal amount
of your loan into an account called the “Loan
Account.” The Loan Account is held under the General
Account. To make this transfer, we will transfer amounts
proportionately from your Investment Options based on your
Account Value in each Investment Option.
As your loan is repaid, a portion, corresponding to the amount
of the repayment of any amount then held as security for your
loan, will be transferred from the Loan Account back into your
Investment Options relative to your most recent allocation
instructions.
A transfer from the Loan Account back into your Investment
Options following a loan repayment is not considered a transfer
under the transfer limitations as stated in the HOW YOUR
PURCHASE PAYMENTS ARE ALLOCATED – Transfers and
Market-timing Restrictions section in the Prospectus.
Loan
Terms
You may have only one loan outstanding at any time. The minimum
loan amount is $1,000. Your Contract Debt at the effective date
of your loan may not exceed the lesser of:
•
50% of the amount available for withdrawal under this Contract
(see the WITHDRAWALS – Optional
Withdrawals – Amount Available for
Withdrawal section in the Prospectus), or
•
$50,000 less your highest outstanding Contract Debt during the
12-month period immediately preceding the effective date of your
loan.
You should refer to the terms of your particular Loan Eligible
Plan for any additional loan restrictions. If you have other
loans outstanding pursuant to other Loan Eligible Plans, the
amount you may borrow may be further restricted. We are not
responsible for making any determination (including loan amounts
permitted) or any interpretation with respect to your Loan
Eligible Plan.
Repayment
Terms
Your loan, including principal and accrued interest, generally
must be repaid in quarterly installments. An installment will be
due in each quarter on the date corresponding to the effective
date of your loan, beginning with the first such date following
the effective date of your loan. See the FEDERAL TAX
ISSUES – Qualified Contracts –
Loans section in the Prospectus.
Example: On May 1, we receive your loan
request, and your loan is effective. Your first quarterly
payment will be due on August 1.
Adverse tax consequences may result if you fail to meet the
repayment requirements for your loan. You must repay principal
and interest of any loan in substantially equal payments over
the term of the loan. Generally, the term of the loan will be
5 years from the effective date of the loan. However, if
you have certified to us that your loan proceeds are to be used
to acquire a principal residence for yourself, you may request a
loan term of 30 years. In either case, however, you must
repay your loan prior to your Annuity Date. If you elect to
annuitize (or withdraw) your Net Contract Value
14
while you have an outstanding loan, we will deduct any Contract
Debt from your Contract Value at the time of the annuitization
(or withdrawal) to repay the Contract Debt.
You may prepay your entire loan at any time. If you do so, we
will bill you for any unpaid interest that has accrued through
the date of payoff. Your loan will be considered repaid only
when the interest due has been paid. Subject to any necessary
approval of state insurance authorities, while you have Contract
Debt outstanding, we will treat all payments you send us as
Investments unless you specifically indicate that your payment
is a loan repayment or include your loan payment notice with
your payment. To the extent allowed by law, any loan repayments
in excess of the amount then due will be applied to the
principal balance of your loan. Such repayments will not change
the due dates or the periodic repayment amount due for future
periods. If a loan repayment is in excess of the principal
balance of your loan, any excess repayment will be refunded to
you. Repayments we receive that are less than the amount then
due will be returned to you, unless otherwise required by law.
If we have not received your full payment by its due date, we
will declare the entire remaining loan balance in default. At
that time, we will send written notification of the amount
needed to bring the loan back to a current status. You will have
60 days from the date on which the loan was declared in
default (the “grace period”) to make the required
payment.
If the required payment is not received by the end of the grace
period, the defaulted loan balance plus accrued interest and any
withdrawal charge will be withdrawn from your Contract Value,
if amounts under your Contract are eligible for
distribution. In order for an amount to be eligible for
distribution from a TSA funded by salary reductions you must
meet one of five triggering events. The triggering events are:
•
attainment of age
591/2,
•
severance from employment,
•
death,
•
disability, and
•
financial hardship (with respect to contributions only, not
income or earnings on these contributions).
If those amounts are not eligible for distribution, the
defaulted loan balance plus accrued interest and any withdrawal
charge will be considered a Deemed Distribution and will be
withdrawn when such Contract Values become eligible. In either
case, the Distribution or the Deemed Distribution will be
considered a currently taxable event, and may be subject
to federal tax withholding, the withdrawal charge and may be
subject to a 10% federal tax penalty.
If there is a Deemed Distribution under your Contract and to the
extent allowed by law, any future withdrawals will first be
applied as repayment of the defaulted Contract Debt, including
accrued interest and charges for applicable taxes. Any amounts
withdrawn and applied as repayment of Contract Debt will first
be withdrawn from your Loan Account, and then from your
Investment Options on a proportionate basis relative to the
Account Value in each Investment Option. If you have an
outstanding loan that is in default, the defaulted Contract Debt
will be considered a withdrawal for the purpose of calculating
any Death Benefit Amount and/or Guaranteed Minimum Death Benefit.
The terms of any such loan are intended to qualify for the
exception in Code Section 72(p)(2) so that the distribution
of the loan proceeds will not constitute a distribution that is
taxable to you. To that end, these loan provisions will be
interpreted to ensure and maintain such tax qualification,
despite any other provisions to the contrary. Subject to any
regulatory approval, we reserve the right to amend your Contract
to reflect any clarifications that may be needed or are
appropriate to maintain such tax qualification or to conform any
terms of our loan arrangement with you to any applicable changes
in the tax qualification requirements. We will send you a copy
of any such amendment. If you refuse such an amendment, it may
result in adverse tax consequences to you.
We are responsible for the safekeeping of the assets of the
Separate Account. These assets are held separate and apart from
the assets of our General Account and our other separate
accounts.
The statements of assets and liabilities of Separate
Account A as of December 31, 2012, the related
statements of operations for the periods presented, the
statements of changes in net assets for each of the periods
presented and the financial highlights for each of the periods
presented are incorporated by reference in the Statement of
Additional Information from the Annual Report of Separate
Account A dated December 31, 2012. PL&A’s
financial statements as of December 31, 2012 and 2011 and
for each of the three years in the period ended
December 31, 2012 are attached. These financial statements
should be considered only as bearing on the ability of PL&A
to meet its obligations under the Contracts and not as bearing
on the investment performance of the assets held in the Separate
Account.
The financial statements of Separate Account A of Pacific
Life & Annuity Company as of December 31, 2012
and for each of the periods presented have been audited by
[ ],
independent registered public accounting firm, as stated in
their report included in the Annual Report of Separate
Account A dated December 31, 2012, which is
incorporated by reference in this Registration Statement.
The financial statements of Pacific Life & Annuity
Company as of December 31, 2012 and 2011 and for each of
the three years in the period ended December 31, 2012 have
been audited by
[ ],
independent auditors, as stated in their report appearing
herein.
16
Form
No. 14503-12A
PART II
Part C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)
Financial Statements
Part A: None
Part B:
(1)
Registrant’s Financial Statements [TO BE FILED]
Audited Financial Statements dated as of December 31, 2011 and for each of the periods presented
which are incorporated by reference from the 2011 Annual Report include the following for Separate
Account A:
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
(2)
Depositor’s Financial Statements [TO BE FILED]
Audited Financial Statements dated as of December 31, 2011 and 2010, and for each of the three
years in the period ended December 31, 2011, included in Part B include the following for Pacific
Life & Annuity Company:
Independent Auditors’ Report
Statements of Financial Condition
Statements of Operations
Statements of Stockholder’s Equity
Statements of Cash Flows
Notes to Financial Statements
Distribution Agreement between Pacific Life Insurance Company, Pacific Life & Annuity
Company and Pacific Select Distributors, Inc. (PSD); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-11-061494, filed on June 24, 2011, and incorporated by
reference herein.
Qualified Pension Plan Rider (Form No. 20-24200); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated by
reference herein.
(c)
(1)
403(b) Tax-Sheltered Annuity Rider (Form No. 20-25200); Included in Registrant’s Form N-4,
File No. 333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated
by reference herein.
(2)
403(b) Tax-Sheltered Annuity Rider (Form No. 20-2156); Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0000892569-08-001558, filed on December 4, 2008, and incorporated by
reference herein.
Stepped-Up Death Benefit Rider (Form No. 20-23500); Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated by
reference herein.
Excess Withdrawal Endorsement (Form No. 15-2152A); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-08-001275, filed on September 11, 2008, and incorporated by
reference herein.
Excess Withdrawal Endorsement (Form No. 15-2152); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-08-001275, filed on September 11, 2008, and incorporated by
reference herein.
Excess Withdrawal Endorsement (Form No. 15-2152B); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-08-001275, filed on September 11, 2008, and incorporated by
reference herein.
Excess Withdrawal Endorsement (Form No. 15-2152); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-08-001275, filed on September 11, 2008, and incorporated by
reference herein.
Income Access Rider (Form No. 20-2104); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-08-001558, filed on December 4, 2008, and incorporated by
reference herein.
(t)
Core Withdrawal Benefit Rider (Form No. 20-2162); Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000892569-09-000477, filed on April 23, 2009, and incorporated by
reference herein.
(u)
(1)
DCA Plus Fixed Option Rider (Form No. 20-2103); Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0000950123-09-029433, filed on August 4, 2009, and incorporated by
reference herein.
(2)
DCA Plus Fixed Option Rider (Form No. 20-2219); Included in Registrant’s Form N-4, File No.
333-175280, Accession No. 0000950123-11-063393, filed on July 1, 2011, and incorporated by
reference herein.
Core Withdrawal Benefit II Rider (Form No. 20-2178); Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0000950123-10-037064, filed on April 22, 2010, and incorporated by
reference herein.
Articles of Incorporation of PM Group Life; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated by
reference herein.
(b)
Amended and Restated Articles of Incorporation of PL&A; Included in Registrant’s Form N-4,
File No. 333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated
by reference herein.
Pacific Select Fund Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated by
reference herein.
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-10-037064, filed on April 22, 2010, and incorporated by
reference herein.
(2)
Second Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-11-037692, filed on April 21, 2011, and incorporated by
reference herein.
Amendment to Administrative Services Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-10-037064, filed on April 22, 2010, and incorporated by
reference herein.
First Amendment to Administrative Services Agreement; Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0000950123-10-037064, filed on April 22, 2010, and incorporated by
reference herein.
(2)
Second Amendment to Administrative Services Agreement; Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
(3)
Third Amendment to Administrative Services Agreement; Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-12-006363 filed on April 23, 2012, and incorporated by
reference herein.
First Amendment to Investor Services Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-10-037064, filed on April 22, 2010, and incorporated by
reference herein.
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-11-037692, filed on April 21, 2011, and incorporated by
reference herein.
(2)
Second Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-11-037692, filed on April 21, 2011, and incorporated by
reference herein.
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-160773, Accession No. 0000950123-10-037538, filed on April 23, 2010, and incorporated by
reference herein.
(2)
Second Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-11-037692, filed on April 21, 2011, and incorporated by
reference herein.
Participation Agreement with Fidelity Variable Insurance Products (Variable Insurance Products
Funds, Variable Insurance Products Fund II, Variable Insurance Products Fund III and Variable
Insurance Products Funds V); Included in Registrant’s Form N-4, File No. 333-107571, Accession No.
0000950123-12-006363 filed on April 23, 2012, and incorporated by reference herein.
(1)
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-12-006363 filed on April 23, 2012, and incorporated by
reference herein.
(2)
Second Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-12-006363 filed on April 23, 2012, and incorporated by
reference herein.
(y)
Service Contract with Fidelity Distributors Corporation; Included in Registrant’s Form N-4,
File No. 333-107571, Accession No. 0000950123-12-006363 filed on April 23, 2012, and incorporated
by reference herein.
Support Agreement with First Trust Advisors L.P.; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0000950123-12-006363 filed on April 23, 2012, and incorporated by
reference herein.
(cc)
Form of American Century Investment Services, Inc. Participation Agreement; Included in
Registrant’s Form N-6, File No. 333-150092, Accession Number 000950123-12-006370 filed on April23, 2012.
(dd)
Form of American Century Investment Services, Inc. Administrative Services Agreement;
Included in Registrant’s Form N-6, File No. 333-150092, Accession Number 000950123-12-006370 filed
on April 23, 2012.
(1)
First Amendment to Administrative Services Agreement; Included in Registrant’s Form N-4, File
No. 333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
(ee)
Participation Agreement with Janus Aspen Series; Included in Registrant’s Form N-6, File No.
333-118913, Accession Number 000892569-07-000444 filed on April 16, 2007.
(1)
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
(ff)
Distribution and Shareholder Service Agreement with Janus Capital Management LLC; Included in
Registrant’s Form N-6, File No. 333-118913, Accession Number 000892569-07-000444 filed on April16, 2007.
(gg)
Administrative Services Agreement with Janus Distributors LLC; Included in Registrant’s Form
N-6, File No. 333-118913, Accession Number 000892569-07-000444 filed on April 16, 2007.
Form of Lord Abbett Series Fund, Inc. Service Agreement; Included in Registrant’s Form N-4,
File No. 333-168284, Accession No. 0000950123-10-067409 filed on July 23, 2010, and incorporated
by reference herein.
First Amendment to Support Payment Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
First Amendment to Participation Agreement; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001193125-12-503068 filed on December 14, 2012, and incorporated by
reference herein.
(a) Consent of Independent Registered Public Accounting Firm and Consent of Independent
Auditors (Pacific Value); [TO BE FILED]
(b)
Consent of Independent Registered Public Accounting Firm and Consent of Independent Auditors
(Pacific Value Select); [TO BE FILED]
11.
Not applicable
12.
Not applicable
13.
Pacific Value — Performance Calculations; Included in Registrant’s Form N-4, File No.
333-107571, Accession No. 0001017062-03-001534, filed on August 1, 2003, and incorporated by
reference herein.
Pacific Life & Annuity Company is an Arizona Stock Life Insurance Company wholly-owned by Pacific
Life Insurance Company (a Nebraska Stock Life Insurance Company) which is wholly-owned by Pacific
LifeCorp (a Delaware Stock Holding Company) which is, in turn, 100% owned by Pacific Mutual Holding
Company (a Nebraska Mutual Insurance Holding Company).
II-7
Item 27. Number of Contractholders
1) Pacific Value — Approximately
690
Qualified
449
Non Qualified
2) Pacific Value Select — Approximately
78
Qualified
31
Non Qualified
Item 28. Indemnification
(a)
The Distribution Agreement between Pacific Life Insurance Company, Pacific Life &
Annuity Company (collectively referred to as “Pacific Life”) and Pacific Select
Distributors, Inc. (PSD) provides substantially as follows:
Pacific Life shall indemnify and hold harmless PSD and PSD’s officers, directors,
agents, controlling persons, employees, subsidiaries and affiliates for all attorneys’
fees, litigation expenses, costs, losses, claims, judgments, settlements, fines,
penalties, damages, and liabilities incurred as the direct or indirect result of: (i)
negligent, dishonest, fraudulent, unlawful, or criminal acts, statements, or omissions
by Pacific Life or its employees, agents, officers, or directors; (ii) Pacific Life’s
breach of this Agreement; (iii) Pacific Life’s failure to comply with any statute, rule,
or regulation; (iv) a claim or dispute between Pacific Life and a Broker/Dealer
(including its Representatives) and/or a Contract owner. Pacific Life shall not be
required to indemnify or hold harmless PSD for expenses, losses, claims, damages, or
liabilities that result from PSD’s misfeasance, bad faith, negligence, willful
misconduct or wrongful act.
PSD shall indemnify and hold harmless Pacific Life and Pacific Life’s officers,
directors, agents, controlling persons, employees, subsidiaries and affiliates for all
attorneys’ fees, litigation expenses, costs, losses, claims, judgments, settlements,
fines, penalties, damages and liabilities incurred as the direct or indirect result of:
(i) PSD’s breach of this Agreement; and/or (ii) PSD’s failure to comply with any
statute, rule, or regulation. PSD shall not be required to indemnify or hold harmless
Pacific Life for expenses, losses, claims, damages, or liabilities that have resulted
from Pacific Life’s willful misfeasance, bad faith, negligence, willful misconduct or
wrongful act.
(b)
The Form of Selling Agreement between Pacific Life & Annuity Company, Pacific
Select Distributors, Inc. (PSD) and Various Broker-Dealers and Agency (Selling Entities)
provides substantially as follows:
Pacific Life & Annuity Company and PSD agree to indemnify and hold harmless Selling Entities,
their officers, directors, agents and employees, against any and all losses, claims,
damages, or liabilities to which they may become subject under the Securities Act, the
Exchange Act, the Investment Company Act of 1940, or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any omission or alleged
omission to state a material fact required to be stated or necessary to make the
statements made not misleading in the registration statement for the Contracts or for the
shares of Pacific Select Fund (the “Fund”) filed pursuant to the Securities Act, or any
prospectus included as a part thereof, as from time to time amended and supplemented, or
in any advertisement or sales literature provided by Pacific Life & Annuity Company and
PSD.
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Selling Entities agree to, jointly and severally, hold harmless and indemnify
Pacific Life & Annuity Company and PSD and any of their respective affiliates,
employees, officers, agents and directors (collectively, “Indemnified Persons”) against
any and all claims, liabilities and expenses (including, without limitation, losses
occasioned by any rescission of any Contract pursuant to a “free look” provision or by
any return of initial purchase payment in connection with an incomplete application),
including, without limitation, reasonable attorneys’ fees and expenses and any loss
attributable to the investment experience under a Contract, that any Indemnified Person
may incur from liabilities resulting or arising out of or based upon (a) any untrue or
alleged untrue statement other than statements contained in the registration statement
or prospectus relating to any Contract, (b)(i) any inaccurate or misleading, or
allegedly inaccurate or misleading sales material used in connection with any marketing
or solicitation relating to any Contract, other than sales material provided preprinted
by Pacific Life & Annuity Company or PSD, and (ii) any use of any sales material that
either has not been specifically approved in writing by Pacific Life & Annuity Company
or PSD or that, although previously approved in writing by Pacific Life & Annuity
Company or PSD, has been disapproved, in writing by either of them, for further use, or
(c) any act or omission of a Subagent, director, officer or employee of Selling Entities, including, without
limitation, any failure of Selling Entities or any Subagent to be registered as required
as a broker/dealer under the 1934 Act, or licensed in accordance with the rules of any
applicable SRO or insurance regulator.
II-9
Item 29. Principal Underwriters
(a)
PSD also acts as principal underwriter for Pacific Select Variable Annuity Separate
Account, Separate Account B, Pacific Corinthian Variable Separate Account, Pacific Select
Separate Account, Pacific Select Exec Separate Account, COLI Separate Account, COLI II
Separate Account, COLI III Separate Account, COLI IV Separate Account, COLI V Separate
Account, Separate Account A of Pacific Life & Annuity Company, Pacific Select Exec
Separate Account of Pacific Life & Annuity Company, Separate Account I of Pacific Life
Insurance Company, Separate Account I of Pacific Life & Annuity Company.
(b)
For information regarding PSD, reference is made to Form B-D, SEC File No. 8-15264,
which is herein incorporated by reference.
(c)
PSD retains no compensation or net discounts or commissions from the Registrant.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant pursuant to
Section 31(a) of the Investment Company Act of 1940 and the rules under that section will be
maintained by Pacific Life Insurance Company at 700 Newport Center Drive, Newport Beach,
California92660.
Item 31. Management Services
Not applicable
Item 32. Undertakings
The registrant hereby undertakes:
(a)
to file a post-effective amendment to this registration statement as frequently as
is necessary to ensure that the audited financial statements in this registration
statement are never more than 16 months old for so long as payments under the variable
annuity contracts may be accepted, unless otherwise permitted.
(b)
to include either (1) as a 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 post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to send for a Statement of
Additional Information, or (3) to deliver a Statement of Additional Information with the
Prospectus.
(c)
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.
II-10
Additional Representations
(a) The Registrant and its Depositor are relying upon American Council of Life Insurance, SEC
No-Action Letter, SEC Ref. No. 1P-6-88 (November 28, 1988) with respect to annuity contracts
offered as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the
Internal Revenue Code, and the provisions of paragraphs (1)-(4) of this letter have been complied
with.
(b) REPRESENTATION PURSUANT TO SECTION 26(f) OF THE INVESTMENT COMPANY ACT OF 1940: Pacific
Life & Annuity Company and the sponsoring insurance company of the Registrant represent that the
fees and charges to be deducted under the Variable Annuity Contract (“Contract”)
described in the prospectus contained in this registration statement are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be incurred, and the
risks assumed in connection with the Contract.
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(a) for
effectiveness of this Registration Statement and has caused this Post-Effective Amendment No. 25 to
the Registration Statement on Form N-4 to be signed on its behalf by the undersigned thereunto duly
authorized in the City of Newport Beach, and the State of California on this
5th day of February, 2013.
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No.
25 to the Registration Statement has been signed below by the following persons in the capacities
and on the dates indicated: